Construction Starts Falling Rapidly Amid Financing Constraints

Construction Starts Falling Rapidly Amid Financing Constraints

 

The state of the construction industry in the first half of 2023 is mostly positive, with more normal pricing for materials and increased overall demand, especially from publicly funded projects. However, the sector is facing challenges in hiring and wages, and it is experiencing a slowdown. According to a report from JLL which reported a rapid decline in construction starts in Q2, as financing constraints impacted the previously hot market.

 

Despite these challenges, there are some positive factors such as strong infrastructure and nonbuilding demand, which have stabilized construction backlogs and architectural billings in the first half of the year. This resilience is providing some support against the softening market.

 

The report predicts that construction starts will continue to decline throughout 2024. It also notes that different sectors within the construction industry will experience varying levels of activity, with specialization and complexity management playing crucial roles in the success of contractors and regions.

The report forecasts that total construction spending will increase by approximately 6% year-over-year, mainly due to federal support. It is important to note that overall industry sentiment remains positive, as consumer spending and the labor market continue to outperform expectations.

 

JLL emphasizes the need for talent retention strategies, as job openings remain high and the industry's unemployment rate is unusually low. Wages have increased by 17% since January 2020 nationally, and with just 4% unemployment and 374,000 job openings, addressing the current pipeline is still a top priority. The report expects wages to continue to rise in the coming months, with a total year-over-year growth of 5% to 7%.

 

In terms of materials costs, finished goods prices have consistently exceeded historical levels, and lead times have remained high in the first half of 2023. The demand for data centers and electrification is outpacing the capacity of mechanical, electrical, and plumbing services.

 

Inventory and predictability have returned to normal levels, but prices for steel, concrete, glass, and plastic products are still higher than historical averages. However, firms have been able to manage total costs well, with margins facing less pressure from materials. Total costs have stabilized, and in the first half of the year, they have experienced the slowest growth and even some declines since the immediate aftermath of the COVID-19 pandemic.

 

Building construction starts have significantly declined, leading to a forecasted contraction of active build construction by one-fifth at the start of 2024. However, nonbuilding construction and select building sectors are expected to maintain a healthy industry. Please reach out to me directly if you are looking for private financing for construction and development projects.

 

If you are in need of an experienced commercial real estate broker I can be reached at 281-222-0433, or you can visit here to schedule a consultation: https://calendly.com/vikingenterprise

 

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#Commercial Real Estate Broker #Commercial Leasing #Commercial Lending #Structured Finance #Commercial Sales #Commercial Real Estate Investment #Commercial Real Estate Development #eXp Commercial – Viking Enterprise Team #Agent Attraction

If you are in need of an experienced commercial real estate broker I can be reached at 281-222-0433, or you can visit here to schedule a consultation: https://calendly.com/vikingenterprise

https://www.houstonrealestatebrokerage.com/

https://houstoncommercialmortgage.com/

https://www.houstonrealestatebrokerage.com/

https://houstoncommercialmortgage.com/

https://www.tenantbase.com/advisors/bill-rapp/

https://www.billrapponline.com/

https://doctorvideo.billrapponline.com/

https://veteransvideo.billrapponline.com/

https://mortgageviking.billrapponline.com/

https://fha203h.billrapponline.com/

https://renovationvideo.billrapponline.com/

#Commercial Real Estate Broker #Commercial Leasing #Commercial Lending #Structured Finance #Commercial Sales #Commercial Real Estate Investment #Commercial Real Estate Development #eXp Commercial – Viking Enterprise Team #Agent Attraction