b'Construction pros expect interestMinneapolis-based contractor. He noted many projects were shelved during the interest rate hikes due to high rate cut to spur new work capital costs, but a sustained decrease in rates could bring developers back to the table. I dont believe the impact is going to be felt immediately but it is a good first step, said Pender. I see construction starts ramping up in the first quarter and the second quarter of next year. Construction executives welcomed the Federal Reserves 0.5 percentage point rate cut announced onOwners and developers added more projects to the planning Wednesday, saying the move is the start of broaderqueue in August, expecting stronger market conditions next easing likely to spur new project starts.year, according to Dodge Construction Network. The Dodge Momentum Index, a benchmark that measures If we have a series of rate cuts over the next three to sixnonresidential construction planning, ticked up 2.9% in months, that will likely start to show up in lowerAugust with most nonresidential sectors posting growth. construction [loan] rates and greater availability of equity investment toward the end of this year and into nextImpact limited by labor and material costs year, said John Sullivan, chair of the U.S. real estateThe broader economic environment, including labor practice at DLA Piper, a London-based law firm. Asshortages and material costs, will also affect how quickly rates come down, borrowing costs will also come downthe rate cut translates into increased construction for many projects and there will be more real estateactivity. For example, Johnson highlighted the ongoing investment and construction activity.strength in sectors such as data centers and manufacturing, which have largely remained resilient despite higher rates. The Feds move follows 11 rate hikes starting in early 2022 to combat soaring inflation. Despite an overallThe pace of groundbreakings in those sectors has already positive reaction to the cut, construction executives saidplaced a great strain on resources throughout the industry, the full impact of lower rates will take time to materializesaid Johnson. Therefore, as more projects in different as financing terms and project planning processes catchsectors hit the queue, competition for labor and up to the new environment.materials will only intensify. In other words, while lower rates are encouraging forIncreased demand in the coming years in the multifamily construction activity, its only part of the equation, saidand light industrial [sectors] will only add to an already Cory Moore, CEO of Big-D Cos., a Salt Lake City-basedstretched demand for workforce, said Johnson. Therefore, general contractor.it will be important to keep an eye on quality of labor as well as cost of labor. The interest rate cut is generally good news for the construction industry, as it reduces borrowing costs andNevertheless, many leading real estate investors think can encourage more investment in new projects, saidvalues for some asset classes are at or near the bottom, said Moore. That said, to really move the needle, loan-to- Sullivan. That means lower interest rates will be value ratios will need to improve alongside the rate cut toanother added tailwind for increased investment and make financing even more attractive.construction activity, though it might not lead to an immediate boom. Impact on project pipelines Construction executives agree construction activity tendsLower interest rates are not a panacea, but they make to be a lagging indicator in the economy. So, while themany projects more economic and can drive positive rate cut is a welcome relief, executives caution that thesentiment in the market, said Sullivan. It often takes time industrys long project cycles mean any uptick in activityfor a reduction in the federal funds rate to translate into a will be gradual.reduction in construction loan rates, but positive sentiment may drive investment forward sooner. With rate decreases, we expect demand for new projects to begin to increase gradually throughout 2025, said Anthony Johnson, president of the industrial businessBy: Sebastian Obandounit at Clayco, a Chicago-based construction firm. However, these projects will take time to get through planning and design and start construction in the field. That sentiment was echoed by Will Pender, president of the Gulf States region at Adolfson & Peterson, a 17'