Construction industry positives and negatives
The Business Journal recently convened a gathering of construction industry leaders for a roundtable discussion at Salt Lake Community College. The following text was edited for clarity and length.
Participants were asked about obstacles they expect over the next 12 to 18 months. A whiteboard list of their comments included labor, interest rates, material delays, lack of power, general uncertainty, the permit process (zoning), Buy America, bad actors and inflation.
Bryan Scott: I assume labor is, appropriately, the first one out there and the largest one. Let’s start there. Lance, talk about what you’re seeing on the education level.
Lance Eastman: On the education side, in our electrical program, we’ve got about 475 electrical apprentices. We’re graduating around 100 a year. On a daily basis, we hear industry saying they need more, and we’re actually expanding our program and hopefully able to get more plumbing. We’re probably in the 350 range. I don’t know if the plumbing has as much appeal as the electrical, but we are promoting that as well. And then our HVAC program, we don’t see nearly as many students just because of the licensure requirements. There’s no DOPL regulations to get into the HVAC industry like there is with electrical and plumbing.
We have had construction programs in the past, and what we found is that there is such a demand for a workforce that companies will just take whoever. Whether they’re an individual with a certificate or a person coming off the street, most companies will hire them. We actually don’t have a construction program any longer. … I think it’s a benefit that the students be able to go through, but the problem was, they were able to get into the workforce so quickly.
So, workforce is a big thing that we focus on. … But what will happen is we’ll see these pockets of demand, and then to have an educational program that can sustain that, it takes quite a bit to put it up, and then industry has to be able to pull it from us. So, we’ve kind of stuck with the big ones, which are electrical, plumbing and HVAC.
We try to meet with industry and get the feedback that the industry says. … I know the educational institutions are wanting to serve you. … Our electrical and plumbing apprentice is a four-year program. The students are working as soon as they start the program. We do offer high school students [the opportunity]. They can complete the first year at our school and then get right into industry after they’re out of high school. We’re trying to create as much workforce for the industry as possible, but it’s a tricky thing. … The mind shift is changing a little bit. We need the construction work to boost the economy or to keep things rolling.
Scott: Braden, you guys obviously have skilled people. Is it short in both (skilled and unskilled)? Do you see it worse in one or the other?
Braden Moore: We’re a general contractor, right? We self-perform concrete. So typically, our PMs, our superintendents, are very skilled, right? Very skilled individuals. And technology has helped us a lot, to your point of, we have a zero-in program that it used to be that you could do if you wanted to. Now it’s mandatory. … It’s about a year-long course, a little over a year course, called “Zero-In for Superintendents.” We’re helping get those skilled, even more skilled, as fast as possible, and try to help their career of “How fast do you want to grow?” and “Where do you want to be?”
The pitch point for us is that. But, because we’re a general contractor, it’s really all of our sub-partners who are having a very tough time getting labor. And it’s a little more complex than just labor itself. If you go to electricians … they’re very highly skilled; however, there’s not enough. If you get people into the field quickly and they’re not skilled, your productivity goes down in a huge way, which makes cost go up and now it’s part of the equation of why these owners can’t build projects.
It’s a very complex issue. Ten years ago, we sat on the board together at ABC. We’ve been talking about it my whole career. And there are some great companies — Cache Valley is one of those and Hunt Electric — that have programs within their companies to help train. But we have to do more as an industry because it’s continued to be a problem. It’s gotten worse in the last 10 years, not better.
Bryan Webb: As Braden mentioned, we’ve got skilled workers. There is a real shortage, nationally, of journeymen. There are more journeymen leaving the industry than there are coming in, and that creates a big void in the projects that we pursue and what we’re chasing. We have a good list of unskilled that want to come work for us, but it just takes a lot of time to go through the process to become a journeyman with what that looks like. It’s a challenge trying to replace those that are leaving the industry right now, and, as Braden mentioned, we do a lot to try to encourage and get these people through the apprenticeship.
Eastman: We really work on retention, but we do run into students that will either transfer to another institution or they’ll move. But for our apprenticeship programs, we have a pretty high retention rate.
Webb: We’re bringing a lot of people through apprenticeships right now, but they don’t know what they don’t know. You can’t ask them to go into the panel and deal with all the complexities, unless you’ve been there and done that. There’s just not as many people that have that ability.
Scott: Is your turnover high? Is everybody’s turnover high for employees?
