Posted on 03/25/2022 10:29:46 AM PDT by blam
Horizon International Group had just nabbed the contract and city tax breaks to develop the W Hotel, a 300-odd-room luxury hotel set to sit atop the Partnership Tower in downtown Houston, in early March 2020. A week later, pandemic lockdowns ground the construction industry to a screeching halt, setting off ongoing labor shortages and project delays that have since been compounded by layoffs, the Great Resignation and severe materials shortages.
When the W Hotel project picks back up later this year for Horizon, it will mark more than two years of labor and materials difficulties that have driven up costs and delayed projects for the entire American construction industry. For Horizon, specifically, the travails of the past 24 months have boosted project costs by tens of millions of dollars and driven the firm to consider a unique solution — creating its own trade school to train construction laborers.
Labor shortages, especially in the dangerous and high-stress construction industry, aren’t new. But like nearly every pinch point in commercial real estate, the problem was exacerbated by the pandemic. As of the end of 2021, the Houston construction industry had only recovered a fraction of the 24,000 jobs lost due to Covid-19, according to Greater Houston Partnership data. As projects are restarted amid recovery, the market must gain even more jobs, 27,700 in total, to recoup losses and have enough hands on deck to go forward with planned projects.
Al Kashani, vice president at Horizon, told Bisnow all of his projects, in Houston and elsewhere in the U.S., have come upon pandemic-related labor and materials challenges.
“Oh, my God, you never have enough labor in Houston,” Kashani said. “Even during downtime, it’s not enough sufficient amount of labor.”
Kashani estimates Horizon, which is involved in both development and construction, employs thousands of ground-level construction workers directly or indirectly and has about 35 or 40 managerial employees. He needs another 500 in the field, and says the company needs about 30 additional managers.
Severe supply delays and materials price hikes alongside a lack of skilled labor and the increase in wages that has spawned mean the W Hotel project costs about $20M more than it did six months ago. Though costs are stabilizing, Kashani said the project will not be completed at anywhere near its initial estimate of $130M.
Experts who spoke to Bisnow offered different reasons for why the industry is experiencing a severe labor shortage. Paul Puente, executive secretary at the Houston Gulf Coast Building and Construction Trades Council, said more workers are retiring without young people to fill the spots. For Makenzie Plusnick, communications manager for the Dallas-Forth Worth-based National Association of Women in Construction, sour public perception of construction work means it’s few young people’s first choice. National data suggests many in the industry are leaving for greener, less backbreaking pastures.
What is sure is that shortages are at crisis levels. Data from the Associated Builders and Contractors last month showed the country needs 650,000 more construction workers this year, and ABC Chief Economist Anirban Basu said in a release that the workforce shortage is the most pressing national issue for the industry.
“ABC’s 2022 workforce shortage analysis sends a message loud and clear: The construction industry desperately needs qualified, skilled craft professionals to build America,” ABC President and CEO Michael Bellaman said.
To make matters worse, as $1T in bipartisan infrastructure funds begin rolling into Texas and other states and post-pandemic projects pick up, the labor shortage is only set to get worse.
“Labor shortages and commodities costs [have] impacted every project,” Kashani said.
Many workers say that they are resigning their jobs due to work conditions and low wages that aren’t keeping pace with inflation. But Kashani, comparing his business to a restaurant that can’t raise costs on a meal and stay in business, says he’s eating the cost amid industrywide demands for higher wages.
“[You] can’t just raise your menu costs, nor can you raise your room rate by 30%,” he said.
Horizon pays its exempt construction managers and superintendents about $80K to $100K a year, plus benefits and tuition reimbursements, Kashani said, which is roughly in line for 2020 averages, according to the Bureau of Labor Statistics. He estimated construction workers on the ground make around $50K to $60K, though benefits will depend on the company they are subcontracted under.
But higher pay is not enough. In his union work, Puente advocates for apprenticeships for construction workers. In Houston, which has no city or state license requirements for general contractors, very few construction workers have received state or federal training through apprenticeship programs, he said. Meanwhile, it’s not just workers that the construction industry needs, but skilled workers.
Though the number of workers starting through apprenticeships is growing, just 16,000 Texans are currently participating in state or U.S. Department of Labor programs, according to Puente. That’s compared to about 700,000 total people who work in construction in the state, per the Associated General Contractors of America.
Puente attributes this lack of workers with formal training to the high death rate in the city and state, which for years has made the state one of the deadliest places in the nation for construction workers. A 2020 report from the Division of Workers Compensation states that construction is by far the deadliest occupation in Texas, with 127 reported deaths that year.
“It’s a risk, but it’s a risk that a lot of [companies] have taken and won, and sometimes they’ve lost,” Puente said. “It depends. It’s not their life on the line, it’s the individual’s life on the line.”
Nonlethal hazards make the industry unappealing for other groups. For women, who make up a small but growing percentage of workers in construction, some became fed up with sexist comments on job sites and pay gaps. Companies are making greater efforts to hire diversely amid diversity and inclusion efforts nationwide, and Plusnick says they can’t exactly afford to be picky.
