Overall construction starts are expected to be flat in 2023, following a 17% increase in 2022, Richard Branch, chief economist at Dodge Construction Network, said during the 2023 Dodge Construction Outlook. Branch presented the outlook on Nov. 15, noting that the forecast assumes the U.S. will narrowly avoid recession.

"We’re walking the razor’s edge here,” he said.

The 2022 increase will bring total starts to $1.086 billion, but $1.083 billion is predicted for 2023. 

Rising interest rates have weakened the residential market, with single-family housing, measured in number of units, expected to decline 12% by the end of this year. Dodge predicts a decline of 6% to follow in 2023. In the multi-family sector, starts are expected to finish the year up 16%, but will drop 9% next year.

Dodge forecasts that the dollar value of commercial construction—which includes warehouses, offices, retail and hotels—will finish 2022r up 24% before dropping 3% in 2023. Retail is up 31% in 2022, which Branch attributes to increased single-family building in suburban areas in the last several years. Just as residential construction slowed, he says retail will also, with Dodge predicting just a 4% increase next year.

Following two years of decline during the pandemic, the dollar value of office construction is expected to rise 23% by the end of 2022, before slightly declining, at a rate of 1%, in 2023. While the number of in-office workers has increased in the past year, remote work is still prevalent, particularly in a tight labor market, notes Branch, which is driving down office construction for the coming year.

The manufacturing sector soared in 2022, up 196%. Branch attributes this to "onshoring," as companies bring plants back to the U.S., particularly chip manufacturing facilities incentivized by the new U.S. Inflation Reduction Act.

While a 43% drop is expected in 2023, "that is still historically a very strong record level of activity," Branch said, at a rate of $51.2 billion.

Institutional starts are forecast to rise 22% this year, with healthcare and education increases of 23% and 8%, respectively. Transportation rose 110%, largely due to the renovation of John F. Kennedy Airport in New York City, and is expected to fall 36% next year. Overall, institutional starts are predicted to remain flat in 2023. Total non-building starts are up 19%, with another 16% increase expected next year.