Latent demand for building expansion, business growth unfolding in front of local construction firms
Story by Lee Marie Reinsch
Ah, spring. Geese flock back to their northern homes. Mice are evicted from birdhouses and gas grills.
Birds build nests in the wreath on your front door.
Voles weave underground dens in your lawn.
And area construction companies say their clients are in a building and earth-moving mood as well.
It’s been a long winter for man and creature alike, and the past few years of economic slump and austerity had chilled much construction.
It’s time to move forward, come hell or high water. The weather’s warming, purse strings are loosening, economic optimism is on the rise along with the mercury, and orders are coming in.
Whether it’s the state government, the weather, the economy, interest rates or just spring’s first daffodils making people giddy, things are looking up on the construction front.
‘Beam’ing ear to ear
Bob Lehrer, Jr., sales manager for R&R Steel Construction in Appleton, said there’s definitely an upswing in construction for all of the above reasons.
“Is it a steep upswing? No, it’s not. And it’s probably best that it isn’t a steep upswing,” he said.
Last year, spring arrived so late it fast-forwarded right to summer. “It was so ungodly cold that we didn’t have that much of a spring,” Lehrer said. “Nobody thinks about building when it’s cold outside or when it’s gloomy out. (This year) construction wasn’t even in their minds until it started warming up.”
Now his phone’s ringing off the desk. It all adds up to 2015 promising to be better than 2014. But although there may be earth moving, he doesn’t think it will be earth shattering.
“You hear everybody saying, ‘Oh, I’ve got so much work I can’t keep up with it,’ but what they’re forgetting is they down-sourced so much they’re working with half the labor they used to have,” Lehrer said. “That’s why everybody is so swamped and so busy. They’re not running like they did back in 2005 and 2006.”
R&R Steel recalls those years fondly.
“Things were just going crazy,” Lehrer said. “There was money all over the place. People were spending.”
This year’s up, but not anywhere near 2005 and 2006. “We’ve got a long ways to go,” he said. “People are sitting on the fence yet. I talk to a lot of (potential clients). They’re all waiting to see what happens. They’re on the fence.”
Many building owners are jumping off that fence, according to Kip Golden, executive vice president and co-owner of CR Structures Group, Inc., in Kimberly.
“Money is pretty economical at this point. The interest rates are so low, so money is cheap. I think they’re taking that as an opportunity and the economy is moving up,” Golden said. “I think it’s more the attitude that the economy is moving forward and increasing, and they want to take advantage and grow their businesses.”
Some of those potential customers sat on the sidelines waiting for an economic turnaround for too long.
“People were just trying to hold their own and keep their businesses, but at this point they really want to expand.”
CR Structures is seeing increases in demand from a variety of industries including daycares, financial institutions, churches, office build-outs and multi-tenant retail buildings.
Manufacturers have squeezed every last piece of machinery they have into their existing facilities and have held out from physical plant expansion as long as they can, said Jim Perras, partner with Consolidated Construction Company of Appleton.
“Car company demands are increasing, (as is demand for) lawn and garden products and agricultural products,” he said. “Things are getting stronger with the rebounding economy. So many people deferred these purchases. They just put them off and put them off. And now they have to get new cars or new farm equipment, and that’s been helping.”
Consolidated is seeing “positive movement” in almost all its sectors: hotels, multi-family buildings, manufacturing facilities, food and dairy facilities, fitness centers and auto dealerships, as well as a few churches and schools.
Perras is also seeing the food and agriculture industries boosted by consistent demand for newer, more innovative products.
“Healthier choices, organic choices: grocery stores, restaurants, chain brands are always looking for the newest and better products,” he said. “We’re seeing our share of food and dairy work driven by market demand and by marketing in general.”
But isn’t Wisconsin manufacturing limping along? Perras said “no.”
“The cost of products made overseas, particularly in China, is rising and is on target to equal or exceed costs for goods made in the United States,” Perras said. “The combination of our quality and predictable deliveries and costs are going to reach a point in the next few years where we’re going to continue to get more competitive with China.”
Also making local manufacturers burst at the seams: emerging international markets.
“We’re seeing firms buoyed by the increasing ability to export,” he said.
Last year was among Keller Inc.’s record years, and this year promises to be even better.
“Interest rates are still really low and the economy is getting a little bit better,” said Mark Nysted, regional manager for Kaukauna-based Keller.
Now it’s time for business owners needing to expand to catch up, and that’s helping Keller’s bottom line.
“I think it goes back to that pent-up demand from 2008. People were unwilling to pull the trigger for a few years, but now they’re willing to move forward because they really don’t have a choice,” Nysted said.
He said Keller’s doing well in all its market sectors, especially its commercial construction and agricultural markets. Milk prices have helped the latter.
“A lot of our clients in the milk market are preparing for the future,” Nysted said.
Many of Keller’s clients didn’t have a choice – their businesses are growing so fast they need more space, including tool and die shops and machine shops.
