AWCI Board Reports Increased Activity, Worker Shortages

December 2015

As part of its Oct. 16, 2015, meeting agenda, the board of directors of the Association of the Wall and Ceiling Industry is asked to provide a regional report. While all regions report increased activity, the shortage of workers is being felt across the country. Read on for more.

Northeast/Mid-Atlantic Conference
Geoff Furtaw, vice president at Ceilings, Inc. in Norristown, Pa., reported that the Philadelphia marketplace has been robust for the past six months and association [Interior Finish Contractors Association] hours are up 6 percent across all trades. There has been lots of activity in Philadelphia and the surrounding five counties, including a second Comcast Tower. Children’s Hospital in Philadelphia and universities are active (Drexel, Temple, University of Pennsylvania). The 76ers are starting to build an $80 million practice facility in New Jersey. There is also continued growth at the Navy Yard.
    
In Philadelphia, Furtaw reported, agreements with the Carpenters and Drywall Finishers are good through April 30, 2018. Carpenters and Finishers were almost at full employment over the summer, and he said it was difficult to find a ceiling mechanic. Tapers were in high demand as well. There is still lots of activity, but some contractors haven’t raised their prices; they continue to chase volume.
    
In New Jersey, Furtaw reported that work has picked up considerably. The forecast for the next 18 months is strong. The most notable project in the area is the American Dream retail development in the Meadowlands.
    
Lee Zaretzky, president of Ronsco, Inc. in New York City, reported that New York City is doing well and things are harmonious with labor. World Trade Center towers are still going up, and Hudson Yards is a nice, big development. The 7th Avenue subway extension has just opened, and work has started on the 2nd Avenue extension. The commercial, healthcare, educational and institutional construction sectors are strong, he reported, but labor is a little tight—they are close to full employment, but things are good.

Mid-Central Conference
Jeff Dreisewerd, director of operations at T.J. Wies Contracting, Inc. in Lake St. Louis, Mo., reported that residential has expanded in the St. Louis area, and this is expected to continue. Residential sales and single-family permits are up. Commercial and industrial construction are positive throughout the district. Most report higher demand for office and industrial properties. Class A office vacancy rates remain low in St. Louis, but commercial activity was positive through most of the district.
    
For the contractors in his district, Dreisewerd said that strong backlogs are starting to become reality. They were slow to get the jobs started but are very optimistic for 2016 and 2017. Margins are not where they need to be, though, to be called a “healthy market.” New, big jobs in healthcare are helping, and private universities have $300 million worth of work. Also, some large office buildings are coming in 2016.
    
From the distribution side, volumes will end 2015 lower than forecasted (10 to 12 percent was the forecast) although there will be an increase of 3 percent for this year. The biggest problem will be finding taping and finishing employees. Most trades are almost at 100 percent capacity.
    
Doug Dahmer, vice president of operations at Performance Contracting Group in Grandview, Mo., said Kansas City is very strong with lots of work. A hotel and residential towers are among the larger jobs. Margins are actually coming up a little bit.

Northwest Conference
John Killin, executive director of the Associated Wall & Ceiling Contractors of Oregon and Southwest Washington, reported that some contractors in Oregon and Southwest Washington are struggling. Major generational shifts are happening, meaning lots of young people are coming up to be head of the company or to be project manager. Because of that, the Northwest association is focusing on soft skills like interpersonal communication and negotiation that aren’t easily taught without time. They are bringing in educators and hoping for great leadership in the coming years.
    
Neil O’Connor, director of labor relations and senior project manager at Western Partitions Inc. in Portland, Ore., said margins are not what they should be, but he believes things will improve because work is coming. The biggest issue is the maturity of craftsmen—that’s going to be a problem.

Southeast Conference
Jeff Burley, president of B&B Interior Systems, Inc. in Plantation, Fla., said South Florida is very dynamic. There are lots of cranes in Miami, but it gets less busy as you go farther north up the state, although things are picking up. The shortage of skilled tradesmen is a problem, and it will probably gain momentum. Habitational work, hotels and hospitals are up, and the Dolphins stadium is getting a $400 million renovation. Margins could be higher.
    
Herman Guevara, director of sales at Plastic Components in Miami, reported that Dade County is building “American Dream Miami” to take advantage of the Latins coming up to shop. Larger than Mall of America, this $4 billion entertainment and shopping complex will have a ski slope. Hopefully this will help the residential building industry.
    
