‘A lot to be grateful for’ despite cost, labor challenges in the construction industry

Last year saw record-high interest rates, inflation and continued labor and supply challenges for the construction industry nationwide. Halfway through quarter one of the new year, what are local industry leaders seeing as the biggest continued concerns and, also, points of optimism?

Ed Kurowski, Pike Company

Ed Kurowski is the executive vice president of the Pike Company, a fifth-generation construction company founded in Rochester in 1873, that specializes in construction management, design-build, facility, and general construction both locally and nationally.

He identified four major current concerns for the industry: construction costs, material availability, labor inexperience, and the potential siphoning of talent from the Rochester region to assist with large projects elsewhere in the state. With each of these challenges, though, Kurowski did see points of optimism embedded within.

Construction Costs and Materials

“Construction costs are continuing to rise in 2023,” Kurowski said. “Material costs are still increasing in the industry. The good news is we’ve seen no significant increases of these increases.”

In other words, while material costs are still going up — especially in the areas of concrete, fiber optics, wood windows, insulation products, and some roofing products — the increases are not as major as they were during the most active time of the COVID-19 pandemic.

Kurowski has seen improvements in material availability overall, but certain construction materials still have long lead times — sometimes up to 65 to 67 weeks out. Materials with the longest lead times include electrical switch gears, transformers, mechanical equipment, and some roofing materials.

Labor Concerns

Per the Associated General Contractors of America (AGC), construction employment increased in 30 states and D.C. between November 2021 and December 2022, including New York.

While that news is positive, Kurowski notes that most of the new people coming into the industry are inexperienced. At Pike, the company has amped up recruiting from college building trades programs.

Pike is particularly focused on programs at SUNY Delhi and Alfred State College. In November 2022 the company hosted about 40 students from Alfred State’s AGC Student Chapter for the day. The students went on a job site tour of the Hampton Inn that Pike is building next to the Strong Museum expansion downtown and met with a panel of site leaders.

“They got to ask questions like ‘What’s it like to get into a trade?’ ‘What can I expect pay-wise?’ Kurowski said. “They were very interested in how we tie tech to the trades — it really piqued their interest. We intend to take the success of that experience and grow it.”

Another challenge with labor is the concern that large projects in other cities around the state — like the Buffalo Bills’ new stadium and highway work in the Syracuse area — could draw talent away from Rochester.

“New York State is going to be busy in 2023,” Kurowski said. “There is a lot of work out there over the next three years, which is both a point of optimism and strain in terms of taking away labor from Rochester.”

Lee Sommerman, LeChase Construction

Despite continued challenges in the industry this year, Lee Sommerman, a senior vice president who manages the Rochester and Central New York offices of LeChase Construction Services believes “there is a lot to be grateful for.”

LeChase is a Rochester-based full-service construction management and general construction firm established in 1944 and has offices across the East Coast and down to the Carolinas. The firm is projecting a 6-8% labor and material price increase for the next twelve months, which is an improvement from the 20%-30% increase seen in the last twenty-four months.

“We are still seeing an escalation in labor and material costs, but the good news is that it’s slowing,” said Sommerman, who pointed to a continued shortage of skilled tradespeople and raising interest rates compounding costs of projects for developers as some continued concerns in the year ahead.

A point of optimism in the year ahead per Sommerman is the Rochester region itself.

“There is a lot to be excited about, especially in Rochester,” Sommerman said. “Our local colleges and universities of all sizes are interested in broadening their ways to attract new students by offering new features on campus. It’s exciting to see that growth in the higher education marketplace. There are also lots of healthcare projects across the board and healthcare entities that are continuing to invest in Rochester.”

Sommerman also points to the Architecture Billings Index (ABI) — a national economic indicator for nonresidential construction activity, with a lead time of approximately 9–12 months — as overall “pretty steady” at the close of 2022. The high point of the December 2022 ABI was that inquiries into new projects continued to grow and architectural firms nationwide were seeing strong project backlogs of 6.7 months, on average.

“Construction is a lagging indicator, but everybody’s busy and there doesn’t seem to be an end in sight,” Sommerman said.

Karl Schuler, Taylor, The Builders

Karl Schuler is the president of East Rochester-based Taylor, The Builders, a second-generation general contractor with over 35 years of experience in the design and construction of commercial, industrial, multifamily, and institutional buildings throughout New York State and across the country.

Among the concerns Schuler has about the construction industry in 2023 are high-interest rates, continued labor shortages, and municipal red tape including restrictive zoning laws in some local communities. Getting utilities can also be a challenge regardless of the size of the project.

He has found some material shortages are stabilizing and a new norm has been set in the industry in terms of an acceptance that other materials are simply going to take longer than in pre-pandemic times.

Despite these challenges, Schuler is very positive about the year — and years — ahead for the industry and Taylor, The Builders.

“The construction industry is always looking two to three years ahead,” Schuler said. “I’m optimistic. I’m optimistic because there’s demand and we can answer the demand.”

Caurie Putnam is a Rochester-area freelance writer.