Construction Lending: Predictions and Trends

It’s safe to say that everyone—the real estate industry included—was ready to put the uncertainty and risk associated with the latter half of 2020 behind them and get a fresh start in 2021. The takeaway from construction industry experts looking ahead to the coming months is cautiously optimistic as the market begins to rebound from the large-scale shutdown last year.

Chief economists at the Associated Builders and Contractors, estimates that the U.S. economy collectively shrunk by about 4%-5% in 2020, but feels that things are primed for a robust start to the year. The reasoning behind this hopeful outlook is partially attributable to the growing availability of vaccinations, but more importantly due to fundamental shifts in markets and processes that will result in more broad-based development activity throughout 2021.

Just take it from Tom Stringer, who is the managing director for site selection and business incentives at professional services firm BDO, who is tasked with locating viable development locations for corporate clientele looking to construct new facilities and offices: “Site selection tends to be a leading indicator in the economy that businesses are starting to think about capital investments, and our phones have been ringing, we’re going to be busy.” He isn’t alone in this sentiment. According to post-election statistics compiled by Deloitte of engineering and construction managers, over 70% of respondents that were polled characterized the business outlook for the upcoming year to be ‘very positive.’ Industry insiders believe there is a significant amount of pent-up demand that is contributing to the anticipated uptick in construction activity.

Here are some key trends and predictions for the construction lending sector in 2021 to give you a better insight on the environment so you can plan your investment strategy accordingly.

Emphasis on Warehouses& Decentralization

Corporate clients are expressing increasing interest in expanding office spaces in tertiary markets away from where their headquarters in more urban regions are concentrated. Additionally, they are seeking to construct manufacturing and distribution structures in order to help address some of the vulnerabilities the pandemic highlighted in their supply chains. The exponential growth of the e-commerce business model has also contributed to the expected uptick of construction activity on the horizon. The most apparent change resulting from this trend has been an increase in warehouse and distribution facilities to meet the demands associated with the rise in internet shopping.

Environmental Concerns

Data center and utility-scale solar center construction projects are predicted to be top-growth industries for the construction market. The appeal of these projects is growing as renewable energy sources are becoming more economically viable alternatives as compared to any emergent electricity capacity premised on fossil fuels. Construction firms are also facing increased pressure from consumers and regulatory entities alike to focus on their environmental services—with several businesses setting goals to become carbon neutral or carbon negative in the near future. Numerous experts expect this trend to continue well past 2021, as construction companies that incorporate building standards that support green initiatives and make sustainable efforts for their clients are primed to thrive in an increasingly environmentally focused culture.

If you are looking to get into the construction lending market, Express Capital Financing is here to help! We provide fast capital for real estate investors looking to close in as little as a few days! Reach out to our team today to learn more about how you can qualify for a construction loan through Express Capital Financing.