Challenges in OC's Construction Sector

ORANGE COUNTY, CA—The ever-shrinking labor pool has been an ongoing challenge since the recession recovery began and one that threatens the growth of the construction sector in the Orange County market, JLL SVP Greg Holcomb tells GlobeSt.com. A recent report from the firm shows that the labor demands and the availability of a sufficient work force remain the biggest challenges and impacts to this market. We continue to see the costs remaining high and growing.

In addition, the report shows that the availability of subcontractors continues to be a problem, so there are fewer bidders, less budgeting support and more schedule impacts. Also, the commercial real estate construction industry is currently revolving at a very high pace, which is likely to be unsustainable. When equilibrium is found and volumes adjust, demands will still be present and business will remain strong.

For two years now, the market has been discussing a pending down turn in the development and construction industry, which hasn't materialized. There also remains a high level of entitlement planning within the region, which. when that funnels through the government system, will result in more development opportunities surfacing, assisting in sustaining positive growth to our businesses, according to the report.

We spoke with Holcomb about the current challenges to the construction sector and how they can be addressed.

GlobeSt.com: What are the current challenges to Orange County's construction sector?

Holcomb: One of the most significant challenges facing the Orange County construction sector is the ever-shrinking labor pool. This continues to be an ongoing challenge the industry has faced since the recession recovery began. We lost a significant amount of the workforce during the recession, and it has been slow to rebound. This loss has become evident in the subcontracting community's ability to respond to the increasing volume of work. We are experiencing subcontractors having diminished capacity and cautiousness in expanding their workforce, as well as subcontractors not bidding work or unable to honor bids due to their inability to execute the work. We are also seeing the manpower shortage impact schedules and cause longer construction durations. Overall, the contractor's ability to expand its staff and accelerate construction schedules is increasingly more difficult.

GlobeSt.com: How can these challenges be addressed?

Holcomb: Pre-planning early in the process to identify qualified subcontractors who are interested in the project is one way to help alleviate the challenge. Communication is key to let the subcontractors know the schedule, scope and project requirements. Managing the budgeting and bidding phases is critical to minimizing demands on the subcontractors. Programmed schedules through the design, bidding and contracting phases must be achieved to maintain the subcontractor's interest and commitment. Everyone is competing for resources, and your project must be desirable. Subcontractors seek organized, well-managed projects with high-quality construction documents. Owners and general contractors need to have good relationships with the subcontractor community to create strong and cohesive teams. Knowing the subcontractor's work load and abilities to staff projects is important in determining subcontractor selection to avoid overloading them and having construction impacts. Managing the volume of changes during construction reduces this chance for overload. Workforces are so thin at times that many subcontractors are challenged to manage added work and the time needed to implement it. Having a complete quality set of construction documents is a vital key in overcoming the workforce challenges.

GlobeSt.com: What are the positive aspects of this sector?

Holcomb: The overall market continues to be strong, with new projects in the pipeline. The various sub-markets appear to have good volume and backlog. This is allowing the contractors and subcontractors to secure work in their primary fields and less crossover to market segments in which they don't normally work. This does allow the contractors to perform with a high level of experience, expertise and knowledge of the product type. This strengthens the ability to assemble teams with members having common strengths complementary to each other.

GlobeSt.com:  What else should our readers take away from your construction outlook for this market?

Holcomb: We have a busy market generating a lot of opportunities and work at all levels of the real estate development process. While manpower is a challenge for our construction workforce, it's not limited to this group. All groups with the real estate industry are faced with the same type of challenge: finding a sufficient qualified and experienced workforce. These conditions demand an active management of projects to include early planning, effective communication, continuous monitoring and anticipating the challenges. Realize that the resources you will need may not always be available when you want them, particularly on short notice. Being proactive versus reactive will always produce better results, and this is even more evident today with the challenges we face. We are experiencing a great period of continuing growth at a strong volume, providing the opportunities we all seek. To be successful in this environment requires sound management, constant evaluation and assessment and leadership from managers at all levels. When times are busiest is when we each need to perform at our highest level to achieve success.

