Panelists share insights into building in today’s economy

Lack of labor, increasing interest rates and regulations are some of the challenges facing the building industry in northern Nevada.

More than 120 members of the business community gathered at Northern Nevada Business Weekly’s Breakfast & Business event held June 1 at the Atlantis Casino Resort. At the event, Don Tatro executive director of the Builders Association of Northern Nevada, Greg Peek of ERGS, Inc. and Jesse Haw of Hawco Properties shared insights on the current construction and development industry in northern Nevada.

According to Peek, the average cost for a new house in Reno is $450,000 and $330,00 for an existing house. Low vacancy rates and continued growth in the region is creating a very heated housing market.

“We don’t create demand, we respond to demand,” Peek said at the event.

Builders are working to keep up and are still recovering from the recession when much of the construction simply stopped due to the lack of demand.

“What happened then was a bunch of projects stopped,” Tatro said.

“A lot of easily accessible projects were just waiting in the wings.”

Now that the economy has rebounded, Tatro said that many of those easy projects have been completed and new projects are in planning stages. However, it takes years to go through the permitting process for new projects. Tatro explained that planning phases can be a 24-month process just to get a lot approved.

“That is a long time and that takes a lot of guts to say I think in three years we are going to put a house on this and finish the project,” Tatro said.

Building costs are also increasing. According to Tatro, 25 percent of a new home cost is regulation.

“Costs are going up and we have a lot of demand going on,” he said.

Other challenges within the building industry include increasing interest rates, fees, regulations and weather. However, the main obstacle is finding skilled labors.

“Labor is our No. 1 issue and we just don’t have it,” Haw said.

Many people in the construction industry left the state or transitioned into other industries during the economic downturn.

“I have friends who were framers who are now barbers,” Peek said. “I have friends who were plumbers that are now selling insurance and they are not coming back in our industry. So our industry truly was dismantled.”

The panelists explained that it is going to take time to rebuild the labor force as a new generation of workers are recruited and trained. Haw said the high wages for construction jobs will also draw people into the industry.

Multifamily housing continues to be in demand and the construction of new complexes is currently outpacing single-family housing.

“Multifamily is coming and it is simply not coming fast enough,” Peek said.

According to the Johnson Perkins Griffin Q1 2017 Apartment Survey, the average vacancy rate in the Reno-Sparks metro area is 2.23 percent and the average rent is $1,111.

Peek explained that it is simply supply and demand. As more multifamily units are built and come on to the market, rents are expected to stabilize. However, the region is continuing to grow as more companies and residents settle into the area.

“This growth has been predicted for a long time and we need to be ready for it,” Peek said.

The panelists agreed that they need to be building a variety of types of housing from entry-level housing to luxury housing and everything in-between.

“Things are ramping up and it just takes time,” Tatro said.

The next NNBW Breakfast & Business event will be held July 6 between 7 a.m. – 9 a.m. at the Atlantis Casino Resort. Jim McClenahan, director of Corporate Relations and Outreach for The College of Business will provide attendees with an interactive presentation on developing effective elevator pitches to build relationships. To RSVP, go to www.nnbw.com/nnbw-live-breakfast-series-registration-july-event.