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Economic and staffing challenges are dampening optimism about economic growth in the development sector in 2024, according to the latest Local Construction Voices survey.
The Tampa Bay Chapter of the American Institute of Architects (AIA) conducted its sixth annual survey in February. The group, which includes 700 area members, will discuss the report’s findings tonight at the AIA Center for Architecture and Design in Tampa.
Two of the four panelists provided insights into industry trends and expectations ahead of the event. Development lawyer Katie Cole, a shareholder at Hill Ward Henderson, expects construction to slow down compared to recent years.
“There is some shuddering in the development community, largely due to continued construction cost and interest rate increases,” Cole told the Financial Times. catalyst. “But the Tampa Bay area has unique strengths and a great location…I would say that while the market may be slowing down a little bit, there’s still a lot of interest in development there, so we’re still going to have positive year.”
AIA believes architects are uniquely positioned to provide a perspective on the development industry because their work begins years before a project is completed. Most of the 124 respondents to the survey were from Pinellas or Hillsborough counties and agreed with Cole.
While 64% predict demand for construction services will increase in 2024, this is 20 percentage points below the 2022 baseline. Additionally, 81% believe the economy will be “good” or “excellent” in relation to development, down 14 percentage points from the past two years.
interest rate
Coles said repeated interest rate hikes over the past 18 months had caused many borrowers to “sharpen their pencils and redefine what might have been an easy ‘yes’ to say in the past”. She doesn’t expect a significant reduction in 2024.
“Certainly nothing that’s going to be a huge stimulus to the development community.”
She noted that the current plan to add to the St. Petersburg skyline was planned and approved several years ago. Cole said the “long lead times” highlighted the need to keep up with the influx of new residents.
At the recent Downtown St. Petersburg Partnership Summit, housing experts blamed a lack of housing construction during the market downturn for exacerbating the current affordability crisis. Cole said a development moratorium or cooling “is not a good thing at all if you’re a resident who needs housing.”
Many public-private partnerships are now reworking project plans to reflect market conditions, she said. Josh Bomstein, president of Clearwater-based Creative Contractors, faces a different kind of headwind.
Work
His firm focuses on institutional projects such as schools, hospitals and municipal facilities. Although Bomstein has heard that some private-sector projects are “slowing down,” he said his market is “still very busy” and accommodating new residents.
However, Bomstein stressed the need to strengthen the local construction workforce. He applauds recent efforts to implement new trade programs for high schools and higher education, but believes there is still a stigma surrounding these efforts.
“Entering a career in a technology-related field, whether it’s architecture or another field, is a very practical, affordable and profitable thing for young people to do,” Bomstein said.
He explained that an insufficient talent pipeline increases costs and delays timelines. Despite some advances in technology, the development industry “relies entirely on the human ability to construct buildings.”
Bomstein said supply chain and labor obstacles are forcing builders to step up due diligence and project planning. He also praised the City of St. Petersburg’s apprenticeship and mentorship programs.
“The war for talent is real,” Bomstein added. “Poaching is happening – contractors are stealing from each other. They can’t find more good, qualified people.”
Other challenges
Bomstein said a lack of regional transportation options and soaring housing costs greatly impact employment issues. AIA’s investigation shows both areas raise industry concerns throughout Pinellas, Hillsborough, Pasco and Polk counties.
Bomstein said a less discussed challenge is significantly increasing insurance rates. He pointed out that this “puts another pressure on the viability of the project” and believed that this issue will continue until 2024.
He said the development industry now has to contend with rising construction, land, insurance and loan costs – just like the people who occupy the buildings. Bomstein believes this will force project selectivity among stakeholders.
“I think these are factors that we all need to pay attention to in the coming year and they will have an impact on real estate development in the area,” he added.
For more information about Architectural Voice events and surveys, visit the website here.
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