What’s Up with the Building Industry in 2023?

When it comes to weather, the stock market or inventory planning, forecasting is never easy. Based on our years of experience and extensive network of top talent what we can ‘predict’ for 2023, is that these four trends are something we will continue to keep an eye on.

Residential building will continue to slow…

At TZR we are observing that inflation continues to challenge the system, driving interest rates up and consumer spending down.

And, this trend is predicted to continue well into 2024 with slowing consumer spending which impacts people’s willingness to take on home improvement projects.

And, while inventory remains low, many people simply can’t afford the price of a home these days. It continues to be a real issue around the country and has led some experts to “call on policymakers to address the ‘worsening housing affordability crisis,’ calling the current housing market as ‘unhealthy and unsustainable.’”

However, despite the point above, we find ourselves with “a woefully undersupplied housing market,” and with a number of projects “sitting in the planning cycle waiting to break ground,” which should inject “…some semblance of confidence and reassurance that developers and owners are continuing to put projects into the queue despite the fact that we’re concerned about what might happen when interest rates keep rising and the economy slows down in 2023.”

From a recruiting perspective, this challenge will require some creativity in 2023, forcing companies to consider what projects they have in their backlog and compare it to the staff they have to complete them, (and juggle that with the fact that the number of new residential projects may not increase at the same rate as previous years).

Watch TZR’s president, Mark Fisher take on inventory and the slowing market direct from the 2023 NAHB International Builders‘ Show.

…but commercial is in a decent spot.

The cost of building is decreasing. “The Producer Price Index, a composite index of construction materials, indicates that material prices and bid price inflation peaked between late 2021 and early 2022.”

Commercial projects – especially hotels that may have been put on hold during the period of dramatic price increases from late 2020 through 2022 may become a reality as prices come down.

Additionally, due to the introduction of more federal incentives, companies are choosing to move production back to the United States, paving the way for large-scale commercial projects going forward.

In Equipment World, Richard Branch, chief economist for Dodge Data & Analytics says “You need to go back to the early ’90s to see the kinds of square footage that we expect to break ground in 2023,” he says. “We’ve significantly raised our forecast for not just 2023, but beyond due to the impact of the CHIPS Act and the IRA. This is a real game changer in terms of stabilizing the construction sector.”

For organizations working primarily in the commercial space, this means doing whatever you can to keep your best talent where they are, and push for creative and innovative solutions to new challenges coming down the pipeline… it’s crucial to hire right and at the right time.

Supply chain issues will improve but not disappear.

Labor market challenges, especially among skilled trades, continue to impact a number of industries even as materials become easier to obtain. “Workforce shortages will continue to affect different levels of the supply chain, from collecting and processing raw materials, to production, manufacturing, and transportation.”

The past few years have taught us that we can anticipate events that will affect the industry but we can’t predict what and when they will occur, “The best we can do is take a proactive approach to procurement and scheduling. We must remain flexible and understand that sometimes, delays will be completely unavoidable.”

Labor availability will remain a challenge.

Overreacting to a slowdown in business now, may mean that labor shortages will reappear as a hurdle down the line; as the economy recovers rehiring could become a nightmare – especially if your company does not have a long-term hiring strategy.

The chain reaction of drastic shortages from ‘20 – ‘22 will be felt even after immediate staffing needs have been addressed. For instance, “The logistics of transporting materials will likely remain a challenge due to driver shortages, especially for construction sites in more remote areas of the country.”

An optimistic forecast for commercial building means these challenges will continue and that employees continue to hold the cards. Now is the time to revisit or start your hiring strategy. Whether you have immediate roles to fill or want to safeguard your business growth through 2023 reach out and connect with us today. Here’s what our proven process can offer.