Borrowing Costs, Higher Prices, Cause More Delayed, Abandoned Projects
Date Posted: July 22, 2025
Posted In: Discussion,
From Construction Dive: In a construction market hungry for clarity, even a hint of positivity could unlock building momentum.
That’s the hope among contractors who say the path forward in nonresidential construction has grown murky. Although planning activity ticked up in June, uncertainty around interest rates continues to hamstring the number of groundbreakings.
“Many commercial builders have developed a wait-and-see approach to planning and starting new projects until borrowing costs come down,” said Brian Schmidt, senior director of economic policy and analytics at the American Cement Association, a Washington, D.C.-based trade group. “Going into 2025, most developers expected interest rates to continue to decline throughout the year. Now tariffs have introduced new uncertainty for both material price escalation concerns and the pace at which interest rates will come down.”
Delayed expectations have already shaken the project pipeline. ConstructConnect, a Cincinnati-based construction data provider, noted a spike in on-hold and canceled projects, according to its Project Stress Index.
“We have seen surges in the number of delayed, on-hold and abandoned projects when generally held interest rate expectations no longer align with reality,” said Michael Guckes, chief economist at ConstructConnect. “In both late 2023 and even more so in late 2024, the industry realized that elevated inflation would keep rates higher for longer than previously expected.”
Even contractors with strong backlogs report growing concern about the future. Many fear for a drop-off once their current workload dries up, said Anirban Basu, chief economist at the Associated Builders and Contractors.