Construction booming in Utah
With no end in sight for regional building projects, workers are in hot demand
By Jenifer K. Nii
Deseret Morning News
Utah's economy is the single strongest state economy in the nation, according to one Utah economist. And the single strongest sector within that economy is construction.
Mike Terry, Deseret MorningNews/KSL-TV Chopper 5
Not much is left of Crossroads Plaza. City Creek Center will rise in its place.
It's growing so fast that many construction companies say they can't hire fast enough to staff the jobs they've got on the docket. It's growing so fast that, according to some general contractors, projects are being delayed or redesigned to suit the available labor pool.
It's growing fast, and though the pace may slow to a trot instead of a frothing gallop, industry watchers say Utah's construction market will continue to see healthy growth for years, perhaps decades.
"From 1990 to 2000, construction employment grew by 200 percent," said Mark Knold, senior economist at the Utah Department of Workforce Services. "We went from 23,000 people employed (in construction) in January 1990 to 67,500 in January 2000. In January 2007, we project that number at 96,600."
Earlier in the decade, there was TRAX and highway construction and The Gateway, Grand America Hotel, LDS Conference Center, and Salt Lake City Library, to name a few projects in addition to the various facilities augmented or constructed for the 2002 Olympic Winter Games. Then the residential sector came apace, as homebuilding exploded, particularly in the southern part of the Salt Lake Valley and in southern Utah.
Now, with home construction fading again, the nonresidential sector is entering what is shaping up to be a record-setting period, according to James Wood, director of the Bureau of Economic and Business Research at the University of Utah.
"On the nonresidential side, we'll set an all-time record in 2007 and most likely again in 2008," Wood said. "We're going to have probably the two best years ever, coming in the next two years. In real terms, adjusted for inflation, we're back to the pre-Olympic years."
Record growth
In the first two months of 2007, nonresidential construction permits were up 43 percent over the same period last year, Wood said. To set an all-time record in the commercial building sector, the industry would have to reach the $1.8 billion mark.
Laura Seitz, Deseret Morning NewsDemolition of Crossroads Plaza's parking terrace, as seen from West Temple, was going strong in February. "I think we'll get there," Wood said. "And that's just in permit-authorized building (which includes office and industrial space, retail and some permitted government facilities). It doesn't include schools, roads, dams, highways. And there are quite a few of those."
Just in the downtown Salt Lake area, Wood said, there's 222 S. Main, a 21-story skyscraper announced by Wasatch Real Estate Partners and Hamilton Partners; a $100 million new courthouse and renovation of the Frank Moss Federal Courthouse; ongoing development at The Gateway; and renovations at the Walker Center.
"And that's in addition to City Creek," Wood said, referring to The Church of Jesus Christ of Latter-day Saints' massive multiuse complex of office, retail and residential space. That project, now under way, has been estimated at $1 billion.
In addition, there are expansions or renovations planned at most of the Salt Lake Valley's shopping malls — from Trolley Square to South Towne Center, Valley Fair Mall to Fashion Place. There's I-15 northbound, Legacy Highway, Frontrunner and TRAX. And on and on.
"It's very typical that they come on like this — economists would call it 'lumpy,"' Wood said of the glut of projects. "With the residential sector, it's much smoother. With the nonresidential sector, you get real spikes, more volatility."
Underneath the lumpiness, though, the fundamentals are at work.
"The driving force of the whole thing is population growth," Knold said. "That comes from two places: our own birthrate and in-migration. And in-migration comes in two forms: You get in-migration from other parts of the United States and in-migration from other countries."
Over the past 10 to 15 years, Knold said the strongest economic growth has occurred in the Intermountain West: Arizona, Nevada, Utah, Idaho. So strong, in fact, as to be curious.
"You wonder why," Knold said. "It's almost as if something has changed. Why the Intermountain West?"
Fundamental change
The Industrial Revolution drew people to cities around or featuring flat roads and waterways, Knold said. Business meant producing a product — a product that had to be shipped or trucked or carried by rail to customers.
Today, Knold said, the development of interstate highways and air transportation, combined with the general movement away from the industrialized economy toward the information/technology economy, means people are discovering the delights of the previously too-remote West.
"Here, you have probably the most beautiful part of the country and the most underdeveloped," Knold said. "With the new economy, the barriers of old are breaking down. Rapidly. People are moving."
According to Jeff Thredgold, president of Thredgold Economic Associates, 70,000 more people moved into the state than moved out between 2005 and 2006. And more people means a need for more housing, more services, more amenities, more jobs.
And so, in February, Utah's already low unemployment rate found even deeper depths: 2.3 percent. Leading the way in job growth? Construction.
"Basically, if you can fog a mirror or have a heartbeat, you have a job," said Rich Thorn, president and chief executive of the Associated General Contractors of Utah. "Construction is an engine that drives the economy, and the economy is strong. We're definitely seeing manpower shortages, and it's pretty much across the board. There is no area, no sector of the industry that seems not to be struggling."
Worker shortage
But there are, according to Thorn and some local builders, some employers whose struggles are proving key. Brigham Latimer, business development manager for SIRQ Construction Solutions, a South Jordan-based commercial builder, said shortages in certain trades — steel erectors, concrete contractors and excavation companies, for example — are having an impact on what gets built and when.
"The work these trades perform are the initial phases of any project," Latimer said. "As a result, the state of a project and the speed of construction will depend on when these trades are available. Iron workers are in especially high demand, and it takes a great deal of competency to perform that kind of work ... therefore staffing takes some time.
"The effect of this demand has the potential to slow down a project or perhaps even change the design of a building to allow keep-up with the speed of construction."
As a result, SIRQ now "proactively prequalifies" subcontractors by reviewing their work programs and targeting windows of opportunity to ensure that subcontractors' schedules are matched up and projects can proceed, Latimer said.
Bruce Heckman, vice president of development for Taubman Centers Inc., a partner with the LDS Church in the City Creek development, said City Creek has not seen any changes in design because of the status of the construction industry in Utah.
The project, which is expected to span five years, currently includes three general contractors — Okland Construction, Big-D Construction and Wadsworth Brothers Construction — according to information posted near the City Creek construction site. Developers declined to estimate how many subcontractors or laborers would be involved in the project.
Rough outside estimates, however, indicate that City Creek may require around 3,000 workers per year, or as many as 12,000 over the course of the project, according to a ratio of employment-to-nonresidential valuation from the U.'s Bureau of Economic and Business Research. The numbers are gross approximations, Wood notes, though he called the estimates reasonable.
The pace of growth may ebb and flow, but Knold, Wood and Thorn all say the basic trajectory of its line extends upward. Thorn said the construction industry is likely to remain red-hot for at least the next three to five years. Knold was even more bullish.
"This isn't just a couple-of-years kind of phenomenon," Knold said. "This is a fundamental shift for the Intermountain West. The construction industry is set to have decent amounts of growth for the next two decades, at least. Not excessive growth, mind you, but the slope of the curve is up. The extrapolation forward is of a growing industry."
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