“We’re seeing a lot of companies starting to realize that they need to focus on the inclusion portion and focus on how do we retain women and other … minorities in our companies,” Plusnick said. “You don’t want to lose the people you already have.”
To gain better-trained workers, Kashani has an idea in mind: He’s building a trade school to create them.
Horizon Workforce Development School, a new school in the former Peck Elementary School in Houston’s Third Ward, will train construction managers. Instructors, Kashani said, are not trained teachers; instead, the nine-month program requires instructors have $15M worth of project experience. The program, which will initially be free until Kashani can get successful alumni to encourage outside funding, will cost the company about $600K for 75 students. The school is underway and set to open on an undetermined date.
“If you have a shortage of tomatoes, what do you do?” Kashani said. “Create a tomato farm. If it’s cold and freezing, what do you do? Build a greenhouse. Our idea is to come up with solutions [for the labor shortage].”
Puente, who advocates for more job training from construction companies, says one of the reasons many companies do not already pay for training, besides the expense, is because they’re afraid they will train employees only to have them leave for another company — a fear Kashani dismisses as the cost of training.
“[It’s] just the nature of the beast,” he said.
Kashani is still optimistic about his upcoming projects as the industry climbs out of the pandemic, and says the company is committed to restarting the W Hotel later this year, as millions have already been poured into it. The last several months have seen projects expedited and he’s begun to see what he calls the light at the end of the tunnel.
“[At] the end of the day Texas, especially Houston, has a bright future,” he said.
To gain better-trained workers, Kashani has an idea in mind: He’s building a trade school to create them.
“To gain better-trained workers, Kashani has an idea in mind: He’s building a trade school to create them”.
Good for him. We need many more trade schools.
I certainly support trade schools.
But, on the other hand, if you pay a better wage, skilled tradesmen from other states will move to Houston.
I agree. When I was younger there were many more trade schools.
I don’t understand what the problem is. There are thousands of highly skilled, qualified trades people pouring across the Southern Border, even as we speak.
Freepers hate this reality
If Latinos leave
Amongst other industries construction at least here in Nashville would stop essentially
Across the board except management
They are 90% of the industry here aside from electricians and plumbers
Even iron workers are now heavy with Latinos
It’s simply staggering and Nashville is crazy building now
Skyscrapers condos and housing ..I think 100 houses and condos come online daily and still a shortfall
3,000,000 illegal aliens have made it into the US since Jan 20, 2021.
And every job site and restaurant I frequent has a help waned sign.
So where are the workers?
I lived in Houston from 1975 to 1995. In the early 80's the freeways were crowded with cars with Michigan state license plates. Often, I would see a bumper sticker that said "will the last person to leave Michigan turn out the lights."
“a help waned sign”
Funny typo. The help did wane, thus the problem.
Pay more. Workers will come.
Bull. Wages would go up. A good thing.
Up north if it’s non-union construction, it’s braceros on the job.
The big projects like downtown buildings are unionized and mostly white guys with some affirmative action blacks and chicks.
At Walmart spending their stimulus checks.
“to develop the W Hotel, a 300-odd-room luxury hotel”
300 odd rooms. How many normal rooms will there be?
Illegals working for cash while collecting welfare. The elites new plan.
That’s because the construction industry has been using illegals for decades now and displacing Americans so much that many don’t enter that field anymore.
They work for less pay and benefits than Americans expect to get paid.
I heard the Michigan Governor in 2016 say the state is begging for construction workers. Biggest problem. Lack of people who can do the trade school math and pass a drug test.
Print trillions of dollars to pay people more to not work than they make by working. What could go wrong?
They work less than union wage but not much less than Americans who’ve grown fat as hell lazy
Middle Tennessee lower middle class whites who once worked as carpenters and masons etc now either do something else
Ot they get disability and sell their pills scripts and other freebies
Blacks just do nothing ....sell dope and grift dole....I know a few black landscape crews and one stonemason group that’s blacks
Mexicans are further up the food chain here
If your bean people and speak English then you’re the straw boss and well paid
The grunts are Salvadorans and Hondurans and Guats
And they won’t hit a lock for less than 18-20/hour
My oldest son is supe for a small cement floor finishing outfit...1.1m in sales last year ....technically he’s number two in the outfit
He’s paid 20/hour and a share of each job he completes from the owner
They use crack labor .....paid 16/ hour
I imagine cheapest bean labor is fast foods
In the beginning they did as u say
But as this matured ....whites just mostly quit or shifted
Blacks had already quit
I build too but now sub out all but maybe concrete and warehouses and car washes only
My family has been in this in one manner or another since 1880 in Mississippi and here in Tennessee
Blacks did the lower end in my youth and worked very well btw
I notice up north not as many Mexicans so whites still work construction
And around here under trump many fed funded jobs required proof and paid more too
Govt money projects have labor pay requirements written in to equalize with union wages
It’s quite high.....but it’s about union demands more than illegals
Beanies go home and man .....it’s a cataclysm here
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