Building Toward the Future

by Madeleine Maccar | Jun 4, 2024

If there’s a prevailing feeling in the region’s building and construction industry, it’s balancing cautious optimism with realistic expectations.

But with challenging times comes the opportunity to revisit, rethink and restrategize how a company operates, whether that means evolving with modern standards, looking inward to determine vertical markets worth expanding into or embracing the opportunity for innovative solutions. With local experts noting that South Jersey benefits from some advantageous geographical positioning that beneficially translates into the likes of more space available for development, a desirable proximity to the potential customer bases of multiple major Northeastern and Mid Atlantic cities, and comparatively lower operating costs and taxes than the price tag attached to setting up shop in more urban locations, it's certainly not all bad news as some significant pros eclipse the cons.

And for the region’s building and construction industry, overcoming multifaceted hurdles like labor shortages, persistent disruptions in the supply chain, the unpredictably fluctuating costs of materials and navigating complicated regulatory requirements are just part of today's operational reality.

"Some of the challenges we are seeing in commercial development are due to economic factors: Inflation and higher interest rates have driven construction costs much higher from where they were a few years ago," explains Robert Powell, CCIM, the vice president of business development and marketing for Vineland Construction Co. "In commercial development, projects can take years to complete and the rising costs have caused many new development projects to be paused or canceled. In addition to the rising costs, many banks are limiting their exposure to commercial real estate, and obtaining financing for certain projects has become challenging."

However, the companies in that sector continually endeavor to be at the forefront of oncoming trends and give their clients what they want while "actively seeking innovative and consolidated solutions to overcome these challenges and thrive in this dynamic environment," according to Blue Rock Construction Executive Vice President Kevin Kelly.

"Navigating this environment as a team has proved very effective to minimize delay and cost,” Kelly continues. "Compared to previous years, South Jersey has undergone significant changes. At Blue Rock, there is now a strong focus on sustainable and energy-efficient building practices, with an increased use of green construction materials and a push for LEED [Leadership in Energy and Environmental Design] certification. Plus, Blue Rock is noticing a trend toward mixed-use developments that integrate residential, commercial and retail spaces. New technology and innovative building techniques have also become more widespread, leading to more efficient and cost-effective construction processes. Overall, the current focus is on creating versatile and environmentally friendly structures that align with the evolving needs of the community.”

The inherent connectivity of the region’s robust business landscape necessitates an array of specialists and experts all contributing their time and talent to holistically elevate an industry. The skilled workers operating sophisticated, heavy construction machinery are “pretty much working hand in hand with contractors” and others onsite, according to Greg Lalevee, business manager of the International Union of Operating Engineers Local 825, which represents thousands of highly trained and experienced heavy-equipment operators, mechanics and surveyors whose work area spans New Jersey and even into New York.

As the union’s work is deeply intertwined with regional needs, Lalevee emphasizes how crucial it is to keep those lines of communication open and conversations going so that everyone can be fully apprised of what construction and business needs they can anticipate meeting.

“For a construction union, a thriving economy is key to our success,” he notes, adding that the nature of the industry insulates itself from the immediate impacts of a bumpy economic scenario but also comes with the risk of a delayed normalization once the region begins to course-correct. “Construction is always the odd thing, because construction as an industry is always the last thing to slow down when an economy does: Back in 2008 and ‘09, when we had the Great Recession, we kept going until 2010! But when the economy turns around, it takes us nine to 12 months [to stabilize] because companies are restaffing, assessing building needs and getting back on their feet. Not until they’re fully back to where they were before an economic downturn do they entertain construction needs, or consider infrastructure as a full thought, so we try to stay close to the business community just to assess what the needs are in every region.”

Young Yoon, Esq, counsel, construction and procurement, at law firm Parker McCay adds that challenging times underscore the importance of building a strong team of trusted advisors who can help shoulder some of the regulatory burden while simultaneously clearing the way for tapping into emerging industries with as much mutual benefit as possible.

