Hartford Business Journal

HARTFORDBUSINESS.COM | APRIL 21, 2025 23 FOCUS | CONSTRUCTION & DESIGN estate capital in New England and Washington, D.C., for KeyBank, said his $187 billion-asset institution is eager to lend into the in-de- mand multifamily construction market in Connecticut, although he acknowledged tariff-re- lated uncertainty as a complication. Banks are tightening loan scrutiny and standards, and contractors might be hesitant to sign contracts until they have more price certainty, Purtell said. "I don't think we will see general contractors quoting deals until there is more certainty in the market as to what the tariffs mean," Purtell said. "Who in their right mind is going to take on cost risk right now? I don't know how long that is going to last." Tempered expectations Michael Riccio, senior managing director for CBRE's debt and financing arm, said tariff uncer- tainty might take some projects off the table or result in design changes. Multifamily lenders typically demand about 5% contingencies for both soft costs and construction. But tariff-related uncertainty is pushing that to 10% to 15% for both, he said. Higher contingencies require a larger budget, loan and interest expense, Riccio said. "It increases construction costs in a significant way, and in some cases makes it not work," Riccio said. "So, there is pressure on people to cut construction costs. Maybe that impacts the size of the project. Maybe the average size of units comes down a little bit. There's all this sort of fine-tuning going on with architects, designers and construc- tion management teams." On a positive note, Riccio said, the bank liquidity crisis prompted by the collapse of a few regional banks in 2023 has worked itself out and lenders have cash to deploy. "They are back," Riccio said. "We are making deals with people like Wells Fargo and JPMorgan and those kinds of banks. The local banks are doing well, Webster and Liberty Bank. Bank of America is back to making loans." Riccio said CBRE's national data shows banks are becoming a bigger part of the commercial lending mix. Nationally, bank loans accounted for 27% of the loans CBRE arranged in 2025 as of early April. At the same point in 2024, banks accounted for only 17% of CBRE-brokered deals. Other lenders in the mix include debt funds, life insurance companies and commercial mort- gage-backed securities, as well as government-backed Fannie Mae and Freddie Mac. Riccio said he started out the year "very optimistic" that commercial construction in Connecticut would continue "at a pretty good clip." He was also hopeful interest rates would continue to fall, making a greater number of projects viable. Recent tariff action and volatility in treasury rates have tempered, but not extinguished, those prospects, Riccio said. "Lenders still want to make loans," Riccio said. "They have a lot of money to put out. They are going to want to make loans, but have to make loans based on some stability. If things are just bouncing around, they don't know if it's a good deal." • CONSTRUCTION MANAGEMENT • GENERAL CONTRACTING • DESIGN–BUILD 2 1 D E M I N G R D , B E R L I N , C T 0 6 0 3 7 • ( 8 6 0 ) 6 1 0 - 1 0 9 3 • W W W. O L S E N C S . C O M VISIT OUR NEW WEBSITE! Matthew Purtell Michael Riccio RESIDENTIAL CONSTRUCTION INFLATION Source: Edward R. Zarenski/Construction Analytics 2015 2016 20% 15% 10% 5% 0% 2017 2018 2019 2020 2021 2022 2023 2024 INFLATION RATE

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