Commercial Real Estate

CRE Opinion: Immigration Rhetoric in Action

What will the impact of national immigration policy be on North Texas’ construction industry?

Charles R. Myers of MYCON

As President Trump’s campaign rhetoric becomes a reality with a growing list of wide-ranging executive orders, leaders in North Texas’ commercial construction industry brace themselves for a labor market not only challenged by skilled labor shortages, but also compounded by anxiety and fear.

If corporate relocations and population growth have been the hallmark of Texas’ economic recovery, the construction industry has been balancing its growth and financial success with the need to deliver large, complex construction projects, many of which have been fast-tracked. Achieving that balance requires a well-trained team of professionals and field personnel who can get the jobs done safely.

With the new administration’s goal of securing our borders, the impact on construction workers and their families has been stressful for a variety of reasons. Mike Green of DMG Masonry Ltd., a well-known masonry services company; Zach Fusilier of North Texas Contracting, a major utility contractor; Scott Brady, PE, of Dyna Ten, a leading mechanical contractor; and Rod Vilhauer of Vilhauer Enterprises LLC, a successful excavation services company, provided insights into each of their firm’s current labor challenges. Each of these firms employs more than 400 personnel so staffing for construction projects with skilled labor is a priority.

According to Mike Green, whose firm was the recipient of the 2016 Golden Trowel Award for its masonry work at the Old Parkland West Campus, the labor shortage is an acute issue and a constant cause of concern. To attract qualified masons, DMG Masonry has developed an in-house, multi-week training program that enables the firm to support its projects. However, the skilled worker supply has been dramatically reduced. In the past, workers from Mexico, for example, would move freely between the two countries, but are now concerned about being stopped at the border. Much of this back-and-forth activity evolved around family visits with work in the construction industry coming from Texas’ growing urban centers like Dallas, Houston, and Austin.

Compounding this labor issue is the aging of experienced managers and supervisors who are nearing retirement. Green says that there is a large gap of employees in the 45 to 55 age range available to step into these roles. And in training millennials, a minimum of five years is required to develop them into competent supervisors.

In terms of Texas’ migration of skilled masons from other states, such as California, Green hasn’t seen that type of laborer moving into this market. He also said that very few women enter the field because of the hard, manual labor involved. However, they are seeing more women in management positions.

In summary, DMG Masonry Ltd.’s leadership is very careful about the work they assume due to concerns about the company’s capacity to perform, based on its skilled labor pool.

Scott Brady, president of Dyna Ten, a multiple award-winner of the Platinum STEP Award from the Associated Builders and Contractors, said that labor shortages are a constant. Although the firm is now a part of Comfort Systems USA, which operates in 39 U.S. markets coast to coast with substantial resources for managing its projects, the company maintain a 24-month labor projection schedule to compare against its project pursuits. That determines the firm’s “go versus no-go” decisions based on projects in the pipeline.

Moreover, labor rates are escalating, according to Brady, whose firm modifies its labor rates twice a year now to remain competitive. Year over year, increases are averaging about eight percent. Brady explained that Dyna Ten hired a labor economist six years ago who estimated that the region had 1,500 unionized commercial pipefitters, plumbers, and HVAC technicians, plus 12,000 non-union workers in the 10-county North Texas region. With the large corporate campus projects of Toyota, American Airlines, Liberty Mutual, and others, these skilled personnel have been quickly absorbed.

Hiring from other states has been out of the question as most states have returned to moderate construction levels. Brady also pointed to the aging workforce as a bigger concern as the industry begins to lose those with 30 to 40 years of experience to retirement. Replacing these seasoned personnel through recruitment from other mechanical contractors has become an expensive proposition.

As a merit shop contractor and founding member of TEXO’s Construction Education Foundation, Dyna Ten is heavily involved in home-growing their people. The company has also begun to move from construction to manufacturing by shifting about 20 percent of its workforce into building construction components, such as ductwork, air handlers, and other mechanical equipment.

According to Brady, work acquisition is not an issue, but turning down work is difficult. Regardless of training and having the scale to perform complex projects, Dyna Ten can’t find enough people to do the work—a shortage that may persist and, perhaps, be exacerbated by recent executive orders.

Zach Fusilier, whose North Texas Contracting firm sees annual revenues of about $130 million, focuses on self-performing work involving underground utilities, turnkey concrete, and civil general contracting. His firm employs about 600 people but, according to Fusilier, finding and retaining skilled labor is not the issue it was five years ago, when North Texas began its recovery.

As with Dyna Ten and DMG Masonry Ltd., Fusilier has seen a growing scarcity of supervisory personnel—which can impact a firm’s profit margins, especially due to lack of experience in the management ranks. North Texas Contracting recruits aggressively from colleges and provides on-the-job training through mentorship to help recent graduates gain field experience, but they are not as qualified to understand the impact of their decision-making in the field.

In terms of the immigration issue, Fusilier said that Hispanics going back and forth to Mexico is not an option. He is a big advocate of guest worker visas and his firm works closely with immigration attorneys to expedite the process. As for women at his firm, he welcomes more applicants and would have no reservations hiring them, although the work is demanding in the field and requires substantial manual labor.

Rod Vilhauer of Vilhauer Enterprises LLC, an excavation services company with more than 400 employees, said that his workload is in good shape but he would like to replace 10 percent of his workforce with higher skilled labor. According to Vilhauer, recruitment from other companies is too costly, and hourly rates are ratcheting up. There is no migration from other states to perform the work his firm requires.

Vilhauer explained that the oilfield gave up some equipment operators, but, as jobs in the oil patch become available, those employees will leave for much higher pay. An aging workforce is also a big challenge, since those with 20 or more years of experience are retiring.

His firm uses a mentoring approach that pairs a seasoned superintendent with a younger person to get the job done. He sees very few women in the field, they are more often engaged as civil engineers in the home office who oversee projects by visiting the sites. His team is also embracing technology applications that help to streamline their processes on-site, using iPads and Blue Beam, a digital workflow and document collaboration software system.

In Vilhauer’s view, given the aging workforce and skilled labor required, if things become worse in terms of immigration, the construction industry will experience a “world of pain.”

With more than 27 percent of Hispanics and Latinos employed today in the U.S. construction industry, according to the U.S. Bureau of Labor Statistics, immigration policy and ongoing rhetoric play a huge role in every firm’s ability to thrive and grow. Operationally speaking, our own production staff and project management team is comprised of those under 40 years of age, with very few in their 50s, and most in their 30s.

Clearly, establishing a national immigration policy designed to reduce our skilled labor shortages, along with training and mentoring, are big priorities. Without a sound national direction, anxiety and fear will prevail; labor shortages will persist; production schedules will lengthen; construction costs will increase; and growth will slow. These are impacts none of us seek.

Charles R. Myers is CEO of MYCON General Contractors and co-chairs the Industrial and Office Local Product Council for the North Texas District Council of the ULI.