SUBMITTED BY AGC
A stable and climbing construction economy picture, both nationally and locally, was painted Wednesday at the Nevada Chapter Associated General Contractor’s annual Construction Economic Outlook.
AGC National Economist Ken Simonson cited double digit construction employment growth of nearly 14 percent this year after Nevada suffered through a five-year recession which chopped 17,000 construction jobs in the region. But finding and retaining employees to re-fill that gap will be a challenge.
“Material costs look to be fairly flat in 2015,” Simonson said. “Employment costs and the availability of workers will be issues in the coming year.”
Simonson noted that a September survey of 1,100 AGC firms found that 83 percent will be seeking to find employees in one or more craft sectors and that 62 percent will be seeking professional or management positions with their firms during 2015. Construction worker pay in Nevada averages $51,400, 20 percent more than all private sector employees in the state.
Brian Bonnenfant, Project Manager for the Center for Regional Studies at the University of Nevada, concurred that the search for employees will be a key issue for Nevada’s construction and non-construction firms in the coming year.
“Since the recession peaked in 2006, we have to replace 22,800 lost jobs,” Bonnenfant said. “That is what is expected to be replaced by the Tesla plant, but there are other jobs creators coming to the market.”
Bonnenfant said the slow but steady job recovery has had one glitch, 31 percent of the area’s jobs have wages that are not keeping up with the rate of inflation.
He said Reno’s image issue is being positively influenced by the Tesla announcement, as well as efforts to get potential businesses “on the ground” to visit the area first-hand.
“Getting them on site, in the community, has really changed their perception of Reno,” he said
While public sector infrastructure should see flat growth in the coming year, three macro issues will be fueling major private construction work nationally in the next 12-18 months, Simonson said.
Multi-family housing will be a growth area as young adults are not buying first homes due to job locations in high-cost urban areas and many are coming out of college with high debt, he said. Lower fertility rates and a generation that is waiting to get married is keeping first-time and move-up buyers out of the single-family housing marketplace.
The shale oil boom will continue to fuel jobs in the construction sector nationally with well field preparation, road and pipeline construction projects. The nation will also see more petrochemical plants being built and natural gas power plants as a result of increased national energy production.
Improvements to the Panama Canal to allow it to handle the new class of super cargo ships should spur construction and growth at the West Coast ports of Oakland. Seattle and Long Beach, all improving Nevada’s access to world markets and thus the logistics and warehousing markets, Simonson said.
Nevada is well-positioned to take advantage of these trends, Simonson said. Lodging and data centers are other areas for potential growth in the Silver State and nationally, he added.
Multi-family housing starts are climbing in the Reno area, fueled by the recent construction of student housing around the university district. Sparks is expected to pick up in the multi-family marketplace as the Tesla plant and other jobs in the Reno-Tahoe Industrial Center start to come on line, Bonnenfant said.
Ken Stark and Brad Elgin of Stark & Associates presented the industrial/commercial outlook for 2015.
“Lack of industrial inventory combined with increased demand is driving sales prices,” Elgin said. “A north Reno warehouse that was sold in 2013 for $29 a square foot is now being offered for $48 per square foot.
“From a national standpoint we have gained a lot of attention with the Tesla announcement and the new Amazon facility,” Elgin said. “Expansion from that attention will be reflected in the Reno-Tahoe Industrial Center and Stead. It will also change the face of Northern Nevada industrial expansion to include outlying areas such as Fernley, Dayton and Minden-Gardnerville.”
Office space vacancies have tumbled since a recession high that exceeded 20 percent, Stark said.
The current office vacancy rate in the Reno-Sparks area is slightly above 14 percent and is projected to drop another percent in 2015, he said.
New office construction will be minimal and in Reno isolated to the south Kietzke area and the proposed Rancharrah mixed-use development. Much of the construction work in the office sector will be with tenant improvements and remodels, Stark said.
One factor that could drive office space growth in Reno is the high cost of office space in Northern California. Average prices of $8 a square foot in San Francisco and as much as $4 a square foot in the outlying Bay Area may drive inquiry to Reno, where the average square foot rates is slightly above $1.50, Stark said.
