Washington state's nonresidential building boom has buffered the state's construction industry from the housing slump. But due to key differences between the residential and nonresidential sectors, relatively few workers are moving from houses to office towers.
The line about Seattle’s official bird being the construction crane may be truer now than ever, as builders put up offices, shopping centers, hotels, health-care facilities and other nonresidential buildings at a fast clip.
“Subcontractors and other general contractors are struggling with manpower,” said Bryce Taylor, director of business development for Lease Crutcher Lewis. “There’s a lot of work out there, and [contractors] want to hold onto their key people.”
At the same time, area homebuilders staggering over a growing stockpile of unsold houses have cut way back on new-home starts. They and their subcontractors have shed thousands of workers since the peak of the market last summer. But relatively few idled residential workers are now helping put up office blocks, because of key differences in skill sets, required experience and unionization between the two types of construction work.
So far, the brisk pace of nonresidential building around the state has helped cushion the state’s construction sector from the impact of the housing slump. Overall, Washington has lost only 3,000 construction jobs, or 1.4 percent, since last June’s peak; over the same period, the national drop was 5.2 percent.
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Dig a bit deeper, though, and the divide between the residential (including condos and apartment buildings as well as single-family homes) and nonresidential sectors jumps out: Over the past 11 months, 6,400 residential building jobs, or 6.3 percent of the total, have vanished, while 5,000 nonresidential jobs have been created. (The third category of construction jobs, heavy and civil engineering, represents work on such projects as roads and bridges; it has fallen by 1,600 jobs since last June but tends to be fairly steady over the long run.)
Spending on nonresidential construction in the Seattle area jumped 20 percent last year, to $9.57 billion, according to FMI, a construction-industry consulting firm based in Raleigh, N.C. But there are signs the nonresidential boom may be headed for a slowdown: FMI expects nonresidential construction growth here to slow to 3 percent this year and to decline slightly in 2009, and demand for apprentices in the skilled trades appears to be slipping.
Still, FMI construction economist Heather Jones said Seattle is part of a U-shaped zone — down the West Coast, across the Sunbelt and up the East Coast as far as Virginia — where commercial development remains strong despite the downturn in the national economy.
The Puget Sound economy is still fairly robust, Jones said, and people continue to move here in search of work. In addition, she said, at least some of today’s nonresidential development is a legacy of yesterday’s housing boom: supermarkets, malls, office parks, schools and hospitals tend to follow housing developments, not the other way around.
(The state Employment Security Department does not break out residential and nonresidential figures for metropolitan Seattle, which accounts for almost half of all construction jobs in the state.)
But while the action may be shifting from building homes and condos to erecting malls and offices, workers themselves by and large aren’t.
Residential and nonresidential builders largely operate in two different labor markets, said Jack Beaudoin, vice president and general manager of Turner Construction, one of the area’s largest general contractors.
“It’s not that someone couldn’t be trained and move from one industry to the other — people do it all the time — but there’s expertise that’s different,” Beaudoin said.
Big commercial projects, such as schools, hospitals or office towers, may have the same components as a suburban dream home — walls, wiring and heating systems — but they’re generally more complex and interconnected. Consequently, commercial buildings are planned far more precisely before construction starts.
For instance, Taylor said, ducts in an office building may contain several conduits and pipes for different systems. “Each different system that goes into the building — plumbing, electricity, HVAC — has to be put in their own layer or zone for the whole thing to work,” he said, adding that homebuilders have more flexibility: “If you’re building a house you drill holes through studs till Point A meets Point B and say, ‘That looks good enough.’ “
And while houses typically are build from the ground up out of raw materials, commercial buildings often are pieced together from modules that are pre-assembled and transported to the job site.
“The coordination with the other trades is incredible,” Beaudoin said. “If you vary from [the overall plan], you tend to have to rip it out and redo it, and everyone gets kind of mad at you.”
For that reason, he said, even experienced residential workers usually need considerable training to work on commercial projects: “In general, you’re going to have to start off at an entry-level job and work your way up.”
Also, while residential builders generally are nonunion, most workers on commercial projects are organized.
In one sign of a possible slowdown in commercial work, there’s less demand for apprentices coming out of programs run jointly by employers and unions. The number of apprentices in the training programs co-run by the Associated General Contractors of Washington and five construction-trades unions jumped 52 percent last year, to nearly 3,600, said Doug Peterson, the AGC’s director of labor relations. But, Peterson said, there may now be more apprentices than work for them.
“A lot of these guys are not going out” on jobs, he said. “There was a point at which if you could breathe you could get a job. Now, the pressure seems to be off. There are people in the (hiring) hall.”
Some local projects have been put on hold, Taylor said, because even though the local economy is still sturdy, the economies in the developers’ headquarters cities have softened. He declined to identify specific delayed projects.
Other contractors said financing for new projects has gotten harder to come by — more fallout from the housing slump — and that the soaring cost of cement, steel, asphalt and other materials means some projects may no longer pencil out.
Nationally, according to FMI, spending on nonresidential building is predicted to grow just 2 percent this year and decline 5 percent in 2009 before rebounding. For Seattle, FMI expects a 2 percent drop next year.
“We may get lucky — we may not see as big a dip as the rest of the country,” Taylor said. “Or we may just be delayed. It’s hard to say.”
Beaudoin said business has eased a bit at his company, but “it’s still good solid work,” and he expects an upturn — and more hiring — in 2009.
“When the housing slump happened I got really nervous, but I’m not as nervous now,” he said. “I see our workload being pretty strong, and some of the projects I thought were a little more speculative still have the pedal down and are moving forward.”