Financing Projects In The Covid Era | Construction Financing |


Financing Projects In The Covid Era

Financing Projects in the COVID ERA

It is no surprise that there are fewer new construction projects now than at the onset of the COVID-19 pandemic. According to Dodge Data & Analytics, residential construction project starts were down 15% when comparing January through July of 2019 to 2020. The non-residential industry faced a grimmer outlook, with a decline of 25% in construction starts. 

However, with the economy slowly opening back up, financial institutions and lenders have a renewed sense of confidence, which means funding new equipment and projects in the construction industry. Projects previously on hold are now slated to finish, and new projects are getting ready to get started. Lenders are now anxious to get to lending, so we should see an upswing in the construction industry as they quickly attempt to get through the backlog. 

“Lenders want to make loans while they can; there’s a feeling that lending could tighten at any time, so it’s a make hay while the sun shines mentality,” according to Nikole D Garcia, an attorney in the real estate and lending practice in Tampa, Florida. At the onset of the Covid-19 pandemic, lenders closed their businesses and stopped lending, but they are now back and ready to finance viable projects. 

Despite the return of lending, it isn’t business as usual for many in the construction industry. COVID-19 brought with it many hard lessons, one such investing intelligently. While many investors are no longer investing as heavily into hospitality, retail, restaurants and offices, there has been a large increase in funding for online commerce, medical research and nonurban housing.

“New deals are getting done in data centers, life sciences, industrial distribution centers and multifamily,” said RCLCO’s Mammen. “The percentage of overall construction activity in those four categories is high, but you’re seeing reduced activity overall.” So, while it is possible to get funding for some sectors such as retail or restaurants, it is considerably easier to find funding for sectors that are booming in this new era.

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