Construction Worker Shortage and Its Impact on CRE

Across the country there is a shortage of construction labor, which has been increasing over the past several years. While certain markets are feeling the effects more greatly than others, it can still be felt throughout the county. Most notably, it is having major impacts on the markets in the mid-Atlantic —including Texas and Louisiana.

There are many factors at play. Many believe that the weakening of the unions since the 1960s has been a major factor that has helped to reduce the number of skilled laborers and construction workers. It has also been noted that the shift in the expectation to go to college has reduced the number of individuals who are interested in learning the trade and obtaining an apprenticeship. Changing immigration laws are also a factor, as many of the labor workforce has been those born outside of the United States.

On a positive note for commercial real estate, one of the causes of the shortage is that commercial developers are increasing the number of projects they are doing. With 61,000 more units to be delivered this year than last for a predicted total of 404,000 units, the construction workers that are available are sure to be at work causing pain for new project starts.

Like any other item, supply and demand is having its impact on the cost of construction, as demand is high for construction workers but supply is low. Costs have gone up by a whopping $23.40 per square foot and are expected to continue to rise throughout 2017 by as much as an additional $15. With these statistics, the cost of entry into commercial development may be higher and more difficult to break into for those potentially looking to invest. As the shortage of construction workers is predicted to continue, the cost of construction is destined to keep rising.

Texas has been particularly hard hit by the shortage. The labor shortage has been so difficult to overcome that companies have been turning down work including The King of Texas Roofing Co., who says they have turned down $20 million in projects.

Despite the shortage, developers are still ambitious, meaning deals are still getting done. How do those involved in commercial real estate help to fight the shortage? Business owners need to take time to invest in workers. Instead of relying on unions and other programs to train workers, developers and businesses should be investing in training their own workers. This will ensure that they are getting skilled workers and they will be able to retain them from project to project.