Commercial Construction

By John Smaligo, president and CEO, Associated Builders and Contractors of Oklahoma

The construction industry is essential. Throughout the pandemic, construction never locked down. Although there was a temporary slowdown in mid-2020, contractors kept building and their employees benefitted from increased demand for infrastructure, maintenance and new facilities over the past two years. Tulsa’s skyline has seen the addition of several new high-rise office buildings and apartments. The OKPOP Museum and the USA BMX headquarters also have signaled growth for the region along with major transportation projects like the I-44/Highway 75 interchange. Right now, most contractors have a substantial backlog of work to begin 2022. In addition, several have reported an unusually large number of project interviews going into the new year. These indicators signal the commercial construction industry is poised to continue its upward trajectory leading regional contractors to remain cautiously optimistic about the near term. Several other factors are also contributing to this bullish outlook.

First, the federal government’s infusion of trillions of dollars into the economy and the recent approval of the bipartisan infrastructure bill means more work for contractors of every stripe. Roads, bridges, water and wastewater projects now have a multi-year funding stream thanks to the new legislation. The State of Oklahoma will undoubtedly use a substantial amount of the infrastructure money headed its way to improve highways and other basic government services. From yet another funding source, the Department of Veterans Affairs broke ground in October 2021 on a $130 million hospital in downtown Tulsa in partnership with the Anne and Henry Zarrow Foundation, the State and the City of Tulsa. Locally, school and municipal bond issues continue to receive broad support from taxpayers ensuring new facilities will be built in communities across the region. Another major influence on northeast Oklahoma’s construction industry is the rapid growth of several tribal governments. The Cherokee, Muscogee and Osage nations have seen an influx of gaming revenue and federal funding in recent years. Each of these tribes is investing heavily in health care facilities, casinos, community centers and more. The area’s private sector remains strong. Downtown Tulsa is eagerly anticipating a $73 million mixed-use development featuring the area’s first grocery store in over 20 years. Preliminary plans also include an apartment structure, hotel, retail and parking. Outside of Tulsa, MidAmerica Industrial Park has been a boon for the construction industry with the expansion of Google. Most recently, Canoo announced plans for a $400 million electric car plant. Back in Tulsa, another major mixed-use development, NOMA (North of Market) was announced this past year. This $60 million project will feature luxury apartments, restaurants, retail and a neighborhood gathering space. Finally, American Airlines is already underway on over $550 million in improvements to its maintenance facility. Those projects will continue for another six years. The COVID-19 pandemic has brought great opportunities to the construction industry, and the essential nature of the work has insulated it from lockdowns and other effects felt by many businesses. However, even the best of times come with hurdles.

The two biggest concerns both now and into the future are supply chain interruptions and workforce shortages. Getting construction materials delivered on time has been problematic in recent months. Adding to this concern are inflationary pressures raising costs for those items. In December 2021, Associated Builders and Contractors analyzed Producer Price Index data from the U.S. Bureau of Labor Statistics and reported input prices are up 23.5% from the prior year and nonresidential construction input prices rose 24.5% over the same period. Right now, clients are paying the higher costs and they’re generally patient with the slowdown. However, the uncertainty surrounding this major concern creates a troubling situation for contractors. The most likely effect will be thinner profit margins for construction companies. The second major issue facing the industry is the shortage of skilled tradesmen, superintendents, estimators and project managers. Nationwide, the construction industry has over 400,000 open positions.

NOMA (North of Market) is a $60 million project on Route 66.