On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long—about 1.5 years—and highly variable, (2) roughly 40 percent of projects are abandoned in planning, and (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. The model has the testable implication that supply is more elastic when there are more "shovel ready" projects available to advance to construction. We use local projections to validate that this prediction holds in the cross-section for US cities.
Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.
Suggested Citation
Glancy, David, Robert Kurtzman, and Lara Loewenstein. 2024. “On Commercial Construction Activity's Long and Variable Lags.” Federal Reserve Bank of Cleveland, Working Paper No. 24-14. https://doi.org/10.26509/frbc-wp-202414
This work by Federal Reserve Bank of Cleveland is licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
- Share