SoCal Construction Market Red-Hot, Contractors Scramble To Keep Up
Want to get a jump-start on upcoming deals? Meet the major Los Angeles players at one of our upcoming events!
With a historic construction boom making its way through Southern California real estate, contractors are struggling to retain the talent it takes to do business. Skilled labor remains at a critical shortage, and contractors are feeling even more pressure in a time of unprecedented growth.
Add in a new challenge with the labor shortage: the state’s high housing costs, which are causing workers to live farther away from their jobs. Thanks to long commutes, some skilled employees are looking for work closer to home, with some even leaving the construction industry for good.
“Every part of construction is booming,” said Scott Brown, co-founder of Canoga Park-based general contractor Parker Brown. “Skilled labor is at a premium, costs are skyrocketing, competition is high. Add to this the fact that California is in an enormous housing shortage now and people have to live so far away from work that they wind up voting with their feet. We have seen some larger companies close their operations in California and move to Florida or Texas.”
Even as the industry has boomed, the number of construction workers in California has remained relatively steady. In October 2018, there were 868,700 construction workers. That number climbed as high as 871,900 jobs before falling back to 868,900 in March 2019.
Since the amount of work is growing but the worker pool is remaining stable, general contractors are having a hard time finding enough talent to get their work completed. With few new recruits joining the construction labor pool, worries are growing that skilled employees will retire with no one to take their places.
According to August 2018 research by the Associated General Contractors of America and Autodesk, 80% of contractors said they are finding it difficult to hire qualified workers. Additionally, nearly half of respondents believe things will get more difficult before they ease up. That means that addressing shortages in the construction workforce is likely to be a problem for years to come.
Parker Brown is not immune to the labor shortage but continues to break ground nonetheless. The company had a record year in 2018, with $50M in construction on the books. The contractor is on track to beat that number this year.
What is behind the real estate boom? According to Parker Brown co-founder John Parker one major driver is growth in the industrial sector.
“But not heavy industrial,” he said. “It’s more entertainment, biotech, software, app development. The umbrella industries of communications and app development, which include independent content producers for Amazon and Netflix, are seeing tremendous expansion and growth in the warehouse arena.”
This need for industrial space is manifesting in an outward push from Los Angeles proper into the San Fernando Valley as developers look for adequate land to build horizontally.
Affordability is also driving expansion. Land in the Valley is available for purchase or rent at a fraction of the cost of land in downtown Los Angeles. Parker estimates that developers can save 60% to 70% by building in the Valley. Farther into Santa Clarita or Valencia, that fraction drops to 40% or 50%.
Another reason Parker Brown is weathering the shortage is its deep roots in the Southern California market, where the firm has operated since its inception — roots that give easier access to local labor pools. Dating back to the devastating Northridge earthquake in January 1994, Parker Brown has provided — and continues to provide — services in a wide variety of sectors including commercial office, medical office, hospital, industrial and manufacturing. Add in the current boom and the firm is seeing good, if challenging, times.
“You never like to say recession-proof, but you look at the factors driving this, and I don’t see anything that will slow this down other than a general economic slowdown caused by a trade war,” Brown said.
This feature was produced in collaboration between Bisnow Branded Content and Parker Brown. Bisnow news staff was not involved in the production of this content.