As businesses are opening back up, they’re running into a problem. It isn’t easy to find labor. While politicians, business executives and policymakers can debate root causes, it’s becoming a more significant issue.

In the construction industry, which is already dealing with huge materials cost increases over the past year, labor is just one more hurdle to getting projects out of the ground.

Dr. Masaki Oishi, co-founder and chairman of MarketSpace Capital, says a labor shortage exists in “the really experienced construction workers.” But it isn’t as acute for construction workers who don’t have specialized skill sets.

“It seems that a lot of construction workers were laid off during the pandemic and really haven’t come back yet,” Oishi says. “That could be because the number of projects going forward hasn’t come back to former levels yet. But it could also be because they’ve just been out of work for so long that they don’t really have the motivation to jump right back in.”

In some commercial real estate segments, projects haven’t picked back up yet, according to Oishi. While developers in multifamily and industrial continue to build, the economic environment is more difficult in retail and lodging.

“I think there may be quite a few developers not in multifamily, but in other such sectors that are not in a hurry to get back to projects,” Oishi says.

To build enough new housing to keep pace with the demand created by economic, demographic and migration factors, developers need workers. Oishi, like many other business executives, thinks government policy is at least partially to blame.

“There was a lot of support for workers who were laid off during the COVID pandemic,” Oishi says. “That is a good thing. But if the government is going to continue to subsidize a certain lifestyle where we’re essentially paying people to stay at home, that will not help the labor shortage. I think there does have to be some carrot-and-stick incentives to get people back to work.”

The labor shortage isn’t just hitting the construction part of the real estate industry hard. Scott Berman, leader of the hotels and hospitality sector at PricewaterhouseCoopers, says it is causing problems for hotels, specifically in high-demand markets that are achieving high occupancies, such as Miami, Orlando, Austin, Phoenix and Nashville.

In some cases, companies are giving hiring bonuses. “That’s just unheard of,” Berman says. “That is what we’ve resorted to, and that’s because the demand for the employees is at an all-time high. There’s no question that the tech companies and the delivery companies and the food service companies are all looking for the same talent.” 

For the economy to recover, labor has to come back. Unlike some observers, Oishi, who says his firm spends a lot of time looking at the numbers and crunching data, doesn’t see inflation as a threat yet.

“The fears of runaway inflation are somewhat overblown,” Oishi says. “The world economy, in general, is still not back to where it was before COVID in terms of GDP and growth. So I am looking at the current inflation worries as a temporary thing. Most likely, you know, supply will adjust to demand, and it will become a self-correcting problem.”