Webb: They’re retired. It’s an older workforce.
Moore: This could be completely made up, but of electricians, I think the master electricians have an average age of like 58, or something like that.
Webb: Once you become a journeyman, [retention] is pretty good. Not many people leave the industry. In fact, as a journeyman electrician, you can do very well financially. There’s a lot of demand for journeymen right now. … You can make six figures.
Taylor Larsen: Have none of those UAC or UAEC pathways and programs, high school to college, bridge programs, helped at all?
Moore: For sure.
Scott: What impacts is it having on your business, just the lack of labor? Are you turning jobs away?
Rick Higgins: We don’t aggressively go after real big jobs because we can’t manage them. And we’re fairly busy. But this year has been kind of an up-and-down year already. I don’t know if it’s the election coming up or what the uncertainty is. But there have been a couple of real big jobs that would’ve been nice jobs, but there’s no way we could hire for that.
Moore: I think the biggest impact we’re seeing is jobs we’re not able to afford. It’s not just labor and the cost of capital, but it’s this algorithm that’s not great for our industry right now. Labor is a huge component. Some of these jobs that we can’t get the labor — say, it’s four or five electric bids or mechanical bids or fencing bids, whatever it is — that cost has gone up because everyone else in the room’s cost of labor has gone up, or if we’re going to get this job, we’re going to have to man up. We have a huge percentage of projects that we price for a year and they don’t move forward because the developer or owner can’t make that pencil, and labor has definitely had an impact on that.
Scott: All right, let’s talk about interest rates.
Taylor Scalley: We’ll spin our wheels on precon, precon, precon. Six months, seven months, eight months down the road, and just nothing happens. Bottom line, it doesn’t fit in developers’ performance. It’s just tough. … Going through that process a bunch of times … our trade partners [are] getting frustrated with us.
Scott: People are bringing projects to you. You’re going through this precon stage over and over again, and then it’s just not being executed because interest rates are where they’re at?
Mike Sowby: I’m feeling a little bit of a shift where developers are starting to figure out how to make things work in this new environment. I’m starting to see more good projects take off now than over the last 12 months. That’s just from my vantage point. I’d like to know if other people are seeing that. Seems like there was a lull as interest rates rose, and now developers and owners are figuring out how to work in that environment.
Scalley: You can only sit on the sideline for so long, and people have to have deals.
Sowby: It feels like there’s more activity now than there has been for years — good activity, not just spinning the wheels.
Scott: I assume some of that’s probably the interest rate, because maybe a level of acceptance, like, it is where it is and we got to figure it out because I don’t think anything’s changed in labor over that time period.
Harold Saunders: Well, I also think too that some of the developers that we’ve been working with out of state, is you circle back to like last year, some of the big projects that you see coming out now, you hear people go, “God, how can that project come out of the ground with interest rates where they are?” But those things were allocated and planned for back in ’23, right? So, they’re just now coming to fruition, but we’re starting to see less of those projects because, as we’ve all stated, those developers or private equity firms had those big projects allocated last year. They spend their money, now you’re circling around, looking at stuff, late ’24 and ’25, and they’re putting the brakes on. They don’t want to go out and borrow any money, either, even though they may have some sitting there. … I think there’s some uncertainty floating out there in the air: Are you going to go spend $100 million for a project, or are you going to sit by the sidelines a little bit? If you got that kind of money, you can play that waiting game a little bit.
Moore: I think we’re closer to the end of this cycle than we are to the front of it. I think everyone was hoping that it depends on the global interest rates to solve problems. And, honestly, it’s mostly a multifamily/warehouse/distribution. If you haven’t built this, or you’re a data center right now or your life sciences, that capital stacks differently; you’re not taking on as much debt and you have capital within your company to pay for some of those improvements. So really, we’re talking about a large percentage is that multifamily/warehouse/distribution type of work, where they rely heavily on that debt-to-equity ratio, and what that does, too.
I think everyone was hoping that the Fed would lower the rates a little bit more but going into an election cycle, every time you look at the history of an election cycle, it changes dramatically right after. I think 2025 — maybe this is my optimism — I think 2025 is going to be much different than 2024 was.
Scott: Do you think that will be because interest rates come down or because the algorithm changes?
Higgins: It’s a matter of perspective. My first house, I purchased in 1978 and I got a 10-and-a-quarter interest rate. I thought we’d died and gone to heaven. I’ve been watching all this conversation about interest rates now, and I’m wondering what everybody is complaining about. I think it’s a perspective kind of thing. We’re looking at what it has been in the last five years, and it looks terrible compared to that. But given the past, it’s not that bad.
