Favorable Financing Creating Construction Tailwind as Labor Shortage Continues

More favorable interest rates and materials prices are colliding with an ongoing labor shortage, bringing a mix of challenges and opportunities for construction project owners, according to DPR Construction’s latest Market Conditions Report. Labor shortages are a critical issue with 77% of contractors reporting increased difficulty in filling skilled craft positions compared to a year ago. While post-election economic policies are still being determined, lower interest rates and inflation are opening financing options for construction project owners.

“Factors like interest rates and inflation will continue to play a significant role in determining financing options for construction projects,” said Matt Murphy, DPR’s core markets leader. “That’s why we believe it’s crucial to plan ahead for variability, ensuring stakeholders’ budgets are flexible enough to handle any surprises. It’s a good time for owners to consider various financing options, including traditional loans, public funding, or private investments, to secure the best terms for projects.”

For example, the Life Sciences sector is experiencing robust growth, highlighted by increased demand for specialized facilities, including research labs, biomanufacturing plants and innovation hubs. This momentum is expected to continue into 2025 and high demand for the limited skilled labor to execute these types of large-scale technical projects requires planning as early as possible to maintain schedules.

Other key market sector trends noted in the report include:

• Advanced technology – The advanced manufacturing sector is expanding as industries like semiconductors, automotive and energy scale up to meet the demand for domestically produced high-tech products. The mission critical sector, encompassing data centers and cloud services, continues to grow alongside the rising need for digital infrastructure. DPR leaders are noticing a surge in data center development.
• Commercial – With a more favorable financing environment, developers can examine expanding their portfolios into sectors where there is high demand for their vacant spaces such as manufacturing, data centers and student housing.
• Healthcare – Lower interest rates are expected to enhance access to capital and refinancing options in the healthcare sector by 2025. As the healthcare financing landscape shows positive changes, DPR leaders believe now is time for owners to get in front of potential challenges by creating strategic long-term capital investment plans.
• Higher education – DPR leaders are seeing a positive spending projections allowing for more student housing projects, technical interdisciplinary research facilities, modernization of stadiums and creating a space for new technologies and advancements in personalized learning for students.

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