What Lower Interest Rates Mean for Construction — and how Sales Teams Should Adapt
There's growing speculation that the Federal Reserve might cut interest rates later this year—a shift that would send ripple effects throughout the construction industry. At first glance, lower interest rates seem like great news. Reduced borrowing costs typically drive increased investment in commercial, residential, and infrastructure projects. Rate hikes in 2022 and 2023 significantly slowed construction starts, especially in commercial real estate, which saw a nearly 20% drop according to Dodge Data & Analytics.
However, this potential good news isn't straightforward. Two significant challenges could temper the benefits: ongoing tariff uncertainties and persistent labor shortages.
The Tariff Uncertainty Factor
Tariffs remain a wildcard. With roughly $469 billion worth of construction-related materials imported annually, sudden tariff increases—especially targeting China, Mexico, or Canada—could severely impact material costs. Steel and aluminum alone represent about 35% of all construction imports, valued around $163 billion. Increases here could quickly erode savings from cheaper borrowing.
Natural stone, another key category, is particularly vulnerable. The U.S. imports nearly half of its natural stone, with China, Brazil, Italy, and Turkey as leading suppliers. Tariffs could not only escalate costs but also disrupt project timelines significantly.
Labor Shortages: An Ongoing Bottleneck
Even if financing becomes more affordable, the industry still faces a profound labor shortage. The Associated Builders and Contractors (ABC) estimated that construction will need to attract over 500,000 additional workers in to keep up with project demand. Without sufficient skilled labor, lower interest rates could boost demand but exacerbate delays and escalate labor costs, potentially offsetting financial benefits.
Advice for Sales Leaders
Given these external uncertainties, suppliers and manufacturers should pivot strategically toward sales enablement and retention. Your most experienced sales reps are your strongest assets. These professionals have deep client relationships, historical project insights, and long-term visibility that newer sales team members can't replicate overnight. Their depth of product knowledge and trusted client relationships positions them uniquely to spot opportunities and threats early. Recognizing this value is critical, particularly during turbulent market conditions.
Sales teams often face pressure when numbers falter, but given today's economic backdrop, it's essential to distinguish between controllable and uncontrollable factors. Instead of scrutinizing why deals aren't closing, shift the focus to strategies and tactics that are proving effective. Encourage your team to replicate successes rather than dwelling on unavoidable market constraints.
When onboarding junior reps, comprehensive training should be a top priority. Teach them not only about your products but also about sector-specific dynamics—how projects evolve, which firms align best with your offering, and how decisions are influenced at various project stages.
We've developed tailored training tools to support exactly this kind of strategic approach. If you're looking to equip your sales team to better navigate these market uncertainties, reach out—we're here to help.
While lower interest rates offer promise, they're no silver bullet. Success in this environment requires proactive management of materials, vigilant attention to labor supply, and strategic reinforcement of your sales team. Stay informed, plan strategically, and invest in your people—these will be your strongest competitive advantages in the months ahead.