Moore: I think it’s either going to be that interest rates go down with tweaks and things, or people are going figure it out and say this is our new normal.
Scott: Do you think once either of those happen, will it take a big ramp-up period? Is it going to take two years to get those projects, or are those projects just being circulated and then they’ll become shovel-ready once it’s finance-ready?
Moore: This is just my opinion. There are so many projects that are design- and permit-ready. If the interest rates drop, then go. But if they don’t, I think there are going to be developers to figure it out. But there’s a ton of projects, whether it’s multifamily or warehouse distribution. … There’s a ton of projects that have been designed for years and are permit-ready, ready to go.
David Dunn: It’s weird, because I’m probably a leading indicator, right, because I’m on the design side rather than the construction side. It’s been interesting to hear perspective, because I actually feel like developers and in the private sector, they’re very calculated right now. They’re waiting for stabilization of rates. Really, it’s the velocity of the change that’s caught people off guard, going from near nothing to 5 percent, so it’s a shock to the system. There are a lot of projects that are designed that I think are shovel-ready, ready to rock and roll, once things kind of either stabilize or pull back.
But I sense on the labor side of things, if we’re a leading indicator, I do think that things have kind of slowed a little bit on the design side which may fix a labor problem in a way that we don’t want it to. But I think the Fed has seen that inflation is a little peskier and stickier than they had hoped for. I know that they want to lower rates, but we keep getting pretty hot inflation. … We did get one recently that was kind of encouraging. The labor market is still really, really strong. I mean, there’s a lot of things that haven’t happened to help them lower the rates. I think it’s coming, though. I sense that we’re on that precipice. The Fed uses all these lagging indicators to make decisions in the future, and they always stay a little bit longer than they should at the party. I think that it’s possible we might have a little bit of a bumpy landing.
But, for us, labor is actually not a huge issue right now. The demand was pulled so far forward on some of these market sectors that we were just going nuts. And some of that labor is tricky because people were able to enter the industry without master’s degrees. You guys were having to hire people that maybe weren’t quite as skilled as you would have liked, just to get the projects completed. …
I think if we settle down a little, we have a lot that’s ready to rock and roll and we’re waiting for things to at least stabilize and settle down. Exciting times. It’s weird to see how fast things shift and what causes the shifts. … Now what I’m seeing is hyper-fixation on costs because the cost of capital is so high. Inflation is running crazy. Now, there’s this super-narrow focus on cost, and these deals are just not making sense like they used to. We’ve gone from schedule and time to cost. And you know, the quality piece is another thing that is something that I’m interested to see how that plays out, because, thankfully, we live in a pretty good state as far as good relationships, not a lot of legal stuff, but I do think the quality of the work on the design and construction side is maybe taking a step back because of how busy everybody is and how stretched thin people are. … It’s something that’s on my radar because I think maybe people got too far extended for us on the design side. Most of our deals are either in construction or kind of waiting for a design start. I was writing a ton of proposals just a couple of months ago. But right now, things are kind of slowing down, especially multifamily and warehouse. That area is slowing down. I mean, on the industrial front, manufacturing, build-to-suit, data center, all that stuff is running sweet. … It’s fun to listen to what you guys have to say, because you’re on a different side of that spectrum than I am.
Sowby: I agree with a lot of what you’ve said, for a subcontractor 99 percent of the time. And looking back 12 months, we were in a hire-warm-body mentality still, and I think that has trailed off now. We’re getting a lot more selective, but I look at the hiring mentality a year ago, [it] was that, and the quality of the work a year ago wasn’t good. We had a lot of costs with redo. It costs a lot of time on projects, a lot of money. But I feel like this year that dust is kind of settled and we’re in a little better spot, labor-wise. It’s still not where it needs to be, but a better spot. But I do see a little more activity with developers figuring things out in the current interest rate environment. I’m optimistic that maybe, like you say, we’re right at the point where things are going to improve. It’s hard to tell.
