2023 will likely be a challenging year for the commercial construction industry.

Dodge Construction Network forecasts commercial starts to fall 12% in 2023 when adjusted for inflation, led by pullbacks in the warehouse and office sectors. A separate Associated Builders and Contractors analysis also suggests slower nonresidential construction activity in the next year.

To help weather the incoming storm, Dallas-based MYCON General Contractors welcomed Jacob Wadlington as vice president of business development. Wadlington will be responsible for generating commercial construction opportunities, while creating partnerships with clients and industry peers committed to long-term relationships.

Here, Wadlington talks with Construction Dive about his new role, company targets for 2023 and his plans to deal with a recessionary environment next year.

Editor’s note: This interview has been edited for brevity and clarity.

CONSTRUCTION DIVE: What are some targets for MYCON in 2023?

JACOB WADLINGTON: We originally expanded to Nashville and Phoenix to meet the needs of our existing clients, so we can better serve the projects in those regions. This expansion has allowed us to establish ourselves and grow our clientele base in these regions.

Now, we're placing a strong focus on how we can apply MYCON’s construction approach in these markets. 

We are taking what we know from our 35 years of commercial construction experience and adapting it to the needs of our expanded markets to ensure our continued growth.

What is your outlook for commercial construction in 2023?

Real estate investment tends to be a fundamentally secure industry, but I do think there will be a drop or shift in 2023. Commercial construction is being hit in three key ways: cost of capital, cost of construction materials and cost of land.

Labor shortages are also playing a role, but we expect labor shortage to soften somewhat over the next year. We expect land-banked deals that were held up by labor shortages and material cost constraints to shake loose later in the year and begin to level out market trends.

What are some sectors in commercial construction that can weather a slowdown in 2023?

There are three: special projects, grocery and self-storage, and industrial. Our backlog is somewhat evenly spread between commercial, industrial and special projects, with special projects taking a slight lead.

Special projects have seen a slight slowdown, but larger clients are using this lull to renovate and reposition current building assets.

For commercial projects, grocery and self-storage historically hold strong in the face of economic downturns as people move to downsize and turn more to cooking and eating at home rather than eating out.

Lastly, industrial will remain strong, but we will see a shift from larger spec buildings to smaller build-to-suit projects catered to specific clients. 

We are building the same amount of industrial space, but our clients are requesting several smaller buildings within the 200,000 to 500,000-square-foot range rather than a single building totaling nearly 1 million square feet.

Do you see a recession hitting in 2023?

2022 was MYCON’s most successful year to date, and with our current project backlog, we expect 2023 to be an even bigger year for us.

That said, 2023 will be a year of market shifts to adapt to current market trends.

Predicting the future is tough, but with the difficulty of making deals pencil, we expect an increased focus on renovations and additions. 

We may also see more construction activity from end-users with land available to develop, which had been purchased before the pandemic, whether that be raw land or simply additions or renovations to existing assets.