Abandonments tick down, but more builds are being mothballed

Dive Brief:

  • Project abandonments ticked down 6.7% over the past month, according to Cincinnati-based ConstructConnect’s Project Stress Index, a measure of construction projects that have been paused, abandoned or have a delayed bid date.
  • Delayed bid activity inched lower 0.4%, but work put on hold increased 10.1%. Overall, the project stress index ticked up 0.2% over the past month.
  • “We traded a more severe form of stress for a lesser form of stress,” said Michael Guckes, senior economist at ConstructConnect, referring to on-hold activity outpacing abandonments. “[This] is a positive. We would rather see more on-holds than abandonments.”

Dive Insight:

Projects put on hold on the public side, which includes infrastructure work, dropped 10.6% compared to the same week a year ago, according to ConstructConnect.

Despite the drop, the American Clean Power Association released a report Tuesday that said clean power installations are falling behind on their expected start dates, according to Reuters.

On the private side, projects put on hold increased 124% compared to the same week in 2023, said Guckes.

For example, developers of District Detroit, a $1.5 billion mixed-use project in downtown Detroit, recently announced a construction delay due to the current lending environment for office projects.

Abandonment rate dips

Guckes said abandonments fell in both the public and private sectors especially over the last three weeks. For public projects specifically, the abandonment reading is now lower than at any time since late January, he added.

However, despite this positive trend over the past month, public abandoned projects still remain 22.8% higher compared to the same week a year ago. Private project abandonments also ticked up 5.6% compared to the same period a year ago.

“For this reason, it has been harder for us to be excited about the latest decline in abandonment activity,” said Guckes. “Private sector stress conditions still have a long way to fall if they are going to return to where they were before interest rates began moving higher.”

Private sector abandonment activity still remains 36% above its 2021 baseline level, according to the ConstructConnect data. In comparison, the public sector activity reading was 7% above its 2021 baseline.

“After seeing some disconnect in the behavior of public and private sector abandoned projects in 2023, it appears that abandonment trends are once again converging as public sector abandonment stress rises at a faster pace than its private-sector counterpart in 2024,” said Guckes. “The growing acceptance that interest rates are going to stay higher for longer will be a hurdle that challenges all project types in 2024.”

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