McKinney homes, MISD stadium, area commercial construction projects costing more thanks to labor shortage

Construction on the McKinney ISD stadium is set to begin this fall.

Construction on the McKinney ISD stadium is set to begin this fall.

Construction projects worth billions of dollars are taking shape throughout Collin County, and as the number of projects continues to increase, so do construction costs and labor demands.

Mayor Pro Tem Randy Pogue, a professional engineer and Dallas-Fort Worth commercial market leader for Westwood Professional Services, said corporate relocations are continuing to drive need in the local construction industry—for both commercial and residential projects—which is in turn increasing final project costs.

The effect of the competitive construction market can be seen locally. The cost of constructing McKinney ISD’s new stadium has increased by $7 million since it was approved in August and the cost of building developments in Frisco’s $5 Billion Mile has increased an estimated $1.3 billion in part because of rising construction costs.

Pogue said a limited workforce leads to an overall cost increase for all facets of a project, including increases in materials cost, labor rates, and overhead.

Rising construction costs hit McKinney

“The cost increases are generally somewhat cyclical due to the supply-and-demand side of the equation,” Pogue said. “I would expect that there will be another correction sometime in the future, but for now there is a mindset to attempt to make hay while the sun is still shining. For now and the immediate future, it appears that this market is here and will continue.”

According to a recent report released by the Associated General Contractors of America, two-thirds of construction firms nationwide report they are having a hard time filling hourly positions that represent the bulk of the construction workforce.

Meloni McDaniel, president and CEO of Texo, the largest commercial contractors association in Texas, said the effect of the insufficient labor market can be seen in North Texas as construction companies vie for both skilled and common laborers.

“People are trying to [entice workers to leave current jobs] for 50 cents to $4 more an hour just because they just need the bodies so much, and they can afford it because they have so many projects,” she said. “It really is just a simple supply-and-demand equation, and right now the demand is high.”

Pogue said construction cost increases like the region is seeing today have not occurred since the recession in 2008, although he said some costs are a corrective action to make up for the general cost of living and inflation costs that were not recovered in the past eight years.

Commercial project effect

In May, McKinney ISD voters approved a MISD bond that would allow MISD to construct a then-estimated $63 million football stadium. However, in August—before even breaking ground—district officials announced construction costs had risen $7 million.

Rising construction costs hit McKinney

Cody Cunningham, MISD chief communications and support services officer, said the rise in costs came from two areas: materials and labor.

“The No. 1 driver of the increase was the rise in cost of concrete,” he said.

Cunningham said because of the number of construction projects in North Texas, there are a limited number of concrete suppliers who can handle filling requests for projects of this size. He said on a project like a stadium, concrete needs are significant.

“A lot of these subcontractors are booked months out and they are not looking for more [work], and in some cases they are bringing in workers from other markets, which would impact the total cost of what we would be paying for concrete,” he said. “The company we are working with isn’t doing that, but that doesn’t mean that there won’t be a significant increase in the cost simply because they can charge more and there’s nothing anyone can do about it.”

Frisco officials scaled back construction on the $39 million Toyota Stadium improvement project to fit within its original cost estimates. FC Dallas President Dan Hunt said market conditions played a major part in the price per square footage increase, which jumped from an estimated $350 per square foot to $511 per square foot in August.

“The market is really tight right now,” he said. “That goes without saying. All you have to do is look around at all the building that’s happening. Sometimes we couldn’t get
the number of bids we wanted on a job because everybody’s plate is so full.”

Hunt said there are not enough workers in the industry.

“There are literally not enough trades to help complete the work that’s going on,” he said. “You’re actually having to look outside the Metroplex sometimes for different trades to get work done.”

Residential project effect

According to the 400 members of the Dallas Builders Association who took part in a recent survey, the residential construction industry is also desperate for workers, more specifically for framers and brick masons.

“We have more demand than we did prior to the recession, and a lot of the labor we had at that time is in a different industry,” DBA President Phil Crone said.

Rising construction costs hit McKinney

Crone said one residential builder surveyed said the labor shortage added a minimum of three months to his construction schedule, adding that a good day was one in which crews were present on four of his nine homes under construction.

“You are having to pay more for the labor, so that is going to be an increase of cost for not only the builder, but for the consumer as well,” Crone said.

Crone said the results of the labor shortage are costing builders and homeowners alike. Study results released on Sept. 26 showed 80 percent of DBA builders surveyed said the labor shortage was adding at least $4,000 to the average home price, and 50 percent of builders surveyed said the labor shortage is adding two months to construction timelines.

“Builders then have more taxes and interest they have to pay because they are owning properties longer than they should,” he said. “On top of that you have a big demand and a short supply for labor, and a lot of these contractors are asking prices almost double than what they were 18-24 months ago just because they can, so that obviously adds [on] the price of a new home.”

Labor outlook

According to the Engineering NewsRecord, a magazine that provides news, analysis and data for the construction industry, labor costs continue to rise throughout the state and the U.S.

McDaniel said the Dallas-Fort Worth and Austin areas are the fastest-growing areas in the country, and right now the  workforce is extremely limited.

According to the AGC, a study conducted between July 2015-July 2016, the number of construction workers in Dallas-Fort Worth did not change despite the number of new construction projects taking place in the region.

“Right now our subcontractors are squeezed for people,” she said. “So the general contractors who have tight deadlines are dependent upon them to make those deadlines, and they just don’t have the people to make it happen. We get a call once a week from an owner who is wanting to build a project but can’t get a general contractor to return his call because they are so busy and in such high demand.”

McDaniel said nationally by 2018 the construction industry is projected to be short 900,000 skilled laborers, such as plumbers and electricians.

“Our industry took a big hit during the recession, and we are definitely not recovering from it,” she said. “I know a lot of people who have left the architecture and construction industry because there wasn’t enough work, and they have still not returned to the industry. This is going to create a huge gap.”

McDaniel said the commercial market is pulling workers from the residential market, causing the residential market to pull from other industries as well, which she said is unsustainable for the entire construction industry.

Lindsey Juarez contributed to this article.