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What to Expect for Commercial Construction Lending in 2023

Recent years brought new stresses on the construction industry — COVID-19 shutdowns, supply chain woes, labor shortages and bank failures have slowed…



A recent report from the American Institute of Architects shows that nonresidential construction spending is expected to slow to a growth rate of 5.8% in 2023 (down from 10% in 2022) and then fall to a mere 1% growth rate in 2024. Recent years brought new stresses on the industry – COVID-19 shutdowns, supply chain woes, labor shortages and bank failures have slowed projects or put them entirely on hold.

Associated Builders and Contractors predicts that the construction industry will need to attract more than 500,000 extra workers in 2023 – on top of the normal pace of hiring – to meet labor demand. Real estate valuations are softening and have negatively adjusted in many markets as well. In Los Angeles, for instance, office building valuations declined by 40% in the first two months of the year, according to data from Yardi Matrix.

At the same time, the cost of capital has risen considerably. Starting in March 2022, the Federal Reserve began hiking interest rates to quell inflation, which hit the highest level seen in four decades in late 2022. While the Fed’s efforts appear to have slowed inflation, a number of macroeconomic factors suggest a rough patch still lies ahead for the economy. This includes volatility in the bond markets and turbulence in the banking sector. Silicon Valley Bank’s failure in March was the largest since the Great Recession. Signature Bank shuttered days later, and Credit Suisse was swallowed up by a rival in the wake of its struggles. In turn, economists are seeing a pullback in bank lending — a trend that will affect commercial construction in the months ahead.

The Current Lending Landscape

Lenders, builders and developers are grappling with tightening credit conditions. Banks are monitoring portfolios and focusing on specific loan types and/or submarkets for signs of distress. In construction portfolios, if there is a sudden slowdown in draw requests, or construction timelines aren’t met, lenders will have to examine underlying conditions affecting loan performance. Any unmet covenants or non-monetary defaults will drive lenders to adjust their risk posture, stiffen adherence to agreements and review individual loan commitments more rigorously.

Changing dynamics have also impacted the number and size of loans:

  • Residential loan volumes still stand lower than peak levels before the housing crisis. According to ATTOM Data Solutions, the number of residential mortgages issued in the fourth quarter of 2022, for example, dropped 24.5% from the third quarter, putting it at the lowest level since early 2014. It was the seventh quarterly decline in a row.
  • Builder confidence declined for 10 straight months last year according to the National Association of Home Builders, with construction spending dipping across most sectors, except for manufacturing and educational projects. However, it has since rebounded moderately.
  • Higher material costs and interest rates make loans more expensive than they have been in the recent past, and builders are experiencing slower absorption levels.

Many banks are protecting themselves from risk and potential loss by increasing loan loss provisions, raising balances to cover non-performing loans and foreclosure losses. S&P Global Market Intelligence reports that of the 19 banks with over $50 billion in total assets that announced fourth-quarter earnings in late January, 14 of them saw an increase in provisions compared to the previous quarter. Modeling for future expected credit losses will be a key focus of bank examiners in this year’s full-scope or targeted regulatory audits. In short, banks are projecting a rise in future losses, potentially impacting earnings and capital ratios.

While the construction industry is experiencing more scrutiny from banks during the lending process, some segments are seeing trends toward growth. These include digital infrastructure, cellular systems and data centers, healthcare, and low- to moderate-income multifamily housing. Stakeholders in these industries may see favorable responses from banks for loan requests if these trends continue.

Differences in Lending Practices

Banks first began tightening their lending practices in the wake of the Great Recession because of the Dodd-Frank Act and other legislation. This created an opportunity for non-bank lenders, who typically offer greater flexibility with loan terms and potentially faster approvals. (According to the U.S. Chamber of Commerce, a non-bank lender is “a financial institution that lends money but doesn’t operate with a full banking license. It does not offer deposit, checking or savings services.”) However, for borrowers, the flexibility of alternative lenders comes with higher rates and greater demands for performance compared to traditional banks, since their portfolios are often financed by secondary investors who maintain strict standards.

Non-bank lenders also tend to be more aggressive than traditional banks when it comes to recovering investments in non-performing loans. They’re more likely to pursue remedies immediately for non-performance, including foreclosure or note sales. This can negatively affect the value of other comparable properties in the same market.

