Delays, Labor Shortages and COVID Stress: Construction Firms Working Through Challenging Times

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Reprinted from Midwest Real Estate News

Construction firms are busy again as developers react to increasing demand for new commercial properties, especially in the industrial and multifamily sectors. But being busy doesn’t mean being stress-free.

Commercial construction firms are facing a severe shortage in key materials. They’re also dealing with a lack of labor and rising prices.

How are they tackling these challenges? We spoke with Eric Gowin, founder and managing member of Contegra Construction Company, to find out. Contegra has offices in St. Charles, Missouri, and Edwardsville, Illinois, both in the St. Louis market, and works in markets across the Midwest and the country. Gowin, then, is familiar with the difficulties construction firms face today.

How busy is Contegra today? Is construction activity on the rise?
Eric Gowin: 
We have been pretty steady. When the pandemic hit, we had a couple of jobs hit the pause button. Within 30 days, we started seeing a lot of new opportunities, mostly in the warehouse and distribution and ecommerce space.

Warehouse/distribution is a big part of our business now. It probably accounts for 70 percent of our business. We’ve started seeing an uptick in new spec buildings and build-to-suits, too, with the warehouse work. Some even have some manufacturing component.

How about other commercial sectors? Are you seeing any demand for new construction there?
Gowin: 
Office and retail requests went way down. Office, for us, we haven’t seen much movement at all. With retail we are starting to see some activity again. Some retailers have poked their heads out again and are starting look for new space.

What are some of the reasons for the big upswing in warehouse construction?
Gowin: 
The pandemic probably highlighted some of our constraints in logistics and delivery throughout the country. It made companies think about the amount of warehouse stock they could sit on and how quickly it turned over. During the pandemic, demand for product sped up so fast. It depleted a lot of warehouse logistics capacity. Out of that, grew a need for more space. Companies are still reacting to that and building new warehouses across the country.

You are seeing that now with the chips that automotive makers need. There are huge delays with that. There was the freeze in Texas that caused a plastics shortage. It seems like there is something new every day that causes shortages.

Does St. Louis’ central location help make it an attractive location for companies opening new warehouses?
Gowin: 
We have a great highway system here. We have a good river system. We have all the Class-5 railroads, too. St. Louis is a good logistics hub. I’d say our main competitors are Kansas City, Indianapolis and Memphis. From what I hear, I do know that Kansas City is really busy, too. Indianapolis has been extremely busy. We have a lot of work in the Kansas City market, too. Columbus, Ohio, is good, too.

How busy do you think the commercial construction industry will be the rest of this year and heading into 2022?
Gowin: 
There is still plenty of demand. And it’s not just this year and next year that should be busy. From what we are seeing, it seems like the next three to five years are going to be brisk.

Can you talk about the materials shortages that are hitting construction projects across the country? How big of a challenge is that?
Gowin: 
It is a major challenge. Two major components that are in short supply are structural steel and roof insulation. For structural steel, the lead times used to be 12 to 16 weeks. Now it is taking 30 weeks or more to get it. That has really been a challenge. Some developers are choosing to pre-purchase steel and then assign it to general contractors to make sure they can meet their development schedules. That has helped somewhat.

We are also seeing big delays with polyiso roof insulation. That has been in incredibly short supply. Those lead times are getting way out there, too.

How are you dealing with these delays?
Gowin: 
For the steel, we have been working backwards from the delivery date to make sure we can stick to our schedule. On the roof insulation, we have been putting temporary membranes down to keep construction on pace. If we are working on a large office development, say, we’ll put a membrane down on one corner of the building. It’s not practical to put it on all over the building, especially if you’re building on spec. But in a build-to-suit, temporary membranes in some locations have worked well for us.

Have you ever seen material delays of this length before?
Gowin: 
Not in my lifetime. Another one we’ve run into is getting dock doors. Those delivery dates are getting way out there, too. The delays are really hitting all facets of construction.

Do clients understand this?
Gowin: 
They do. They probably have it built into their core businesses, too, with their supply chains. It can still be difficult, though, when they have lease commitments and are moving out of a facility before moving into a new one. It can be tough for clients to juggle that.

Are you seeing any signs of relief from these delays?
Gowin: 
We had heard that this winter and in the first quarter of next year that some of the kinks will work themselves out. That is yet to be seen. So far, it doesn’t seem to be heading in that direction.

