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Dive brief:
- Even as delays in some megaprojects have caused jitters in construction, real job losses fell 23.7% in July, according to the Cincinnati-based. ConstructConnect’s latest project stress indexa measure of construction projects that have been stopped, abandoned or have a delayed bid date.
- Backlog activity was down 6.8%, while stalled work also slowed by 10.6%. Overall, the project stress index fell 14.2% in July.
- “Project owners are more convinced than ever that the Federal Reserve is destined to cut interest rates sharply and in the immediate future,” said Michael Guckes, chief economist at ConstructConnect. “If being convinced that holding on just a few more weeks or months could make the difference between a project being a success or a failure, it makes sense for developers to take even a brief wait-and-see approach rather than giving up projects just before conditions can improve.”
Diving knowledge:
Project abandonments fell in July in one of the largest monthly declines on record the expected interest rate cut, according to ConstructConnect.
Pending private projects slowed 20% year over year. On the other hand, the activity of abandoning private projects fell by 14.1%, according to the data.
But until the Fed actually cuts rates, the relatively high cost of borrowing will continue to weigh on the pace of construction projects, especially in the private sector.
For example, Philadelphia-based real estate developer Shift Capital recently paused conversion work on the Beury Building in North Philadelphia. lender financing problems. Brian Murray, CEO of Shift Capital he told the Philly Voice that high interest rates are making banks nervous about committing to certain construction projects.
The developer planned to convert the building into a Marriott hotel. Marriott International, the Bethesda, Maryland-based hospitality company, recently prioritized transformation projects on new construction as a response to the high costs and complex financing involved in the construction of new buildings.
On the public sector side, stalled projects declined by 3.8% year-over-year, according to ConstructConnect, reflecting the relative strength these projects have maintained due to readily available public funding, although construction with financing private has had problems.
