Supply chain, costs, labor force are top issues for regional construction sector

The McDaniel family has for generations been known for two things in Northeast Arkansas — practicing law and construction. The family had been involved in building projects since the early 1900s, and many businesses such as Henderson McDaniel, W.A. McDaniel and Sons and others operated in the Arkansas Delta.

In the early 1970s, Rufus A. McDaniel and his two sons, Danny and Bobby, founded Ramsons Inc. The building company’s name was a combination of the patriarch’s initials and the word sons. Danny’s son, Scott McDaniel, is now an heir to this legacy business and even at a young age he wanted to be a builder, he told Talk Business & Politics.

It wasn’t easy, however. Despite his family connection, he began at the bottom. He labored for years on construction sites, slowly moving his way up in the company that eventually his father took over. As time passed, he learned to be a project manager.

“I was born into this. The McDaniels have always been builders,” he said with a smile. “I was the lowest paid employee. I was pretty good with a broom and a shovel.”

Construction has been one of the most consistently growing economic sectors in Jonesboro during the past decade, but building project values numbers are down in 2022, according to city permit data. From the beginning of the year through June 3, the city has issued permits for projects valued at more than $112 million. Commercial building projects ($43.9 million), single family homes ($29.3 million) and additions ($19.4 million) were among the leading sectors.

Through the first six months of 2021, about $156 million in projects received permits. Those were fueled by commercial ($55.9 million), commercial addition ($43.7 million) and single-family homes ($41.3 million). The 2021 data includes about one month more of permit data, but even with that, project values for the year are down 16% when compared to 2021.

Jonesboro Mayor Harold Copenhaver said while some construction sub-sectors are down, overall construction numbers have remained relatively steady considering the supply chain and inflation issues that have plagued the country during the last year.

“Construction through the first quarter of the year has remained strong. The number of commercial permits is up over the same period of the previous two years. Residential construction permits for the first quarter slowed slightly, down by approximately 7%,” he said. “I am pleased that the noticeable uptick in material pricing is not currently stunting growth, and I believe that is a testament to the strength of Jonesboro’s economic position, safety, fire protection and ready-to-work population.”

The mayor also said the city is still recovering from impacts of the pandemic. The city’s flexibility in turbulent economic times is a result of its multi-dimensional jobs and business base, he added.

“Jonesboro continues to benefit from a diverse economic base. Our businesses and industries showed great resilience during the pandemic, and we have seen growth in most business sectors. Major expansions in industry, health care and growth in our hospitality sector all continue to contribute to the overall economic success of Jonesboro. Sales tax collections, despite recent inflation pressure, continue to be robust with first-quarter collections approximately 20% above the same period of 2020,” the mayor said.

Copenhaver recently attended the groundbreaking for a new 150,000-square-foot Hytrol warehouse. City officials have worked to expand the area’s industrial base and that should lead to new construction projects, he said. (As of June 28, Hytrol had not disclosed the cost of the warehouse and no building permit had been obtained for the project.)

“We have several industries focused on equipping factories across the country for industrial equipment needs, fueling production lines for conveyors, automated systems, casters and electronic equipment,” he said. “Over the years the city and Chamber of Commerce have invested heavily in recruiting food-based industries to our area. Even during times of economic uncertainty, people need to eat and our food production industrial partners are second to none. We have great leadership at each of those plants and continue to impress me with their production and the way they support our community.”

McDaniel has experienced many changes in the building sector through the years. Ramsons has been involved in public building projects, and when he started as a manager the process was simple. Governmental entities would take bids for projects after designs were fully formed and generally the lowest bid got the jobs, he said. In recent years, that has changed. General contractors are brought in earlier in the process now, which helps to streamline costs, he said.

PROBLEMS LOOM IN THE INDUSTRY
Supply chain issues have hindered projects and thrown schedules off in unprecedented ways, McDaniel said. Inflation continues to spike and getting simple, affordable supplies such as doors and windows can be a challenge. Copenhaver said these issues are impacting businesses throughout the city.

“Supply chain issues continue to be a factor for all business sectors as well as local government. The need for longer lead times for certain products, identifying and using alternative products and rising overall costs certainly will continue to impact our country and community,” he said. “Private industry faces the same challenges. Their timelines are impacted, and they must be creative, and they are.”

Another issue that impacts building is labor, especially skilled labor, McDaniel said. The U.S. needs about 10 million more workers in its labor force, and that number will double in the coming years. Finding electricians, plumbers, carpenters, welders and other skilled laborers is getting harder.

Part of the problem is a mindset in high schools. Not enough students are encouraged to get into vocational careers and those careers are rewarding and high paying, McDaniel said.

“You can make a lot of money [in the trades], plain and simple,” he said. “We’ve got a lot of skilled guys that are aging out. It’s a problem that all of us are going to have to deal with.”

McDaniel said he remains optimistic despite the challenges. He expects several industrial projects to come to fruition in the coming months if the leads he’s working are an indication. Warehouses, medical offices, retail, and other types should continue to grow even in uncertain economic times, he added.

Quality of place or life projects will expand in the coming years, McDaniel said. The pandemic proved many people can work from home and that means they can live wherever they want. If cities want to compete for these highly education, high earner residents, quality of life will have to improve.

What are the mayor’s expectations for the rest of the year and beyond?

“In the next six months several major construction projects will be completed. I think we will also see numerous retail and restaurant construction projects turning dirt in 2022. It is an exciting time, and I believe that we are positioning ourselves to have even more to offer Northeast Arkansans in 2023 and beyond,” he said.