Beyond the Build

Construction Trends

Taking Away the Punch Bowl?

If one is not careful, it can be easy to get lost in your own bubble.

While we are in the construction business–service providers–I make a conscious effort to look beyond securing new projects. After all, if there is no capital or product demand, it usually doesn’t matter how hard we work to get new business. It’s even worse when we get started and have to chase money owed. That’s why a couple of weeks ago, I attended a CRE function to discuss the 2017 forecast for our financial and CRE world.

After that meeting, a few of the things on my radar:

  • There is some concern over the end of the current cycle. Can the US economy continue to grow in light of rising interest rates?
  • It’s a balancing act. While there still may be an abundance of capital, we are seeing increasing regulatory scrutiny. There has been more soft underwriting to increase the yield on paper.
  • Decreased regulation in lending, which has been promised with the current administration, can increase capital market volatility.
  • We are seeing new property types coming to market, but still have an oversupply of other types.

I think this quote from October 1955 still rings true.

“The Federal Reserve, as one writer put it, after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl bowl removed just as the party is warming up.” William McChesney, then chairman of the Fed.

Having said all of this, I’m thinking at 30,000 feet. In the end, I also think we can over analyze, and this is dangerous as well.

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Merrill Stewart Jr.

Merrill Stewart is Founder and CEO of The Stewart/Perry Company, a commercial building contractor based in Birmingham.