Cranes Loom Large in NH

With a backlog of work extending nearly a year, and continued growth in 2018, construction is weathering the storm of economic uncertainty.

Cranes have dotted NH’s landscape as evidence of the robust construction activity in the state, from the six-story garage being built by Harvey Construction for Southern NH University in Manchester’s Millyard District to the $100 million of development projects occurring in Dover. (Included here is a sampling of five of the major construction projects that are either under way or were completed in the past year in NH.)

Company: Hutter Construction in New Ipswich
Project: Market and Main Mixed-Use Retail Development in Bedford
Cost: Did not disclose
Size: 16 acres

Market and Main is a 16-acre high-density Class A mixed-use site in Bedford. Being developed by Encore Enterprises, plans call for retail, recreation, fitness, dining and office space. Whole Foods, contiguous to this site, opened in spring 2016, while Trader Joe’s, Friendly Toast and REI are set to open in spring 2019.

Construction in the state grew 3.6 percent in the first quarter of 2018 on a year-over-year basis, the fastest among the New England states and 12th fastest in the nation, according to Bernard M. Markstein, Ph.D., president and chief economist of Markstein Advisors, which conducts state construction analyses for Associated Builders and Contractors (ABC).

ABC’s Construction Backlog Indicator (CBI), which measures the amount of construction work in the U.S. that is under contract but not yet completed, reported that in the first quarter of 2018 there were 9.53 months of backlog in the Northeast. CBI expanded to a record 9.9 months during the second quarter of 2018.  

Company: Engelberth Construction in Concord
Project: Merrill Place Conference Center and Residences in Plymouth
Cost: $31,328,550
Size: 95,000 square feet

The seven-story Merrill Place Residences at Plymouth State University features 288 beds. The coed residence hall has single rooms with bathrooms, double rooms with bathrooms, and two single rooms with a shared bathroom. The first floor features a lobby with a study area, an administrative office area, a laundry facility, and a large conference center. The 4,300-square-foot conference center will hold up to 500 students or summer guests for lecture-style events or up to 300 people for dinners and other special events.

Kurt Clason of K.A. Clason-Fine Woodworking Corp. is the NH representative of the National Association of Home Builders (NAHB) and serves on its executive committee. He says he is enjoying the backlog of work but is keeping an eye on the future. “At the state level, almost every single one of us is overloaded,” he says. “We are optimistic, as the phones keep ringing, but we know it can’t last forever.”

Clason says architects and surveyors are out straight. “That’s our pipeline and it matches what we are seeing nationally,” he says. “[Experts] say that we are looking at the last half of 2019 to begin the downturn, but it will be [nowhere] near as severe as 2010. It will be a correction, not a recession.”

Company: PROCON in Hooksett
Project: AC Hotel by Marriott in Portsmouth
Cost: Did not disclose
Size: 152,000 square feet

Currently under construction, this five-story hotel, located in the north end of Portsmouth, has 154 rooms and will offer first-floor retail space, meeting space, an outdoor terrace, and 43,781 square feet of community space deeded to the city. The property owner is XSS Hotels.

New housing starts have dropped, which Clason says is due in part to higher interest rates, and the cost of labor is going up as firms compete for talent. And while Clason says lumber prices have stabilized, lumber tariffs has affected the market. He says they have an expression at NAHB; “It’s lumber, labor and lot,” as the top concerns in the industry are the cost of lumber, the workforce shortage and the cost of land.

Labor Shortage Spurs Innovation
Construction in all parts of the country is suffering from the shortage of skilled workers, Markstein says. ABC estimates that there are roughly 500,000 open positions in the industry right now. “This often leads to projects taking longer to complete as the available skilled workers are moved from job to job,” he says.

Many builders are responding to the labor shortage by using prebuilt sections, such as panelized framing. Clason says that unlike prefabricated walls, which are complete upon arrival, panelized frames still let the builder decide where to put electrical and plumbing. “We will have the frame up in a day, and maybe the time saved allows us to build one more house a year. It maximizes your workforce.”

Company: North Branch Construction in Concord
Project: NH Army National Guard Field Maintenance Shop in Hooksett
Cost: $10 million
Size: 27,200 square feet

The project includes a 27,200-square-foot field maintenance building and a separate 2,435-square-foot metal storage building. The main facility includes a six-bay garage with overhead crane maintenance capabilities, a drive-through wash bay, a tool storage room, offices, classrooms, and gym and shower facilities. The project includes major site improvements. This new facility, currently obtaining LEED certification, has combined the Manchester and Hillsborough field maintenance shops into one location to support the maintenance and repair of combat and tactical vehicles.

Clason says NAHB recently signed an agreement with the government to train military veterans for construction trade jobs. In NH, the association has partnered with tech schools to strengthen connections between professionals and students in order to convince more students to enter the trades. Clason notes that this is the first year in a long time that those building trades classes have been filled.

Preston Hunter, vice president of Eckman Construction in Bedford, says the workforce challenge puts pressure on schedules and costs. “It’s become a lot more challenging to get competitive bids to get the best prices,” he says. “Construction cannot be outsourced. You can’t build a building in China and ship it back.”

Company: Eckman Construction in Bedford
Project: Litchfield Fire Station in Litchfield
Cost: $3,750,000
Size: 11,000 square feet

The new fire station in Litchfield is currently under construction after it was approved by Litchfield voters in March. It includes construction of a new four-bay fire station, site work and soft costs. 

He says Eckman partnered with ABC and Pinkerton Academy in Derry to create a promotional video about the construction industry. “It includes actual job site video and showcases the opportunities and the pride. This is just a first step, and we hope other companies will help try to change the stigma. There has never been a better opportunity,” Hunter says of the negative perceptions some students and their families have of the trades.

Having a sizable trained workforce gives companies a distinct advantage. Pierre LeBlanc, president of Engelberth Construction, which has an office in Concord, says the size of their staff allows them flexibility. “We have more than 100 carpenters, so we are able to move project to project,” he says. “But we are always looking for good candidates—always advertising; when we find someone good, we find a home for them.”

Outside Influences
Decisions in Washington, from taxes to tariffs, are having a mixed effect. Tariffs are driving up the cost of materials, especially steel framing and Canadian softwood lumber, and squeezing profit margins.

However, according to Kristen Swearingen, vice president of legislative and political affairs at ABC, members say they have experienced substantial increases in capital and workforce investment, hired more employees, and given more raises or bonuses as a direct result of the tax code reform.