In the wake of 2022’s high inflation rate, the federal government has continued its interest rates hikes for over a year. While officials suggest that this may be the culmination of their efforts for the time being, it is worth noting that the interest rate has climbed a staggering five percentage points over the past year.

This move was intended to stabilize the economy, and it has had some positive effects. By curbing demand, the supply chain and the construction sector have been able to catch up, alleviating the severe shortages experienced during the pandemic.

Both roofing and steel saw significant spikes over the past few seasons, though roofing’s increases were more rooted in the scarcity of materials. At the same time, steel suppliers tripled prices in a six-month span due to high demand.

With few alternatives for construction projects, steel prices drove up construction costs significantly. Fortunately, steel prices have now stabilized, bringing more certainty to the market–albeit at a significantly higher level than in 2021.

On another front, major roofing manufacturers have established redundant suppliers for key materials, creating greater reliability of materials and stabilized pricing, although still higher than two years ago. Cement restrictions have subsided in general, and precast and concrete materials are now more readily available as well.

Electrical components remain a challenge, particularly with switchgear and panel boards. Increased demand, driven by the occupancy of previously vacant spaces and the surge in speculative buildings, has led to extended lead times of 12 to 14 months for many electrical components.

Alternative suppliers and custom manufacturers may be able to alleviate some of that demand, but clients are being advised to pre-order electrical components in order to meet construction deadlines.

With interest rates high and tightened capital, the market for speculative projects has dwindled. The industry is now more focused on build-to-suit developments.

While there are still opportunities, there are definitely fewer projects on the boards than just a couple of years ago. Notable players in the e-commerce space have scaled back, while others have accelerated to catch up to industry leaders.

Additionally, there is an emerging trend in battery plants and electric vehicle charging facilities, along with a continued demand for data centers.

Overall, high interest rates have slowed large-scale construction projects, particularly speculative development, however build-to-suit and some speculative development projects continue to exist where market conditions can tolerate the supply chain and interest rate challenges.