• The impacts of the credit crisis have been widely felt across the global construction industry.Hard working construction worker at a construction scene. image by Andy Dean from Fotolia.com
  
  The global liquidity shortage, also called the "credit crunch," is a hallmark of the late 2000s financial crisis. As of September 2010, banks were again profitable; however, they were still not lending enough money to businesses, according to a United Nations official. In particular, the construction industry has suffered from the ongoing liquidity shortage, as financing for projects remains limited.
  
  

Fewer New Projects

• The lack of liquidity among financial institutions in the years following the financial crisis made it difficult for construction businesses to obtain the financing necessary to start new projects. Specifically, the liquidity shortage resulted in high lending rates and strict terms for construction project loans, according to an article from "Apartment Finance Today" about the U.S. multifamily housing sector. An "Executive View" article on the Portuguese project finance market explains that, as in other world markets, banks in Portugal as of June 2010 were unwilling to supply long-term construction loans, which deterred borrowers. Simply put, the liquidity shortage has made it difficult for construction developers to secure financing for new projects, which has ultimately resulted in fewer new construction projects getting off the ground since the crisis.
  
  

Project Suspension

• The liquidity shortage has resulted in the suspension of construction projects that had already begun prior to the credit crisis. A report prepared by the United Nations Regional Commissions said that due to liquidity shortages, 30 to 40 percent of construction projects in the once-hot market of Dubai, United Arab Emirates, had been suspended as of October 2009. According to a report from the European Bank for Reconstruction and Development, liquidity problems remained a major obstacle for the completion of stalled construction projects throughout Europe as of March 2010. The bank explains, "Many projects across the region were commenced without having secured full construction financing, in the expectation (realistic in the preliquidity crisis environment) that sufficient funding could be found after construction had been launched." Many such projects were halted midstream when developers were unable to obtain financing needed to complete projects following the crisis.
  
  

Lower Project Costs

• One positive effect that the liquidity shortage had on construction projects is cheaper costs for construction materials and labor. Less liquidity for construction projects has meant a decrease in construction activity, which has negatively impacted demand for both construction materials and labor, driving down the costs for both. According to Middle East business news website MEED, costs of construction materials like steel and cement dropped sharply in 2009 throughout the Middle East region in reaction to the sluggish construction demand. Worker salaries also decreased as construction jobs became scarcer. For example, according to MEED, salaries for expatriate project managers working in the UAE decreased by 29 percent from July 2008 to February 2010. MEED says that although the drop in construction project costs alone is not enough to bring about a revival of the industry, it has been a welcome relief for developers who suffered a relentless rise in construction costs in the several years prior to the crisis.