AIA tracks spike in projects idled by financing issues

Sources: McGraw-Hill Construction, New York; American Institute of Architects, Washington, D.C.

Drawing on McGraw-Hill Construction Dodge data, a new AIA report finds the share of projects—led by those in the education and multifamily sectors—stalled due to financing problems has nearly doubled since 2008. “Stalled Construction Projects and Financing” correlates the challenges of construction financing to the incidence of stalled projects in the U.S.

“The increased difficulties construction projects have experienced in securing financing is of real concern to our customers, and this report highlights its extent and impact on the overall U.S. economy and on jobs,” says McGraw-Hill Construction President Keith Fox.

“A July 2011 AIA survey of a nationally representative panel of architecture firms discovered that almost 70 percent had one or more projects at that time where work was stalled. There were a variety of reasons projects were not moving forward, including general client nervousness, a generally weak economy, and an insufficient budget for the project as currently conceived. However, financing problems topped the list,” AIA Economics and Market Research, and Government and Community Relations staff note in their report.

“Difficulties in securing financing are widespread,” they add. “Architecture firms report that residential, commercial and institutional construction projects all are subject to serious financing problems. And it is not only large, complex projects that are at risk … Projects with estimated construction costs of under $5 million account for almost half of all projects stalled due to lack of financing, even in the commercial and institutional categories. Only 15 percent of stalled projects have estimated construction costs in excess of $25 million.”