Look out, developers. The construction labor shortage may be getting worse. Recent natural disasters, including the severe hurricanes in Houston and Florida and the rampant wildfires in Northern California, are going to increase demand and competition for qualified construction labor. Developers have been challenged by the construction labor and rising costs for years, and experts at RealShare Apartments are bracing for the problem to intensify. Experts—moderator Mike Rovner, president of Mike Rovner Construction; Patrick Crandall, managing director of Construction Real Estate at CapitalSource; Matt Levy, VP of Investments at the Laramar Group; Jamie Fleming, CEO & Co-Founder of Studio 216; and Kitty Wallace, EVP of Los Angeles at Colliers International—discussed the issue on the Rising Above the Competition with Redevelopment, Repositioning and Renovations panel at RealShare Apartments last week.

Fleming said that the problem is getting so bad that contractors are driving by work sites and offering to pay workers double. “Since the hurricane, people are walking off the job. That can kill your budget and timeline.” He said the solution is to vet general contractors to make sure that they have deep relationships, and, if you can, to keep moving people to new job sites to keep their work flow consistent.

The construction shortage is among the most challenging problems for developers, and it isn't only the recent natural disasters that are aggravating the problem. Development legislation like Measure JJJ in Los Angeles is also increasing construction costs. Wallace says that measure has increase construction costs by 30% to 40%. “It is a burden,” she said. Even without these challenges, construction labor is limited and expensive. “We want to deliver the best product that we can, and when you find labor, you are paying a premium for it,” said Levy. “Soft costs and labor costs are significant, and mitigating the cost of labor is a challenge.”