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Utah Business

This month, Utah Business partnered with Holland & Hart to host a roundtable event featuring building and construction leaders to discuss trends in Utah commercial and residential building.

A Discussion With Building, Construction, & Design Leaders

This month, Utah Business partnered with Holland & Hart to host a roundtable event featuring building and construction leaders to discuss trends in Utah commercial and residential building, partnering with sub-contractors, and the industry workforce. Moderated by Richard J. Thorn, president and CEO of Associated General Contractors of Utah. Here are a few highlights from the event.

What is the state of the commercial and residential building industry in Utah? 

Rob Moore | CEO | Big-D Construction

The state of our business is very robust. We’ve got some nice projects in front of us. The airport, the prison, and some of the big projects down south. In addition, we’re seeing an enormous amount of multifamily in the marketplace. I don’t see this market slowing up. I don’t see a recession coming with the indicators we’re seeing.

Keith Buswell | VP | Wadman Corporation

We see thousands of family units being built and there is still not enough. Most of us have been in various cycles, there were too many hotels or too many restaurants, and the cycles in multifamily used to be in that. All of a sudden, you’d have too many. The vacancy would go up and you’d have problems going through that, but we don’t see that happening in Utah, and that’s a positive thing. 

Cris Hogan | President | Hogan & Associates Construction

It’s a good time to be a contractor. I don’t see a major slowdown. This is one of the hardest years we’ve had with manpower and schedules, and trying to get jobs and quality done on the projects, so I don’t see that slowing down immediately. Maybe a tapering off of the sharp incline in a year or two that will provide some relief with the major projects taking so much manpower right now. Then maybe there’ll be more manpower available to help all the rest of the projects in the state.

Gary Ellis | EVP | Jacobsen Construction Company

Construction is booming everywhere. I think we’ve been discovered nationally, and we’re taking many phone calls a week, from people that are wanting to come into Salt Lake City  and take advantage of the opportunities that are here. I think you’re going to see a lot more tower frames going up downtown than we’ve had. Where construction mostly has been outside of the downtown area, you’re going to see that now even more concentrated on the downtown area as well. You’re going to get higher lease rates and it will continue to be a dynamic growth opportunity for Salt Lake City. 

Brandon Squire | President | Ralph L. Wadsworth Construction

The market’s pretty steady, a bit backlogged going into 2020. There are going to be some large projects that are advertised and awarded in 2020. The extension of Legacy, the West Davis Corridor, Highway 89 will get going. There’s more projects on Bangerter. The UDOT market is still very strong. As far as development on the private side, we’re seeing that is still very strong too. A lot of technology companies are coming in, and there are big, heavy civil projects related to that also. The labor market is still very tight, even on the heavy civil side. 

What are some of the challenges you experience with sub contracting? 

Troy Gregory | President | Hunt Electric

I think what we struggle with the most is just some of the timing and being there. Trying to take on backlog and being responsible signing up for backlog is difficult. What happens is a lot of these projects start to push and that’s out of our control. You take on what you think you’re responsibly doing but then jobs start to push and it starts to compress, and then, all of a sudden, a whole bunch of stuff just kicks loose at the same time. 

I love hearing from somebody that you’re going to do more due diligence and vetting out subcontractors. I think that’s really important, because they impact our work. We’re at the very beginning and at the very end, and if the schedule gets compressed anywhere in between that we’re a part of trying to make that up in the end. I think what we can do is definitely vet out and make sure that people aren’t over-committing resources right now.

Brandon Squire | President | Ralph L. Wadsworth Construction

The economy being as good as it is, we’ve seen more sub failures this year than we really ever have. We’ve had to step in on several occasions and take over the work. We’ve had several subs that have gone bankrupt, and so part of that is they’re taking on too much work for too little money, and they get overextended and not paying their bills, and they try to take out more work to dig out, and it’s just a never ending cycle.

Rob Moore | CEO | Big-D Construction

The general contractors are doing a much better job of keeping track of subcontractors. I get a report every Friday of exactly how much contract I have with every subcontractor we’re working with. I think for contractors, we’ve got to be really careful not to overburden our subcontractors, who simply are trying to keep the pace of work. They don’t want to say no to many of us at times and they want to keep the work in front of them, and the largest failure of subcontractors are in the very heat of the battle, which is right now, right? Like you’re saying. We’re very conscientious about that.

