Developers Now Facing Drastic Shortage of Construction Workers

Mar 14, 2017
by Brian Klebash

ATLANTA, Georgia – For several months now developers across all categories of projects have seen a drastic decline in available labor to keep construction running smoothly. This according to a consensus of developers and analysts who recently convened at The Southeast Apartment Summit: Spring Update & 2017 Forecast in Atlanta. The construction workforce, which thinned out during the economic downturn, is only three-quarters what it was pre-recession. Project demand, meanwhile, is booming.

Many of the participants said in private interviews that in order to cope with looming shortages, they are locking in skilled labor months before scheduled start dates, and promising overtime to make the jobs more enticing. Labor shortages are part of the industry’s cycles, but “we’re seeing an extreme cycle right now,” said one expert. Yet the Associated General Contractors of America surveyed nearly 1,500 firms nationwide about their construction workforce needs. Sixty-nine percent of firms said they had a hard time filling hourly craft positions, the people that work on the job sites.

Meanwhile, construction activity is back in full swing and several are aggressively recruiting workers from existing projects. The number of permits issued has reached pre-recession levels, hitting 897 in 2014 and 806 last year, according to Cushman and Wakefield data. The total declared value of the permits is higher than it was before the downturn, suggesting higher construction costs. But reasons for the shortage are as diverse as the workers themselves.

Panelists at The Southeast Apartment Summit: Spring Update & 2017 Forecast in Atlanta, held March 8th at the Georgia Aquarium, had varying reasons for the shortages, including hostile political attitudes toward migrants, to retirements of skilled laborers when the recession peaked in 2010. Another reason could be a lack of new candidates due to unions who put apprenticeship programs on hold. They have come back online as the industry has picked up, but the programs are several years long so a lag in turning out the needed labor is still some time away.

The experts did agree that the issue is driving up costs and causing delays, which in turn create restlessness in investors. In fact, some were contemplating using more prefab materials and exploring offsite construction techniques. Many of these new methods for construction can reduce labor while keeping costs under control. But many of the facilities using these new techniques are months behind completing orders and cannot handle more contracts.

In the U.S., only about 2% to 3% of homes built in recent years are classified as modular, according to the Census. In other parts of the world, that statistic is pointedly higher. More than a third of all homes in Austria and Sweden are built using off-site methods, and in Japan more than three-quarters of all detached homes are pre-assembled, according to industry research.

Another unanimous consensus was when addressing the solution. Most wanted to see aggressive incentives to train new skilled laborers in trade schools or high schools around the nation. Several job fairs are being held nationally to recruit positions such as general laborers, carpenters, concrete finishers and other positions developers are requesting.

Construction firms are also having a hard time filling salaried positions, especially project managers/supervisors according to the Associated General Contractors of America. According to the latest ManpowerGroup Talent Shortage Survey, 2017 is the sixth consecutive year skilled trade vacancies are the hardest to fill in the U.S., and for the fourth consecutive year, skilled trade roles are the hardest to fill globally. A survey of single-family builders conducted in June by the National Association of Home Builders found that 72 percent of builders reported a shortage of construction workers willing and able to do carpentry.

Growing competition for workers is prompting 56 percent of firms to increase base pay rates for hourly craft professionals. Moreover, 43 percent of firms have increased their reliance on subcontractors because of tight labor conditions, according to the Associated General Contractors of America survey. The competition to recruit and retain skilled labor is also causing some tension onsite and some contractors have even resorted to legal remedies to curb poaching of workers.

“It is more competitive than ever, and we have to pay more for each skill. When a guy leaves, he can jump to another site instantly. We are not necessarily after the competition’s workforce, but they are constantly coming to us looking for help. It is very competitive, and it takes a large bite out of our profit margins,” one expert confided.

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