How to Thrive Amidst Rising Interest Rates

In a world where the only constant is change, we are not immune to the financial shifts that influence our clients bottom line. One of the most significant challenges we face in recent times is the rising interest rates on commercial construction projects and remodels. The era of cheap money may be gone, but we built our business during a high interest rate environment in previous decades. We know these rates can be a challenge, but we’ve been here before and we can thrive during these changes.

These rates can wreak havoc on a budget, potentially leading to cost overruns and strained resources. However, rather than succumbing to these challenges, we can adopt proactive strategies to mitigate the impact of rising interest rates and ensure the success of construction projects. While there are many things you can do to reduce the rate impact, here are a few ways we can work together as an industry to combat the rising interest rates on commercial construction projects or remodels. 

  1. : We know that the key to any project's success lies in meticulous planning and budgeting. In an era of rising interest rates, early planning becomes even more crucial. Starting the construction planning process as soon as possible, allows time to secure financing before interest rates rise further. A thorough budget that accounts for potential interest rate increases can help retailers navigate financial uncertainties and maintain their profitability. While every project is different, we can offer historical data on previous similar projects to help you familiarize yourself with current costs.

Moving from the design-bid-build method to a more collaborative approach can allow you to assemble a team dedicated to your project. This can increase accuracy through subcontractor collaboration and trust in the estimating process which can avoid costly surprises in the field during the project. The right team will learn your project and process and be able to replicate the experience on future locations, saving money and time. 

  1. Implement Cost-Saving Measures: To counteract the financial strain of rising interest rates, we often need to implement cost-saving measures throughout construction projects. This may involve value engineering, where we work with architects and subcontractors to identify cost-effective alternatives without compromising the project's quality or functionality. Larger projects can be phased so separate tasks can be priced and financed separately to help eliminate the need for larger contingencies when pricing through a multi-year schedule. Additionally, the owners can look for energy-efficient and sustainable construction practices that not only save money but may also qualify for tax incentives and rebates.
  1. Communication: As we shift to a more collaborative approach, keeping the lines of communication open remains essential. With the online project management tools available today, it’s important to keep them as updated as possible. However, with all the alerts, emails, and texts competing for our attention; there is value in talking and meeting on the phone or online meetings to keep accountability and positive momentum.

In conclusion, rising interest rates present a significant challenge for all of us engaged in commercial construction projects or remodels. The entire A/E/C community is working together to implement new and creative ways to make construction projects successful. With careful planning and strategic decision-making, we can combat these challenges effectively. 

In addition to areas where we can help, there are also other ways outside of our expertise; for example, locking in fixed-rate financing, exploring alternative financing options, or negotiating with lenders to help navigate the storm of rising interest rates can ensure the success of construction projects. By proactively addressing these financial hurdles, we can not only weather the storm but also thrive in the ever-changing world of construction.


Mitch Lapin

Mitch Lapin is President at Fortney & Weygandt, Inc. His responsibilities are to drive the growth of Fortney & Weygandt, Inc.’s general contracting service nationwide. Lapin works closely with Fortney & Weygandt’s Board of Directors, Management Team and all employees to serve clients and partners on all projects.