Rising Costs, Labor Shortage Could Force Commercial Construction Delays
With a large increase in the amount of office construction nationwide and continued building of warehouse, distribution facilities, and multi-family housing, the outlook for commercial development hasn’t been this strong in years.
However, the increased building activity is exacerbating the already-keen competition for skilled construction workers in the commercial real estate market – including Philly office space, Philly retail space and Philly industrial space. Combined with the rising cost of construction materials, fuel, and services, the labor shortage is expected to squeeze commercial contractors this year, potentially pushing back the timetables for some CRE projects in the development pipeline.
This CoStar report on national and Philadelphia commercial properties is being offered through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Recent data from the U.S. Bureau of Labor Statistics and the temporary employment agency Manpower Group suggest contractors’ costs continue to rise and they are having a tough time finding labor, in many cases luring away workers currently involved in other U.S. and Philadelphia commercial real estate properties from rival firms with offers of higher pay, according to Kenneth Simonson, chief economist for Associated General Contractors, which recently released its 2018 forecasts and membership survey.
Three-quarters of construction firms involved in the U.S. and Philadelphia commercial real estate markets expect to expand their payrolls this year amid rising confidence that economic conditions will remain strong as tax rates fall and as the White House and Congress pursue business deregulation, according to AGC’s 2018 Construction Industry Hiring and Business Outlook.
Of the more than 1,000 construction companies and contracting firms that participated in the survey, 44 percent expect net expansion of demand for all types of construction services related to both national and Philadelphia commercial real estate listings, the strongest period of growth in the history of the 10-year-old survey.
This good news is tempered by concerns in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – over workforce shortages, rising labor, and business costs and whether government plans to invest $1 trillion in the nation’s roads, highways, bridges, power grid, and other infrastructure can move forward.
Rising materials, fuel and other non-labor costs also are squeezing contractors dealing with U.S. and Philadelphia commercial real estate listings. The Producer Price Index for inputs to construction, excluding capital investment, labor, and imports, increased 4.8 percent year over year in November, exceeding the 3 percent PPI increase for new nonresidential building construction. The PPI for all goods used in construction, including diesel fuel and other items consumed by contractors, rose 5.6 percent, the largest increase in six years.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (firstname.lastname@example.org) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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