Dunn: I am, too. I’m getting phone calls like “OK, we’re ready to roll again.” They’re still rumblings and discussions that an interest rate hike could be on the table, right? I mean, we were projected for the four cuts this year, and now it’s like, “Oh, shoot, maybe we’ll have a hike.” Thankfully, the CPI data was good, and things are trending in the right direction. I do think that we’ll either stabilize or lower here soon. I think that will help. I’m getting some developers reach out and say, “OK, we’re ready. We’re ready to go again.” … I’m encouraged, I share your optimism, but it has been a weird time. I’m getting good candidates, solid candidates, coming across the wire, and I’m in a position where I’m pretty selective on who I’m hiring right now. I’m not in warm-body mode in my office. It’s like, do we have a good spot for this really good candidate? And if not, we’re passing. That is a reflection of the workload dynamic for us as well.
Sowby: I feel like things are leveled out a little bit on the construction side. So that’s what we’re having.
Moore: I would agree that part of it is a positive, right? It is positive that we have some time to get labor and solve the labor issue a little bit. … We’re focusing a ton on training right now, making sure that we have the best-quality people that we can and that they have a career ahead of them. …
Scott: Does everybody feel like, whether it’s your company or the companies you work with, is everybody just stretched thin? If you feel it, do you see it?
Saunders: I think yes and no. The yes would be you get trade partners on certain projects. You’re coming out of the ground, and whether it’s your structural or your envelope, you get those specific trade partners, where you hear our superintendents or project managers go, “Gosh, yesterday they had eight guys, and then today, for the next three days, they only had three guys,” because trade partners now are moving their manpower around just to make every project viable.
And I’ve often told trade partners we really would like you to look at this, but if you can’t perform, do us all a favor and just don’t pursue it. We’re the same way. I’ve seen lots of great projects, and, you look at your workload and you look at your futures, and we really don’t have the right team to put on that project, so we’re going to let it slide. I think sometimes we talk about labor shortages, one of our trade partners, actually it’s self-inflicted. Because they look at all these good projects and they want to get their claws in, and then they do, and then all it does is ends up hurting them and the firms that they’re working for.
Sowby: Where are all the laborers? I have a theory that our economy has expanded in such a way that there are work opportunities in places that there never was before, and that’s sucking a lot of the trade workers that would have ended up in the trades 20, 30, 40, 50 years ago. But everybody is having technology jobs that didn’t exist before, and it’s really squeezing the traditional workforce. That’s my theory.
Moore: It’s a great theory. It’s our theory in our industry.
Sowby: But everybody in every industry is feeling it, because there are so many new industries sucking that labor force out. Everybody’s feeling it.
Dunn: Yeah, it’s like the technology industry is actually the one that suffers the most from these interest rate hikes. … Obviously, some of the technology companies are reducing their workforce pretty aggressively, so I don’t know. That is the theory. Maybe there’s a pendulum that can swing back a teeny bit. Because in a low-rate environment, companies that aren’t making money, there’s multiple expansion and just like “that was awesome.” And then as rates started ticking up we started seeing these technology companies actually caring about profitability and pulling back a little bit, so maybe it’ll right-size itself a little bit.
Sowby: Our construction methods and just the products that are produced now are so much more complex than in the past, and I think that is also contributing. It takes more labor to do projects now because they’re so much more complex, even though we have a lot of technology and a lot of equipment to assist. It takes a lot of people. We look for jobs that meet one of two criteria. Equipment-intensive, to minimize labor, or material-intensive. Never do we look for something that’s labor-intensive. If it is, we have to walk away, because how do you stop it? Building a fence, you can’t do that with equipment. You’ve got to have labor. That’s been our strategy, to minimize the impact of the labor shortages for stuff that’s equipment-intensive or material-intensive, but not labor-intensive.
Moore: I would echo that. One of the things that we’re really, really focused on, more so since the slowdown than ever, is the technology part of it. People don’t understand until they’re in our industry how much technology we use. It’s incredible how much technology we have been using and how fast it’s progressing. I mean, we can go do a model in two days of an existing building now with a LiDAR scan. Pretty incredible technology we have. But with that, you have to have great management of a project.
I think our trade partners would echo what I say, but you have a great managed project, your PM is a go-getter, he’s solving problems immediately. Your superintendent is a very, very high communicator. They can communicate with the trade partners to make sure that the project is being scheduled and communicated effectively. That’s what solves a later problem more than anything, is to manage your project really, really, really high-quality and high-efficiency. I think those two things, technology and best-of-class project management, is how we solve it a little bit more than we have.