What about labor? Is it difficult to find labor on construction projects?
Gowin: 
That has been another challenge. Our biggest shortage of labor has been building superintendents who travel to projects in different towns. Even project management in-house has been tight. It seems like in every job description in construction there is a shortage. I don’t know why it is. I think, especially when it comes to the construction of new distribution centers, everyone in the country is busy. General contractors are all busy. Everyone is looking for the same type of labor. That makes it difficult to find enough people for all the projects.

On a more positive note, are you seeing any good trends in the construction industry?
Gowin: 
We are hearing people talk more about planning for new projects other than warehouse and distribution centers. A lot of people are waiting to see how the pandemic plays out. I still hear that the multifamily market is strong. The interest rates are still good. In multifamily and industrial, we continue to see projects roll in the door or enter the planning stages. For the rest of the sectors, it’s wait and see.

USGBC-Missouri Gateway Names Cara Spencer as Director of the Building Energy Exchange-

U.S. Green Building Council – Missouri Gateway Chapter (USGBC-MO Gateway) is excited to announce the hiring of Cara Spencer as the Director of its Building Energy Exchange St. Louis (BE-Ex STL), a regional resource to help building owners, operators, and community members drive greater efficiency in the built environment. More specifically, BE-Ex STL will provide support to the local real estate community and building industry professionals as they work to improve their building’s performance and reduce their greenhouse gas emissions in accordance with the Building Energy Performance Standard passed unanimously and signed into law by the City of St. Louis in April 2020.

In the City of St. Louis commercial and residential buildings account for 65% of greenhouse gas emissions (2018 GHG Inventory), which come from the energy used in buildings – both day-to-day operations and during design and construction. Based on analysis of local energy benchmarking data, St. Louis buildings are more inefficient than the national median. This means the opportunity for costeffective climate action is even greater. “The time to act is now. There is a tremendous opportunity to reduce emissions, save money, create jobs and protect public health by taking steps to make our buildings more efficient,” says the City of St. Louis Building Commissioner Frank Oswald.

“Over the past several years, USGBC-MO Gateway has proudly partnered with the City of St. Louis on its energy efficiency and climate protection efforts through stakeholder engagement, policy development and education. We are thrilled to have Cara join our team and help accelerate the important role of high performing buildings in leading regional decarbonization,” says Emily Andrews, Executive Director of USGBC-Missouri Gateway.

Spencer earned a B.S. in Mathematics from Truman State University and brings experience from both the regulatory and investment side of development. She was elected to the City of St. Louis Board of Aldermen in 2015 and represents the 20th ward, a role which she will maintain. The 20th ward is an area of South St. Louis City that has seen significant investment during her tenure. Prior to public service, Spencer spent over a decade in the private sector consulting Fortune 500 companies in strategic planning.

“Now is the time to be preparing for climate change and positioning St. Louis as a climate ready city” says Spencer. “Not only will reducing energy consumption help make our air healthier, but it will make St. Louis more competitive and help position our city for growth. Major employers like Google and Amazon join a growing number of small and mid-sized companies in prioritizing cities and spaces that reflect the values of a customer base that increasingly values the environment. I’m excited to work with property owners to make investments that are smart for their bottom line, the future of our city and the planet as a whole.”

BE-Ex STL will provide critical hands-on assistance to help building owners meet the City of St. Louis Building Energy Performance Standard while addressing barriers to implementing high performance building strategies in the region. A formal launch of BE-Ex STL is scheduled for early 2022. It will work in partnership with the City of St. Louis, the Institute for Market Transformation (IMT), the Natural Resources Defense Council (NRDC) and Washington University, along with other non-profits, businesses and institutions, including foundational support from Ameren Missouri, the Leon Lowenstein Foundation, Spire and Washington University.

“We look forward to working with Cara in our ongoing efforts to connect building and business owners with strong incentives to reduce energy use and save money,” says Tony Lozano, director of energy solutions at Ameren Missouri.

Missouri Gateway Chapter USGBC-Missouri Gateway Chapter is a 501(c)(3) nonprofit community of members, advocates, and practitioners that gives voice to our commitment to improve human health, support economies, and protect the environment through green buildings. The Chapter serves the community by educating and advocating for green building principles and practices, and believes that everyone deserves access to green and healthy spaces.

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