Gaines Group Architects
RMH Labs

Lots of construction and a shortage of labor leading to higher prices

Lots of Construction and a shortage of labor is leading to higher prices.

There is a lot of construction happening right now. I don’t think it has been this busy since I moved to the valley 10 years ago. This is not just a local issue, as the national AIA Architectural Billings Index is also seeing strong growth. I hear from many builders that are booked through the end of the year and some into Spring of next year. I am also hearing for the first time in years, builders “too busy to bid work.” Things are getting back on track in the construction industry!

labor shortage

However, there is one major change – we no longer have the work force to keep up with all this growth. According to the NAHB “the share of builders reporting either some or a serious shortage (of workers) has skyrocketed from a low of 21% in 2012, to 46% in 2014, to 52% in 2015, and 56% in 2016.” The result is higher wages for those skilled workers that are still in the industry – which is good. It also means quickly growing construction costs for our clients – which is bad. The higher prices are not reflected in appraisals or comparables making it harder to get bank loans. The quickly rising prices are also making it hard to predict construction costs during design.

The results of higher construction prices are starting to be seen. Some jobs are being put on hold. Some projects are getting smaller. However, we don’t know the long-term impacts. As 10,000 baby boomers retire each day for the next decade what happens to our labor force? With many young people going to college instead of trade schools, where do the next generation of builders come from? Is this a temporary problem, or can it be corrected?

RMH Labs

We are seeing automation come into other industries where labor costs are rising. Will this be the start of robotics on a real scale in construction in our country? Will large-scale companies that “optimize” construction fill the void that once employed local companies? It remains to be seen where this will go. For now, I hope things can moderate. Prices are rising too quick to be sustainable.