Jim McClintic: We’re going through the same thing as a jurisdiction, keeping people on and people retiring, but then training new people to come in. And the last thing our city wants to do is to be in the way of the building. You’re dealing with a lot of inexperienced people in the field now. The working relationship with the jurisdiction is really important to keep the jobs moving. It’s not them finding something four days after it’s done; it’s working with you to build a project and schedule things. What we’ve done on multifamily, some of those, we’re there twice a day and more, and you have an assigned inspector that’s over that job. Some of the jurisdictions, you’d have five different people showing up with five different things and it slows you down.
I think part of that is being able to train our manpower and to be part of that team to build. We’ve always strived for that. The whole process is building. You want oversight. You want oversight especially on structural items and things like that. It’s really important to have the experience on that. That’s the challenge that I’m hearing from different builders in different cities, is the inexperience. It’s hard to keep people in, and you’re right that nobody wants to come to work every day anymore. A three-day [a week] job is what they want now that makes it difficult to try to perform and function as a builder and as a business and as a city.
Scott: Maybe we’ll use that to jump into things like permit processing and zoning.
McClintic: Well, what we see most times that delays the projects is a good team to start the project, to start working with planning. You need that team in place. We see a huge range of those who are organized. An example would be when Scheels came in and built that. That architect was in our office a couple times a week, making sure we had all the stuff we needed, making sure the contractor had the information he needed, and things like that. And through the design process, he was connected all the way. So, when it’s handed over to these guys [in the room], it’s ready to go. And that doesn’t always happen, because you end up with some projects that are design-build, and you’re going with the flow and stuff.
The communication with the planning and building are really important. Some cities, you’ll find they’re really open to the process and they’ll work as a team. And there’s other cities where it’s just totally impossible to work through. As far as how to make it better, I think it’s just the communications part of it and having a design team that will come in. We have a development meeting every Monday and somebody can come in with a proposed project and they get all the department heads there in that meeting, where they can get a head-start on things and concerns in the design process before they even start the plan. If you have to go ahead and design everything and then try to go in, it’s costly. It takes a lot of time.
The planning part will take time for cities and stuff. That’s probably the biggest delay. The building plan part of it is a lot less time. I think the key to it is getting to the planning process first, and knowing what you’re up against when you do your project. There’s a huge difference, whether you’re out here or you’re downtown, on how you’re able to communicate and able to have somebody to talk to. It’s either distant or you’re connected. So that’s the biggest challenge that I see in today’s world, where you can communicate from anywhere and send plans everywhere, you still hear too many instances where people just won’t call you back. That’s frustrating. …
Moore: I would just say one of the best states in the United States, and we operate in the whole western United States and Minnesota. I’m telling you, every city here is better than most places elsewhere on the permitting and teaming. Our superintendents know it’s part of their training program that the city is a partner, and we need to get with them as soon as possible, meaning, usually in design. Let’s be partners with the city, because we have to make that successful for everyone. If we don’t have that partnership and that communication, then you will have failure on efficiency.
We can’t tell you two weeks in advance when all our inspections are going to be, then that puts a lot of pressure on the city. It’s just unfair. You can’t sit there and complain about how the city’s not showing up. Our team’s first question is, “Well, have you communicated? Did you sit down with them originally? Show the schedule? Show the plan?” They want to be a team partner. Sandy City has been awesome to work with and all the projects done in Sandy because of that partnership. We understand, not only does it help us with efficiency, but also quality.
I’d say in Utah, we’re pretty lucky to have great cities that want to participate. If you stop doing that, our insurance rates are already way too high. … But I would say overall for us, if you approach the city with complete communication, and you’re answering the phone calls and you’re communicating … then you have a pretty good state to build with.
Saunders: I’m just going to touch on what was said as it goes into the upfront planning. Whatever the delivery method of it is, there’s still a level of involvement in an early front end that needs to be done. And what we’re seeing is we’ve got a couple of projects that we just came out of the ground with that we were awarded back in December. As a contractor, you get awarded that job while the drawings are in plan review and it goes to its first plan review, and it comes back and they’ve got 185 comments they’ve got to address. Well, is that because you didn’t take enough time in the planning process? Or is your inspector a little more stringent than this city’s inspector? I just think, personally, that there needs to be a little bit more time involved in that planning process. …
I think you need to look at all options during the design phase [and other phases] so when it comes time to get the permit, the city is ready to go and the whole team is ready to go, you’re not playing the waiting game, waiting for your permit, because that just leads to a whole new plethora of problems. You get awarded the project, you’re not getting their permit for two to three months down the road, all of a sudden, you’ve got your trade partners going, “Hey, I can’t hold my prices anymore” or “Copper just went up,” or whatever it is just went up. Now, as a contractor, we’re going back to our clients or the cities, going, “Hey, we have a problem.” And they look at us as a contractor, and go, “Well, why is that my problem? It’s your problem. You’re the general contractor.” Well, the problem started very early on, before you even brought your contractor on board.
