The Road Ahead, Part 1
Vince Bailey / January 2022
Don’t stop thinkin’ about tomorrow; don’t stop, it’ll soon be here… — Christine McVie
Please excuse me if I seem to descend into the realm of banality here, but I am going to go down a path too commonly traveled by columnists at this time of year. Yeah, you got it: I’m going to make some pithy predictions about the upcoming 12 months as applies to construction activity in general, and to drywall estimators in particular. My willingness to flirt with the cliché stems from my unique perspective as an estimator to see the future. Consider that the very nature of estimating entails intense focus on a structured process of prognostication. When you think about it, all bidmeisters are professional prophets of sorts, and so I feel quite justified in bringing to bear on the task all of my well-worn clairvoyance, along with my Ouija board, my Tarot cards and my chicken entrails.
Now, at the risk of overstating the obvious, I’ll start by citing that driving force behind all industries: the state of the economy. At present, as we all know, we are experiencing a devastating wave of inflation (fear and loathing at the gas pump abounds). The causes behind skyrocketing prices are various, but, more to the point, are unlikely to abate over the upcoming year. History teaches us that even when inflation is corrected, the cost of just surviving never returns to what it was before. And while the general populace is definitely feeling the pinch, the construction industry is currently impacted more acutely with a double whammy. I am referring to the two mainstays of construction activity: material and labor.
The heartburn with the escalating material costs that we estimators experience so acutely is borne out by the numbers. According to the Bureau of Labor Statistics, the price of metal rose a staggering 21% so far in 2021 over the previous year. Similarly, gypsum products have risen around 18% over the same period. Supply chain issues and rising fuel prices continue to exacerbate the more immediate production shortages of building materials. Surely these stats are yesterday’s news for most bidmeisters, but demand continues to exceed supply, and hoping that material costs might abate over the next several months may be wishful thinking.
If inflated material pricing was the only debilitating factor, one could predict that the demand for new construction might absorb the sticker shock. But labor rates are likewise rising at an alarming pace as well. Again, the demand for more skilled carpenters and finishers (and, as always, apprentices) outstrips the current size of the workforce, a phenomenon that has many commercial drywall contractors (and their estimators) submitting prices that exceed prevailing wage levels. The reasons for a shrinking workforce are several. For one, we are missing an infusion of new blood into the building trades. Young men and women graduating from high school are more attracted to attending college or pursuing careers in the information and/or tech industries. Fewer young people are inclined to work with their hands. Higher wages and opportunities for advancement have not attracted nearly enough young people to our industry to replace the large numbers of retiring tradesmen. Couple this dearth of new blood with a significant reduction in the immigrant workforce, the outlook becomes even more grim. More stringent and more aggressively enforced laws against hiring undocumented workers have significantly diminished this portion of the construction workforce. Of course, enforcement of the law is necessary and appropriate, but it has had a profound effect on manpower availability, nevertheless.
Needless to say, the significant level of rising construction costs may well become a quagmire that the demand for new construction cannot overcome. The added expense for developers to fund new projects may soon become cost-prohibitive. Many market analysts agree that the recent upswing of activity in the construction industry is likely short-lived, and that we may be on the brink of yet another stall.
While cost issues continue to plague the industry in general, the rising cost issues impacting (and will continue to affect) estimators in particular are currently surfacing. One such issue lies with providing solid proposals to general contractors on future projects. As I have stated, we bidmeisters are professional prognosticators, but drastic inflation such as we are experiencing has made the future maddeningly murky. Moreover, many skeptical GCs have stubbornly stuck to their bid requirement that proposed prices be held for 60 days or more. Yet most material suppliers are reluctant to commit to long-term pricing for future projects, due to market volatility, while labor rates are subject to dramatic fluctuations in labor demand. The one-two combination punch will be tough for drywall estimators to recover from.
There you have my informed prediction regarding the outlook for the upcoming year. And while there will surely be unforeseeable factors that may well mitigate the gloom and doom, the road through 2022, as it stands, portends to be a bumpy one. Buckle up.
Next month: some of those “unforeseeable” mitigating factors.
Vince Bailey is an estimator/project manager working in the Phoenix area.