In 2010, I was writing articles lamenting the lack of any good news in the design and construction industries. Construction and design firms were slow or failing, construction unemployment was in the double digits and there were no tower cranes in the sky anywhere. Like Pete Seeger songs and 8-Tracks, those days seem like a distant memory (can you tell how old I am?).
Design and construction firms are so busy that they now face a serious talent shortage. Industry surveys predict that demand for design and construction will continue to increase in the coming years in the face of a limited pool of licensed design professionals and skilled laborers.
Good, right? Yes, for the economy and for the industry. But this is a good news/bad news story depending on your location on the construction food chain.
For architects, engineers and those in the construction trades, the shortage means higher demand and lower supply -- higher pay, at least for the near term. This is true in many sectors of the economy, where employers compete for the same pool of workers. You may have read about an online retailer building enormous fulfillment warehouses in the Chicago suburbs and intending to hire thousands of workers. "From where?" asked one of the articles, citing unemployment rates in Will County under 5 percent (at or near "full employment" if I remember my college macroeconomics correctly).
Higher pay and labor shortages also mean lean staffing and greater demand for employee efficiency and performance. Construction and design employees will be pressed to work harder with less support. Employers should expect and plan for a rise in regulatory, union and other complaints and a decline in employee loyalty as competitors lure talent away. Employers should also watch for enforcement of the new overtime rules under the Fair Labor Standards Act.
Owners and developers will fondly reminisce about the days of five years ago, when they had a pile of bids to choose from, aggressive pricing and ample capacity from design and contractor teams. We now expect fewer bidders, particularly on smaller projects, as well as increased costs to pass along the higher pay discussed above. There may also be a complete lack of industry capacity to tackle some jobs, particularly large infrastructure projects with insufficient industry capacity to meet the demand for steel, for example. We have represented developers offering to pay premium rates and bonuses to accelerate the work and trade contractors having to decline because they don't have the people needed to do so (One was a school project in a rural area, where the acceleration conflicted with hunting season -- guess which won out).
These next 36 months will be exciting and challenging for all involved in design and construction. And if I had a hammer ...
• Eric Singer is a partner and construction lawyer at Ice Miller LLP. He has more than 25 years of experience representing design and construction professionals, lenders and title insurers in contracts and dispute resolution. He can be reached at (630) 955-5826 or firstname.lastname@example.org.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel concerning the reader's specific circumstances.