Feature Stories - March 2008

Industry Focus:

Commercial Builders

In its monthly Industry Outlook series, Nevada Business Journal gathered with commercial builders to discuss the various challenges facing their organizations. They confronted concerns such as project financing, recruiting and retaining qualified employees, as well as the effect of the construction industry’s image. Connie Brennan, publisher of Nevada Business Journal, served as moderator for the event that, as part of the NBJ’s monthly Industry Focus series, brings industry leaders together to discuss issues pertinent to their professions. Following is a condensed version of the roundtable discussion.

Financing Projects

Has financing projects become more challenging?

Scott Loughridge: On the commercial development side, clients are having difficulty securing financing for projects. Financing is very difficult now because of the change in the market. Many projects are being put on hold or shelved for financing reasons.

Jeff Vilkin: From the subcontracting standpoint, our whole wood business has really been challenged by the slowdown of the residential market. Residential framers currently have nothing to do and the only market available to them is the commercial market – the margin is pretty much gone. The financial market is disconcerting. So many projects seem to be hovering and pending sheets. It makes you wonder if they are ever going to get financed.

Nelson Cumana: We have had several clients whose projects just aren’t penciling out right now and are all on hold. It would probably be more profitable for them to sell the property than to develop it. So, we have lost a couple like that and then there are some just up in the air, waiting for financing.

Larry Monkarsh: The financial market is a huge issue. Projects are actually stopping in the middle because financing has dried up. Financiers offer a commitment to the loan, however, after it is approved, they want a pre-leased requirement. The rules are being changed halfway through a project, which stops the project until a pre-leased requirement is completed. With that said, one of our biggest problems is controlling our overhead. You have a signed contract, superintendent, project manager and then you are told to stop building.

Staffing Issues

How difficult is it to recruit and retain talent?

Steve Brooke: After we get the right people, it’s hard to keep them if you aren’t keeping pace with the new salary requirements, which are being driven by the huge Las Vegas Strip projects. Coupled with that, recruiting out of state is difficult because of the current cost of housing. We have Californianized ourselves. It’s a big problem.

Monkrash: We’ve tapped the military for the superintendents. Those who have served in the military know how to take charge and run operations. They don’t really know construction, but you spend some time with them, train them and they’re quick learners. Most people today want to get into business and make money right away – they don’t understand the process of working their way up the ladder.

Linda Harris: But if you look at the average income for the construction industry, overall, the Las Vegas market pays about 21 percent higher.

Joe Crisci: We have started going out to recruit younger people, individuals who are not in construction, but have good work ethics, and we train them with superintendents for six months to a year. It has really increased the quality of our superintendents.

Catherine Robinson: We have started mentoring students from the construction management school at UNLV. They go out into the field and work in the office with our project managers. It’s important to allow these students to work both  in the field and in the office to help them understand fully all aspects of the business. In the long run, it will help in our industry’s recruiting efforts.

Randy Highland: We have done a lot of internal surveys in our company with our employees. The consistent feedback that we get is that folks want a challenging place to work, they want an opportunity to advance, and they want to like their boss. In order to keep these employees, we must create a likeable work environment and provide opportunities for advancement.

Jerry Daugherty: That is the challenge – creating an acceptable workplace. If you have an employee who is happy, he or she will stay. If you have an unhappy employee, he or she is going to go on to the next company. It all depends on whether or not the employees are happy.

Highland: In order to stay competitive, we must train existing employees and provide growth opportunities. We focus on training our younger employees and taking them to the next level of leadership in our company. Over the next five to 10 years, there will be an even greater shortage of qualified trade people. The immigration issue at hand is also going to cause more challenges for our industry moving forward, and might eliminate a lot of the workforce that we have relied on in the past.

Dick Rizzo: It’s important to focus on the employees we already have – professional staff, administrative staff and subcontractors. Two years ago, we were at 250 administrative and professional staff in Las Vegas and now, we are at 750 people. Finding and attracting these employees to come to this area was difficult. But what it has forced us to do is develop our own training program, which we have now invested in. We have dedicated 2,000 square feet of office and around 10 employees to conduct training sessions. It’s a big investment for us – around an annual basis of $1 million in terms of training, bringing in outside professionals, and bringing employees up to speed on the latest trends. We have to do that to meet the demands of our clients.

Industry Image

Does the image of the construction industry make recruitment efforts more challenging?

Highland: Yes, I think many parents today don’t want their kids to get into vocational trades. We’re looking at attracting college students who have a knack in the field and want to get into that side of the business and pushing them over to the superintendent side and field management side. There’s been success there but it’s going to be a huge challenge for the industry moving forward.

Greg Korte: It’s not an attractive industry to be in. The perception of the industry started back in the ’40s and ’50s, when adults wanted something better for their children than they had, and it’s been a continual process. For management positions, the construction industry is not respected or perceived as successful like being a doctor or a lawyer. Every school or university system that has a construction management program has 100 percent job placement for their students, which is outstanding for students and the school, but it’s not enough.

Highland: We have to do a better job of promoting the construction industry. The only people earning higher salaries than a student graduating with a construction management degree are engineering and nursing graduates.

Kevin Burke: We’re in a demanding business. Construction requires long hours, hard work and is confrontational at times – it’s challenging to attract the right people. Many times, qualified staff look at the development side of the business as much a more attractive alternative – more money and fewer hours.