Increased Interest in Modular Construction Amid Financing Challenges

Despite mounting financing issues, many contractors are witnessing a steady pace of new construction in their respective markets. In some cases, developers are turning to modular construction as a solution to bypass cumbersome banking requirements.

Kelley Barcuch, a project consultant based in Arlington, Texas, for Technology Construction Performance, a project management firm, reports that construction activity in Texas continues to surge. Similarly, Brian Jaubert, a construction superintendent at Gulfstream Plumbing, also operating in the Lone Star State, emphasizes that traditional construction remains robust in Texas.

Even further afield, Matt Poppoff, president of Poppoff, a concrete contractor headquartered in Moxee, Washington, shares that his firm's backlog is at an all-time high. On the opposite coast, Marty Copsey, president, and COO of MacKenzie Contracting, a general contractor based in Lutherville, Maryland, states that his company recently posted its largest backlog in history.

This optimistic outlook is reflected in the Associated Builders and Contractor (ABC) analysis, showing a norm of confidence among contractors throughout the year. Despite a slight decline in ABC's Construction Confidence Index reading for sales and staffing levels in May, both indicators remained well above a score of 50, suggesting expectations for continued growth over the next six months. Additionally, backlog levels in June remained unchanged from the previous year, standing at 8.9 months, indicating a strong pipeline of projects.

However, contractors should be prepared for continued tightening and tension from small and regional banks. Lenders are taking a more conservative approach with individual developers compared to corporate builders, according to John Wolfington, principal of Exceler Building Solutions, a construction company based in Hazelton, Pennsylvania. This cautious stance comes as pressure on U.S. banks increased following the collapse of Silicon Valley Bank and Signature Bank in March, causing uncertainty in financial markets and raising concerns about a potential slowdown in privately financed projects, as highlighted by Anirban Basu, ABC's chief economist.

One such example is Shopoff Realty Investments, which temporarily halted construction on its approximately $550 million Las Vegas Dream Resort in March due to construction financing concerns.