It’s another example of Wisconsin manufacturing expanding, rather than contracting.
“In our society of throwaway things, people have come to realize that people will pay extra for good quality products, and our (manufacturing) clients in northeast Wisconsin are fantastic at making good quality products,” he said. “I think (consumers) are realizing that you don’t always get the best value for the least expensive product.”
Nysted and others did indicate the glut of leasable retail space is holding down demand for construction of new retail and Class A office space.
On top of the world
Not surprisingly, if new construction is down, then roofers notice.
So Dave Schultz, president of Borsche Roofing Professionals of Hortonville, said his company is finding its jobs elsewhere.
“New construction is way down somewhat from what it was six or seven years ago,” he said. “We’re seeing a little more new construction in the commercial/industrial arena … but the majority of our work is reroof and repairs, and some new construction.”
Manufacturers of white roofing – which reflects sun and reduces costs to cool buildings – have lowered prices, so Borsche is seeing more people opt for this energy-efficient roofing alternative than ever before.
Forging new frontiers
There’s definitely an uptick in the private sector demand for expansion, said Jeff Stodola, owner of Frontier Builders & Consultants in Kaukauna, primarily in retail and manufacturing, both in additions and new construction.
“This year is busier than last year or the last three years,” Stodola said. “There’s more happening in the commercial markets than there had been in previous years. Things are loosening up a little bit in the financial markets, so there’s more money available and it’s easier to finance projects.”
Clients aren’t popping the champagne corks and asking for gold-plated bathroom hardware, though.
“They’re very well thought-out and conservative projects,” he said. “They’ve been waiting for the right time, and now with the economy, where it’s at, people are moving forward with plans that were perhaps put on hold.”
Renovate, renew, recycle
While paper mills and manufacturing plants have historically comprised much of James J. Calmes Construction’s business, industrial construction is being eclipsed by private-sector construction and office and restaurant remodeling jobs.
“With the over-abundance of vacant office buildings in our area, new small office and restaurant owners are finding inexpensive rent and great values on purchasing existing buildings,” said Randy Calmes, president of the Kaukauna-based general contracting firm.
This allows those business owners to not only save money, but to also customize their store, restaurant or office building.
“Many are finding it more attractive to expand by renovating larger buildings at a bargain rather than building new at a premium,” Calmes said.
Specialty contractors benefit as well
As companies build new facilities or expand their existing plants, the need for upgraded infrastructure places increased demand on specialty contractors like Tweet/Garot Mechanical, Inc. of Green Bay, which is experiencing more new construction, especially in the commercial sector.
“There’s a lot of healthcare work that is just coming to the surface … and some bigger projects in the state where companies have decided to do some additions, which likely arises from their own internal growth, so that’s promising,” said Christopher Howald, Tweet/Garot’s vice president of administration.
Tweet/Garot is earning work on new assisted-living facilities, apartment buildings, hotels and buildings in downtown Green Bay and Appleton.
“We’re expecting a better year this year than last year, but we’ve had a great couple years of growth,” Howald said. “If you look on the horizon for the construction market in general, it looks to increase slightly over the next couple of years as well. So the forecast for all construction, both commercial non-residential and residential, is strong over the next couple of years.”
Good help can be hard to find
But along with the good news of a construction uptick, many construction companies are facing a problem: Finding skilled labor.
R&R Steel’s Lehrer said he hears about this challenge from friends across multiple industries, from banking to high tech.
“Nobody wants to work in the construction field anymore,” Lehrer said, noting that after the economic downturn a few years ago, construction dropped off.
“Nobody was touching anything, so anybody that was in the construction field got out,” Lehrer said. “And nobody wants to come back in now because they’re scared that there’ll be another crash.”
Since its employment peak in 2006, construction lost 46 percent of its jobs, according to a report from the Federal Reserve Bank of Chicago created for the Wisconsin Legislative Council. Construction employment is coming back, though, with projected job growth of 5.5 percent expected through 2017.
Borsche Roofing Professionals indicated it hasn’t been easy to find good help, and has sweetened its offerings to attract employees.
“We’re starting employees at much higher wages than we did just a couple years ago,” said Schultz. “There are just so many people who have dropped out of the workforce. It’s extremely difficult to find skilled labor.”
Similarly, Keller is “constantly hiring people,” according to Nysted. “Last year we hired 42 craftsmen out in the field.”
Along with skilled labor, Keller is looking for an architect and an accounts manager, as well. “But being an ESOP company, employee-owned with a benefit package, we seem to generate and attract some of the best workers available out there,” he said.
While various industries face skilled workforce shortages, Nysted said if area manufacturers could find 500 computer numeric control (CNC) operators to relocate to the region, every tool and die shop would be building additions. And that would keep construction firms busy around the clock.
Lee Reinsch of Green Bay worked 18 years at daily newspapers before launching her freelance business, edgewise, in 2007.