When navigating uncertain macroeconomic conditions, IT and business intelligence become increasingly important. Digitally collected asset management data solutions can provide additional levels of visibility into construction loans and collateral progress, often acting as the first line of defense in identifying predictive risk characteristics. These solutions track key metrics of loan performance and enable informed asset management decision making. Non-banks often have more flexibility to digitize paper-heavy, manual workflows and streamline lending processes, whereas traditional banks tend to rely on outdated legacy systems.

The Importance of Transparency

Once again, a primary concern for builders in this market revolves around materials shortages and supply chain issues. This has been evident for a while. By the fourth quarter of 2021, for example, the U.S. Chamber of Commerce’s Commercial Construction Index reported that 46% of contractors estimated they would have to pay more for materials than in the previous quarter, and virtually all of them indicated that those costs would have a significant impact on their businesses. Since that time, prices for materials such as copper and lumber have fallen due to reduced supply chain backlogs and lower tariffs, but high interest rates and inflation remain an obstacle. Increases in the cost of materials and loan financing have a ripple effect, leading to delays and cost overruns.

Fluctuating material costs and backlog issues make project visibility more important than ever. (In construction, project visibility refers to the ability to monitor and track the progress of a project in real-time, as well as to identify any potential issues or delays before they become significant problems.) Greater visibility means greater risk mitigation, giving lenders an advantage in tight economic times. Surveillance monitoring and an understanding of what’s happening with projects on a granular level – from drawdown delays to material disruptions – offer another layer of protection for loan performance.

The bottom line is that uncertainty is perhaps the only sure thing in the year ahead. Predicting where events are going and taking swift management action based on data will protect lenders and limit risky exposure in today’s rapidly changing market.

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DNAmFitAge: Biological age indicator incorporating physical fitness

“We expect DNAmFitAge will be a useful biomarker for quantifying fitness benefits at an epigenetic level and can be used to evaluate exercise-based interventions.”…



“We expect DNAmFitAge will be a useful biomarker for quantifying fitness benefits at an epigenetic level and can be used to evaluate exercise-based interventions.”

Credit: 2023 McGreevy et al.

“We expect DNAmFitAge will be a useful biomarker for quantifying fitness benefits at an epigenetic level and can be used to evaluate exercise-based interventions.”

BUFFALO, NY- June 7, 2023 – A new research paper was published in Aging (listed by MEDLINE/PubMed as “Aging (Albany NY)” and “Aging-US” by Web of Science) Volume 15, Issue 10, entitled, “DNAmFitAge: biological age indicator incorporating physical fitness.”

Physical fitness is a well-known correlate of health and the aging process and DNA methylation (DNAm) data can capture aging via epigenetic clocks. However, current epigenetic clocks did not yet use measures of mobility, strength, lung, or endurance fitness in their construction. 

In this new study, researchers Kristen M. McGreevy, Zsolt Radak, Ferenc Torma, Matyas Jokai, Ake T. Lu, Daniel W. Belsky, Alexandra Binder, Riccardo E. Marioni, Luigi Ferrucci, Ewelina Pośpiech, Wojciech Branicki, Andrzej Ossowski, Aneta Sitek, Magdalena Spólnicka, Laura M. Raffield, Alex P. Reiner, Simon Cox, Michael Kobor, David L. Corcoran, and Steve Horvath from the University of California Los Angeles, University of Physical Education, Altos Labs, Columbia University Mailman School of Public Health, University of Hawaii, University of Edinburgh, National Institute on Aging, Jagiellonian University, Pomeranian Medical University in Szczecin, University of Łódź, Central Forensic Laboratory of the Police in Warsaw, Poland, University of North Carolina at Chapel Hill, University of Washington, and University of British Columbia develop blood-based DNAm biomarkers for fitness parameters including gait speed (walking speed), maximum handgrip strength, forced expiratory volume in one second (FEV1), and maximal oxygen uptake (VO2max) which have modest correlation with fitness parameters in five large-scale validation datasets (average r between 0.16–0.48). 

“These parameters were chosen because handgrip strength and VO2max provide insight into the two main categories of fitness: strength and endurance [23], and gait speed and FEV1 provide insight into fitness-related organ function: mobility and lung function [8, 24].”

