We're looking at you, 2023: Building industry forecasts & insights

Don’t look now, but 2023 is right around the corner. To help us prepare for planning season, we pour through forecasts and trends from so many data banks, looking for insight for opportunities, positioning and focus for our clients. We have to admit, we don’t remember a time that the majority of forecasters aligned in their predictions. From Fannie Mae, Dodge, CBRE, NAHB, and NMHC, to Farnsworth Group, Wells Fargo and others, while there are slight variations the foundation is the same.

Here is a recap of some key insights from CBRE's 2022 US Construction Cost Trends Report, as well as clear opportunities that we see moving forward. 

OVERALL MARKET

• As we see construction costs (thanks to materials and labor) continue to rise through the end of this year, escalation should stabilize to 2%-4% in 2023 and 2024; on par with historical averages.
• Supply chain-related disruptions are expected to ease, but ongoing global labor and component shortages will hamper production and logistics capacity. As a result, long lead times and material shortages will likely continue in the short term.
• The construction industry continues to face numerous labor challenges, including a smaller talent pool, an aging workforce—1 in 5 workers is currently older than 55—and strong competition from other industries like logistics.
• Construction demands are expected to remain healthy for the near term. Although the possibility of an economic downturn isn’t off the table, pent-up demand for new construction—including a nationwide housing shortage—and government infrastructure projects should largely sustain activity. As contractor backlogs grow, margins should increase, pushing up total construction costs.
• U.S. multifamily performance remains strong. With a deceleration in growth and demand continues to exceed supply, asking rents are up 12.6% year-over-year through July. The National Multifamily Housing Council estimates that the U.S. needs 4.3 million new units built through 2035 to meet demand.  

TRENDS & OPPORTUNITIES

Sustainability

Governments have begun to take more and more notice of green initiatives, resulting in policy that is putting increasing pressure on all sectors of the construction industry to use green design and technology. The Architecture, Engineering and Construction (AEC) industry is collaborating to invent and design new methods of limiting the negative impact of construction to support these initiatives and access available incentives. Designing buildings using natural resources and passive climate control will become the norm in the coming years. 

Our take: Manufacturers that have a defined environmental impact story will have an advantage.

Manufacturing

Prefabrication and modular construction methods are making offsite construction an increasingly popular option for the commercial building industry.

Our take: Manufacturing that can reduce onsite labor costs will have a big advantage.

Outdoor spaces

People are more interested than ever before in building outdoor spaces that encourage gatherings without compromising safety or style. This trend will continue to hold strong in both residential and commercial construction in 2023.  

Our take: Don’t just focus on the contractor. As labor costs are escalating, manufacturers that pay attention to the DIYers and the wannabe-DIYers will have the upper hand. Invest in “how to” and give simple, easy instructions for the novice. Video, YouTube, Social Media & “How To” P.O.S., inspiration video/photography and training should be considered.  

Multifamily

This appears to be the largest growth opportunity segment. Building products manufacturers need to structure their product lines to align with the investor-focused construction – current trend, low maintenance, and affordable.

Our take: Multifamily. Multifamily. Multifamily. Manufacturers that have products (indoor or outdoor) should have strong marketing efforts focused on all audiences within this sector. This should be a long-term strategy. Align your products and messaging. It will pay off for the next decade.

Supply chain

Manufacturers that can navigate supply chain and labor issues will win out.

Our take: Brands that are in the position to promote “available to order now,” “why wait for a contractor when you can do it yourself,” or “Inventory in stock; we’re ready to go!” will jump ahead of the competition.

Relationships

Partnering well is more important during times of uncertainty, shortages and long lead times.

Our take: Brands in the trenches alongside the channel will rise to the top. Being authentic, straightforward, and having a customer-first mentality will pay dividends in the long term. Both oral and written interaction should “humanize your brand.” If you are a company that cares about people and offers a good product, now more than ever, this is a winning combination. Don’t miss the opportunity to be authentic.

Final thoughts

There have been plenty of curveballs thrown at our industry the last few years, and some things still feel very uncertain. But there's one thing we are sure of: those brands that are relatable, flexible and strategically focused on growth opportunities will rise to the top.

For over 30 years, Brandner Communications has taken pride in being different. No matter what the challenge, we stretch our limits to find the right solution. Most agencies will surrender and turn to an easier option if they don’t have the answer. Not us. We roll up our sleeves and dig in … developing new technologies, strategies and methods as a result.

Brandner Communications is a full-service advertising and public relations agency unlike any other.

BRAND BUILDING FOR BUILDING BRANDS.