2010 and Beyond: Big Challenges for Commercial Construction

As we grow through great hardship, optimism becomes the feet of progress.        Author Unknown

Merely three years ago, 2007 found our firm running to keep pace with construction demands – with full speed project planning, peak efficiency efforts, long-range design consulting, and on-going client meetings.  During this brisk business period, some of our largest concerns were jobsite Safety (as always) – and ensuring we maintained enough skilled tradesmen and sub-contractors to properly staff our projects.

2010 brings completely different challenges. 

The big story will continue ….Lack of Work. 
As most are aware, the extreme tightening of available funding brought many planned building projects to a swift halt – while real estate developers and building owners were forced to re-think their business strategy.  For most developers, reasonable financing options are simply no longer available.  In addition, many companies have down-sized or shut down entirely, creating major space vacancies within all business sectors, with no new tenant prospects in sight.

As an added concern, the strong ripple effect of work slowdown in related professions has caused a major impact in lay-offs.  Fields affected include Architects, Engineers, Suppliers, and Subcontractors, among others.

Construction Unemployment …. A Startling Statistic.
The Association of General Contractors recently published (January 6, 2010, Data DIGest), that an amazing 53,000 construction workers lost jobs in the month of December.  The 2009 national unemployment rate was 9.7% overall – 22.7% for construction – the highest rate of any industry in the US. 

Potential Effects …Healthcare Reform.
During past recessions, medical projects largely remained unaffected.  Healthcare facilities are heavily used, and routine remodeling due to normal wear and technological advancements were common – in addition to expansions, through population growth and demographic change. 

However, today’s uncertainty due to the nation’s Healthcare Reform legislation, placed many medical projects on hold – as Health Administrators work with government to determine future processes.  Insurance companies are also a large participant in the process, along with many other associated sectors.  Thus, until healthcare providers, and related industries, gain a better understanding of the future of medical practice, the technologies required, and associated vendors and partners — many planned growth initiatives will continue to be delayed.

Making matters worse, the current Healthcare Reform package has singled out the construction industry for special rules – which places a heavy healthcare requirement on smaller firms.  These additional burdens could likely cause an overall increase in construction pricing, and become a serious game changer for the viability of small construction companies.

An ongoing issue … Aging Infrastructure
Although the 2009 Stimulus Act funneled much needed funds into South Carolina’s infrastructure, a tremendous amount of money is still needed in this area.  Many of our roads, bridges, sewer systems, water plants and distribution lines are significantly aged – bringing varied scales of inefficiencies.  In addition, deferred maintenance will continue to be a problem for decades, creating a greater long-term cost for repair or replacement.

Along with existing system needs, ongoing population and industry growth requires infrastructure expansion in most South Carolina cities, towns and communities.  At a national level, the problem of aging infrastructure looms even larger – and effects range from the Federal Government, to the smallest municipality.

As this funding problem continues, communities must promote public awareness and creative solutions in addressing these issues, bullishly, and strategically – so that a palatable program can result.

Future Concerns … Beyond 2010:
The issues above are just a sampling of challenges faced in the Commercial Construction Industry today.  But, many experts are equally concerned about the long-term affect of today’s environment. 

With so many job losses within a single industry, college students currently pursuing majors in related sectors; Construction Science, Engineering, Architectural Design, etc.; are beginning to redirect their progress toward fields that offer greater hope for employment upon graduation.  For those of us with years of hindsight, this talent shift and resulting cycle is not unfamiliar.

Thus, the threat of severe labor shortages within our field is of great concern.  As the economy begins to recover, and building activity begins to climb, a lack of skilled professionals and tradesmen might ultimately work against the recovery.  Likewise, supply and material manufacturers have sharply cut production – and it might take months to gear back up to timely demand. 

As a result, an economic building recovery will likely be affected by challenges of much higher labor and material pricing, along with slower progress toward project delivery. 

Challenges creates growth … Optimism creates progress. 
As a business leader, I remain encouraged — that by partnering with local community and business leaders – great things will result.  I am continually impressed by the many bright minds and diligence of others around me, and look forward to contributing my efforts toward this time of necessary change. 

 

Mark Hood is the President, Chief Executive Officer of Hood Construction. He began his career as an Civil Engineering major at The Citadel, which broadened into over 25 years tenure in the commercial construction industry.  Founding his own company in 1986, Mark’s business philosophies are best displayed by his focus on strategic analysis of the methods and means of the construction and project management process.

 Mark is an active member of the Carolinas AGC, currently serving as the Executive Board’s Senior Vice Chairman.  Mark’s previous contributions to the CAGC include positions as Executive Board Treasurer, Mechanical Contractors Joint Cooperative Committee member, Director-at-Large Board Member, Chairman of the Building Services Division – as well as serving as Chairman for the Carolinas AGC/AIA Joint Committee. His professional affiliations also include current positions on the Board of Directors for Citizens For Sound Conservation; The Oliver Gospel Mission; The Fellowship of Christian Athletes; and the Construction Division Chair for the 2009 United Way of the Midlands Campaign.  Other former positions include Past President of the Columbia Contractors Association, and Board Member of the President’s Advisory Board for Kirby Building Systems, among others.

 Mark and his family are long-time members of Shandon Baptist Church, where he currently serves as Deacon, Sunday School Dept. Director, and Personnel & Building Committee member.  

 

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