Our prequalification of subcontractors is more robust than we’ve ever had it in the past. We’re making sure that the subcontractors are keeping up, or there’s insurance or financials and people. Our number one challenge to a robust market is: can the sub contractors keep up pace?

Chris Knoles | Director of Marketing | Zwick Construction

One of the biggest ways subcontractors earn our respect is to tell us if they are overworked. We say, “can you do this?” They say, “we’d love to do this, but we can’t do it and we’ll pass,” and the respect level goes from here to here. You won’t be put to the bottom of the list. You won’t be overlooked at the next opportunity.

Brady Thorn | VP | Beehive Insurance Agency

We’re seeing problems and it’s not with the small contractors it’s with larger contractors that I think everybody would be surprised with. There’s just too much work and not enough manpower to do it. We’ve seen more bond failures on the surety side this year than we have for many, many years. The subcontractors are dying from a lack of work. The first thing that we do is to coordinate meetings with them. We’re sitting butts in chairs and saying let’s really dive into this.

The subcontractors don’t want to tell you no. They’re like, “okay, how do we make this work?” They’re just spread too thin, and then the schedule shifts even a little bit and it’s just a massive domino effect. So the first question that we ask is: how are we going to man the job? Because of the labor shortage, they’re already spread thin enough.

Assuming they can man the job, do they have the cash flow and means to be able to keep the capital coming through the door, keep the job going? There’s just too much work and not enough manpower to do it. We need to communicate and have more intimate conversations with our contractors and say, “hey, you’ve worked for us for 20 years. We know you’re spread thin. This is a big job. Can you really do this?” We’ve got to get them comfortable and onboard with saying, “we really can’t,” or, “we can, if you’re willing to do this.”

James Williams | President | AE Urbia

In the last two, three years, the cost of construction has gone up fairly quickly. We’ve seen a few projects where it’s going to take two years to build. They’ll award the contract and it’ll be an aggressive fee, and we’ve had some subcontractors on these projects that haven’t locked in their pricing, and then, all of a sudden, as costs go up, they’re tight, and there are no change orders for them to make up the money. 

It’s just a constant struggle of how are they going to make up the money? At the end, you get a contractor and owner that are at odds, because they want to build it for the price it was contracted, and they can’t get the pricing locked in. There’s not enough contingency, so that’s an issue that we’ve seen on a couple of big projects.

Troy Gregory | President | Hunt Electric

The average time that we could build keeps stretching over the years. It used to be 30 days, and now it’s like 70-75 days. A subcontractor is trying to manage suppliers that expect it within weeks, and so they’re trying to turn that over, yet the other is stretching, and stretching, and stretching.

How is unemployment in the construction industry and what is being done about it?

Richard J. Thorn | President & CEO | Associated General Contractors of Utah

We’re building a new training center, 16,000 feet, to hopefully train some of these people and address some of these workforce issues. Unemployment nationally is 3.7. We’re at 2.7 percent here in Utah.  That is like full employment. If you’re not working there’s a reason, right? That’s a great problem to have, but holy cow! That’s going to impact us even more if we don’t roll up our sleeves.

Cris Hogan | President | Hogan & Associates Construction

One of the things that I think all of us can do more of is recruiting for the industry.  We’ve got to change that mentality that construction is for people who don’t graduate or if you can’t get a job you go into construction. I think reaching out to the community, schools, and various educational partners can help change that culture. We need to let people know you can make a lot of money working construction.

Rob Moore | CEO | Big-D Construction

From our project’s viewpoint, we are short on electricians. That’s probably the number one thing for us, truly. We look at the project, the airport’s got 500-600 and we need more. Facebook has had a huge push on electricians this year, for everyone. The prison’s starting up and there’s a lot of pressure there.

Troy Gregory | President | Hunt Electric

We have been heavily involved in recruiting out of high schools for several years. We’re having great success. We’ve put a lot of the investment. We have full-time instructors in-house. We have people that work in our prefabs, so part of the onboarding is they come into prefab, which is a controlled environment, and we’re trying to teach them as they’re assembling and building parts.

In addition to that, we’re pulling them off the floor and having them work with a full-time instructor, to help them get spun up for the construction job. We’re really putting a lot of energy into getting them prepped properly with safety. Safety is a huge component of that, and even in everything that we’re doing, they’re still going through the work environment and it’s a whole different risk of safety form in that construction environment.

Kendall Smith | VP | Hughes General Contractors

We’re seeing some of the school districts recognize that college isn’t for every high school student. We’re starting to see some of the districts implement some career pathways programs. So we are starting to see some high school students recognize that construction is a place to make a living and to be able to raise a family, and have a good life.

