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Blog/August 1, 2018

Houston: The Key to Tomorrow —Skilled Workforce Development

Monthly Metrics

Any person related to the construction industry not keenly aware of the skilled craftworker shortage is simply not paying attention or is in denial. All reliable sources validate the shortage. In a recent National AGC survey, over 70 percent of the contractors responding indicated they are experiencing a shortage of these highly trained and highly critical workers. These contractors represent both general and specialty contractors and serve all major nonresidential market sectors: Commercial, Industrial, Municipal/Utility and Highway/Heavy. They also represent a broad cross section of geography: those areas where unions remain strong with traditional apprenticeship programs and those areas where open-shop labor policies prevail and formal training programs are more aimed at industrial crafts or conducted in-house. The shortage is real now and projected to grow.

There are already innovative responses – prefab, for example, which allows greater productivity per traditional craftsman in an off-site, controlled environment. And, more recently, new companies, funded by experienced technology venture capital funds, have charged into the marketplace. These new arrivals hope to disrupt the long-entrenched value chains using technology, artificial intelligence, machine learning and robotics. They will build most of the structure off-site in a manufacturing mode, then assemble and install on-site. They purport to offer both schedule and cost advantages. Katerra and Full-Stack Modular are examples; their websites deserve a look. Certainly, 3D printing is also gaining momentum and the capacity to produce larger structures.

However, while these options hold promise and will help ameliorate the shortage so buildings can be built with competitive schedules and budgets, none will replace the continuous need for senior leaders to ensure that there is a serious skilled workforce development initiative in their companies, in their associations and in their communities. As a matter of fact, these programs need to be strengthened to recognize the complexity of the tools of tomorrow and their increased capacity for both productivity and data recording. Skilled workers will always be needed to program the robots, make the inevitable adjustments and finish these jobs, no matter where components are built.

The Houston construction community recognizes this need and is responding at every level. The Construction Career Collaborative (C3) is a membership organization supported by all major construction associations and many general and specialty contractors as well as owners, both institutional and private. To be a member, a contractor agrees to play by the law and have verifiable, approved, specific safety and craft training for his workers. Owners then specify that this project is “a C3 Job.” Compliance can be verified. The group works with the Greater Houston Partnership, “Upskill Houston,” an initiative to have community colleges partner with industries to create the post-secondary, technical training needed for Houston’s future workforce. The building trades unions are collaborating too. And there are also some exceptional in-house workforce development programs that will be reviewed in coming articles. These integrated initiatives are beginning to gain real traction and can serve as a model for restoring construction craftwork to a desirable blue-collar career option.


Houston’s Monthly Metrics

The chart below, reflecting year-to-date permits issued by the City of Houston, confirms what all commercial building contractors sense and feel: The market is off substantially. However, beginning in mid-July 2018, several large projects were awarded and should begin soon. These involve office building, both downtown and in suburban campuses. Perhaps, during the third quarter, the market will close the current negative gap with 2017 numbers.

Houston Construction Metrics, August 2018

The office market remains problematic. There was negative absorption again in the second quarter. The sublease market remains a major drag on new construction; there is still 9.7 million square feet available, despite the creation of over 90,000 jobs in the last 12 months and favorable energy markets. The office and employment numbers puzzle even the most seasoned Houston economists.

Despite oil production in the United States being at record levels, the Houston-based office jobs are returning very slowly. Dr. Bill Gilmer of the Center for Regional Forecasting at the University of Houston indicates that about 75,000 Houston-based energy jobs were lost in the recent downturn, and it appears only 15,000 have been added back. Technology has eliminated some office jobs as well. There is a sense that energy-related manufacturing companies will ramp up their hiring soon. Prices are now favorable for all shale fields to be profitable, and global energy demand is projected to remain strong. Rigs and equipment that had been “cold-stacked” are being put back into service; new ones will be needed.

CBRE has begun a special Houston medical office report covering 317 Medical Office Buildings (MOBs). This first such report indicates the vacancy rate is 12.7% and the square footage under construction is 620, 508. It also indicates that there are 15 MOBs, totaling 855,00 square feet, now underway or in late-stage planning. Other commercial markets remain healthy, but not robust. However, residential construction, especially single-family dwellings, is very strong. The number of new homes to be built in 2018, originally projected to be 28,500, has now been increased to 28,800, and the raw land lot supply is dwindling.

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