Dunn: I’m a real firm believer that there’s always time to do the right thing and when you do things out of sequence, you get into trouble. But that’s kind of the pressure of trying to figure out if these deals pencil. Sometimes you guys are having to put GMPs or really hard numbers in complete documents. … It happens all the time. Thankfully, I’m noticing that’s slowing down on our end, too, that there’s a little bit more time to be calculated. But there’s a couple of things that were at play.
Code cycles are interesting. We recently had a pretty significant change in especially mid-rise concrete. There was a little bit of a rush to try to get stuff into the new code, which is kind of funny. … I’m on the downstream side of that planning side because I was a consultant to the architect, generally the one responsible for the planning. Boy, I sure like it when they do that first. When they don’t, and I’m designing a project that hasn’t been fully approved, and then it comes back with all the changes based on what the city is requiring. Who do I send that bill to? I can’t, I just eat that. So, I have to redo my work to try to make it compliant with what the city needs. That’s a tough one, so I really do appreciate the architects.
When that process is done right, there’s full communication with the city, there’s full buy-off and blessing on what the plan is, and we get to do our design and complete it, so you guys can put accurate, hard numbers to it, [it’s] a dream scenario. It doesn’t always work that way, though. In fact, it very rarely works that way. But we’re all pretty good at what we do, and we can figure it out. But, honestly, trying to figure out if deals pencil sometimes we’re accelerating that. And then downstream, no one seems to remember the Herculean efforts that were required. So, we pull a rabbit out of the hat with a design that is, like, “Wow, I can’t believe you did it that fast.” But the first change order, it’s like no one remembers. “Why’d you mess up?” Because it takes nine months to have a baby, and you gave us six months. You’re pulling things out before it’s ready.
Participants were asked about opportunities they expect over the next 12 to 18 months. A whiteboard list of their comments included the state of Utah (to do business), population growth, different markets/verticals, strong local development, increased external development/money, master-planned development, the Point of the Mountain, sports, the quality of partners, surrounding states, government support, data centers and Utah’s physical location as “Crossroads of the West.”
Higgins: I think the work ethic in Utah is pretty spectacular, and even though we’re having difficulty attracting labor, we’ve got some here with a good work ethic, like we have had in the past and we do now. I think that’s very favorable for the Utah economy. Sometimes you ring your hands and you think, “Well, these people don’t have any work ethic.” But I think generally they do.
Webb: Well, we’re very bullish on the state of Utah and what’s happening here. And we talked about just a few of those developments. Those are generational projects that are going to take place here in Utah over the next several decades. That’s impressive, and I go back a long ways, but I remember when the Utah data center was built here in 2008, that was a really big deal for the state. And right after that, the church introduced City Creek, and the airport came … and the prison.
It just seems there have been these mega jobs that have taken place here in Utah. It’s really transformed how we’ve done construction. And now there’s a handful of these mega jobs that are billion dollars-plus. I remember when a $50 million or $60 million job was enormous, and it’s not even that big a deal anymore. And that’s very fortunate that we’ve been able to be part of that revolution, and see all that work coming, and there’s a lot of good stuff that’s coming still. …
Scalley: It’s is a great state to do business, but part of the reason is because we have so many different verticals that allows for these different projects. I mean, you talked about the sports industry, data centers, inland port, transportation, distribution, [the] housing shortage. I mean, there’s so many options, so it’s not like one thing shuts down or stifles. We’re fortunate.
Dunn: It’s a great point. There’s a lot of diversity in the economy here. It’s not tethered to any one area. We have technology hubs. We have distribution hubs. We have so many different entities here locally. I feel a bit of cognitive dissonance. I love to get in the mountains and get lost and be by myself, and I love the fact that Utah is a little bit of a secret, but the secret’s out. I mean, as we start drawing more major-league sports teams, that’s kind of an indicator of where we are nationally as a market. We just get so much attention turning towards how awesome Utah is, and that’s going to provide a lot of opportunity for all of us, for sure. One thing we didn’t mention with the sports, obviously, you can talk about the NHL, MLB, but the Olympics is a huge one, too. We do a lot of resort development. All of that is going to probably ratchet up as well as we gear up for another Olympics; [it] probably seems like an inevitability at this point.
