As 2025 winds down, many construction leaders are doing what they always do this time of year: taking stock of progress, lining up next year’s bids, and closing out projects. But this year feels different. Interest rate whiplash, unpredictable financing conditions, and growing pressure on cash flow have pushed conversations from “What’s our pipeline?” to “What happens if everything changes… again?”
That’s where scenario planning comes in. And if you haven’t already woven it into your year-end strategy sessions, now’s the time.
Why Scenario Planning Matters in Today’s Construction Market
Scenario planning isn’t about forecasting the future; it’s about preparing for multiple futures at once. For developers, contractors, and project owners, it provides a framework for answering the tough “what ifs”:
- What if interest rates drop more slowly than expected?
- What if financing loosens (or tightens) mid-project?
- What if supply costs stabilize, but labor availability worsens?
- What if cash flow stress becomes the norm, not the exception?
Rather than reacting when conditions shift, scenario planning helps leaders anticipate impacts, test assumptions, and protect margins.
How Developers Should Be Thinking Right Now
Developers are feeling rate conditions more than almost anyone. Even small swings in financing costs can determine whether a project pencils out. Heading into 2026, proactive planning means:
- Running side-by-side financial projections based on multiple interest-rate environments (best case, expected case, and worst case).
- Re-evaluating go/no-go thresholds, especially for early-stage deals.
- Building contingency into timelines and budgets, knowing that new lending conditions could extend approvals orslowstarts.
- Reassessing tenant demand assumptions, especially for office, retail, and mixed-use assets.
Being prepared doesn’t just help manage risk; it positions developers to move quickly when a window of opportunity opens.
Cash Flow: The Silent Pressure Point
Cash flow challenges aren’t new, but they’ve intensified. Between delayed draws, longer project cycles, and pricing uncertainty, even highly profitable projects can struggle to stay liquid.
At year-end, firms should be:
- Mapping 2026 cash flow month-by-month, factoring in seasonal slowdowns, retention releases, and expected change orders.
- Stress-testing cash flow under different rate and cost scenarios—higher borrowing costs, slower pay cycles, or delayed starts.
- Reviewing credit facilities and lines, ensuring capacity and terms align with higher-volatilityconditions.
- Identifyinghigh-risk projects now so leadership can intervene before liquidity becomes a crisis.
The Practical Side: What Leaders Should Do Before Year-End
Here’s where your plan turns into action.
1. Build a Scenario Dashboard
A simple dashboard, with three or four defined scenarios, helps everyone speak the same language. Track variables like financing costs, labor availability, material pricing, backlog strength, and cash flow impacts.
2. Pressure-Test Your 2026 Pipeline
Evaluate each upcoming project across all scenarios. Where do margins hold? Where do they crumble? Which projects become too risky unless conditions shift?
3. Evaluate Strategic Levers
For each scenario, identify what you would do:
- Pause?
- Renegotiate?
- Re-sequence?
- Pursue alternative financing?
- Shift subcontractor strategy?
When change hits, you’ll already know your move.
4. Align Internal Teams
Finance, operations, and business development should be working from the same playbook. Scenario planning is most powerful when everyone understands the options and the triggers for action.
5. Document Your “If-This-Then-That” Plan
This helps eliminate guesswork. For example:
- If rates exceed X% → defer new land acquisitions
- If cash reserves drop below Y → slow hiring or adjust billing cadence
- If financing loosens → accelerate preconstruction on stalled projects
Clarity gives teams confidence.
Looking Ahead to 2026
No one can predict the next twelve months, but the firms that enter the new year with flexible, forward-looking plans will be in the strongest position to adapt and to seize opportunities competitors may miss.
Year-end is your chance to reset assumptions, challenge your models, and create optionality in a market that demands it. With thoughtful scenario planning, construction leaders can navigate uncertainty with intention instead of anxiety.
After all, 2026 is coming whether we’re ready or not. With the right planning in place, you will be.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
