Across much of the country, a skilled craft labor shortage has construction firms—particularly those operating in the Dallas, Phoenix and Los Angeles areas—getting increasingly creative to find the talent necessary to unclog a pipeline of industrial and commercial projects.
This is not the situation in Baton Rouge.
Here, demand is on the decline. Construction employment in August was down 2,600 workers, or 5%, over a 12-month period, ranking Baton Rouge second nationally in terms of construction job losses.
Indeed, like the rest of the U.S., Louisiana’s capital city continues to see a shortage in the number of qualified, skilled craft workers available for nonresidential construction jobs. But the other reality right now—evidenced by employment figures released in early October by the Associated General Contractors of America—is that there’s just not that much work available.
Economist Loren Scott, in his 2020 Louisiana Economic Outlook, describes the Baton Rouge metro area as being in the midst of an industrial construction “lull,” or a trough between two crests of explosive industrial activity.
Scott, however, is optimistic about growth next year, citing an upcoming round of planned large-scale private investments—including the Shintech expansion ($1.5 billion), a new methanol unit for Methanex ($1.4 billion) and a new Shell Chemical unit ($1.2 billion)—which are expected to get underway in the next few months.
There are also some major public sector projects planned, like MovEBR ($1 billion) and some federally-funded flood mitigation and resiliency projects (totaling $2.6 billion), though work on most of those projects won’t begin for several more years.
“We’re cautiously optimistic. Our training centers are full and our members are bidding on work, so we think the work is coming,” says David Helveston, president of ABC Pelican, which has more than 300 members across 52 Louisiana parishes. “That being said, these projects are not assured. They can go away, and they can move to Texas.”
Exacerbating the lull, says Helveston, are several challenges deeply ingrained in Baton Rouge’s political and business fabric. These include, most significantly, the continued uncertainty surrounding the industrial tax exemption program, as well as other issues related to the state’s tax code. This comes at a time when cities in Texas, like Beaumont, Baytown and Corpus Christi are rolling out the incentive carpet for industrial investors.
“We’re in a weird spot right now,” Helveston says. “There are significant job losses in the construction market, but the current labor pool is honestly not that tight.”
Essentially, some $5.2 billion of announced industrial projects are up in the air, prompting many local construction companies to shift their focus toward bidding on projects in other markets and diversifying their portfolios of services.
State of play
Local firms specializing in industrial and commercial construction are feeling the effects of Baton Rouge’s regular year-over-year declines in nonresidential construction employment, to varying extents.
First and foremost, there are at least some companies—many of which declined to provide official comment for this story—that don’t expect many projects to go up to bid locally.
“Even though there’s less people out there, I feel like we’re being more selective with our projects,” says Beau Leitner, vice president of operations for Doyle Electric, adding there are fewer commercial and light industrial projects up for bid so far, compared to some years past. “We’re trying to stay around 100 employees and tighten things up internally.”
Leitner’s outlook for the next 18 months is less than optimistic. He’s generally noticed longer lag times between project announcements and groundbreakings—including a couple of contracts that were awarded to Doyle last year (which Leitner declines to name). Both were delayed because of issues tied to the securing of federal funding during the federal government shutdown earlier this year.
To mitigate any negative effects from this, Doyle has also been trying to diversify its repertoire by organically expanding its service department, with workers becoming more reactive to current clients’ needs—whether it’s addressing a small, quick-fix lighting issue, or offering more specialized preventive maintenance or predictive testing services.
Over the past three years, Leitner says service department volume and personnel have nearly doubled, with department revenues up between 70% and 100%. Today, the segment comprises up to 15% of Doyle’s overall business.
Meanwhile, The Excel Group is diversifying its footprint, chasing and stocking up on a significant amount of out-of-state work.
“If we were waiting just for work here in Baton Rouge, we’d be in trouble,” says Lauren Champagne, vice president of Human Resources for The Excel Group. “Our CEO [Dave Roberts] always wants to expand and grow where it makes the most sense for us, and right now, that’s all happening out-of-state.”
Excel has 12 offices throughout the continental U.S., along with one in Puerto Rico and one in St. Croix.
Acknowledging it’s been a slow time for construction locally, Champagne says the number of the company’s projects in Baton Rouge has “fluctuated,” but not expanded. Excel’s strategy has been to “organically grow some current contracts and add more services,” she adds.
Moreover, the firm has buckled down on efforts to forge a strong pipeline, forming critical partnerships with high schools. Excel recently hired several local students who participated in Mayor Sharon Weston Broome’s Youth Workforce Challenge Program.
“Getting in front of these kids at a young age and exposing them to industry is critical,” Champagne says. “We want to start them off having a positive first impression of the industry. It goes a long way.”
Aside from Scott’s projections, there are some other positive forecasts for construction in the Baton Rouge area. The LSU Center for Energy Studies has calculated there are nearly $20 billion worth of capital expenditures for LNG export projects along the Gulf Coast in 2020. By 2021, total capital expenses for LNG export projects are expected to surpass $30 billion along the Gulf Coast.
Additionally, Sasol has spent $4.3 billion with companies in Louisiana out of $12.9 billion total, including Turner Industries in Baton Rouge.
Like ABC Pelican, industry leaders are, for the most part, remaining cautiously optimistic.
“We think it’ll start picking up again early next year,” says Connie Fabre, executive director of the Greater Baton Rouge Industry Alliance. “Now is a good time for people to make sure they have good procedures and take stock in the workforce by training their craftspeople.”