The latest data from ConstructConnect reveals that private construction projects are facing significant delays, with a sharp rise in on-hold activity, while public projects are showing signs of improvement. The Project Stress Index (PSI), which measures construction projects that have been paused, abandoned, or delayed, revealed a 9.7% drop in February from the previous month. However, this improvement was not evenly distributed across sectors, with civil infrastructure work seeing most of the positive change, according to Michael Guckes, chief economist at ConstructConnect.

While civil projects such as infrastructure builds drove much of the decline in project stress, private construction continues to face increasing pressure. On-hold private projects jumped 36.7% year over year, highlighting a growing challenge in the private sector. As a result, the PSI for private projects remains 12.4% above 2021 levels, the baseline year for the index.

“The early months of this year have seen an unusual and even unexpected divergency by sector,” Guckes said in an email to Construction Dive. “For those of us who anticipated the new presidential administration would generate a boost in private business confidence thanks to easing regulations and a drop in taxes, we have yet to see any benefits as measured by the PSI.”

Private Projects Struggling with Delays

While overall abandonment and on-hold activity in construction projects fell by 14.7% and 5.9%, respectively, private projects have experienced a notable surge in delays. The number of private projects put on hold surged by 36.7% from the previous year. At the same time, private abandonments decreased by only 2.4%, offering little relief to a sector already under stress, according to Guckes.

“The numbers are showing a clear gap between private and public sector performance,” Guckes explained. “Private projects are still struggling with delays, while public projects are doing better than expected.”

In contrast, public projects have fared significantly better, with on-hold projects dropping 25.3% and abandonments falling 25.8% compared to February 2024. Guckes pointed out the rarity of such divergence, especially at the beginning of the year, where public projects under a new presidential administration might have been expected to face more funding challenges.

“Such divergence is rarely seen, especially at the beginning of a calendar year,” Guckes said. “This divergence is very interesting as one would think that public projects under the new presidential administration would be at heightened risk of funding losses and cutbacks.”

Rising Uncertainty Among Private Developers

The sharp contrast between public and private project delays suggests that uncertainty within the private sector could be a significant factor in the slowdown. Developers may be hesitant to break ground on new projects due to concerns about economic conditions, regulatory changes, and potential funding issues.

The uncertainty is reflected in the broader construction market, with total construction starts falling by 6% in January, according to data from Dodge Construction Network. Nonresidential building starts, such as office buildings and hotels, saw a steep decline, dipping by 18% in January.

This hesitation among private developers may be contributing to the higher number of on-hold private projects. The lack of clarity on economic conditions, regulatory changes, and market stability could be fueling delays and cancellations, further impacting the private construction sector.

Optimism for the Future

Despite these challenges, Guckes remains optimistic about a potential rebound in private sector activity. He expects private sector confidence to improve later in the year, as businesses adapt to relaxed regulations and potentially more favorable economic conditions.

“Our full-year expectations remain that private work will benefit from more relaxed regulations this year while public projects struggle to find funding,” Guckes said. “This dynamic could lead to an eventual rebound in private sector construction activity.”

Guckes also noted that while public sector projects are currently performing better, the ongoing difficulties in the private sector should not be overlooked. The uncertainty faced by private developers could continue to put pressure on the sector, delaying progress in both residential and nonresidential projects.

However, if regulatory changes and economic conditions stabilize, Guckes believes the private sector will eventually recover, leading to an uptick in construction activity.

Looking Ahead: Construction Market Shifting

The construction industry is at a crossroads, with private and public sectors diverging in terms of project delays and cancellations. While public projects are showing resilience despite potential funding challenges, private projects continue to grapple with delays and uncertainty.

As the year progresses, the key question will be whether private sector confidence improves, driven by regulatory easing and broader economic stabilization. If private developers regain confidence, the construction industry could see a significant rebound in the second half of the year.

Ultimately, the construction sector’s ability to adapt to these challenges and address the growing delays in private projects will determine how well it can navigate a volatile economic landscape and ensure a steady pipeline of new developments moving forward.

Key Takeaways:

• Private construction projects are experiencing a 36.7% year-over-year increase in on-hold activity, indicating significant delays.
• Public projects are performing better, with on-hold and abandonment rates dropping significantly.
• Private sector uncertainty may be contributing to hesitation among developers, as seen in a 6% decline in overall construction starts in January.
• Despite current challenges, experts expect private sector confidence to improve as regulatory changes take effect.

As the year unfolds, the construction industry will be closely watching how these trends evolve and whether private construction can regain momentum in the coming months.

Originally reported by Sebastian Obando in Construction Dive.