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Those of us in the construction industry have been on the edge of our seats, watching inflation and interest rates reach historic numbers over the past few years. The Fed raised interest rates 11 times since March 2022 to their highest level in 22 years. This rate of growth, among other factors, has caused a decrease in project pursuit and deal conversion as 86% of respondent architecture firms have had significantly delayed projects over the last six months, according to the AIA Architectural Billings Report (ABI) of December 2023. The Fed, however, has hinted at rate cuts in 2024 as inflation has seen a steady decline, but when is still the big question. Through KEPHART’s 50-year history, our firm has seen projects through numerous economic downturns. Leveraging experience and data, our firm is prepared to help you get ahead of the predicted rate cuts. 

Wall Street is already reacting to the predicted cuts before the first Federal Open Market Committee meeting of 2024, with the Dow and the S&P 500 seeing record gains in the fourth week of January. Wall Street believes the first cut will be in March. However, the Fed is starting to dampen those hopes, with Fed Governor Christopher Waller saying there is no rush to cut rates. “With economic activity and labor markets in good shape and inflation coming down gradually to 2%, I see no reason to move as quickly or cut as rapidly as in the past,” said Wallace in a virtual discussion hosted by The Brookings Institute. While March might not see the first rate cut, there is a high chance it could come this summer, according to the CME FedWatch Tool. Colorado Senator John Hickenlooper is also now calling on the Federal Reserve to cut rates. In a letter sent to Fed Chair Jerome Powell, Hickenlooper says the rate hikes are “aggravating the country’s persistent crisis of housing access and affordability” and noted the lack of new construction. The central bank’s summary of economic projections released in December indicates at least three quarter-point rate cuts in 2024.

Beyond these predicted rate cuts, there are other reasons to stay optimistic for future projects in 2024. Institutional Property Advisors (IPA) predicts that the margin between implied returns and debt service costs will improve as rate cuts increase, with high-interest rates being one of the largest project hold-ups. Residents are also returning to more urban lifestyles, with many cities poised to be prime hiring hubs if economic growth endures. As Wallace said, labor markets are in good shape, with the unemployment rate at a steady low of 3.7% in December. When we specifically look at the Denver multifamily construction market, the numbers are starting to trend toward a favorable construction outlook. According to IPA, Aurora achieved a record-low 3.2% vacancy rate in June, matching the Colorado Boulevard-Cherry Creek area as the lowest in the metro. The average asking rent in metro Denver is also increasing by 3.8% year-over-year. The Mile High City’s growth outlook is also influential, with net in-migration achieving a seven-year high, prompting household formations to be their largest total since 2019. Many Denver transplants are finding well-paying jobs, increasing the metro’s average income by a record 8.1%. Affluent residents are coming back to metro cities, especially Denver, leading to a better investment outcome (reliant on rate cuts) for future or on-pause projects.

Since 1974, KEPHART has seen numerous economic changes and advised our clients on the best paths based on their business models. We understand the pressure high-interest rates put on deal viability and how volatility in other industry inputs contributes to the challenge. As KEPHART President Bryce Hall puts it, rate cuts aren’t a “silver bullet, but easing is required to get everything else flowing.” Just like the Fed is watching multiple variables in the market, so are we. Using our history and knowledge, KEPHART is prepared to help you stay ahead of the curve on your next project.

“We want to see our client’s vision through to a built reality and understand the multitude of factors that make business challenging for developers. We examine economic data to understand how it affects our clients’ business models. Using this data, our experienced history, and our design savvy, we are adept at guiding our clients through strategic design decisions and the steps they can take to be well-positioned to act in anticipation of economic recovery. We are not just consultants, we are stakeholders and partners with our clients and have a vested interest in the success of every project.” Bryce Hall – KEPHART President


This is the philosophy that drives KEPHART to create thoughtful homes and communities that positively change people’s lives.

KEPHART is a nationally recognized, award-winning architectural design and planning firm with 50 years of housing expertise. Our passion for designing well-designed places to live, work, and play has driven us to create more than 500,000 homes across the country, ranging from single and multifamily homes to workforce housing, senior living, LIHTC communities, and everything in between. We have a deep bench of talented staff to design and deliver innovative and practical solutions to meet the unique requirements of every project.