Iowa’s Construction Industry Sees Opportunities and Challenges
Iowa’s construction industry, which accounted for $6.29 billion of the state’s total $179.7 billion Gross Domestic Product in 2021 and employs more than 85,000 people, is healthy but facing challenges — especially in the area of workforce —according to leaders of three of the state’s major players in the commercial construction market.
“We are feeling like we have a good backlog of work,” said Katy Susong, President and CEO of Waterloo-based Cardinal Construction. “There are projects out there. In the past, ahead of COVID, we saw more personal and private investment in projects. We’re now seeing more public investment.”
One such project for Cardinal is Hudson High School, where school district voters in September backed an $11.65 million bond issue to update the high school’s building systems and infrastructure, convert underused space into classrooms, create a safer main entrance, rebuild the career and technical education labs and add gym space, according to the Waterloo-Cedar Falls Courier.
“From a private development standpoint, we are seeing investment but at a smaller level,” she said. The pandemic changed how employees and employers view and use the workspace, she noted. “We are renovating existing spaces to accommodate those people that still want to be in an office on a regular basis.”
“We’re seeing more opportunities this year than we’ve expected,” said Caitlin Russell, president of Russell Construction, a Quad Cities based firm with offices in St. Louis and Kansas City. Opportunities are strong in all markets and coming from hospitality, healthcare and manufacturing, said. “We are also seeing a lot of activity in the affordable housing market,” she added.
In the past three years, Russell has seen about 70% of its work come from local markets, but that has changed. “We’re working in multiple states right now. Not every contractor likes to travel.
Russell likes to be a provider to our clients wherever they are.”
She has also noted changes in the workplace. “We’ve seen some of our clients desiring to modify their spaces to encourage their team members to come back. The balance between work from home and in office work continues,” said Ms. Russell.
“From where I sit, the climate is pretty favorable for business expansion and growth,” said Mike Espeset, president of Story Construction, Ames. “We have a population problem. Unless we can attract more people, it will be the limiter of our capacity to grow the economy and the state.”
Below the Fold: Labor Supply and Scarcity
Supply chain disruption, created by the pandemic, “has been the story ‘above the fold’ for the last 12-18 months,” said Mr. Espeset. “The story just below the fold — labor supply and labor scarcity — drives the business of commercial construction in Iowa.”
Construction jobs in Iowa totaled 68,900 in January 2022, well below the record high of 88,400 in August 2016, but well up from the record low of 34,800 in February 1990, per the Trading Economics website, which pulls information from the Federal Reserve.
More recent statistics show the industry inching to a high of 85,900 construction jobs in January 2023, before falling back to 84,300 in February, compared to a total state workforce of 1.712 million, according to the U.S. Bureau of Labor Statistics. In the 12 months ending in November 2022, the U.S. gained 248,000 construction jobs and Iowa saw a 2.7% increase in construction sector employment.
The upward trend in construction jobs comes as Iowa’s unemployment rate is trending downward. The state’s jobless rate declined from a peak of 6.6% in the summer of 2009 to a low range of 2.5-2.6% from mid-2018 to early spring 2020, before shooting to a pandemic high of 10.9% in April 2020. Post-pandemic, the rate fell to 2.3% in April 2022 and stood at 2.9% in February 2023.
Ms. Susong said Cardinal’s workforce of 50 people is smaller than it’s been in the past. “We’d like to be bigger. People who retire and the pace at which people are coming into the workforce is not the same. People who are coming into construction are coming without the skill set.”
“Workforce is the predominant issue for us,” she said. “We’re trying to be creative in how we approach that issue.” Cardinal partners with local high schools to provide programming and last summer put its own carpentry apprenticeship program in place for non-college-bound students who want to get into a craft. The program includes on-the-job training and facilitated online training.
Women and minorities also represent potential construction talent, Ms. Susong said, noting she is often the only woman in the room at many construction meetings. “We need to do a better job to encourage women to get into the workforce. Conversations need to start earlier. A lot of girls even by the time they’re in middle school don’t see a place in construction for them.”
To encourage people from minority groups to seek construction careers, she advocates efforts to “make our industry feel more inclusive to encourage participation from different people.”
Mr. Espeset sees similar workforce challenges. “In the decade before, we knew we were going to retire a lot of seasoned people, and we weren’t going to replace them with the same numbers or skill sets.”
Along with changing demographics in the workforce, the industry is facing more complexity in technology, building codes, material systems, contracting methodologies, insurances and legal issues. “Things have gotten harder and the industry is less well suited to deliver gracefully than in the last 25 years… It’s a lot for owners to consider. I’d love to build more capacity but I’m not confident I can find the labor.”