The researchers then used these DNAm fitness parameter biomarkers with DNAmGrimAge, a DNAm mortality risk estimate, to construct DNAmFitAge, a new biological age indicator that incorporates physical fitness. DNAmFitAge was associated with low-intermediate physical activity levels across validation datasets (p = 6.4E-13), and younger/fitter DNAmFitAge corresponds to stronger DNAm fitness parameters in both males and females. 

DNAmFitAge was lower (p = 0.046) and DNAmVO2max is higher (p = 0.023) in male body builders compared to controls. Physically fit people had a younger DNAmFitAge and experienced better age-related outcomes: lower mortality risk (p = 7.2E-51), coronary heart disease risk (p = 2.6E-8), and increased disease-free status (p = 1.1E-7). These new DNAm biomarkers provide researchers a new method to incorporate physical fitness into epigenetic clocks.

“Our newly constructed DNAm biomarkers and DNAmFitAge provide researchers and physicians a new method to incorporate physical fitness into epigenetic clocks and emphasizes the effect lifestyle has on the aging methylome.”

Read the full study: DOI: 

Corresponding Authors: Kristen M. McGreevy, Zsolt Radak, Steve Horvath

Corresponding Emails:,, 

Keywords: epigenetics, aging, physical fitness, biological age, DNA methylation

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About Aging-US:

Launched in 2009, Aging publishes papers of general interest and biological significance in all fields of aging research and age-related diseases, including cancer—and now, with a special focus on COVID-19 vulnerability as an age-dependent syndrome. Topics in Aging go beyond traditional gerontology, including, but not limited to, cellular and molecular biology, human age-related diseases, pathology in model organisms, signal transduction pathways (e.g., p53, sirtuins, and PI-3K/AKT/mTOR, among others), and approaches to modulating these signaling pathways.

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Spread & Containment

Martha Stewart Has a Spicy Take on Americans Who Want to Work From Home

This half-baked take might need to stay in the oven a little longer.



Lifestyle icon Martha Stewart has been on a roll when it comes to representing vivacious women over 60. Whether she's teaming up to charm audiences alongside her BFF Snoop Dogg, poking fun at Elon Musk, or starring as Sports Illustrated's Swimsuit Issue cover model, Martha stays busy. 

Her most recent publicity moment, however, doesn't have the same wholesome feeling Stewart brings to the table. In an interview with Footwear News, the DIY-queen had some choice words about Americans who want to continue working from home after covid-19 lockdown shut down offices.

“You can’t possibly get everything done working three days a week in the office and two days remotely," the cozy-home guru said. "Look at the success of France with their stupid … you know, off for August, blah blah blah. That’s not a very thriving country. Should America go down the drain because people don’t want to go back to work?”

Well, that's certainly a viewpoint. A lot to unpack there. Many online were confused--after all, didn't Stewart basically make her career by "working from home?"

Sitting down with The Today Show, Stewart elaborated on her controversial stance. It seems she's confusing "work from home" with a three-day workweek. 

"I'm having this argument with so many people these days. It's just that my kind of work is very creative and is very collaborative. And I cannot really stomach another zoom. [...But] I hate going to an office, it's empty. During COVID I took every precaution. We [...] set up an office at [...] my home[...] Now we're our offices and our three day work week, I just don't agree with it," Stewart tells viewers. 

"It's frightening because if you read the economic news and look at what's happening everywhere in the world, a three-day workweek doesn't get the work done, doesn't get the productivity up. It doesn't help with the economy and I think that's very important."

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How cashless societies can boost financial inclusion — with the right safeguards

The UK could learn a lot from developing economies about using digital payments to boost financial inclusion.




Accepting digital payments. WESTOCK PRODUCTIONS/Shutterstock

Cashless societies, where transactions are entirely digital, are gaining traction in many parts of the world, particularly after a pandemic-era boom in demand for online banking.

Improvements in digital payment infrastructure such as mobile payments, digital currencies and online banking, make it more convenient for people and businesses to buy and sell things without using cash. Even the Bank of England is looking into how a digital pound might work, showing the potential for a significant shift from physical cash to digital payments in the UK.

