Construction to continue strong through 2023

AIA Construction Consensus 2023

What’s ahead for the construction industry? Construction spending on buildings is projected to increase just over 9% this year and another 6% in 2023, according to the mid-year update of the American Institute of Architect’s AIA Consensus Construction Forecast.

The commercial construction market is projected to see mid-single-digit percentage gains both this year and next, spurred by strong growth in the retail and other commercial facilities. Modest gains in the office sector this year are expected to accelerate a bit in 2023, and the hard-hit hotel sector is finally projected to recover next year.

While the industrial market is expected to pace the building construction upturn this year and next, the institutional sector is forecast to begin its recovery this year and accelerate moving into 2023. Given the diverse collection of facilities in this category, the institutional recovery will be uneven. Construction spending in the healthcare sector never declined during the pandemic, and this strength is projected to continue with 5%-6% gains both this year and next.

The education market suffered from remote learning as there was less immediate need to renovate older facilities or build new ones. However, with most educational institutions back to in-person formats, modernization and added space needs will be more apparent, with growth projected at 2% this year and an additional 5% in 2023.

Finally, there is significant pent-up demand for amusement and recreation facilities as these activities begin to return to normal and delayed projects come back on-line. The forecast panel is projecting upper-single digit percentage gains in spending for this category for both this year and next.

The AIA Consensus Construction Forecast panel includes leading nonresidential construction forecasters in the United States from the following groups:

(Source: AIA Consensus Construction Forecast)

-Dodge Construction Network
-S&P Global, Market Intelligence
-Moody’s Analytics
-Associated Builders & Contractors
-Wells Fargo Securities​
-Markstein Advisors

It projects business conditions in the construction industry over the coming 12-18 months, and has been conducted for nearly 20 years. Somewhat surprisingly, as the prospects for construction spending have improved since the beginning of the year, the outlook for the broader economy has significantly deteriorated. A growing set of economic indicators have turned negative, and many economists feel that the prospects of an economy-wide recession have increased.