Despite continued material cost increases due to tariffs and the trade war between China and the United States, the construction industry remains busy in large part thanks to public sector spending, according to industry experts.
“What we see in 2019 is remarkable. The opportunity for the industry to have good paying jobs for their workers has never been as fruitful as it is now,” John Hakel, executive director of the Southern California Partnership for Jobs (SCPJ), said. The SCPJ represents 2,750 contractors and 90,000 union employees.
The catalyst for employment growth in the industry is billions of dollars for water and transportation infrastructure approved by California voters, Hakel explained. Senate Bill 1, originally approved by Gov. Jerry Brown in April 2017 and upheld by voters last year, dedicated more than $50 billion to road-related infrastructure repair over the next 10 years.
Additional funding comes from Measure M, which funnels an estimated $860 million into transportation improvements annually, and Measure W, a parcel tax that stands to generate an estimated $300 million annually for storm water infrastructure repairs and improvements. More than $11 billion was allocated for water infrastructure, parks and environmental-related improvements through Propositions 1 (2014) and 68 (2018). “There’s a tremendous amount of work, and the funds are there,” Hakel said.
While there is dedicated funding for public sector projects, private investors are more likely to be affected by increased construction material costs, according to Kenneth Simonson, chief economist for the Associated General Contractors of America (AGC).
“I’d say we’re in a period of maximum uncertainty right now. . . . The president did impose 10% tariffs on thousands of Chinese goods,” Simonson said. “He threatened to raise those tariff rates to 25% on January 1, but then suspended that increase [to see] if they could achieve a trade agreement by March 1. So the clock is running.”
Materials impacted by tariffs from locations around the world include steel, aluminum, lumber and plywood, and asphalt mixture. Many prices of product used in construction increased as much as 7.4% from September 2017 to September 2018, AGC reported.
In December of last year, 38,000 construction jobs were added. The total annual increase in construction jobs was 280,000 jobs (or 4%), according to an AGC report. Construction employment totaled 7,352,000 in December, which is its highest level in a decade, just shy of the pre-recession high of 7,760,000 at the end of 2006, Simonson noted.
Continuous strong demand for skilled laborers has become somewhat problematic for the construction industry, Simonson said. In an AGC survey released on January 2, 79% of construction firms indicated that they expect to add employees in 2019. However, 78% of firms reported already having trouble filling certain positions, with 68% expecting hiring to remain difficult or become harder throughout the year.
President, Brascia Builders Inc.
It’s an exciting time in the construction industry. If we look right outside our own backyard, Downtown Long Beach is booming in commercial and residential real estate. We remain the second busiest container port city in the U.S., right behind Los Angeles. And beyond what’s happening here, there is a lot of planning underway for big future developments around us. When I think about the Olympic Games coming to Los Angeles in 2028, I think about the exciting upstart in new businesses it will bring about. It may seem far off, but an event of this caliber requires planning and building years before it comes to fruition.
Realistically, it is natural to experience a slowdown in construction at some point or another, but I am confident that the building opportunities over the next few years are exponential. Brascia Builders Inc.’s new South San Francisco office is a testament to our belief in California’s future economic prosperity. We had a great year in 2018 and we are off to another busy year in 2019. This June, we proudly celebrate our 10th anniversary in business. There’s been no better place to plant our roots than Long Beach.
President, 2H Construction
I expect that 2019 will be another good year for construction in Long Beach. However, my guess is that 2019 will flatten and be equal to 2018 revenues as opposed to the continued growth rates we have seen over the past several years. Housing is expected to drop in 2019, which usually is the leading indicator for commercial construction.
It appears that material prices will continue to rise at the same rates that they have in recent years. The largest impacts on material prices continue to be steel related. The increase in material costs and flattening in construction revenue might cause for a feeling of tightening in the marketplace.
California State University, Long Beach, Long Beach City College and Long Beach Unified School District all continue to renovate and improve their facilities through 2019. Douglas Park has proven to be a very prosperous development that will finish this year with an upcoming Long Beach Airway phase that hopes to be as successful. 2nd and PCH, Long Beach Civic Center and other downtown projects continue to improve the city landscape. I am happy to be a Long Beach resident and contractor in 2019.
President, Morey Remodeling Group
The start of 2018 had a lot of optimism with the stock market up, property values rising, lower home inventory and interest rates down. The beginning of 2019 began with a significant drop in the market, then a big jump up, yet the market remains up overall. So, what about client confidence? With fewer homes on the market, it is still a great time to sell. However, if you are staying in the area, real estate options are limited. Our clients want to stay in the neighborhoods they love while remodeling their home to support their lifestyle. As a design and build remodeling company, we work with homeowners exploring their desires as the household changes over time. A larger part of our focus is “aging in place” through universal design, which we find younger owners also concerned about, not just seniors. Many predict this “improve in place” movement is going to keep growing. The post-holiday season is a great time to start the design process for a remodeling project. Many have hosted friends and family and the flaws of an unaccommodating home are still fresh in our minds. Most of our clients are using savings to do their projects, which shows their confidence in the future, and desire to have a home they love living in.