Time-to-plan lags for commercial construction projects

• We estimate the planning time for commercial construction projects.
• The mean planning time is long — 16 months or more.
• Variation around the mean is wide, due to differences in project size and location.
• Regulatory factors are associated with the variation across locations.
• The mean planning time lengthened by 3 to 4 months over our sample period.

Gestation lags have long been understood to be an important feature of the investment process. However, previous research has focused on the time-to-build part of the gestation period and has provided little information on the earlier time-to-plan period during which key decisions are made about the project's scope and financing. We develop new estimates of time-to-plan lags for commercial construction projects in the United States, using a large project-level dataset that allows direct measurement of planning lags. We find that these time-to-plan lags are long, averaging about 16 months when we aggregate the projects without regard to size and about 26 months when we weight the projects by their construction cost. The full distribution of time-to-plan lags is very wide, and we relate this variation to the characteristics of the project and its location. In addition, we show that time-to-plan lags lengthened by 3 to 4 months, on average, over our sample period (1999 to 2010). Regulatory factors are associated with the variation in planning lags across locations, and we present anecdotal evidence that links at least some of the lengthening over time to heightened regulatory scrutiny.