Contractors across the U.S. are cautiously optimistic after the Federal Reserve cut its benchmark interest rate by 25 basis points on Wednesday — the first reduction in years. While firms say the move provides a meaningful confidence boost and may help certain projects move forward, many agree it won’t spark a broad construction surge without further cuts.
The rate adjustment comes as nonresidential construction spending remains weak, down 1.1% year-over-year in July, according to the most recent federal data. While data centers continue to thrive, many privately financed commercial projects have stalled under higher borrowing costs and uncertain economic conditions.
For some contractors, the decision is a much-needed nudge.
“It could finally wake up the bear from its slumber,” said Scott Lyons, commercial core market leader at Redwood City, California-based DPR Construction.
Lyons noted that mixed-use, hospitality, and high-end office developments could now see movement, particularly as firms also report an uptick in tenant improvement work heading into the fall. Still, he emphasized that one rate cut isn’t enough to “reset the market.”
“Although a cut of 25 basis points is a good start, we don’t believe this first cut will be enough to start the engine,” Lyons told Construction Dive. “We believe it will take a series of cuts in order to get some deal momentum underway.”
Other industry leaders echoed the sentiment.
Granger Hassmann, regional president at Adolfson & Peterson, said the cut is welcome but unlikely to cause an immediate turnaround.
“From where we stand, it might help projects that were on the edge of being financially viable, but one small rate cut on its own probably won’t lead to a big global shift just yet,” Hassmann said. “If this is the start of a trend, though, we could start to see more activity and movement in privately funded projects.”
Robert Brown, CEO of GCM Contracting Solutions in Fort Myers, Florida, stressed that projects already well-prepared — with capital secured, permits advanced, and delivery partners in place — could now push forward.
“Rate cuts help at the margins, but in our world it’s not a magic switch,” Brown said. “Owners who were already within reach may use this as the moment to green light.”
Even with cheaper financing, contractors warn that other challenges remain.
“The labor market is the wild card,” Lyons said, noting that rising wages and worker shortages could erode any savings developers gain from lower borrowing costs.
In Florida, where many builders are already busy, some worry about future backlogs. Peter Dyga, president and CEO of Associated Builders and Contractors Florida East Coast Chapter, said the cut was overdue and could help support long-term project pipelines.
“I think this rate cut is just going to do wonders, certainly for the economy,” Dyga said. “Probably not as big a cut as we like, but we know how they can stack up over time in terms of the reductions.”
Contractors now have their eyes on the Fed’s next meetings at the end of October and early December, where additional rate cuts may be on the table.
“A cut often has a psychological impact. It boosts confidence,” Brown added. “Even if the math only changes slightly, it can make owners feel better about taking the plunge. That’s important in construction, because sentiment and timing drive just as much as numbers on a spreadsheet.”
Until then, firms expect modest momentum, particularly in tenant improvements, select commercial projects, and capital-ready developments. But many agree that only a sustained easing cycle will meaningfully revive construction activity.
Originally reported by Sebastian Obando in Construction Dive.
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