With more than 100 years of combined construction experience, these Arizona Builders Alliance members weigh in on the current state of the construction industry, how it’s evolving and what to expect coming down the pike.
Each of them are decision makers and thought leaders for their respective companies tasked with ensuring its prosperity and viability, which makes them uniquely qualified to share their analysis, outlook and insights.
Q: What’s the biggest issue facing the construction industry in Arizona?
Steve Whitworth: The availability of skilled labor is probably our biggest ongoing challenge.
Derek Kirkland: Everyone from trade and industry organizations, to general contractors and subcontractors, are tackling the question of how to rebuild a dwindling talent pool. At DPR, we are working to rekindle interest in construction by educating teens in our local community. We currently partner with the Phoenix nonprofit, New Pathways for Youth, to provide training, internships and scholarships to high school teens who follow a construction career path.
Randy Eskelson: The two main issues we are facing are the shortage of skilled labor and the aging workforce. We need to recruit the next generation of construction workers and allow them to learn from our current tradesmen.
Justin Kelton: Hiring, training and retaining a skilled workforce as more and more projects come on-line will present more significant challenges, and could hinder the recovery of the industry. McCarthy has been investing in our apprentice program and career training programs with WestMEC and other JTED schools. We’ve launched efforts directed at training people in industries that are less active now‚ such as mining or manufacturing, and we’re having success with training people to work in emerging industries like solar.
Derek Wright: Labor has been and will continue to be the biggest issue facing the subcontractor market in Arizona. Labor, while available, will be unskilled. Training and educational programs will be the necessity for companies wanting to increase their labor. Market wide, there will be upward pressure on wages that has been long overdue.
Q: Where are you seeing innovations and how are they disrupting the construction industry?
JK: Technology in construction is bringing advancements and innovations that are causing disruptions for contractors, particularly those who have not invested in technology. While we began using a form of Virtual Reality (VR) several years ago, today our technology has advanced to a form that makes it available for any client to virtually create their vision and experience the space in full-color using VR goggles. One specific example of this is Mirabella Senior Living, where we developed a full-color, full-screen, 360-degree experience for their potential residents of what it will be like to live there.
SW: Virtual reality is and will be used more commonly; the ability to have clients interact with their projects before sticks and bricks are in the field. This technology is disrupting the industry because it’s impacting the way we design and redesign.
RE: Building information modeling (BIM) technology has been around for many years now, and many of the large companies have been using this for years. Now we are seeing this more prevalent in the medium sized and even small general contractors.
Q: Looking ahead, what will be the construction trend everyone is talking about?
DK: The desire for greater predictability in terms of cost, quality and schedule has been driving automation and prefab for a number of years. The issue there is supply chain volatility. There are comparisons to the similar path and story of the evolution of the auto industry from the 1990s, which resulted in a similar shift to prefab and robotics. At DPR, we have a fully automated prefabrication facility in Phoenix. On our recent SkySong 4 project, we saw increases in efficiencies of over 40 percent versus the previous SkySong 3 project.
RE: With the labor shortage that we are facing, many companies are trying to move towards prefabrication. Prefabrication allows you to work in a controlled environment and in an assembly line, which leads to greater worker productivity.
JK: The building information modeling (BIM) trend is being taken to new levels with advancements in virtual reality technology, underground utility mapping as well as augmented reality, which maps vertical utilities in buildings. The combination of these technologies is already taking us towards more collaborative building methods such as CMR, integrated project delivery and design build, and eliminating job-site conflicts and scheduling delays because everyone is seeing and experiencing the building before a shovel goes into the ground, and works together to make necessary modifications or choices.
DW: Technology, in all of its forms, will continue to transform our industry. Think back even five years ago – little or nothing is done the same. Companies that can harness their creative and intellectual ingenuity with their employees will find themselves leading the market. The engagement of a different type of construction workforce that can utilize this technology will be the trend we all talk about.
SW: Internationally, we are seeing that you can 3-D print a home in concrete. This could move into beams, trusses, walls and other building components. With our off-site prefabrication facility, we are already seeing the value and benefits of modular assembly, and as technology improves, we will see greater complexity.
