Industrial O Indiana

Where’s the labor? Construction companies struggle to keep up with demand for spec construction in Indianapolis

Construction crews can't keep up with Indianapolis spec demand,ph01

Jonathan Hardy, a broker with the Indianapolis office of Bradley Company, said that demand for new industrial construction is as high as ever in the Indianapolis market. This is why the large number of spec industrial buildings rising throughout the market is no surprise to him.

And for as much spec industrial as there already is in the market, Hardy thinks there could be even more, if construction crews could move fast enough, and find enough labor, to keep up with the demand.

“There is so much going up right now in town,” Hardy said. “We have so many deliveries. But the cost of construction today is also rising. That is one of the most prohibitive reasons why we don’t see even more going up. Every company in central Indiana is forecasting that they are going to keep growing. But there are only so many construction companies out there. There are only so many people who can lay block.”

Hardy estimated that the lead time on precast can be as high as 12 months today.

“You can’t get physical material,” he said. “What we are finding is that spec construction isn’t slowing because the market is slowing. It is slowing because there simply aren’t enough construction crews available to build it as fast as companies want it.”

Research from JLL confirms Hardy’s view. JLL in its fourth-quarter industrial report, said that the Indianapolis market set a new record with more than 7.5 million square feet of new industrial product delivered in 2017. JLL said that an additional 6.3 million square feet of industrial space remained under construction as 2017 ended.

JLL said that 11 speculative industrial buildings delivered in 2017. Five of these buildings already had a tenant in place as of the end of the fourth quarter and three were fully leased.

Hardy said that with demand so high, construction labor is in especially high demand throughout the Indianapolis market. It’s not unusual, he said, for a forklift driver here to make $30 an hour.

“We have onsite daycare for forklift drivers,” he said. “That’s unheard of. That’s not a bad thing. It’s a good thing. If you help people take care of their families, you’ll have better employees who do better work. But it is a fundamental shift in the industrial sector today.”

And what’s behind much of this demand? E-commerce, of course.

Hardy calls it the Amazon effect. Once Amazon sets its roots in a market, other ecommerce players follow. That’s what is happening now in Indianapolis.

“You always want to live next door to the smartest guy in the business,” Hardy said. “Companies figure, if they follow Amazon, they have a chance to do well, too.”

When Ikea and Topgolf entered the Indianapolis market, other similar big-box stores followed. Hardy refers to this as drafting, these other retailers followed in the draft left behind the ship captained by Ikea. The same thing is happening with Amazon, as other e-commerce retailers follow in the online giant’s draft.