Scalley: Redevelopment, too. Infrastructure. …
Dunn: Well, credit to the state for putting in the work to provide a supportive infrastructure. I mean, the airport opened so many doors, the relocation of the prison, just everything.
Sowby: Couple all of those things with the population growth that’s anticipated or projected, and it’s a really nice mixture, really nice concoction of stuff. I see the trajectory of construction in the state continuing. We’re going to have a few little bumps in the road, but that trajectory is not going to change. There are too many things that are driving that trajectory for any one thing to throw it off, even a few things to throw it off. We’ll see some bumps, but just pay attention to the overall trajectory.
Dunn: Well, I work a lot with national architects from all over and they’re like, “Our Utah work is doing pretty well. Everything else is slow.” So even the headwinds we talked about aren’t enough to really slow us down. … That’s trying to slow things down and we still muscle through.
Moore: Diversity is huge. I mean, think back to the last five years, 90 percent of our work was either warehouse, distribution. …
Dunn: Or I could I say office. That was my bread and butter five years ago, now it’s gonzo.
Moore: And that’s gone now, but we’re all still really busy because we were able to, OK, well, we’ll do some more city/county work. … some more data centers that we didn’t have before, and sporting events. To your point, the diversity of what we’re able to build in Utah is huge. Because in other states, if you’re a multifamily builder, you’re in a tough spot right now.
Dunn: But that got us through when Class A died, you know. Like, it’s amazing with the cyclicality of things … there’s enough going on.
Scott: Do you see one of those areas waning a little bit, and one of them coming up right now? Do you see any change happening right now?
Dunn: I love Class A office space. I believe that Class A will come back eventually. I think that the way that we do it will change a little bit, but I think the efficiency of being in an office will start to make sense again. When you see tech kind of push that pendulum so far out that “nobody will ever come to work ever again,” and then, like, “Just kidding. We should have some people in the office.” I think it was Elon Musk, the polarizing figure, that said that you can come back to work or pretend to work somewhere else.
I think it’ll come back. But Class A’s dead, though, to answer your question. It’s not speculative. We’re not doing much build-to-suit. Government contractors, medical offices, things where you have to be in the office, are doing OK. Retail is doing surprisingly well. You have a drive-through, you’re ready to rock and roll. So retail is doing OK, and multifamily was really, really strong. Seems to be kind of slowing a bit, but I think it’ll get there again once things stabilize. Spec warehouse, not a lot of that going on.
Moore: Just too much supply and not enough demand right now.
Dunn: Production, though, is going well. Cold storage, kind of that onshoring effect of getting stuff close to where it needs to be. There’s a lot of that happening. Data centers [are] good.
Sowby: There’s a lot of distribution. So not the spec warehouse, but stuff related to inland ports, there’s a lot of that that’s still happening. It’s the same type of work as distribution and warehouse.
Saunders: To Rick’s point about opportunity within the Intermountain West, our company will be 100 years old next year in March. And we’ve pretty much over the last decade been a Wasatch Front builder and in the last six months I’ve been up in Idaho, Montana and Wyoming at the request of clients. We’ve never really looked at that sector before because we’ve been so busy here. Now when you get someone calling you saying, “Hey, we’re not getting much interest in this project up in Montana; would you come up and look at it?” you say, “Yeah, I’ll be there tomorrow.”
But if your niche is here and you’re staying busy here, it doesn’t necessarily mean you need to go there but there is opportunity real close by. … There’s still a lot of work out there. You can pretty much pick and choose what you want to look at. We’re liking the opportunity we see within the Intermountain [area] outside of Utah.
Moore: I echo that. I mean, leisure, you hit it a little bit. Leisure, hotel, leisure living, we call it, right? The Wasatch Back probably should be included in some of those major projects. There are some humongous projects on the Wasatch Back. That’s another way to diversify our local economy here. But you have Wasatch Peaks, you have what’s going on with the Mayflower. There’s a tremendous amount of high-end hotel and high-end resort work we have in our state right now as well.
Scott: Any closing remarks?
