Summit Steel Buildings Says Prospects Are Good for a Strong Construction Market in 2023

It’s at this time of year when we see quite a few articles and commentaries on what trends we can expect to emerge for the new year. These forecasts can be interesting and can pique people’s curiosity about what is on the horizon. It’s also a fun time to look back at the year that was, and debate the hits and misses that industry experts rolled out at the beginning. Everything seems to have a pattern.

While we may write off the insignificant projections, some outlooks can be important. No one can predict the future, but economies run in cycles and financial experts invest a great deal of their time trying to understand what may or may not happen over the next 12 months.

It’s nice to have friends in all places…

Recently, an industry acquaintance sent me a forecast for the construction economy. While our Summit Steel Buildings leadership team usually starts strategy planning well before the turn of the New Year, this article contained some interesting points and important questions about where our industry is going in 2023, especially as we reach the precipice of an expected recessionary drop.

No one questions that the North American economy is going to take a hit. There’s a strong prediction that consumer spending is going to drop, retail and service-based businesses are expected to cut costs, putting many people at risk of layoffs or employment reductions. It’s a regrettable situation, particularly impacted by the ongoing effects of a 40-year high in inflation.

There have been signs

Economic theory explains it all. At the top of the business cycle, when the economy has fully expanded, workers and raw materials become scarce and production maxes out, slowing growth. We’ve seen this happening throughout the construction industry for the last two years. Shortage of workers, especially in skilled trades is pronounced.

A shortage of workers and raw materials leads to drops in production and puts upward pressure on prices. In response, interest rates increase, making it more difficult to borrow money. People spend less, invest less and begin to cut back in other areas as they become concerned for their financial security.

Don’t worry, it’s going to get better

Fortunately, the news is not all doom and gloom. The road to recovery always goes through materials and industrials. While the consumer side of the economy is going to experience rough days ahead, construction spending will remain strong. A backlog on new building orders means project activity will continue, providing employment and an injection of money into the economy that fuels recovery.

Material and resource pricing has increased, but those inventories were purchased well in advance, at a time when prices were lower. Clients are locked into their original prices and won’t be affected; highlighting why it’s a good reason to book your projects early and save on overall building costs. Not all buildings materials are as sensitive to inflation, so adequate supply remains (such as steel, glass, aluminum and insulation) to propel new commercial construction.

The recent disruption to the global supply chain is diminishing. Manufacturing and other wholesale industries are implementing the lessons learned to fix and minimize any future effects of supply disruptions and inflation. Companies have already learned to do more with less and to communicate faster and more openly with clients.

Another positive for the construction industry? During recession, governments turn to one of their favorite economic levers: spending. Government-supported projects absorb some of the increased pricing on raw materials (steel, concrete, windows, copper piping, utilities, etc.). Companies can also access increased capital financing through government programs. More projects lead to more labour demand, high-paying jobs and a nice injection of secondary spending at retail (thank you, multiplier effect).

When government spending and investment, two critical components of GDP, have been activated, increased production helps improve supply, ultimately lowering prices and reducing the effects of inflation. Along with the decrease in unemployment in the trades, we then enter back into the recovery portion of the business cycle.

The necessity of doing more with less

Don’t get me wrong, we’re just at the beginning of our weakening cycle. Fortunately, as the backbone of the economy, construction and the trades remain strong with prospects for continued growth from the backlog of orders coming out of pandemic doldrums. Together we may face the prospect of recession, but it’s going to be unlike any we’ve experienced before. The economic downturn is forecasted to be shorter in duration and smaller in scale than previous recessions.

Obstacles and challenges provide opportunities for innovation and improvement. The pandemic-related disruption has taught the construction industry more than a few lessons to make the supply chain run a little better. Specifically, implementing technology and making smart decisions can sometimes offset the effects of inflation, as can cutting unnecessary costs and operating more efficiently to reduce waste. People are working smarter and becoming more productive with fewer resources.

Summit Steel Buildings had already implemented many of these lessons before the pandemic. By working directly with our manufacturing centres to streamline production and reduce shipping costs, we have ensured a steady delivery of required components and materials. We have implemented new technologies to automate processes and monitor inventory, produce what is needed and avoid waste. By planning ahead and working closely with clients, we can focus on delivering value, effective cost management and ensure a higher standard of delivery.

Summit Steel Buildings also sees the importance of focusing on the marketplace. With an immense shortage of warehousing in Canada, and in places like Toronto and Vancouver in particular, we provide an effective way for industrial manufacturers and wholesalers to enhance their value proposition, increase potential for growth and employ more people. This critical need for logistics construction will remain steady throughout any recession. It’s another reason to be optimistic any recession will be short and constrained.

Read why it’s much better to build your own warehouse than to rent and the reasons why warehousing space has never been more critical.

A positive outlook

At a time when many experts are making their forecasts for the year ahead, we remain vigilant that intelligent, lean business practices and maximizing resources to benefit our clients are the best ways to proceed. Staying calm and steady while anticipating the needs of our clients and putting them at the center of what we do each day has been a foundation for our company and will continue to be.

While recessionary clouds have been forming, the storm hasn’t hit us yet. At Summit Steel Buildings, we’re relying on our business experience in weathering previous recessions to remain strong and to continue providing the best commercial and industrial buildings to our clients. It’s our mission to provide the best pre-engineered steel building solutions to suit any purpose at affordable prices with design and engineering that will withstand decades of use.

We look forward to speaking with you and to learn about how we can custom tailor a building investment that will maximize the potential for your operation. Visit www.summitsteelbuildings.com or contact us today at 877-417-8335 for a free quote and to get started on initial drawings.

About Summit Steel Buildings

Summit Steel Buildings is a premier manufacturing and construction supplier in the pre-engineered building industry. Their engineering team provides full stamped engineered drawings for permit and construction across North America. They fabricate their commercial and industrial steel buildings throughout multiple factories strategically located around the continent to ensure they are able to deliver inland and to any port on the east and west coasts. Please visit www.summitsteelbuildings.com.