What’s Ahead for the Construction Sector in South Florida

This year will be another strong one for the construction sector in South Florida as contractors work through their existing backlog, but the sector may not see significant growth.  And that’s not necessarily a bad thing, said industry leaders who recently spoke at an exclusive panel discussion at Kaufman Rossin’s Miami office.

“Stabilization will be great to see,” said George Cuesta, CEO of Cuesta Construction. Miami has graduated as an international city, he said. It is now a matter of reaching stabilization within the local real estate market and continuing smaller infill projects in the areas surrounding where major development has already occurred.

“The market fundamentals are still here,” said Patrick Ramge, senior vice president of commercial real estate at Wells Fargo. However, he predicts construction and financing will slow down this year, largely due to fluctuating foreign economies and the high cost of land.

Suffolk Construction President and General Manager Jeffrey Gouveia agreed that the health of Miami’s real estate market is closely tied to the health of the foreign economies that invest here. Other factors that he noted will affect the industry in 2016 include the stock market, oil and gas prices, and the presidential election.

Areas of opportunity

Abby Melone of Invest Miami and Capital Analytics Associates moderated the panel discussion, which explored opportunities, challenges and innovations driving South Florida’s construction industry today and what these trends mean for the region’s economy as a whole.

A major difference between this boom and the last boom, said Ramge, is that this time around, significant deposits (up to 70% in some cases) are being made on residential construction projects. And although it seems like there have been several big construction finance deals announced in the news, these $100-million-plus loans will be conservatively structured, he said.

So what types of projects do the panelists expect to see in 2016?

Apartments, retail and office space will continue to be in demand, according to Ramge. He thinks the condo market will cool a bit, but what’s out there now will close. Other growth areas will include healthcare and aviation, Gouveia suggested.  He anticipates major expansions at local airports in the coming months and years. And hospitality looks like another bright spot.

As the industry focus shifts to different types of projects, general contractors should find ways to stay nimble, said Cuesta. They need to understand where the next segment is and where they can add value.

Innovating is one way to stay nimble, and technology is helping Suffolk Construction to do just that. The building construction management firm is using sophisticated 3D technology for planning projects and engineering. They first build virtually, Gouveia said, because “pixels are cheaper than bricks.”

Top challenge: Labor shortage

Despite the positive outlook, this bellwether industry is not without its challenges.

One of the biggest challenges for industry executives continues to be finding skilled labor. Many construction workers left South Florida after the last building boom and did not return for the real estate resurgence. The relatively high cost of living and housing prices in the areas where South Florida has the most construction make it harder to attract workers there.

Nationwide, fewer young people have been going into construction-related trades, such as carpentry, partly because many school districts have cut back on vocational training.

Suffolk Construction is helping to tackle this problem by participating in a local trade partnership series that provides training and apprenticeships for people interested in learning the trades, Gouveia said.

There is no easy solution to the shortage of skilled labor, and it will inevitably lead to an increase in prices as contractors pay more to hire subcontractors. But at the end of the day, Cuesta and Gouveia keep focus on the most important part of their business: their customers. Maintaining good communication and transparency with clients about changing costs, timelines and other issues is not only important, they said, but it is critical for building trusting relationships and succeeding in the industry.