The saying might alarm you, but it’s both a reality of the strong construction market in West Michigan and a sign of challenges to come.
For construction buyers and managers, it’s important to understand current changes in subcontractor backlog, cost and how you can stand out as someone who trade contractors want to work for.
Subcontractor backlog and labor shortage
Many West Michigan construction subcontractors and suppliers are busier than ever, and two main factors seem to contribute to this increase in construction demand.
First, without a doubt, almost every sector of the construction market has made a strong recovery in recent years. Health care, industrial, retail and residential have not reached pre-recession levels, but they have certainly grown much stronger. And it all seems to be happening at once. One needs to look no farther than downtown Grand Rapids to see the resurgence in investor-backed construction in real estate and development.
Second, as workload increases, skilled-trade labor is in high demand. During the recession, many tradespeople left the residential housing market for commercial construction. Trades such as drywall, painting and flooring had their pick of workers, as good craftsmen flocked to commercial construction. As the residential construction market recovered and is booming in West Michigan, these workers are returning to the residential market. A large interior-finishes contractor told me recently that workers are returning to residential construction, because of better payment terms, less-stringent safety policies and simplified work environments.
Increasing construction costs
The holiday season and coming New Year are notorious for price increases from construction material suppliers. Combined with project backlog and labor shortages, construction prices swell. In addition to being faced with a full schedule, construction managers and trade contractors will choose projects with the most attractive terms and best work environment.
Attracting good help
1. Plan strategically
I cannot over emphasize the importance of sound project planning. Hiring a construction manager early in the building process allows you to build buy in to compressed schedules or tight budgets. Push your CM to advertise your project before bidding, so that trade contractors reserve time to look at your project closely and give their best number. Finally, be aware of your bid timing. Is there another major project in the area bidding at the same time? Are your budgets or schedule going to be affected by seasonal increases in material pricing? A good CM will advise you on these questions, but you can also research on your own through organizations like the Associated Builders and Contractors.
2. Anticipate a cost increase
Busy subcontractors increase prices. It’s simple supply and demand. As the demand for trades increases and the supply remains the same, prices goes up. A forward-thinking CM should anticipate this increase and include it in their estimates. You should also consider when your last project estimate was completed. A few years ago, many organizations estimated their capital project costs only to “sleeve” them until times were better. Now, as projects come back to life, it’s important to make sure your estimates are up-to-date.
3. Be accommodating and appreciative
As mentioned earlier, construction managers and trade contractors have the freedom to choose which projects to pursue. They consider many factors in this choice, but, in general, they’ll choose companies that treat them fairly and offer the best contract terms and environments to work. If you have the ability to create adaptable payment terms, companies will seek you out. You may even get discounts from some companies for faster payments. If you can’t change payment terms due to corporate regulation, try to at least pay on time.
Show your appreciation for the work performed on your project. A simple “thank you” from a building owner can go a long way in future trade-worker performance. Take an interest in the people working in your building. If they feel like you care, they’ll give your project much more attention — similar to working for a friend or family member. Offer your amenities to the construction team. If you have a cafeteria on-site, let workers use it. Ultimately, if you respect the workers, they’ll respect your rules and your expectations.
In general, West Michigan is still a very economical area for capital investment, and, despite increasing costs, construction is still very competitive.
Good help can be hard to find, but finding that help isn’t out of your control.