Construction industry spending will continue at around $9 billion until 2021, report finds
It’s a good time to be working in Hawaii’s construction industry. It’s so good that concerns are being raised about a labor shortage being on the horizon if some exceptionally big planned projects go forward.
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It’s a good time to be working in Hawaii’s construction industry. It’s so good that concerns are being raised about a labor shortage being on the horizon if some exceptionally big planned projects go
That concern and reasons for it are laid out in a new
report forecasting construction activity statewide.
The University of Hawaii Economic Research Organization report released for publication today projects that construction spending in Hawaii will hum along
between $9.6 billion and
$9.7 billion this year and for the next two years after rising by $1 billion last year to $9.5 billion.
industry has shown forward movement this year, and the large pipeline of pending work suggests that the industry will maintain a relatively high level of activity for the next several years,” the report said.
This expected relatively high plateau for construction spending is largely driven by a bunch of residential high-rises, several hotel or timeshare towers, resort renovation work,
retail property upgrades and some big government projects including rail and ongoing modernization of Daniel K. Inouye International Airport on Oahu.
Among the ongoing
construction projects are
at least eight residential high-rises on Oahu: Azure Ala Moana, The Central
Ala Moana and Hawaii City Plaza in the Ala Moana area; Nohona Hale, Ko‘ula and ‘A‘ali‘i in Kakaako; Kulana Hale in Kapolei; and Lilia Waikiki.
Several more towers are slated to start construction next year.
A pair of master-planned residential subdivisions, Ho‘opili on the Ewa plain and Koa Ridge between Waipio and Mililani, also
are in the early years of work expected to last more than a decade. And numerous smaller or less high-
profile housing projects are underway or slated to break ground in the next year or two.
“The total volume of new residential construction planned or in progress in Hawaii is impressive,” the
Planned hotel projects
include building a new tower that expands Hilton Hawaiian Village in Waikiki along with a renovation of Tapa Tower on the property, redeveloping the Princess Kaiulani Hotel and building
a timeshare tower on the former site of King’s Village in Waikiki.
If spending reaches
$9.65 billion this year as UHERO forecasts, that would be a decade high and the most since $10.3 billion in 2008. The peak was
$10.7 billion in 2007. All three figures are adjusted for inflation and are measured in 2018 dollars.
Construction costs have been higher partly due to tariffs for steel and other materials imposed by President Donald Trump, according to the report, which cited state and industry estimates that costs last year rose between 2% and 5%. UHERO forecasts that construction costs in Hawaii will rise less than 2% a year over the next three years.
The possibility of starting big government projects
including the redevelopment of Aloha Stadium, Blaisdell Center and Oahu Community Correctional Center — $1.7 billion of projected work for these three alone — could make it hard to find workers.
“If all these planned projects happen, including the stadium and Blaisdell, you could start seeing a situation where labor is a challenge,” said Carl Bonham, UHERO executive director.
UHERO’s report notes that the number and value of building permits issued this year fell off, but said this is in part due to permit processing delays. Also, the timing of one or two large projects receiving permits
at the end of last year instead of early this year could have contributed to the $1 billion gain last year instead of making this year’s gain bigger.
“Building permit numbers have come in surprisingly weak this year, but we think they give a misleading read on forthcoming construction activity,” the report said. “Our discussions with a number of large builders, developers and other construction-related firms paint a very different picture than the weak permit numbers would suggest. We are hearing again the concerns we heard back in 2015-2016 about the hiring problems that firms foresee, should the large volume of pending projects come to fruition.”
UHERO said Hawaii’s working construction labor force is expected to rise by 400 this year to 36,500 workers. That’s 4% below the recent peak of nearly 38,000 in 2016.
Next year construction jobs should rise by 700 to 37,200 and then to 37,300 in 2021, UHERO forecasts.
It remains to be seen whether concerns of a worker shortage, which can push up construction costs, are realized. The fears in 2015 and 2016 eased as the number of jobs declined by about 2,000 over the next two years.
A lot depends on whether and when new big government projects move ahead. Honolulu Mayor Kirk Caldwell faces some resistance at the City Council for redeveloping Blaisdell for an estimated $800 million. Building a new prison in Halawa for an estimated $525 million has passed an environmental review. And a new
stadium budgeted for
$350 million is in a master-
planning phase that could be finished next year or in early 2021.
Another caveat to continued expansion of Hawaii’s construction industry is
the risk of negative economic events locally or
outside Hawaii that could derail projects, the report noted.