The Dodge Construction Network has produced a forecast for the U.S. construction sector for 2023, in which it signals a slowdown across many typologies. Overall, the dollar value of construction starts will be $1.08 trillion, which, though unchanged from 2022, represents a 3% dip when adjusted for inflation.

Dodge’s analysis suggests the stagnation will not be felt evenly across the industry, with declines in residential and commercial activity offset by growths in manufacturing and infrastructure.

The dollar value of single-family homes starts will hold steady in 2023 versus 2022, which, when adjusted for inflation, represents a decline of 5%. The number of single-family housing units is expected to decline by 6% to 891,000 units, a fall fuelled by higher mortgage rates and continued high construction costs.

The multifamily sector will show similar stagnation with a 1% rise in the value of construction starts versus 2022, which becomes a 7% decline when adjusted for inflation. As a result, the number of units will fall 9% to 723,000, fuelled by ongoing labor shortages and hesitant investors.

The value of commercial starts will fall by 3% in 2023, representing a 13% inflation-adjusted decline. While warehouse and office projects will decline, and hotel and retail starts will stagnate, data center construction is expected to remain strong. Meanwhile, institutional projects will hold steady in 2023, representing a 1% inflation-adjusted decline. While traditional school construction is set to fall, life science buildings and healthcare projects, including outpatient clinics and hospitals, continue to rise.

In contrast to the stagnating or declining numbers across residential, commercial, and institutional projects, manufacturing and infrastructure projects continue to be lucrative. Manufacturing, including chip fabrication plants and EV battery plants, saw a tripling in construction starts in 2022, and while starts will decline in 2023, the $51 billion value in 2023 starts is still far higher than historical figures, according to Dodge.

The value of public infrastructure projects will gain 18% in 2023 versus the previous year, or 12% when adjusted for inflation, led by streets and bridge work. Meanwhile, utility/gas projects will see an 8% gain, or 2% when adjusted for inflation, fuelled by utility-scale wind and solar projects.

“As the clouds of uncertainty mount on the fate of the economy in 2023, the construction sector has already started to feel the impact of rising interest rates,” explained Richard Branch, Dodge’s chief economist. “The Federal Reserve’s ongoing battle with inflation has raised concerns that a recession is imminent in the new year. Regardless of the label, the economy is slated to significantly slow, unemployment will edge higher, and for parts of the construction sector, it will feel like a recession.”

While anticipating a slowdown in construction, Branch does not believe we will see a repeat of the extreme conditions endured following the 2008 financial collapse. “The funds provided to the construction industry through the Infrastructure Investment and Jobs Act (IIJA), The CHIPS and Science Act, and the Inflation Reduction Act (IRA) will counter the downturn allowing the construction to tread water,” Branch notes. “During the Great Recession, there was no place to find solace in construction activity — 2023 will be quite different.”

The latest figures by the Dodge Construction Network come in the same month that the AIA’s Architecture Billing Index saw a decline for the first time in nearly two years. In October, meanwhile, a chief economist from the National Association of Home Builders warned that the U.S. housing sector has already entered a recession.