Commercial Construction Financing Still Sluggish Amid Improved Housing Market

by / Wednesday, 29 August 2012 / Published in Commercial Construction Financing

Commercial Construction FinancingConstruction Spending Increases Slightly In June

The Commerce Department has reported that construction spending grew by 0.4% in June, after seeing growth rates of 0.9% and 1.4% in April and May respectively. An improved housing market spurred an increase in residential construction, which saw a 1.3% increase in June. However, commercial construction remained stagnant. While growth remains sluggish, these numbers are still better than last year, when new construction projects accounted for just 56 million square feet of space, the lowest level on record since at least 1960.

Investors Hesitant To Break Ground On New Projects

Private developers remain reluctant to invest in new construction products in light of recent recent economic data suggesting ongoing contraction. Additionally, uncertainty about the upcoming presidential election has prompted many investors to postpone new projects until they can assess the post-election economic outlook.

Meanwhile, competition among contractors has driven profit margins down throughout the construction industry. Given these conditions, it is likely that many commercial construction firms will require additional financing to maintain a positive cash flow. In an industry that is regarded as “high risk” by most banks, alternative funding sources can provide construction professionals with the financing they need to keep their businesses afloat.

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