Credit crunch plagues construction industry


The American Institute of Architects (AIA) released a comprehensive report which concludes that the major obstacle holding back job creation in the United States  is the persistent lack of construction financing, despite record low interest rates.

This report should lay to rest any doubt about what is a key source for holding back job creation in the United States,’ said Kermit Baker, chief economist of the AIA. “It is the lack of financing especially to the design and construction sector, which accounts for $1 in $9 of U.S. Gross Domestic Product.”

Relying on data compiled by McGraw-Hill Construction and Reed Construction Data, the report found that:

* The share of projects stalled due to financing problems through August 2011 has almost doubled since 2008;

* One-in-five stalled projects are directly resulting from financing problems;\

* Financing problems account for a higher share of stalled projects in the education and multi-family sector;

* More than 25 percent of projects reported as stalled due to the credit crunch could qualify for LEED, Green Globes or other green certification status;

* Financing issues are less of a factor holding back projects in the manufacturing, private healthcare and retail environments.

“Whatever, the reason – be it over-regulation, the threat of a double-dip recession or the reluctance to have too many loans on the books, lenders are just not lending to a major job-producing sector of the American economy,” Baker noted. “Until more credit is extended, the potential of non-residential construction to promote greater levels of economic growth will not be realized.”    Read More.


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