Commercial Real Estate Construction Industry Year in Review
December 12, 2022
The last few years have been challenging for all industries. It’s the continuing mantra related to the supply chain, rising costs, labor, or lack thereof, and shortages of materials. The commercial construction industry certainly has not been immune to any and all of those challenges.
The key is how to work around those challenges, find solutions and complete projects on time and as close as possible to on budget, despite all the delays, obstacles and other issues working against us in the commercial construction industry.
The good news is that there is always light at the end of the tunnel. We just have to navigate the landscape that is different now than it was pre-Covid.
The public typically doesn’t see the labor shortages outside of restaurants and the hospitality industry. But the labor shortage in the commercial construction industry is real and challenging. Why is that? Well, there are a few reasons. We are competing against larger corporations that have raised their minimum wage rates. Because of that laborers in the construction industry are migrating to jobs in retail, restaurants or in jobs that have a work-from-home option. Add to that the fact that almost everyone is hiring.
There are a number of commercial real estate projects underway and many more on the drawing board. Yet there is just not enough of a work force to support them. What the industry is finding is that jobs that typically take a full crew to finish are being worked on by only one or two people. We’ve handled that challenge with established long-term relationships and a history with our sub-contractors. That means they know and can trust us that when we say a job is ready for them, it is, meaning they can go in and get out as quickly as possible. We schedule accordingly and do what we say we’ll do.
The work-from-home mentality, one of the lingering effects of Covid, is still impacting the commercial construction industry because it’s really difficult to build something when working from home.
While labor issues in the commercial construction industry are nationwide, in South Florida, and throughout Florida for that matter, we are benefiting from the influx of new residents which can translate into potential new employees.
As we talked about in our first white paper, the industry is still struggling with getting HVAC and electrical parts. The supply chain can’t keep up with the demand. The warehouses are not efficiently stocked as companies were not quick to replenish inventories when we shut down during Covid.
With that as our reality, we relied on careful scheduling and open communication. It seems like a small work around, but it does the job. At Excel Construction of Florida, we get involved in projects much earlier in the process, typically during the design phase. This allows us to help guide the designs to what materials, parts, systems and finishes are currently available.
Here’s a case study:
Project: Excel Construction of Florida’s reduction of current office space for Siemens
Timeline for completion: 14 weeks
Issue: As part of the project, we had to split the electrical service and add a new panel to handle some additional AC, but when we ordered the electrical gear, delivery was 120 days out. That would put us more than three weeks past deadline.
The Solution: We redesigned the electrical riser so that we could use locally sourced parts. By partnering with a subcontractor that had our essential items, such as a meter can, in stock, we were able to meet the deadline.
Lesson to be Taken Away: This goes back to relationships and communication. You better know someone who has the materials you’ll need in stock.
Of course, it would be great to peer into the crystal ball to see the future of the commercial construction industry. If we could predict shortages, we’d be stocking up today.
What we can do is control what we can control. That means keeping a finger on the pulse of the industry by engaging with colleagues, suppliers and sub-contractors. We cannot emphasize enough the importance of keeping communication lines open and continuing to be honest with your teams.
The commercial construction industry in Florida will have a softer landing than most other markets. In Florida land is tight, and the population is increasing. That population will need places to live, work and play.
There are signs of the market slowing, and project starts are being pulled due to the debt markets. The commercial construction industry needs the markets to stabilize, whether that’s with higher interest rates or with lower interest rates. The market needs to know where we are headed so deals can be analyzed.