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Posted: July 21, 2014

Real estate: Labor pains

Building surge leaves contractors scrambling for workers

Margaret Jackson

Cranes dotting the skyline are a sure sign that Colorado’s construction industry and overarching economy is improving from the devastation of the 2007-2009 recession. But the newfound challenge contractors are facing is finding skilled laborers to build their projects.
Big developments like the renovation of Denver Union Station, Denver International Airport’s new hotel and transit center, as well as countless multifamily projects and office buildings, are exhausting the labor force.

That – and the fact that many skilled laborers left the industry to work in oil and gas fields or relocated to find opportunities in other markets – has forced the postponement of many projects and increased the cost of others, including the South Terminal Redevelopment Program at DIA.

“It takes longer because it’s hard to find good contractors who have a crew available in the next six months,” said Michael Gifford, president and chief executive of the Colorado chapter of the Associated General Contractors of America (AGC). “Folks are having a really hard time finding additional employees.”

The national unemployment rate, specifically in construction, dropped to its lowest level in seven years this April. Contractors added 32,000 workers to payrolls, bringing industry employment to 6 million, the highest level since June 2009, according to an AGC analysis of government data. As of April, the national unemployment rate for construction workers actively seeking jobs declined from 13.2 percent a year ago to 9.4 percent.

Construction companies added jobs in 38 states over the last year, according to the AGC. In Colorado, there were 666,000 construction jobs in March, a nearly 6 percent increase over the 628,900 jobs in the state during the same month last year – putting it ninth among states for construction-employment gains.

Greeley experienced a 17 percent increase between February 2013 and the same month this year – the largest percent increase among the 19 cities nationwide that hit a new February construction employment high. Grand Junction’s construction employment increased 11 percent, from 5,600 jobs in February of last year to 6,200 during the same month this year.

While that’s good news for job hunters, it’s raising concerns among contractors looking for skilled laborers to build their projects – especially in the booming multifamily segment where it’s difficult to find craftspeople in specific trades such as drywalling and wood framing.

“A lot of projects have been delayed four to six months because of labor shortage,” said Tim Walsh, president of Confluence Cos., a Golden-based developer and contractor. “The biggest shortage right now is wood framing crews. There just isn’t the quantity of skilled carpenters there used to be.”

Despite an average 15 percent increase in wages, the labor shortage problem is compounded by the way workers are compensated – the faster they get a job done and more square footage they install, the more they get paid. The consequence is there’s less supervision, so quality suffers. Crews will also abandon jobs if there are opportunities to earn more per square foot on another site.

“We’ve had to ramp up our staff we put on the job to oversee the work,” Walsh says. “Otherwise you have to backtrack and fix things.”

Another way to combat the labor shortage is to bring subcontractors in as partners early in the project, a strategy long employed by The Neenan Co. The Fort Collins-based design-build firm integrates all disciplines early on – from architects to project managers – involved in delivering a project to ensure the process is as seamless as possible.

“When we’re talking to subs six to 12 months out and we’re reliable, we can get slotted into a spot they’ll hold for us,” said David Shigekane, the company’s chief operating officer. “The traditional method is to give subs two to three weeks notice, but now they’re booked much further in advance.”

Over the years, AGC has been able to keep a steady flow of workers joining the industry through various training and apprenticeships. AGC hosts construction career days in high schools and works with construction management programs at Colorado State University and the University of Colorado Boulder. But that strategy isn’t working as well as it used to, Gifford said.

“When you have an economy that jerks up and down the way this one has, our steady programs are not going to be enough,” he said.

AGC’s Colorado chapter had 5,000 students in its four-year apprenticeship program in 2008. That number dropped to 200 students between 2010 and 2011. It has gradually increased to 400 current students, but that’s not enough to meet today’s needs.

“A four-year program can’t keep pace with a 12- to 24-month demand,” Gifford said. “There is a lot of on-the-job training taking place as well.”

In its latest effort to attract new people, AGC is teaming up with the Colorado Contractors Association to develop a website aimed at getting 20-somethings in the know about construction and helping them connect with potential employers. Colorado will be one of the first 10 states to launch BuildColorado.com, part of a national initiative to address the labor deficit.
The site is expected to launch in June.

“We just had a big meeting with Denver Public Schools about how to create internship programs with high school students. We still have to work out details like how to insure them on the job site,” Gifford said.

MORE MANAGEMENT

The shrinking pool of skilled labor isn’t the only challenge the industry is facing. Finding qualified employees for management positions also has become increasingly difficult. At a recent job fair, 97 companies were vying for the 63 graduates coming out of CSU’s construction management school this year. With the steep competition for program graduates, Swinerton Builders targets specific programs at CSU, Kansas State, Washington State, University of Denver and Cal Poly San Luis Obispo.

“We spend time on campuses lecturing and promoting the industry,” said Scott Conrad, manager of the company’s Colorado division, which has five interns from those universities this summer. “We use it as a feeder program to facilitate those young professionals and hire upon graduation.”

Even with the labor challenge, contractors are optimistic about the future and say the volume of work is a welcome change from the dearth of work they had just a few years ago.

“We’re fortunate to have some very significant projects here in the Front Range,” Conrad said. “That’s the good news. But we have challenges in making sure we maintain a significant number of craftspeople in the market.”

Margaret Jackson is an award-winning journalist who spent nearly 25 years in the newspaper industry, including seven years as a business reporter for The Denver Post covering residential and commercial real estate. She can be reached at myjackson7@gmail.com.

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