Forecasting construction in the months ahead

By Kevin Yanik| June 29, 2023

Health care construction starts should be healthy over the next two years, with Dodge Construction Network forecasting 10 percent growth in 2023 and 11 percent growth in 2024. Photo: Thomas Bullock/iStock / Getty Images Plus/Getty Images

Several dynamics are holding back U.S. construction these days.

Projects are taking longer to break ground. Firms have a plethora of jobs to fill. Material prices remain high. And the nation’s population isn’t growing like it did in previous decades.

Despite these factors, the outlook for construction remains positive. Some sectors will experience more growth than others this year, but construction starts overall are expected to rise when 2023 comes to an end.

These, at least, are the projections of those at Dodge Construction Network.

“In nominal dollars, we expect starts to rise 2 percent this year,” says Sarah Martin, Dodge’s associate director of forecasting who offered a 2023 midyear outlook for construction during a mid-June webinar.

Some construction subsectors have been standouts, Martin adds, while others lag the overall norm. Here’s a look at a few she highlighted during the Dodge webinar.

Nonresidential (institutional)

Martin

• Health care. This subsector is one of the bigger opportunities Dodge sees in the institutional building space. To Dodge, health care consists of inpatient hospitals, nursing homes and standalone clinics.

According to Martin, clinics account for about 40 percent of health care’s construction starts.

“The recent spread of the residential market out into the suburbs and rural areas has lifted demand for those urgent care and standalone clinics, as they are typically built in strip malls,” she says. “They share a lot of similarities and drivers as retail construction, which had a pretty good year in 2022.”

About 20 percent of health care construction is attributed to nursing homes. Martin says nursing home construction ranges from flat to down over the last couple of years.

“From a square footage perspective, nursing homes are about 50 percent lower than where they were pre-pandemic,” she says. “In general, we’ve just seen sort of a shift away from nursing homes post-pandemic and more toward independent care and adult living communities.”

Dodge attributes the rest of health care construction (about 40 percent) to inpatient hospitals.

“We’ve seen a huge underinvestment in hospitals over the last decade,” she says. “The COVID-19 pandemic exposed our limitations on surge capacity and really caused a revival of interest in renovating and building new hospitals.”

According to Martin, an aging cohort of Baby Boomers will drive steady demand for hospitals in the coming years.

“Our current forecast puts health care at a plus-10 percent this year, and then another 11 [percent] in 2024,” she says.

• Education. This is another construction subsector Dodge projects to grow this year. The firm expects education starts to grow 13 percent in 2023 and by another 5 percent in 2024.

“The strongest segment within education construction within the first quarter of this year was laboratory construction,” Martin says. “That was up about 30 percent from year-ago levels.”

The surge in laboratories is a byproduct of the pandemic, she adds.