Charlotte-area construction activity and jobs are increasing, but rising costs could slow growth

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As the second quarter of 2012 begins, Kevin Higgins is seeing good things on the horizon for Charlotte’s construction industry.

Higgins, owner and president of Charlotte-based construction company THS National, which specializes in apartment projects, says his company is adding personnel at apartment-renovation sites around the Southeast.

“I would say we are seeing growth,” Higgins said. “We’ve hired two project managers in Charlotte and a senior manager to help with coordinating our projects.”

His experience is consistent with the latest construction jobs report from the Associated General Contractors of America, which showed North Carolina construction employment increased 3.5 percent in January over January 2011.

“I think the increase is mostly in Charlotte, and other cities in North Carolina might be bringing the average down to only 3.5 percent job growth,” Higgins said.

But it’s not all good news for the construction industry.

Some Charlotte-area construction companies say that the uptick in business is coinciding with increased costs to build. Materials prices and costs from subcontractors, who are busier, have been rising, they say.

“For several months last year the subcontractors we work with were only charging the bare minimum they needed to pay their employees,” Higgins said. “And now they’ve started to increase their prices.”

That’s especially true of the mechanical, electrical and plumbing subcontractors he works with, Higgins said.

Like THS, Charlotte-based homebuilder Eastwood Homes is having a stronger year in 2012 versus 2011 – and hiring as a result.

“Our February sales were some of the highest in our company’s history,” said Michael O’Brien, corporate vice president of marketing for Eastwood. “Our first quarter is on target to be about 20 percent ahead of our 2011 first quarter, and that was 20 percent higher than the 2010 first quarter.”

Eastwood has about 150 employees across the Southeast, with 50 in the Charlotte market.

O’Brien said he’s in the market for more salespeople.

“We maintained our work force throughout the recession, and now we need more people,” he said.

But he said his company is seeing an increase in material prices and some subcontractors are looking to raise rates.

Alan Banks, co-founder of Charlotte-based Evans Coghill Homes – which is building homes in Riverwalk, a mixed-use community in Rock Hill, S.C. – said his company is also hiring one sales person and one estimator.

It might just be two positions, but any hiring is big news for his company, he said.

“We haven’t hired anyone in four years,” he said. “To hire anybody means we must be doing more business.”

So far in 2012, his company is at 40 percent of 2011 sales volume.

“We are on track to be 15 percent ahead of where we were this time last year,” he said.

Banks would not disclose raw sales numbers, providing only percentages.

North Carolina gained about 5,900 jobs in January from the same month a year ago, according to the Arlington, Va.-based AGC.

In January, the state had 176,700 construction-related jobs, up from 170,800 in January 2011.

AGC statistics back up Higgins’ claims that Charlotte is boosting the state’s construction employment. According to an AGC breakdown of metropolitan areas across the state, Charlotte had a 3 percent gain, or about 1,000 construction jobs for the period. In the Greensboro-High Point area, the growth was 11 percent, or about 1,400 jobs. The Wilmington area had a loss of 900 construction jobs, while other metro areas, like Durham-Chapel Hill and Raleigh-Cary, had no job growth.

Still, not all Charlotte-area construction companies say their workloads are growing.

“I’m less busy than ever,” said Barry Simpson, owner of Charlotte-based Barry Simpson Construction Co., which does residential and light-construction projects. “I haven’t had a project since January. As far as I’m concerned, nothing has improved since last year.”

An increase in construction material prices could stymie job growth, according to the AGC. Last  month, the AGC announced that the price index for construction inputs — a weighted average of all materials used in construction, plus items consumed by contractors, such as diesel fuel and equipment tires — rose 0.9 percent in February, more than double the 0.4 percent rise in January.

As construction materials prices rise, so are prices from subcontractors, industry officials say.

“They are looking to make a little money on the top and have gone up in some cases as much as 15 percent,” Higgins said.

Banks said he hasn’t experienced subcontractors’ prices going up. But subcontractors are busier, he said.

“In the past we’ve done about half our work in portfolio homes and half in custom homes,” Banks said. “Today it is all about custom homes. All those increases we’ve seen in sales have come from custom homes, so of course we’re talking to a lot of subcontractors, and they don’t get back to us as quick as they once did.”

Last year, contractors responded to phone calls almost immediately, Banks said. Now, they’re harder to reach, he said.

“There’s not really been any increase in fees from our subs, but more protracted delivery,” he said. “So, I might call him up and say, ‘Mr. Plumber, I need you to come work on this home’s plumbing, and I need you next week.’

“And if this were 2011, he would say he’d be there right away, maybe Monday or Tuesday of the next week. It was like he was sitting around waiting on the phone to ring. Now he’s busier, and he might tell me he won’t get there until Friday.”

O’Brien said he expects work to keep rising for Eastwood Homes this year. So far in 2012, the company has announced two new developments, both in Concord: Gates Meadows and Savannah Commons. The two projects combined will feature 170 new-home sites, and the homes will cost about $180,000 apiece and range in size from 1,700 to 3,000 square feet each. Eastwood said it will begin construction on the Concord projects later this year.

“When we look just at the Charlotte market, we are up about 11 percent since last year,” O’Brien said, but he declined to give specific numbers.

Banks said he expects construction activity will keep growing.

“I look at those subcontractors who are sometimes taking a week to get back to me and I know that means they are busy,” he said. “I think this is a good sign.”

BAUGHMAN can be reached at [email protected].