Specifical to construction’s role in helping the nascent cannabis industry first find its footing and then establish itself as an important revenue niche, it can be dizzyingly complex knowing how to proceed without running afoul of the tricky legal parameters that come with expanding a locally legal industry that national partners and even some stateside ones aren't always receptive to. As the growing pains of New Jersey's cannabiz market continue to be ironed out two years after the introduction of adult-use recreational marijuana, having sound legal guidance helps ensure that projects stay on the right side of regulatory standards.

"Our construction team handles every aspect from pre-construction drafting to post-construction litigation," Yoon says. "We prioritize avoiding litigation and offer risk management counsel. To that end, we assist in review of bid documentation, contract preparation, pre-claim assistance, handling contract disputes, partnership formation, and other aspects of capital improvements. We provide ongoing advice during construction and specialize in construction defects, project impact claims, and energy efficiency systems issues. ... As this growing [cannabis] industry continues to expand and take shape, it’s important to acknowledge potential obstacles. These could include navigating complex regulatory frameworks, addressing security concerns, ensuring compliance with zoning ordinances, and managing community perceptions. Additionally, financing such projects may pose difficulties due to the stigma associated with the cannabis industry and potential legal uncertainties."

And Powell notes that while the general challenges confronting the industry may be many, its present opportunities are certainly not lacking—and are buffeted by that good fortune that always makes for a real-estate advantage: location, location, location.

"We are still seeing demand in the industrial sector," he affirms. "Clients are looking for modern spaces with high-ceilings, ample loading/parking, and quick access to major highways and population centers. E-commerce and reshoring are some of the influencing factors driving these demands. South Jersey is a good location for this sector due to its geographic location and lower costs than companies see in North Jersey and parts of Pennsylvania.

Kelly is similarly heartened by the scope and demand for a variety of commercial construction projects, many of which are driven by today's standards that recognize the importance of a long-term vision that prioritizes environmentally friendly options. He agrees that the increasingly on-the-rise preference for online shopping versus brick-and-mortar storefronts continues to dictate the kind of commercial and industrial projects his team takes on, and that the overall trajectory for the rest of 2024 looks to be driven by the societal trends and expectations of a post-lockdown population, noting his expectation that "the commercial construction industry in South Jersey will continue to see growth in the year to come."

“The increasing demand for last-mile delivery centers and fulfillment centers has springboarded a significant increase in commercial construction projects. Additionally, the demand for sustainable and energy-efficient construction practices has also contributed to the industry's growth: Blue Rock clients are increasingly focused on sustainable and energy-efficient commercial buildings," he says. "The demand is driven by a growing awareness of environmental concerns and the potential for long-term cost savings. Additionally, there is a rising need for buildings that provide flexible and adaptable spaces to meet evolving work environments and technological advancements. These factors are compelling clients to prioritize sustainable and adaptable commercial construction projects ... Additionally, with a focus on sustainable and innovative construction practices, we may see more environmentally friendly and technologically advanced projects in the future.”

Yoon, too, sees sustainable infrastructure as both the current and long-term future of the industry.

"There seems to be a noticeable overlap between residential and commercial construction trends, especially in sustainability, technology integration, and design innovation. Both sectors are leaning towards energy-efficient techniques, smart automation and mixed-use developments," he notes. "In the coming year, the construction industry is poised to further embrace sustainability, innovation, and digitalization. I’d assume that infrastructure investment and urban renewal will take center stage, boosting demand for construction services."

No matter what direction the industry goes as it continues to forge ahead toward the future, one crucial component of ensuring the region’s construction industry is built atop a sturdy foundation remains a constant: a keen respect for on-site safety to ensure “that inspector or that crane operator can get home safely to their family.”

“Construction is inherently dangerous: There are lives on the line, and this isn’t a video game where you get another chance if you dig a ditch wrong and it collapses and someone gets trapped,” Lalevee points out. “Now that [machinery like excavators] are getting more sophisticated with GPS and machine controls and electronics like we have in our cars, it takes a more sophisticated operator to run it and understand the technology. So training, retraining and education are at the heart of everything we do because we hold ourselves to an extremely high standard so everyone makes it home at the end of the day.”

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Published (and copyrighted) in South Jersey Biz, Volume 14, Issue 4 (April 2024).

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Author: Madeleine Maccar

Building Toward the Future

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