More Construction Projects Are Being Delayed Or Abandoned Entirely
The number of U.S. construction projects that are being abandoned, paused or seeing a delayed bid date was up 1.7% over the last month for the week ended March 2, according to ConstructConnect.
Fourteen percent more public projects, which includes infrastructure work, are on hold compared to the same week in 2023, ConstructConnect reports. On the private side, 9% more projects are on hold.
Perhaps most alarmingly, the number of abandoned public projects jumped 70% compared to the same week in 2023.
The company's Project Stress Index closed the week at 131.1. The index tracks the pace at which U.S. commercial construction projects have experienced a bid date delay, have been placed on hold temporarily or have been abandoned altogether. Currently, 100 is equal to the average of the index's weekly values in 2021.
Projects can be delayed by several factors, including materials shipment timelines, labor issues, financing concerns or weather. Many of these factors have converged in recent months, with elevated interest rates meeting shipping logjams and winter storms.
Overall depression in the commercial real estate sector is a major culprit for delayed projects, ConstructConnect Senior Economist Michael Guckes told Construction Dive.
“I want to see loan officer surveys point to a greater willingness to make commercial real estate loans once again, and for commercial and industrial lending and commercial real estate credit delinquency metrics to stop rising since hitting lows in 2022,” Guckes told the publication. “The pressure will come off the construction industry once existing commercial real estate price strength renews.”
The week ending March 2 represented the third in a row in which the index moved up modestly. Delayed bid activity for the week was up by 0.2%, while on-hold and abandoned activity increased by 3.4% and 1.7%, respectively, from their week-ago levels.
“At some point the market needs to rebalance and find its steady state,” Guckes told Construction Dive. “When this happens I believe the PSI trend will return to a generally horizontal orientation once again.”
Guckes added, however, that elevated interest rates will mean slow progress in that regard.
