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Resilient Rise: Navigating the Shifts in America's 2023 Construction Landscape

The state of real estate construction in the United States in 2023 is experiencing some shifts due to various economic factors. While there's a general trend of cautiousness in the commercial real estate sector due to high interest rates and the anticipation of a recession, construction activity remains strong.

This is largely because of the high value of construction starts in 2022, which continues to drive robust construction spending into 2023. However, the pace of new construction starts is beginning to slow, particularly in the residential sector, influenced by rising interest rates and economic slowdown.

The construction industry is grappling with challenges such as increased costs and supply chain disruptions, which had led to significant spikes in construction costs over the past two years. While material costs might not rise significantly in the coming year due to easing supply pressures, labor costs are expected to increase. This combination of factors is likely to result in a total construction cost escalation in 2023 that is slightly higher than historical norms but still lower than the levels seen in 2022.

The CBRE expects a moderate recession in the U.S. from late 2023 into early 2024. This economic forecast, combined with the anticipation of falling interest rates in the second half of 2023, is likely to impact the real estate market and construction trends. Despite these challenges, the construction sector, especially in nonresidential and industrial areas, is expected to remain resilient, supported in part by government infrastructure programs.

Overall, the U.S. construction market is undergoing a period of adjustment, with some sectors experiencing stronger growth than others. While there are headwinds due to economic factors, the industry is adapting and continues to see significant activity, particularly in industrial construction and infrastructure projects​.

Source: Loan Analytics, CBRE, U.S. and Canada Constrruction Outlook


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