Working Paper

On Commercial Construction Activity's Long and Variable Lags

Abstract: 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.

Keywords: commercial real estate; construction; time-to-plan;

JEL Classification: R33; E22; E32; L74;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2024-06-27

Number: 24-14