Despite economic uncertainty, an ongoing workforce shortage, and threats from tariffs and trade wars, commercial construction in NH remains strong, according to the industry leaders who took part in Business NH Magazine’s recent commercial construction roundtable.
“There’s plenty of work out there,” says Frank Lemay, president of Milestone Engineering & Construction in Concord. “If you lose one proposal, there is always another opportunity coming along.”
Although the Associated Builders and Contractors (ABC) Construction Backlog Indicator contracted to 8.1 months during January 2019, it rebounded by March. The NH sector remained strong, and Joshua Reap, president of ABC NH/Vt. chapter, says he doesn’t see the NH market slowing down anytime soon. “Our construction sector has grown by nearly 10 percent over Vermont and other places. Our economy is booming, and there is plenty of work out there right now.”
The robust market does come with challenges, though. General contractors compete for a limited pool of subcontractors to complete projects, and those subcontractors are also juggling multiple projects, says Preston Hunter, vice president of Eckman Construction in Bedford. Both general contractors and subcontractors face the same workforce crunch.
James Loft, co-president of PROCON, an architectural and construction management firm in Hooksett, agrees, adding that if a project is delayed, it is difficult for general contractors to hold onto subcontractors because those “subs” have five other jobs.
“Budgets are tight, the cost of construction continues to go up, and because we get involved early in a project, budgeting six months out, it’s very difficult to predict cost escalations,” Hunter says. “Without the manpower, it becomes more and more challenging to bring the project in on time.”
Material costs are a constant challenge to create and keep to a budget. Just when it seems like the dust has settled from the latest tariffs from the Trump administration, another tweet sends the markets reeling and opens the door to price spikes. With the possibility that the U.S.-Mexico-Canada agreement (USMCA) that is set to replace NAFTA may stall in Congress, there’s even more uncertainty.
Prices for lumber, steel and even lighting fixtures have risen, though there are questions as to whether those are driven by increased tariffs or whether tariff threats are “a convenient excuse to increase margins or hedge some risk,” Hunter says.
A long pipeline of construction projects is driving demand for construction workers, but like other businesses, the construction industry faces a scant supply of workers. Lars Traffie, president and CEO of Hutter Construction Corporation in New Ipswich, says the Great Recession of a decade ago still affects the industry today because so many workers did not come back when work returned. “About 40 percent of the workforce was laid off, and 60 percent of them found a new profession,” Traffie says. “We have no way in the licensed trades to reproduce that because they are retiring faster than we can replace them. The challenge as contractors is to come together and determine how to attract young people.”
Lemay says systemic prejudice against the industry only serves to exacerbate the shortage. “As parents, we all push our kids to go to college. Guidance counselors are not pushing kids to go into trades. A parent’s dream is not for their kids to go into the trades; it’s to become a professional. It is systemic throughout society, and part of the crisis in student loan debt,” he says.
Hunter says a major cultural shift is needed. “It’s like turning a freight liner in the middle of the ocean: It has been headed in one direction for so long, it will take everyone in the industry talking about the opportunities and bringing back the pride and satisfaction of doing something with your hands. We have to open people’s eyes, focus on the lack of student debt, and the good pay.”
Construction is not a sexy industry for young people, but the industry is beginning to emphasize the technology used on jobsites to entice the next generation of workers, says Mike Stansbury, CFO of Northpoint Construction Management in Hudson.
“Technology in our office has been the biggest catalyst to get young people in the field,” says Craig Jewett, president of Jewett Construction in Raymond.
Reap says the ABC is working in many ways to bolster the pipeline of workers, including a craft-worker program targeting those who are unemployed. ABC is also helping to craft a curriculum for career technical centers at high schools across the state. The group is working with NH Sector Partnerships Initiative (a collaborative, industry-led program that provides funding, training expertise and other resources to help companies in critical sectors with workforce development) through the “I Build NH” initiative, which aims “to shift the conversation from a college-only mentality to giving students a pathway” to careers in the trades, Reap says. “When I started my career, I met a guy, a heavy equipment operator, who was 10 years younger than me and already making $100,000, and here I am with student debt. Why didn’t somebody tell me?”
Hunter says it is important to share stories of successful young people in the industry and show not only the excitement of jobsites, but how they are safe, professional and well managed. Eckman worked with ABC to create a video aimed at doing just that, and he hopes it will start to change the minds of guidance counselors and parents.
