3 Ways Infrastructure Construction Will Impact Real Estate

Part of President Trump's new plan for the U.S. economy is to spend billions of dollars in infrastructure construction to repair, replace and retrofit many aspects of the U.S. transportation system.  Many bridges, roadways and tunnels are close to a hundred years old, and showing signs of deterioration.  President Trump promises to address many of these unsafe issues, and launch a huge amount of construction spending to repair and replace these worn out parts of the transportation system.  

Here are three ways that infrastructure construction will impact the real estate industry.

There will be a severe shortage of workers

There is already a shortage of skilled experienced construction workers working in the construction industry.  Right now homes, condos and commercial projects are not being built at a quick enough rate to keep at pace with demand.  Home prices are increasing rapidly in many areas because of a shortage of supply, and new residences are not being built very quickly.  Developers are having a hard time completing apartment and condominium projects, due to the lack of skilled construction workers.  

President Trump's infrastructure construction program will take more construction workers from the already depleted pool of experienced workers. There will be a delay before the labor pool has enough workers with high end construction skills.

Big commercial construction projects will take longer

Skilled labor is needed to build shopping centers, luxury condominiums and stadiums. Many of these workers will probably be be busy replacing bridges and tunnels as part of the new federal infrastructure construction program; with it costly and expensive work needing requiring thousands of skilled laborers. Many of these project will take years to complete.  

Large commercial developers will be competing for the same workers, and in time there will be delays in large projects that require a lot of talented construction workers to complete it.  There will also be a shortage of some supplies required to do framing and concrete work because of increased use of these items in the infrastructure projects.

Housing and new construction starts may drop

New projects depend on a predictable timeline to assure that the completed building can be purchased or occupied by the buyer in a timely way. There is a slower construction growth rate on the way for 2017. Many times there are financial penalties built into the contract if the builder or developer fails to deliver the project on time. Builders may be less willing to take risks with liability and penalties if they can’t predict when a project will be completed, whether they will have enough labor, or whether there will be a shortage of supplies. Instead of building new projects, they may wait until the peak of infrastructure work has passed, and there is a more builder-friendly oversupply of workers.

Looking Forward

The new infrastructure construction plan promises to improve many of the worn out parts of America's transportation system. This will be a boon for many aspects of our economy. Many companies will have more work than they can handle. The results may be that the shortage of labor may cause a further inflation in labor and construction prices for the CRE industry. However, once completed these infrastructure improvements would pave the way for a new wave of commercial and industrial construction.