Read more: How a digital pound could work alongside cryptocurrencies

Fintech companies have accelerated the transition towards cashless payments with innovations including mobile payment apps, digital wallets, cryptocurrencies and online banking services. The COVID pandemic was also a tipping point that created unprecedented appetite for digital transactions. Fintechs emerged as a life line for many during lockdowns, particularly vulnerable populations that needed emergency lines of credit and ways to make and receive payments.

By 2021, approximately 71% of adults in developing countries had bank accounts. But this leaves nearly 30% of the population still needing access to essential financial products and services. Fintechs can provide more affordable and accessible financial services and products. This helps boost financial inclusion, particularly for the “unbanked”, or those without a bank account.

In the UK, around 1.3 million people, roughly 4% of the population, lack access to banking services. The government and financial institutions have worked together to promote the adoption of digital payments, and the UK’s Request to Pay service allows people and businesses to request and make payments using digital channels such as Apple Pay and Google Pay.

But other countries are moving faster towards a cashless society. In Sweden, only about 10% of all payments were made in cash in 2020. This move towards cashless payments in the country has been facilitated by mobile payment solutions like Swish, which people can use to send and receive money via mobile phone.

Boosting financial inclusion

India has gone even further. In less than a decade, the country has become a digital finance leader. It has also made significant progress in promoting digital financial inclusion, mainly through the government’s flagship programme, the Pradhan Mantri Jan Dhan Yojana (PMJDY).

India’s banks also participate in mobile payment solutions like Unified Payments Interface (UPI), which can connect multiple accounts via one app. India’s digital infrastructure, known as the India Stack also aims to expand financial inclusion by encouraging companies to develop fintech solutions.

Many developing economies are using digitalisation to boost financial inclusion in this way. Kenya introduced its M-Pesa mobile money service in 2007. While microfinance institutions that provide small loans to low-income individuals and small businesses were first introduced in Bangladesh in the 1970s via the Grameen Bank project.

Digital lending has also grown in India in recent years. Its fintechs use algorithms and data analytics to assess creditworthiness and provide loans quickly and at a lower cost than traditional banks.

These innovative platforms have helped to bridge the gap between the formal financial system and underserved populations – those with low or no income – providing fast access to financial services. By removing barriers such as high transaction costs, lack of physical branches and some credit history requirements, fintech companies can reach a wider range of customers and provide financial services that are tailored to their needs.

It’s the tech behind these systems that helps fintechs connect with their customers. The increased use of digital payment methods generates a wealth of data to gain insights into consumer behaviour, spending patterns and other relevant information that can be used to further support a cashless society.

Helping the UK’s unbanked

Countries like the UK could also promote digital financial inclusion to help unbanked people. But this would require a combination of government support, innovation and the widespread adoption of mobile payment solutions.

There are some significant challenges to overcome to create a true – and truly fair – cashless economy. For example, a cashless system could exclude people who do not have access to digital payment methods, such as the elderly or low-income populations. According to a recent study by Age UK, 75% of over 65s with a bank account said they wanted to conduct at least one banking task in person at a bank branch, building society or post office.

Providing more cashless options could also increase the risk of cybercrime, digital fraud such as phishing scams and data breaches – particularly among people that aren’t as financially literate.

There is a dark side to fintech: algorithm biases and predatory lending practices negatively affect vulnerable and minority groups as well as women. Even major financial firms such as Equifax, Visa and Mastercard can get compromised by data breaches, creating valid concerns about data security for many people.

Cross-border transfer of personal data by fintech companies also concerns regulators, but there is still a lack of internationally recognised data protection standards. This should be addressed as the trend towards cashless societies continues.

Two hands hold a fan of GBP banknotes: £5, £10, £20, £50.
Paying with cash. Nieves Mares/Shutterstock

Building guardrails

Regulations affect how fintech companies can provide financial services but ensure they operate within the law. Since fintech companies generally aim to disrupt markets, however, this can create a complex relationship with regulators.

Collaboration between regulators and fintech companies will boost understanding of these innovative business models and help shape future regulatory frameworks. Countries like India have shown the way in this respect. An innovation hub run by UK regulator the Financial Conduct Authority is a good start. It supports product and service launches and offers access to synthetic data sets for testing and development.

Fintech can help finance become more inclusive. But it needs policies and regulations that support innovation, promote competition, ensure financial stability and – most importantly – to help protect the citizens of these new cashless societies.

Thankom Arun does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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