Navigating project risk in today’s tight credit market requires more than optimism – it demands insight, strategy, and an honest read of both national indicators and local realities. As controller at Spectrum Engineers, in addition to the creation of new internal client and project risk models to help me understand our market, I’ve started to track national indices like the Architectural Billings Index (ABI) and the Credit Manager’s Index (CMI) to gauge economic trends, but I’ve also found they don’t always reflect the resilience and complexity of Utah’s economy.

Nationally, the ABI has held below 50 for several months, signaling waning demand for new design work. The CMI, meanwhile, remains just above 50, suggesting companies are still honoring obligations despite tighter lending. These indicators, taken together, often point to late-cycle conditions: work gets completed and paid for, but new projects are harder to finance.

Yet Utah tells a different story. Over 36,000 people moved in during 2024, and nearly 18,000 new housing units were built to meet demand. Utah County is leading the nation in housing starts. Policy momentum is also strong. In his 2025 State of the State address, Governor Spencer Cox made the directive clear: “We must build.” His Built Here initiative pledges 35,000 starter homes within five years, supported by flexible and faster permitting and infrastructure investment.

Still, the most significant bottleneck remains capital. Recent reporting in Building Salt Lake echoed what many developers—and our firm—have been experiencing: viable projects are being sidelined not by zoning or demand, but by increasingly conservative lending terms. Loan-to-cost ratios now hover around 50–60%, equity requirements are rising, and underwriting is more rigorous than ever. One developer offered the perfect summary: “Vibes aren’t cutting it anymore.”

Even with potential relief from the Fed—a modest rate cut of 25 basis points in September and possibly another in December—the structural issues won’t budge. Rate adjustments can ease financial modeling, but they don’t address high construction costs, flat rent forecasts, or lender caution. In this climate, every financing package requires scrutiny.

The ABI and CMI form a helpful framework—but it’s not enough to view them in isolation. They serve different purposes: ABI offers a forward-looking lens on design and construction, while CMI reflects current payment health. When both trend downward, risk multiplies. In August, with ABI at 46.8 and CMI at 54.1, we’re in a familiar late-cycle posture: projects are closing, cash flow is steady, but new starts face headwinds.

Interestingly, this dynamic—and its limitations—were central to a thoughtful conversation at the recent NACM Credit Congress in Cleveland, OH. Following the session “An Economic Update – What’s Next” April Tanner, CCE, and I had the pleasure of speaking with NACM’s chief economist, Amy Crews Cutts, Ph.D., CBE, about potential improvements to the CMI. We agreed that increased participation is essential to generating robust data. In particular, regionalizing the results could provide a clearer picture of market-specific trends— especially in unique areas like Utah. With broader involvement, the CMI could even be broken down by industry. While the national lens is valuable, localized insight is essential.

The need for specificity applies not only to economic indices but also to localized payment protections. On a recent apartment project in Salt Lake County, our firm’s early filing of a Notice of Preconstruction Services with the State Construction Registry (SCR) proved decisive. The project went through several revisions, likely due to the municipality’s flexibility during entitlement negotiations. While the design team worked hard to meet the evolving expectations of the owner and developer, the architect, based out of state, did not secure a firm fee agreement and failed to file a preconstruction notice. When payment issues arose, our early filing offered critical protection. Our notice surfaced during the financing process, triggering an escrow arrangement that ensured we were paid directly at closing. The architect, unfortunately, remains unpaid, caught between a fixed budget and stalled fee negotiations. In today’s tight credit environment, understanding lien rights isn’t enough, you also need to know whether entitlement has been achieved. Without municipal approval, funding may still be out of reach. Legal safeguards and financial awareness must go hand in hand.

In today’s environment, a dual-track evaluation—assessing both the project and the client—represents sound practice. On one track: can the project succeed under current financing conditions? On the other: does the client demonstrate sound credit fundamentals—such as liquidity, track record, capital discipline, and a history of meeting financial obligations? And like my situation, is the client prepared for cost escalation or delay? A prudent review should also consider the structure of financing, the depth of equity support, and whether the overall capital aligns with today’s lending realities. Optimism has its place—but hope is not a metric.

Still, we remain optimistic, with our eyes wide open. Utah’s development pipeline is impressive: The Point of the Mountain is launching a $250 million initial phase; Utah City in Vineyard is moving forward with a 1,500-acre, $5 billion master plan; and Tech Ridge in St. George is transforming 180 acres into a tech-driven urban hub. New hospitals are underway in Vineyard (broke ground in April), West Valley (groundbreaking in June), and Salt Lake City (planning phase ongoing). Salt Lake’s west side is also poised for transformation through Rocky Mountain Power’s 100-acre campus redevelopment. Convention and hospitality investments—from the Daybreak entertainment district to hotel and event expansions in Salt Lake, Park City, and St. George—are gaining momentum. Meanwhile, major transit upgrades are opening new growth corridors across the state. Momentum is clearly on our side—but signals from the ABI, the CMI, and local lender behavior remind us that in today’s climate, prudence is power.