Strong fundamentals: As cranes

Strong fundamentals:

As cranes dot the skyline, all signs point to strong and continuous growth, although COVID-19 has raised the specter of uncertainty

It’s a good sign for construction when the skyline is dotted with cranes. In Tampa Bay, cranes are numerous, reflecting the increase in construction spending and development across the region. The increase in construction activity is also reflected in the number of new jobs created in 2019, which in itself is also posing a significant challenge: finding qualified workers to fill those jobs. By early April, state and county authorities had not yet stopped construction in the wake of COVID-19, although some communities had taken measures themselves. Rather, efforts to impose social distancing at construction sites were in place, although a continued spread of the virus would no doubt impact the sector moving forward.

Sector performance National construction spending for 2019 totaled $1.3 trillion, 0.3% below 2018 and the weakest level since 2011. But the value of public construction last year grew 7.1% on 2018, to $328.8 billion and educational construction 3.4% higher to $79.0 billion. In terms of job growth, The Tampa Bay-St. Petersburg-Clearwater region tied for tops in Florida and 11th in the nation, with a 10% gain in jobs to 85,000 in 2019, the same percentage rise as Palm Bay-Melbourne-Titusville, according to the Associated General Contractors of America (AGCA).

Although jobs growth, and the continued low unemployment rate, are sure signs of a strong economy and sector, they are also a challenge. Despite the number of construction workers growing more than 28 percent from 2014 to 2019, Tampa still faces a labor shortage, according to CBRE. The shortfall of qualified construction sector workers has pushed labor costs up further, causing delays to many projects.

Academia is an integral part of the labor solution for many businesses in the construction sector. Many believe the job of educating an appropriate workforce is getting done. “We used to have to attract from three schools, the University of Florida, University of Miami and FAMU, and none of those are really close to the Tampa area,” said Ward Friszolowski, president of architecture firm Harvard Jolly, to Invest:. “We used to have to not only travel to recruit students but also convince these students to relocate to Tampa Bay, which was traditionally a retirement area. Now, it’s not taking a lot of effort to convince people that St. Pete is the place to come and live as a graduate, and also a lot of the talent is right here in the area. This is often overlooked, but

it’s really something that’s making a big difference right now.”

Nationally, one of the biggest factors impacting the construction sector in 2019 was President Donald Trump’s trade war, which levied 25% tariffs on steel and aluminum imports and packed a punch for the bottom line of construction companies and developers. The 2019 drop in construction spending was the first annual decline since 2011, according to Nasdaq Nationwide, steel imports took a tumble, lending support to the domestic manufacturing industry but simultaneously placing significant pressure on margins for construction companies and developers. Prior to the tariffs, Turkey was one of the most significant steel rebar exporters to the United States, exporting almost 1.5 million tonnes of rebar in 2015 alone, with its closest competitor Canada at just over 400,000 tonnes. After the tariffs were imposed in 2018, Turkish rebar exports fell to just 367,609 tons and Canadian to 280,181. U.S. rebar imports on the whole tumbled to 1.5 million tons in the first 11 months of 2019, compared with 2.5 million tons in 2017 prior to the tariffs being imposed. This created limited supply for U.S. developers, who were largely forced to source from domestic mills, which in turn were able to hike prices.

Yet, development in Tampa is still relatively affordable for an economic hub. To buy a property in the city center, the average cost is $254.65 per square foot, compared with $327.25 per square foot in Sarasota and $390.66 per square foot in Miami. Additionally, real estate data from Zillow shows that the median home value in Tampa is $219,100. Tampa home values have gone up 2.5% over the past year but the company predicts that the Tampa real estate market will stay flat within the next year, meaning it is a strong market in terms of affordability. But with population growth and plenty of demand, land is set to become scarcer and prices are set to rise. “Across the board, everyone in the design and construction industry is concerned about construction costs and a strained labor force. It is challenging to handle the cost escalation that we have been experiencing in recent years. The lack of workforce and rising costs, as certain projects are taking longer to complete, and some are taking longer to get approved to start. A lot of work has to be done to complete a project within the established budget or deal with cost escalation on that project. On the development side, the availability and cost of land is always a significant topic. These factors affect our business as we have a number of clients that are actively seeking new projects, but are having trouble finding a site that meets their needs and their budget,” said Stantec Senior Principal Dave Kemper.

Another headache for developers in Tampa is the difficulty in obtaining permits, a process that CBRE says poses “significant challenges” due to the timeframes involved. The approvals process in Tampa can constitute up to 32% of the total project cost. But in November, Tampa Mayor Jane Castor took the first steps to addressing the issue, revealing a plan to streamline the permitting process. The plan would involve additional staff in the planning and development department as well as making the online permitting process clearer and more user friendly.

Zoning In response to land and permitting issues, developers have started moving to the peripheries of major metro areas, meaning traditionally suburban areas are ( )