Guevara also reported that things are very bad in Puerto Rico. Their debt is $72 billion, and two out of five people are not working. This also affects the Florida market.

Southwest Conference
The report from Travis Vap, president of South Valley Drywall in Littleton, Colo., said Colorado’s unemployment rate is 4 percent, and Denver metro housing is down 8 percent compared to last year at this time. Single-family homes are up 6 percent, and margins down 26 percent. The overall market—commercial and residential—is almost back to 2007 levels.
    
Trends in Colorado include the following:

  • There is a labor shortage.
  • General contractor’s fees are up.
  • More GCs are self-performing framing and drywall.
  • Some GCs are bypassing specialty contractors and hiring labor brokers.
  • Prefabricated cold-formed steel in multifamily structures is gaining real traction.

    
Johnny Barnes, president of Triangle Plastering, Ltd., in Mesquite, Texas, said Houston is still strong even though some oil towers have pulled back. They are still optimistic. San Antonio is the weakest Texas market. Austin and Dallas–Fort Worth are doing well.
    
Manpower is a concern, he reported, and margins can go up more. Oklahoma City and Tulsa have a lot of work, but they can’t get their margins to go up. Margins are starting to go up in Dallas. Everybody is starting to get worried about manpower.

Western Conference
Michael Mazzone, president of Statewide General Contracting & Construction in Kapolei, Hawaii, said in Hawaii, the contracts with the three unions were done last year; they are currently in the first year of the five-year contracts. Work in Hawaii is steady in both commercial and residential. While single-family is starting to pick up, there are a lot of multifamily projects. The other big job is the rail project, which is scheduled to finish in 2020. It is over budget by $1 billion and behind schedule. Manpower is tough to get right now; all the benches are empty.
    
Nancy Brinkerhoff, CEO, president and CFO of Ironwood Commercial Builders in Pleasant Hill, Calif., reported that Northern California is in good shape and overall, things are busy. Apple and Google have big projects in Silicon Valley, and San Francisco still has 35 cranes. Outlying cities are busy, too. The San Francisco Warriors have secured financing for a $1 billion stadium in San Francisco. The main issue in the area is (wo)manpower.
    
Homeland security is still going through Northern California contractors’ I-9s, Brinkerhoff said.
    
Like many others, Brinkerhoff also reported that margins are still not what they could be. Estimators are still hearing, “Can you sharpen your pencil? It’s over budget.” Also, some of the larger general contractors are opening their own drywall divisions.
    
Travis Winsor, CEO of Raymond – Southern California in Orange, Calif., said economic cycles start in the northern part of the state and roll down to the southern part of the state, so now the Los Angeles basin and San Diego markets are starting to see what Northern California has been enjoying for the last 12 to 24 months. Southern California is what he calls a “target-rich environment.” Some of the tip of the iceberg of the big projects are the 73-story Wilshire Grand that is clustered around a number of high-density residential units, and a massive project at the University of Southern California. There is discussion that Los Angeles may get an NFL team, but there are currently three competing stadium projects as well as the Memorial Coliseum renovation, and Disneyland has a major campaign to expand their amusement park.
    
All of this has led to a labor shortage. Right now their market is short on finishers, and it is anticipated that carpenters and plasterers will be next. As it is now, there are projects that cannot be properly staffed, primarily by finishers.
    
The area is seeing a large non-union movement going forward in traditional union strongholds. Winsor’s company operates as a union contractor, and he said, “We see our market continue to erode.” There is a struggle going on with their labor partners because they see their hours coming up and they’re at full capacity, but they don’t realize their market share is dropping. Winsor said, “When we come off this cycle, they will be feeling the brunt of that.”
    
He then reported that Las Vegas is anemic. There are some large capital campaigns going on but they’re at least 18 months down the road. He predicts a shortfall of activity in Las Vegas in the near future.
    
Given the activity on the West Coast and California, “we are in a war for talent,” Winsor said. There is a shortage not only in the field but in the offices. Self-performing GCs are recruiting the interior systems subcontractors’ employees. He lost four key managers in the last three months to one of his largest clients. He said he has spoken to the CEOs of some major companies, and they have indicated a strong strategic direction to move into self-performed activities because the margins are not there in the general contracting business. The mechanical and electrical trades are also being affected by self-performing GCs.
    
This is a troubling trend, he said, and he cautioned people to stay abreast of it.

AWCI’s board of directors will meet again in April 2016 during AWCI’s Convention in New Orleans.

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