Abundant Jobs, Labor Shortages Define Regional Market
It’s been feast or famine for regional construction employment, with job figures reaching record highs in Oklahoma and Texas while Louisiana experiences the largest jobs decline of any U.S. state, according to data from the Associated General Contractors of America.
From October 2018 to October 2019, Louisiana lost 9,700 jobs (down 6.4%). Conversely, Texas added 51,400 jobs during that period (up 6.9%), with October being a record month for the state. Oklahoma added 2,000 jobs (up 3%), and employment peaked at an all-time record of 85,900 jobs in July. Job growth also took place during that period in Arkansas, which added 3,800 jobs (up 7.6%), and Mississippi, which added 1,200 jobs (up 2.8%).
Economy propels Texas
Specialty contractors in Texas continue to ride the wave of a robust economy, although there are signs construction activity could level off. “The market continues to remain strong in the Southwest region, especially in Texas. At the same time, we do see a flattening of the market in the next couple of years,” says Hattie Peterson, spokeswoman for mechanical subcontractor TDIndustries.
Dallas-based TDIndustries saw a $26-million gain in regional revenue in 2018, which the company attributes to economic growth in Texas and client relationships. The firm provided mechanical and plumbing systems for office buildings, including the 25-story Frost Tower in Fort Worth and the Domain 12 building in Austin. In health care, TDIndustries worked on the Methodist Stone Oak Hospital expansion in San Antonio and the Texas Scottish Rite for Children Sports Medicine and Orthopedics Center in Frisco. The firm also worked on the 14,000-seat Dickies Arena in Fort Worth, relying on prefabrication methods to reduce the schedule.
Rosendin Electric of Manor, Texas, saw a $67-million revenue gain in 2018 due to several large projects, including the 161,000-sq-ft aircraft apron expansion and a 9,000-sq-ft Delta Sky Club at Austin-Bergstrom International Airport. “Texas will continue to have commercial and transportation-related growth opportunities as more businesses and employees continue to relocate to the state and to large Texas cities such as Austin, San Antonio and Dallas/Fort Worth,” says John Colley, director of Texas operations for Rosendin.
Business for the past year has been good for most specialty contractors in the region, but with some exceptions, says Russell Hamley, president of ABC Greater Houston. “The large specialty contractors are finding it difficult to maintain their backlog after a few great years,” Hamley says.
The ongoing expansion of distribution chains is fueling a demand for the construction of large-scale industrial warehouse and manufacturing buildings, while activity remains strong for high-rise residential projects and multifamily complexes, Hamley says. On the commercial side, the Texas market is oversaturated with office buildings, but interior work is keeping contractors busy.
Business weakens in Louisiana
The construction industry is “struggling terribly” for specialty contractors in Louisiana, where business has been on the decline in recent years, says Louisiana AGC CEO Ken Naquin. A lack of long-term infrastructure spending and the loss of industrial projects has significantly weakened the state’s construction employment, Naquin says. “We’re the only Southern state out of 13 not to address our long-term infrastructure spending,” he says, noting that other states have added sales and fuel taxes to fund infrastructure projects.
Louisiana at one time had $180 billion in plans for industrial expansion, but many of those opportunities have left the state for places like Texas that have the infrastructure to support these kinds of projects, he says.
Business has remained strong in large markets like New Orleans, Baton Rouge and Lake Charles in terms of infrastructure and private development, but Naquin says economic development has been lacking from Acadiana to north Louisiana.
One significant infrastructure project is the SASOL petrochemical plant in Lake Charles, the latest major contract for Baton Rouge-based MMR Group. The project’s contract value exceeded $300 million for MMR. The number of workers on the project peaked at 1,400; 4 million work hours were logged; and 1,365 miles of cable were installed. MMR saw a $35-million gain in regional revenue in 2018, which the firm attributes to large-scale projects in the Lake Charles area. “At one point, we had over 2,000 craftsmen working in the Lake Charles area,” says Eric Miller, director of business development at MMR.
Strong regional markets
Specialty contractors in Mississippi are experiencing an uptick in work across all segments, both public and private, with health care, education and hospitality leading the way, says Lee Nations, president and CEO of ABC Mississippi. “The current market for specialty contractors in Mississippi is very healthy. We are hearing positive things from both a volume and margin standpoint across all disciplines,” Nations says.
The Arkansas economy continues to be stable and is still experiencing growth, says Joey Dean, executive vice president of AGC Arkansas.
“What we see most has been a good mix of both public and private projects, including schools, colleges and universities, infrastructure, banks and the health care industry,” Dean says.
Data from the U.S. Bureau of Labor Statistics indicates that most industry sectors in the region experienced marginal growth in the past year, but that growth has been highest in construction, Dean says. “Our specialty contractors have benefited from the continued growth of the economy,” Dean says. “Some have taken advantage of this to widen the scope of their services.”
Commercial construction is showing signs of strength in Oklahoma, with the state’s two largest cities poised to approve a combined $1.5 billion in new infrastructure projects. Oklahoma’s Native American tribes are also adding casinos and health care facilities across the state. “Specialty contractors continue to remain flush with projects and are in a position to be selective regarding the projects they bid,” says John Smaligo, president and CEO of ABC of Oklahoma.
Expanded training, recruiting
Challenges stemming from the industry-wide skilled labor shortage continued to be a prevailing theme among specialty contractors across the five-state region, and some companies are taking a more active role in addressing these concerns. “There are simply not enough human beings, skilled or unskilled, to fill the jobs available in southeast Texas,” Hamley says.
Through its association with the National Association of Women in Construction, Rosendin hosted Camp NAWIC, a daylong event at the company’s facilities to give middle-school girls an opportunity to learn about careers in the electrical construction industry. “As a union contractor, we have always had the luxury of ‘calling the hall’ for manpower. Today, we are forced to actively engage in recruiting for real-time needs, but also for future needs,” Colley says.
TDIndustries offers a skilled trades training program focused on recruiting high school students and providing them fully paid trades training both in school and on the job. The company has also worked to recruit more women and veterans.
Finding enough skilled labor to meet market demand is the most pressing challenge in Arkansas, Dean says. “It ultimately increases the construction costs and delivery times,” he says.
Specialty contractors in Mississippi are also feeling squeezed by the labor shortage. “While contractors continue to have record times, those could be even further enhanced if qualified crews were available to put in place,” Nations says.
In Louisiana, MMR has initiated its own workforce development efforts. It developed a craft training center accredited by the National Center for Construction Education & Research and a federally recognized apprenticeship program for electrical journey workers.
Efforts to entice high school students to choose careers in construction have attracted broad support from contractors in Oklahoma, Smaligo says. “The biggest complaint we hear from our specialty contractors is not having enough workforce to keep up with the projects available,” he says.
Going into 2020, specialty contractors are expressing optimism about the market, although with a few caveats.
In Louisiana, there is hope that state lawmakers will recognize the need to address the state’s horizontal and vertical infrastructure needs, Naquin says. “Because if we don’t, we’re in for some even harder times to come,” he says.
Hamley predicts another good year for specialty contractors in Texas. “The economy is still strong and should continue throughout 2020,” he says. “There are a couple of signs of general weakness, but there usually is after an upturn.”
The key for the industry, Hamley says, will be to recruit people into construction and train them so they can play a role in building the environment in which they live. “It is a great and rewarding career, and we need to spread the message that great opportunities are available,” he says.