2016 Construction Outlook: Ron Barrett

Ron Barrett is monitoring the Queen City’s student housing boom, which could slow in the coming year.

2016 Projection Materials prices will remain flat and the region will continue its struggle to secure specialty tradesmen.

SBJ: The annual local construction bidding forecast was down 13 percent for 2016. Is that an accurate picture?
Ron Barrett: I don’t see the indicators pointing at additional inventory for new construction projects. I do see them getting larger in size – larger meaning in the $5 million to $10 million range versus the $1 million to $2 million range. But I’m seeing a smaller inventory of projects to bid.

SBJ: National forecasts paint a different picture, predicting a 6 percent increase in construction starts. Is this just a local problem?
Barrett: Let me be more specific. Between ’13, ’14 and ’15, the rise in individual projects was immense. We had an all-time growth challenge in front of us. In talking to some of my peers, or competitors, if you will, they were experiencing the same things. It was a scramble to find enough people to run all those projects. I would say Springfield, regionally, is in more of a traditional growth pattern, versus a boom. Six percent from D.C. may not be off track depending on where communities are. When you’re talking about Las Vegas, Phoenix, L.A., New York, Chicago – those are all coming from behind. Springfield has always been kind of steady. We had a recession, but it wasn’t a Great Recession in ’08, ’09 and ’10.

SBJ: Was 2015 a big year for Build LLC?
Barrett: It was a huge year. It was an all-time year. So much so that we were trying to control growth and had growing pangs. Now, we are over the growth, and ready to settle into a normal construction stride with good people in good spots.

We are excited about 2016, but we kind of have a 2015 hangover, if you will, from all the growth. In 2013, we had $19 million [in revenue]. In 2014, we had about $33 million. In 2015, we’ll have in place $55 million. We are hoping to get back into that $20 million to $25 million range. It’s a better fit for us being more of a boutique contractor.

SBJ: Local student-housing development has been prominent in recent years, with about $140 million in projects since 2009. Is the market built out or is there room for more?
Barrett: I think you’re going to see a lot of the smaller student-housing developers pause to see what happens with Aspen [Springfield]. Aspen is a huge project and is going to soak up a lot of the inventory for students, if you will.

SBJ: The U.S. Bureau of Labor Statistics projects strong construction hiring in the next decade, with 1.2 percent compounded annual growth in workers. Will that play out locally?
Barrett: The term strong is so subjective, but do I think it will follow the growth of the industry? I think it will.

I’m starting to see employee cycles – some of the folks who worked with other contractors or in specialty [trades] have run out of work or are looking to get hired by contractors like myself or Larry Snyder Co. or Morelock-Ross Builders.  But as far as new names and faces to the market, I haven’t seen a plethora of resumes and interest, but we’re not actively pursuing truckloads of work either.

From our perspective, because we are more managers than self-performers, we’ll have no problem. But I’ll tell you, we are seeing a dire shortage of labor in certain trades – the masonry trade, the carpentry trade. It’s hard to find good subcontractors in a handful of those scopes, that’s for sure.

SBJ: Interest rate hikes are expected in 2016. Do you have any concern about that impacting the ability to borrow and build this year?
Barrett: No. not for ’16. Our interest rates have been so low for so long, we’re kind of still in that euphoric state where money is still available and easy to get. If it is moving up a quarter point or half point, I don’t think it would impact construction starts in 2016. I just don’t.

I’m more interested in what will happen with the presidential race to see what we could get as far as tax breaks and so forth. That’s what I think small businesses will be focused on. That is probably more of a 2017 thing, but ’16 is when we’ll make our decision on who the next president will be.

SBJ: Do you think current low oil prices will help keep construction material costs down in 2016?
Barrett: I don’t think it’s going to hurt. Even though oil prices dropped dramatically in the last two years, we didn’t see a massive drop in prices on roofing products, for example, which are petroleum-based.

Converse to that, we didn’t see any increases either. So, the challenges we’ve had are more based on labor than products. Even with metals – copper, which typically has an uptick in January – there have been no signs [of an increase] with copper or lumber. We haven’t had any massive hurricanes, which drive up those lumber prices. So, we’ve been fortunate to be able to avoid those traditional increases we see annually. In 2016, I see it being flat for material prices across the board.