Richard J. Thorn | President & CEO | Associated General Contractors of Utah

About five years ago some of us met with the Governor’s Office to create a construction career pathway.  This past year-and-a-half the AEC, Architecture, Engineering and Construction Career Pathway was formally adopted by GOED, which was an effort by the private sector. It was an effort that included public education, higher-ed, and the executive branch that has been embraced.

It’s been raised to a higher degree in northern Utah, mainly through the efforts of Weber State. In northern Utah you are able to get what they call stackable credits by taking courses that are construction related. You can come out of high school with credentials on various construction trades. This is now migrating across the State of Utah. 

Keith Buswell | VP | Wadman Corporation

We’re not necessarily looking for construction management guys coming out of college. We’re looking for young tradespeople who want to work with their hands. They don’t want to go to school, but we’ve given that a negative connotation. Much of the PR we need to do as an industry, is get to the counselors in the high school, counselors even in the college and the tech schools, and to the parents.

The parents have to get past thinking that “my kid’s got to have a college degree to be successful and have a lot of debt.” You think about the electricians that are coming up, their buddies that are in college. Electricians can buy a house and have a great life, and the other guy’s having a tough time for 10 years, do you know what I mean? 

Brady Thorn | VP | Beehive Insurance Agency

I think construction gets this reputation that you’re down in the ditch shoveling back and forth. Technology on some of these bigger projects that are so complicated and the younger generation loves that kind of stuff. They don’t want to think about the manual labor aspect. I think there’s a lot more technology in construction that will be a big selling point. We need to paint the right picture for them to see because the picture they see is a picture that their parents have painted them, and it couldn’t be any more opposite.

Describe the trends you are seeing in healthcare-related construction.

Jeff Palmer | EVP | Layton Construction

We do healthcare across the country, and we’re not seeing it slow down at all. There’s great opportunity there throughout the country, and it’s a strong market right now. We’re very fortunate to have such a presence in the healthcare market. The general population is aging, and with that, there’s a need for additional healthcare facilities.

John Evans | VP | Okland Construction

Our footprint’s more regional from a healthcare standpoint. When you look at the Utah market, a couple of the bigger players here, whether they be Intermountain Healthcare or the University of Utah Health Sciences, they’ve had very robust building programs over the last five years. Very robust, and so we’re still seeing opportunities. From a national perspective, we’re not lacking. There are still lots of healthcare opportunities in other markets. 

J. David Giles | Principal Architect | FFKR Architects

I just recently met with a national healthcare provider who’s developing a new care opportunity, and their model is to develop small ambulatory, rehab, physical therapy centers next to hospitals so that hospitals can move patients out of beds and move them into these transitional care facilities, and give hospitals an opportunity to expand their market and put more people in beds, and so there are a couple of companies that are actually aggressively moving in that kind of transitional care opportunity, so the healthcare is changing a little bit in that market.

Kate Carlisle-Kesling | Partner | Holland & Hart

We’ve got a lot of conversions going on where apartments, multifamily, developers, and contractors are trying to figure out how to convert to senior living. The look ahead at the aging population and how to convert to a condo, how to convert to senior living is a fascinating discussion. 

Are you experiencing any challenges with construction materials?

Jake Goodliffe | VP | Staker & Parson Companies

In the heavy civil sector, we haven’t seen a real strain on material supply. Up and down the Wasatch Front, the building materials we’re part of have been relatively stable for us. The utilities and infrastructure and highway operations have been pretty stable. Our outlook is more or less stable through 2020, so pending construction in the marketplace, we feel like things are pretty stable.

Troy Gregory | President | Hunt Electric

Fixture costs have been going up. I sometimes think they’re using the tariff as just an excuse to raise those up on us, so fixtures are a major challenge. I think copper, the rest of it, steel, in general, is staying fairly flat. 

Jeff Palmer | EVP | Layton Construction

We’ve seen many of our developers start to scramble with the tariffs on millwork and carpentry, where it’s coming directly out of China. There’s some uncertainty there and so we’ve seen them start to go to other countries to try to get that direct shipment. 

Brandon Squire | President | Ralph L. Wadsworth Construction

From what we’ve seen, it’s been more the finishes have maybe tried to come up a little bit more on price. The cabinets and stuff being sourced from other areas, the countertops. Lumber, concrete, steel―all that seems to be pretty consistent.