Will Banking Sector Uncertainty Cause a Slowdown in New Construction?
New-construction projects are becoming more expensive to finance, and some builders worry the work may not be worth the payoff
April 18, 2023
Image: Christian Delbert / stock.adobe.com
Builders are anticipating a slowdown in construction activity over the coming months as financing costs for developers soar. While elevated interest rates have made construction less profitable since the final quarter of 2022, recent banking turmoil is increasing headwinds for residential developers.
As lending standards tightened, construction backlog decreased to 8.7 months in March, its lowest level since August 2022, Construction Dive reports.
“Increased financing costs remain a concern around construction.” said [Nicolas] McNamara. “Developers are challenged with projects that simply are not penciling due to increased rates.”
Recent uncertainty in the banking industry is compounding that issue for construction firms, he said.