ORANGE COUNTY, CA—The ever-shrinking labor pool has been an ongoing challenge since the recession recovery began and one that threatens the growth of the construction sector in the Orange County market, JLL SVP Greg Holcomb tells GlobeSt.com. A recent report from the firm shows that the labor demands and the availability of a sufficient work force remain the biggest challenges and impacts to this market. We continue to see the costs remaining high and growing.

In addition, the report shows that the availability of subcontractors continues to be a problem, so there are fewer bidders, less budgeting support and more schedule impacts. Also, the commercial real estate construction industry is currently revolving at a very high pace, which is likely to be unsustainable. When equilibrium is found and volumes adjust, demands will still be present and business will remain strong.

For two years now, the market has been discussing a pending down turn in the development and construction industry, which hasn't materialized. There also remains a high level of entitlement planning within the region, which. when that funnels through the government system, will result in more development opportunities surfacing, assisting in sustaining positive growth to our businesses, according to the report.

We spoke with Holcomb about the current challenges to the construction sector and how they can be addressed.

GlobeSt.com: What are the current challenges to Orange County's construction sector?

Holcomb: One of the most significant challenges facing the Orange County construction sector is the ever-shrinking labor pool. This continues to be an ongoing challenge the industry has faced since the recession recovery began. We lost a significant amount of the workforce during the recession, and it has been slow to rebound. This loss has become evident in the subcontracting community's ability to respond to the increasing volume of work. We are experiencing subcontractors having diminished capacity and cautiousness in expanding their workforce, as well as subcontractors not bidding work or unable to honor bids due to their inability to execute the work. We are also seeing the manpower shortage impact schedules and cause longer construction durations. Overall, the contractor's ability to expand its staff and accelerate construction schedules is increasingly more difficult.

GlobeSt.com: How can these challenges be addressed?

Holcomb: Pre-planning early in the process to identify qualified subcontractors who are interested in the project is one way to help alleviate the challenge. Communication is key to let the subcontractors know the schedule, scope and project requirements. Managing the budgeting and bidding phases is critical to minimizing demands on the subcontractors. Programmed schedules through the design, bidding and contracting phases must be achieved to maintain the subcontractor's interest and commitment. Everyone is competing for resources, and your project must be desirable. Subcontractors seek organized, well-managed projects with high-quality construction documents. Owners and general contractors need to have good relationships with the subcontractor community to create strong and cohesive teams. Knowing the subcontractor's work load and abilities to staff projects is important in determining subcontractor selection to avoid overloading them and having construction impacts. Managing the volume of changes during construction reduces this chance for overload. Workforces are so thin at times that many subcontractors are challenged to manage added work and the time needed to implement it. Having a complete quality set of construction documents is a vital key in overcoming the workforce challenges.

GlobeSt.com: What are the positive aspects of this sector?

Holcomb: The overall market continues to be strong, with new projects in the pipeline. The various sub-markets appear to have good volume and backlog. This is allowing the contractors and subcontractors to secure work in their primary fields and less crossover to market segments in which they don't normally work. This does allow the contractors to perform with a high level of experience, expertise and knowledge of the product type. This strengthens the ability to assemble teams with members having common strengths complementary to each other.

GlobeSt.com:  What else should our readers take away from your construction outlook for this market?

Holcomb: We have a busy market generating a lot of opportunities and work at all levels of the real estate development process. While manpower is a challenge for our construction workforce, it's not limited to this group. All groups with the real estate industry are faced with the same type of challenge: finding a sufficient qualified and experienced workforce. These conditions demand an active management of projects to include early planning, effective communication, continuous monitoring and anticipating the challenges. Realize that the resources you will need may not always be available when you want them, particularly on short notice. Being proactive versus reactive will always produce better results, and this is even more evident today with the challenges we face. We are experiencing a great period of continuing growth at a strong volume, providing the opportunities we all seek. To be successful in this environment requires sound management, constant evaluation and assessment and leadership from managers at all levels. When times are busiest is when we each need to perform at our highest level to achieve success.