Gary Thomas, president of Northpoint Construction Management, says their outreach efforts start even earlier. “A lot of college graduates are looking to the big cities, and high school students are already focused on a path. We have been going into [middle] schools to reach them before they get to high school—their minds are already made up by then, and the parents are pushing them toward college.”
Lemay says he went to college for engineering, but worked on a paving crew and found engineering boring compared to being on a jobsite. “It’s exciting to see a carpenter who can build circular stairs,” Lemay says. “The perception of a guy with a hammer, his pants hanging down, T-shirts with [inappropriate] slogans … we need to change that.”
Running the Red Tape Relay Race
But labor is not the only challenge. So is timing. As companies wait for projects to get approved, they have to find ways to manage the gaps of weeks and even months while also managing client expectations and budgets.
Lemay says it really puts pressure on small businesses. “They come in to build a 5,000-square-foot building in NH, and we tell them that just the engineering [costs] to get through the planning board is between 30 and 40 grand. Then they get hit with impact fees and they can’t afford to do it,” he says. “It is expensive to develop in New Hampshire and it starts to squeeze out the small businesses.”
Loft says while there are still some challenging communities to work in, many are modernizing zoning laws and recognizing the need to work with businesses. Thomas says planning boards are often made up of laypeople who don’t have the benefit of staff with industry expertise as they do in larger cities. Lemay adds even in the communities that “get it,” hurdles and delays increase the cost of projects.
Where Are the Cranes?
Hot spots for construction are Boston, the North Shore of Massachusetts, and the Seacoast, especially Portsmouth, where new hotels have been opening up every year. Loft says hospitality, assisted living, and health care are investing in infrastructure, and warehousing is making a comeback. Lemay says municipalities are also building, including fire stations and libraries.
Another growth sector is manufacturing for aviation. Jewett says aerospace manufacturing is strong, and he expects that sector to continue to invest in expansion projects. Loft says hangars are big business, too. Executives are making big bucks and need a place to put that Gulfstream private jet, he says. “It is a sign of the strong economy.”
Emphasis on Quality and Culture
Alongside meeting the latest standards in green building and energy efficiency, roundtable participants agreed businesses are opting for quality and design aesthetic over less-expensive options. “When I started in the business, a lot of clients just wanted to do what’s cheapest, just get it out there and get rent coming in,” Loft says. “The codes are making the building much more energy efficient, but beyond that they want the quality, so when they go to sell it, it’s worth more. If you can show that operating costs are less, that’s a huge plus. The down-and-dirty cheapy stuff is not as popular. There’s a real mentality with the developers to hold assets and sell for a profit someday.”
Thomas says when it comes to customer-facing spaces, it is all in the details with lobbies and waiting areas that are more reminiscent of the hospitality industry, especially in car dealership designs. “I think it is part of the economy and mindset,” says Thomas. “They feel they need that to get people in the door.”
Jewett says company culture and creating a work space that makes the lives of employees more enjoyable is driving design. Workplaces now include gyms with locker rooms, and even in the age of open work spaces, companies want quiet rooms so employees can have privacy to make a phone call. “Who would have built that ten years ago?” he says.
Cafeterias are being designed to blend break room space with work space and are flooded with natural light to make them places where employees want to hang out, relax and connect with coworkers or grab a laptop and work quietly or collaboratively. As Hunter says, the old cafeteria is being replaced by a hip café.
Lemay says he is seeing the need for office space shrinking as companies are less centralized and opening more
Where Is the Industry Going?
When asked about the future, participants cited more prefabrication and use of modular and panelized products. Lemay says 10 years ago, all of the wooden structures were stick built, but now more buildings are built using precut panels. A big advantage is that preconstruction can be done indoors, in a factory setting, and projects are not weather-dependent, he says.
Loft says the move to modular also reduces the need for multiple subcontractors at a jobsite at the same time while having to contend with weather conditions. There are other ways, though, for the industry to find efficiencies. On a recent PROCON project, Loft says the electrician showed up with the wires all precut and the boxes ready to go. “We are seeing a more systemized approach, and that is where the industry will keep going,” he says. “You don’t have to make everything modular, just a little more systematized.”