Major indicators are pointing toward a slower construction market in 2023.
That’s according to a market report released by construction company, general contractor, design-builder and construction manager The Weitz Co., which prepared the report for the American Seniors Housing Association.
“The recession that many economists are predicting has not yet come to pass; however, construction industry executives foresee a shrinking market in 2023,” authors Larry Grave and Amy Burk wrote, adding that 64% of construction executives anticipate a slowdown during the first half of the year.
Pricing is starting to level out after two years of hyperinflation, according to the Graeve and Burk, yet the overall construction market is expected to contract 6% this year due to a shift in sector spending. Although some sectors will see some growth, they said, residential and commercial markets are expected to see decreased volumes.
Overall pricing is not expected to come down any time soon, according to the experts.
“Contractor backlogs are still very strong, and contractors will move to different sectors to maintain a full pipeline. Based on all of these variables, we anticipate a 0.5% to 0.75% per month escalation rate, much lower than the previous six quarters,” Graeve and Burk wrote.
The per-square-foot cost of construction in winter 2023 in independent living has averaged $227 to $245 per gross square foot, depending on materials and finishes used, according to the brief. Costs in assisted living, meanwhile, have averaged $263 to $429 per gross square foot, and costs in skilled nursing have averaged $302 to $479 per gross square foot.
“The material costs declining the most are the same ones that skyrocketed [such as lumber and freight] during the pandemic. Costs on other products such as concrete, masonry and drywall are predicted to rise moderately in 2023,” the authors wrote.
