Atlanta Construction Faces New Challenges Amidst Rising Tariffs and Labor Concerns
As the city of Atlanta gears up for another whirlwind in the construction world, industry players are looking back on their strategies from 2018 to brace for an uncertain future. With the looming threat of higher tariffs on construction materials and possible mass deportations under a second Trump administration, developers and contractors are getting ready for what might be a bumpy ride ahead.
What Does This Mean for Construction Costs?
Experts at the Atlanta Construction and Development Summit recently gathered to discuss the potential impact of these developments. They painted a vivid picture of a scenario that could drive construction costs up, with material prices set to rise and labor shortages increasing. Melissa Banko, founder of Banko Design, wasn’t shy about stating that it might “suck for a second.” But she also sought to spread a little optimism, urging her colleagues to be proactive in preparing for these challenges.
Banko’s firm is already ahead of the game, having purchased furniture and other necessities in anticipation of rising prices. “When one thing goes up, you’ve got to find the cost savings somewhere else,” Banko said reassuringly. Her message? “Take a deep breath. We’re going to navigate this, and it’s going to be just fine.”
Economic Storm Clouds Are Gathering
Trump’s proposed tariff structure, including a universal 10% tariff and a whopping 60% on goods from China, has experts fidgeting with worry. China plays a pivotal role in the supply of construction materials like steel — accounting for a staggering 54% of the world’s crude steel. Consequently, this new tariff situation could spiral into a similar crisis as during the first trade war with China, leading to higher costs and delays in construction timelines.
But that’s not all. The construction industry is grappling with potential deportations of undocumented workers. According to the National Association of Home Builders, over 25% of the U.S. construction workforce is made up of immigrant workers. Moreover, it’s estimated that about 27% of immigrants are undocumented or on temporary status that could be affected by policy changes.
Facing Labor Shortages
During the summit, Keith Mack of Gibraltar Capital Partners echoed the sentiment that contractors may need to lean into technology to compensate for looming labor shortages. “Strap in, because we don’t know the extent of it,” he warned, hinting at the unpredictability of future labor landscapes. With freight costs expected to rise due to labor shortages, it could mean that developers need to get a bit creative.
Others at the event, including Erick Garcia Salas, owner of Contineo Group, believe that labor concerns are nothing new. He dismissed fears that Trump’s policies would spell disaster. Instead, Garcia-Salas pointed out a more pressing issue: the construction industry’s failure to attract younger talent. “You want to make it sexy and make it seem like a real career that you can excel at,” he said.
A Shift in Strategies
With escalating costs, many developers may reconsider their current projects. Instead of pioneering new developments, they might focus on revitalizing older commercial properties from the 1980s and 90s, according to Jonathan Rodbell of Atlanta Property Group. McCarthy Building Cos. Project Director Kyle Orr indicated that prefabricated construction could become a go-to strategy as it may make operations more efficient.
Optimism Amidst Uncertainty
Despite the challenges, there’s a glimmer of hope. Many panelists noted a recent easing in the capital markets, with banks feeling confident enough to jump back into the commercial real estate lending scene. Some industry players are now eager to tackle new developments due to a clearer political landscape following the election.
Katherine Mosley, a partner at TriBridge Residential, pointed out that knowing the election’s conclusion helps remove some of the uncertainty in the industry. “This allows us to move forward a little faster,” she said, bringing a sense of hope in an otherwise daunting reality.
As Atlanta navigates the rocky waters of construction in a changing political climate, one thing is clear: builders and developers will need to be agile, creative, and ready to adapt to the unexpected in the months and years to come.
