April 2024

On Commercial Construction Activity's Long and Variable Lags

David Glancy, Robert J. Kurtzman, and Lara Loewenstein


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 on average—and highly variable, (2) roughly one-third of projects are abandoned in planning, (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. Endogenous abandonment make short-term building supply more elastic, as price shocks immediately affect the exercise of construction options rather than just planning starts. 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 U.S. cities.

Keywords: Commercial real estate, Construction, Time to plan

DOI: https://doi.org/10.17016/FEDS.2024.016

PDF: Full Paper

Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.

Back to Top
Last Update: April 04, 2024