Best – and Worst – of Times: Contractors talk about high demand, rising prices
Business is booming for local builders, plumbers, electricians and other subcontractors — to the point that many say they regularly turn down work.
The number of residential building permits issued in Grand Traverse County has nearly tripled since the Great Recession, from 164 in 2009 to 450 in 2016, according to most recent census data compiled by the Federal Reserve Bank of St. Louis.
Many contractors are unable to expand because of a labor shortage and have decided not to try to grow beyond their current employee base.
Contractors also say they are worried about rising material costs and the possibility of another housing bubble. They fear new tariffs recently announced by President Donald Trump could boost material prices, create shortages of steel and other building products, and set off a costly trade war.
For those who want to build a new home or commercial structure this year, it’s likely too late. Many builders are booking into 2019 and beyond. Here’s what a few builders and contractors had to say about the current building climate.
Mike Brown, owner, Burdco Inc.
“Business is good. I think there’s a lot of demand in the market,” Brown said. “It takes a bit of a measured approach to match the clients’ needs with the resources available. Our number one challenge is figuring that out.”
Burdco has a core staff of six employees but relies heavily on a range of subcontractors.
“We employ some contract labor and we’re always finding new subcontractors as people emerge in the market,” he said. “But we have a solid core of people used to working with us and that helps us a lot.”
Brown said the key to maintaining a quality workforce is to pay people well and to treat them fairly.
“That’s part of our mission statement,” he said. “We’ve developed our own brand in the market as a reliable place to work.”
Burdco is almost fully booked with work for the rest of the year. Brown is predicting commercial building demand in the Grand Traverse area will continue at a high level for at least several more years.
“The demand is there,” he said. “It’s likely our prospects for the next couple of years will be strong. Everything works in a cycle, but things look really solid.”
But he says he is concerned about the potential negative impacts of the Trump administration’s announced 10 percent tariff on imported steel and 25 percent tariff on aluminum.
“Steel is a significant part of our business,” Brown said. “The fluctuation of steel supply and prices is important to us. If you restrict the flow, it’s going to have an impact. It’s hard to know how the tariffs will play out, but the sound of it does not make me happy.”
Steve Eveleigh, owner, Northwest Carpentry
“We’re scheduled through 2018 and into 2019,” he said. “I can’t complain about the amount of work out there.”
Eveleigh builds four or five homes a year, mostly homes for new retirees and vacations homes for people who eventually plan to retire in the area.
“That’s the sweet spot for me,” he said. “I would have to hire more carpenters or managers to expand. It’s a big step to have the right people in place. It was a lot of work to establish the well-rounded crew I’ve got now.”
But Eveleigh, past president of the Home Builders Association of the Grand Traverse Area, said he might eventually hire more workers graduating from Northwestern Michigan College’s construction trades program.
And a new U.S. Labor Department-approved carpentry apprenticeship program that Eveleigh said is expected to start in the fall should help expand the local labor force.
Eveleigh said his biggest problem is finishing homes on schedule. Even though he has a good long-term relationship with subcontractors, they are spread thin because of labor shortages and the high volume of construction.
It’s not just labor, either. Cabinets and windows that used to take two to three weeks to be delivered now take four to six weeks to arrive because of the national upturn in home building, he said.
There also have been delays in getting newly finished homes hooked up to gas and electric service because of understaffing at some utility companies, Eveleigh said.
“That’s been a little tricky,” he said. “It’s definitely a challenge to keep a project on schedule.”
Material prices are rising, in part because of recent hurricanes that hit the southern United States. And an ongoing trade dispute over Canadian softwood lumber could have a larger negative impact on the construction industry than the steel and aluminum tariffs, Eveleigh said.
Andy Chadwick, owner, A & R Flatwork & Poured Walls
If you want Andy Chadwick to build a poured-wall basement for your new home, you have a one-in-four chance that he’ll do it.
“We’re really busy. We have to pick our customers this time of year,” he said. “We turn down three jobs for every job we do.”
In addition to basements, A & R installs driveways, sidewalks and decorative concrete work, mainly as a subcontractor for new-home general contractors. Chadwick also builds basements and does other concrete for small commercial projects.
Chadwick, who employs three workers, has been in business for 25 years.
The company built 85 residential basements last year and expects to build about the same number this year, he said. The lack of available labor has constrained the number of projects the company can do.
Chadwick said a major concern is the possible impact of steel tariffs.
“That would definitely affect us,” he said. “We go through two tons of rerod [a steel reinforcing rod] a week.”
The small size of his company is an advantage in dealing with price increases or a downturn in business, Chadwick said.
“We’re a small enough company that if something does happen, we can adjust,” he said.
Blaine Vadeboncoeur, owner, Top Line Electric, Traverse City
“We used to kick and scratch to keep people working,” he said. “It’s taken a little practice to say no.”
Even though Top Line Electric is a fairly large company that employs 29 people, the lack of skilled workers in the area is limiting its growth.
“We’re trying not to overextend ourselves because of the labor shortage,” Vadeboncoeur said. “We’re staying within ourselves as much as possible and not getting too greedy with new work.”
While Top Line has as much work as it can handle, Vadeboncoeur said rising labor and material costs are a concern.
“We’ve raised wages 15 to 20 percent over the past three years,” he said.
And current escalating material prices for projects that were bid months ago challenge profitability.
“It’s a tough thing,” Vadeboncoeur said. “You have to decide whether to order materials now and store them. It’s a gamble every time.”
The announcement of steel and aluminum tariffs in early March prompted some of Vadeboncoeur’s suppliers to boost prices.
“We were getting notices from some suppliers that prices were going up seven to 10 percent in the next week, and if we needed anything we should buy it now,” he said.
But those worries have been trumped by the increased business Top Line and other companies are experiencing, Vadeboncoeur said.
“It’s great for the area to see all the growth and opportunity,” he said.