Q: How do you describe the evolution of the construction industry in Arizona?
SW: As a homegrown Arizona company with nearly 70 years under our belt, we have seen our share of change. Technology has impacted nearly every aspect of our industry. The way we build has evolved and our people think differently.
DW: Evolution of the construction industry is driven by expectations, whether internally or externally. External requirements that force changes in our businesses often make us better (i.e. the downturn in our economy forced us to find new efficiencies). The evolution of continued success derives from a model that seeks and finds those efficiencies from internal expectations.
DK: I moved to Arizona 11 years ago and was surprised and impressed by the progressive and collaborative alternate project delivery method and qualifications-based selection process here in Phoenix. We have a tremendous opportunity in front of us to refocus and create a new joint vision as we move forward. I have started some of that initial discussion with our higher education customers and am hoping to bring a wider industry group together for a deeper dive.
Q: What’s your outlook for Arizona’s construction industry?
DK: We see strong trends through 2020 within DPR’s core markets: healthcare, higher education, advanced technology, commercial and life sciences. Various data sources (Dodge Reports, FMI) reinforce this picture. Overall, the Arizona construction industry growth projections from 2017-2020 are in the range of 15-20 percent, leveling off in 2020. There are also opportunities in the wider commercial sector for us, which includes corporate office and hospitality.
JK: The Arizona construction industry consolidated during the recession, but in the first two quarters of 2017, we’re seeing more projects coming on the books, and we anticipate that the federal infrastructure funding will continue to increase work. Workforce limitations are going to threaten a robust construction industry recovery, particularly for those contractors who rely on subcontractors for concrete, civil, mechanical and piping services.
DW: The outlook is optimistic – good and bad. Arizona was slow to recover from the Great Recession. Fortunately, we see the upside in our market as it has gained substantial momentum in 2017. Education and our lack of a sustainable solution to public education funding in Arizona will continue to be a risk to attracting new businesses to Arizona.
SW: Our outlook is stronger than the national average, but not to the levels that we experienced in the mid-2000s. Historically, we see a downturn every seven to 10 years. The severity of the bubble is the bigger question. Fortunately, we’re well positioned to weather downturns as we have over the past 67 years because of our diversity of services.
RE: We are seeing an uptick in projects and opportunities, but the market is still very competitive. The start of the past downturn was almost ten years ago, but it has lasted for so long that it still doesn’t seem that we are completely out of it. It is too difficulat to predict when a major slowdown will occur in this ever-changing environment.
Q: What’s a job site challenge that you faced and what lesson did you learn from it?
DK: The reality is jobsite or project challenges usually stem from the human factor. Communication issues, unforeseen circumstances, lack of focus or discipline are just a few examples that can cause breakdowns to the already dynamic nature of human interaction. Making sure that we spend the time to really see, support and care for each other is such a crucial piece of the puzzle. Once folks feel seen, supported and cared for, their level of engagement, choice of words, focus and discipline elevates significantly.
JK: A common issue faced on jobsites, which has in the past had a significant negative impact on schedule and cost, are the result of hitting an underground utility that is unknown – gas, water, electric. While our laser scanning and 3-D mapping were successfully addressing above ground tie-ins, it was not until the past few years that we were able to develop and hone our underground mapping technology, which is having a significant impact on projects today.
DW: Things will happen – they always do. We all would like to prevent the unfortunate things that can happen in this business. However, when they do come, it is what we do during and afterwards that leaves an indelible mark. Don’t ignore it. It won’t go away. Attack the issue with energy and passion and make it a growing experience, no matter how painful it may be.
RE: Due to the shortage of skilled labor, subcontractors have to wait on another trade to finish their work before the following trades can get onsite to do their work. This can cause delays on projects or may create the need to work overtime.
SW: It’s too challenging to think of any one particular situation as a game changer for me. I’ll just say that since I graduated with a construction degree 35 years ago, the industry is safer, smarter and much more collaborative. Did I ever think we could build homes with printers, or envision complex projects with VR goggles? No, but I see amazing things happening regularly in this industry. I learn something new all the time from the smart people that I’m fortunate to work alongside every day.