Scalley: I think the opportunities far outweigh the obstacles. To your point earlier, where you said, I think we’re on the tail end of the depressing side of things, it’s a good place to be.
Higgins: I think we’re very fortunate in the Utah construction industry, because I think it’s more of a collaborative effort for the most part, certainly for everybody in this room it’s that way, and it sure makes a job easier if it’s not contentious. There’s nobody trying to beat up on anyone else. It’s a collaboration from the very beginning, and I think there’s a lot of that in Utah. I don’t know if it was just the way of life in Utah, but we’re very fortunate to have that.
Dunn: Amen. I’ve worked with outside groups and sometimes it’s a little shocking to the system how they operate. …
McClintic: As the state grows, too, I think the cities need to grow with those who are coming into the state. They need to learn how to grow with everything else. That’s important, because they can’t become stagnant during the whole process, either. It’s important for everybody, whether it’s the services you provide to a city or anything else that comes along with it. They need to be able to grow. And the technology needs to advance also. We lagged behind under the last administration. We were working with the builders who were miles ahead of us with everything and they still are on that. They need to up their game, too. I think it’s important for everybody that’s involved with it, to continue to grow with their own city.
Redevelopment is going to be big for us, I think, with the purchase of [The Shops at South Town] mall and things like that, but it was bound to happen with the way things were going financially. I think that the whole area will be a catalyst and drive some things that have been sitting for a while. These are good things. When Larry Miller built all this stuff here, we had the auto mall that was brand-new and had every dealer down there. It became too small for what dealers want to have on their lot. This whole [SLCC] campus that they built was all at the same time, and his other buildings and theaters and things like that. So now this is like the second wind for Sandy City to see these things come in. It just takes the right players to do that. It’s exciting times, stressful sometimes, but exciting to see some things in the city so that it’s growing and we need to modernize some areas, definitely.
John Rogers, Business Journal editor: Let me ask one quick question. Would someone like to comment quickly on AI in your industry? AI is never going to pour concrete or tie steel or erect fence, but if you read about it, you just tell the bot that you need a 30,000-square-foot medical plaza and come back in 10 minutes and it’ll be ready. What’s happening with AI for each of you individually?
Saunders: I think what we’re seeing is, you know, when 3D technology came out, and I think Braden mentioned LiDAR technology. Now you’re already into 4D modeling now. That quickly. Had it been happening? Yes, but it really wasn’t brought to the forefront ’til, all of a sudden, you’re reading now “AI, AI, AI” and now you’re looking at it in our industry. It’s like, wow, this is kind of been going on but now you really notice it. And I think it’s only going to progress more in moving forward. Was there 4D technology a year ago? Maybe a fringe, and now it’s widely used.
Dunn: It excites me, because it allows me to be creative and cut back on the monotonous tedium, the boring stuff. I can automate some of the things that whenever I’m doing stuff that doesn’t feel like I’m being creative or using my brain, exercise my brain in a way that is that I’ve been trained to do, that frustrates me. Tedious work bothers me. So, when I’m able to use some automation or use some way of AI to enhance what I’m doing, I like it.
There are some threats, right? Like, it could impact the way that design is done. But ultimately, I don’t think I’ll be replaced by AI, but I think I may be replaced by others that use AI more effectively. Somehow, I have to figure out how to use it as the tool. I like that Microsoft calls it a co-pilot because you still have to fly the plane, right? I like that analogy, that it can probably enhance and makes some things better. And anything that can help us with efficiencies obviously helps some of the labor issues that we talked about. I know it scares a lot of people. Maybe I should be more scared than I am, but I do embrace technology to make us better at what we do, so I think it’s kind of exciting.
Moore: We always say either you either have a strategy for it, or you’re going to get left behind, right? You need to know what your strategy is going to be, and it’s going to be ever-changing as more technology comes out, as AI becomes more powerful. In the construction industry, as we hit on this earlier, you can’t skip a process. There’s a process. … Can AI help get through that process? Yeah, 100 percent. We’re using it a ton right now for scheduling. How do we verify our schedule? Are we behind or ahead in our schedule? But there has to be a co-pilot to that. It will change our industry, no doubt, and it already has started doing that.
Sowby: We’re using it more on the administrative side, because, like you say, it’s never going to do the work, right? But there’s a lot of administrative functions that it’s already speeding up. For example, recognition of documents that come in from vendors, invoices … that are recognized and uploaded automatically, taking away the need for somebody to do that data entry. That’s one of the ways.