Post-Ian Reconstruction Needs, Tight Construction Labor Market Add Up To Delays Nationwide
Nearly a month after Hurricane Ian hit Florida, the sheer number of workers required to put the pieces back together, combined with a pre-existing labor shortage in the industry, will severely hamstring and delay rebuilding, and some believe the backlog in the Sunshine State will ripple out and impact commercial projects across the country.
The multiyear road to recovery for areas damaged by Hurricane Ian will be an expensive one, with estimates from risk modeling firm RMA reaching up to $74B of damage across the region, with the cost of repairing those damages exacerbated by a longstanding construction labor shortage.
“It’s going to be an overwhelming challenge,” Associated Builders and Contractors Florida Gulf Coast President Steve Cona said. “It’s a perfect storm with the lack of skilled labor, plus supply chain challenges getting the materials and the components to build a project. This is something that we really haven't seen before.”
An expected multiyear recovery project of this scale will require tens of thousands of new workers spendings months and even years in southwest Florida, especially in and around Fort Myers and Lee County.
Cona estimates the state as a whole already faced a shortage of 50,000 construction workers before the storm. The state’s 2.7% construction unemployment rate in August was the lowest since 2006, and surveys taken before the storm found 93% of state contractors had open positions.
Florida may need 30,000 or more additional workers just to handle rebuilding, Cona said, adding that they will need to be recruited and trained.
“The good news is there's gonna be a lot of money and resources coming down to rebuild the area,” said Cona, who also forecasts significant wage increases. “That will bring extra labor, because that’s where the resources are. But it’ll be a struggle for the rest of the country because there's only so many folks to go around.”
The typical timeline for reconstruction starts with restoring power and utilities, then debris removal and demolition, a process that tends to be handled by teams of immigrant and migrant workers, as well as workers who for years have contracted with large firms such as Servpro and travel the country, bouncing between disasters, storm sites and fire-ravaged communities.
They have their work cut out for them. Servpro Disaster Recovery Manager Clint Brickles said Ian was the largest event the firm had ever responded to, and it had 5,000 workers on-site, dispatching from every state except for Alaska.
After cleanup, months of evaluating repairs and distributing funding take place before many construction projects begin in earnest. Owners evaluate whether it is worth the cost and risk to rebuild.
The already-hot housing market in the region means that architects and engineers needed for rebuilding plans are already busy and in short supply, said SVN Partners senior associate Lauri Albion, a local commercial real estate expert.
B&I Contractors President Gary Griffin, whose firm specializes in mechanical, electrical, plumbing and institutional HVAC, said his firm of roughly 800 workers is having trouble prioritizing since there’s great need to help repair and rehab buildings so they can open, but not nearly enough staff. The industry as a whole will need to figure out how to recruit workers from outside of the market, arrange housing and afford additional or hazard pay.
“It’s a challenging time,” he said. “And the labor market is the underlying issue. These constrained resources will slow down our ability to rebuild these areas that were badly damaged.”
This mixed and unpredictable picture creates a complicated calculus for reconstruction efforts, as well as construction labor, Associated General Contractors of America Chief Economist Ken Simonson said.
Plus, the economic situation could further complicate the labor question. The increase in interest rates, as well as continued inflationary pressures on materials and supply chain issues, may cause many existing projects or reconstruction projects to drop off, lessening some of the demand for workers.
ABC Chief Economist Anirban Basu said the impact of the hurricane would have been greater had it occurred last year, before a sea change in construction economic dynamics. Slowdowns in the housing and commercial markets may free up laborers previously focused on a red-hot single-family home construction market.
And although residences took a harder hit in the storm than commercial properties, the labor slowdown will still impact commercial reconstruction. Studies have shown multifamily buildings tend to be repaired slower after emergencies than single-family homes.
There will be high demand for skilled tradespeople and specialized supplies, including electricians and transformers, plumbers and sewer systems, flooring specialists and HVAC technicians.
The challenge of finding workers will be even further complicated by the lack of places for them to stay.
The region’s existing housing shortage has been amplified, and now construction workers must contend with first responders and other workers for limited housing stock and space in the still-functioning hotels. Albion said she has heard of workers driving to the region from Florida’s Atlantic coast, a four-hour round trip, because there aren’t places to stay any closer.
Another factor complicating commercial rebuilding is that growth often follows consumers, and right now, many are shopping and dining, and perhaps even moving, to neighboring regions. Demand may get pushed to nearby Charlotte County, Albion said, since it’s cheaper and there’s more available land and commercial real estate. A similar phenomenon happened after Hurricane Andrew in South Florida in 1992 when relocation and readjustment set off a development boom in Broward County, which suffered less storm damage.
Insurance has been a problem in hurricane-prone Florida for years, but the latest storm will cause some providers to raise rates and others to leave the state altogether, reducing competition and options. That could be especially problematic for smaller commercial owners, First Street Founder and CEO Matthew Eby said. His nonprofit aims to democratize access to up-to-date flood insurance information and risk data.
While larger firms and owners can distribute the cost of increased flood risk and insurance premiums, smaller landlords can’t count on that kind of cushion, especially if they owned older property that wasn’t up to current building codes and may have suffered more damage, Eby said.
“If you're a little guy and you're concentrated in Florida and you have three buildings or something like that, then you're screwed,” he said. “This isn’t something you can split across a lot of wealthy tenants. Your net operating income will change significantly, and you may dump the property.”
Even if a commercial property isn’t directly impacted, flood damage spreads across an area, and the rising cost of insurance and resiliency can begin to devalue a region, impacting all real estate in the area, Eby said. While some of these factors may ease the strain on construction labor, they may in turn impact the region and its economy in significant, long-lasting ways.
The demands on smaller owners and investors are likely to push many to forgo rebuilding altogether: Mom-and-pop retail stores won’t be able to weather months without customers; small apartment buildings, seeing the impact of new insurance rates and asset values, won’t see the value in rebuilding; and labor shortages mean a much longer wait for those without significant capital and resources.
Albion said she sees this shift coming for many of the longstanding restaurants and small businesses on piers, often housed in wood buildings. Code requirements and Federal Emergency Management Agency rules will likely mean they will need to rebuild with modern methods and more costs, including placing a building up on pilings, which may be prohibitive to owners.
“Nothing is going to look the same,” she said.