• Construction Work Backlog the Longest Since 2019, but Higher Interest Rates Could Slow New Projects

    The work backlog at construction and engineering firms in the United States was the longest in about 3 1/2 years in December, a sign that contractors could remain in demand even in the event of a recession in 2023.

    The national construction backlog remained at 9.2 months in December, the same level as the previous month and one month higher than in December 2021, according to Washington, D.C.-based trade group Associated Builders and Contractors.

    It’s the longest average wait time for the start of construction since the second quarter of 2019, the group said. The figures are based on a survey of ABC members conducted from Dec. 20 to Jan. 5.

    The infrastructure segment of the construction industry has the longest average wait at 10 months, according to the survey, followed by commercial and institutional projects at 9.4 months and heavy industrial projects at 8.2 months.

    Contractors also said in the survey that their expectations for sales and profit growth this year increased in December compared to November.

    “Contractors enter the new year with plenty of optimism,” ABC’s chief economist, Anirban Basu, said in a news release. “Even if the economy were to enter recession this year, contractors would likely be insulated from significant harm.”

    New Construction Projects

    New construction projects launched in December or early this month include a $245 million apartment complex in Atlanta steered by general contractor Brasfield & Gorrie and Granite Construction’s $174 million project to rebuild runways at Los Angeles International Airport.

    Still, higher interest rates portend a possible slowdown, and some contractors have reported a higher rate of project postponements, Basu said.

    “Anecdotal evidence suggests that financing commercial real estate projects is more difficult, due in part to recession predictions,” said Basu.

    Basu added that “the general increase in the cost of capital has also jeopardized many projects.”

    ABC members are large construction firms such as Balfour Beatty and Hensel Phelps, small construction firms and specialty contractors, including electricians, waterproofing experts and glass-installation providers.

    Source: www.CoStar.com