In recent years, the country has been experiencing supply chain challenges, material shortages, and rising fuel costs. What is the state of these issues now and how have they impacted the industry?
Susan Bergdoll: Extremely tight supply with a challenging entitlement process for creating new logistics space, coupled with supply chain bottlenecks hampered by port congestion and shipping container, rail car and trucking shortages are driving rent increases and shipping chokeholds. Additionally, rising fuel prices and material shortages are adding to development costs and lead times. Finally, companies want readily available workers, and most markets that are seeing growth, including Chicago, are experiencing a shortage of skilled tradespeople needed to build projects. Our clients are seeing general labor shortages, as well. That is a concern, given that a large e-commerce facility may need to employ several thousand workers.
Leigh McMillen: Supply chain challenges that include rising costs, long lead times and unavailability continue to impact building materials as well as equipment categories. Companies need to take a proactive approach to solving for the supply chain problem. At Leopardo we have an in-house procurement expert who negotiates local, regional, and national buying agreements for pre-manufactured goods and materials. We closely monitor supply chains in an effort to maintain the pricing, timing, and quality of critical project materials and equipment. Getting the right materials in the right place at the right time requires capable planning, logistics, and transportation. While we are seeing the benefit of early involvement, we anticipate many of these challenges to last well into 2023. Restarting the global economies will take time and restocking inventories will be challenging while demand remains high.
Elbert Walters: As with many industries, the unionized electrical industry of Chicago and Cook County has faced its own set of challenges over the last few years. Many of Powering Chicago’s member contractors specialize in highly technical installations where electronic chips are needed. Due to the global chip shortage, this has slightly altered the timelines of some ongoing projects, but our members continue to move projects forward by completing other components of the project while the chips are developed. One way to do this is through an increase in prefabricated work done off-site before or during a project timeline. Prefabricated work includes assembling a job’s key components, which leads to a smooth and rapid installation process.
How are lead times at the moment? What issues are most impacting those lead times?
Susan Bergdoll: Construction labor and the process of developing a building, in general, has become increasingly difficult. It’s hard to maintain schedules due to a shortage of labor, materials, and material cost increases, along with delivery delays that have upended traditional timing expectations. It’s certainly more difficult to sit across the table from our customer and give them the timing clarity they are looking for. What used to take nine to 10 months to build can be a solid 15 months today if you don’t plan ahead. We’ve been able to use our size and scale as an advantage and make commitments on critical path items months ahead of starting a project to keep us on track. We have already placed orders for materials on most of our 2022 pipeline in an effort to ensure our start dates and minimize schedule disruptions.
Leigh McMillen: We are currently experiencing longer lead times across numerous building materials and equipment categories. The issues most impacting the lead times start at the manufacturers, where low raw material and component inventories, low finished inventories, labor shortages, transportation and logistics delays are a poor mix for the corresponding high demand.
Elbert Walters: Many of the projects Powering Chicago members are working on have progressed on time and on budget with little to no impact. Since many of the unionized electrical contractors throughout Chicagoland have been around for decades, their skilled project managers and electrical estimators have adapted to external changes to ensure projects have realistic timelines that, once started, are completed in a timely and budget friendly manner.
Can you talk about a few specific building trends customers have been requesting recently? What do you think is driving these trends?
Susan Bergdoll: There are many, but here’s one example. Given the supply chain disruptions we are seeing today, many of our clients are asking for increased trailer parking and site fencing so they can store additional products in trailers within the secured boundaries of the site.
Leigh McMillen: One request we have from clients in the lab and life sciences space is flexibility. While the initial footprint requirement for these labs is small, 5,000 to 15,000 square feet, that need could easily double or triple quickly as the business scales. The challenge is that these lean start-ups are bootstrapped and lack the means—both in terms of funding and in-house expertise—needed to acquire such expensive turnkey spaces. Lab and life science clients need short term leases or traditional lease terms with flexibility to scale up.
Elbert Walters: A recent trend with new and existing buildings has been the desire to install electric vehicle (EV) charging stations to meet the growing demand of EVs that consumers are purchasing, especially considering the tax breaks and incentives that the federal government and Illinois offers EV buyers. Powering Chicago has over 30 Electric Vehicle Infrastructure Training Program (EVITP) certified union electrical contractors and each of the IBEW Local 134 journeyperson electricians are specifically trained on renewable energy. This ensures a knowledgeable and skilled workforce ready to meet the EV infrastructure demand.