Examining the Workforce Shortage in Construction and Logistics

Workforce Development

A robust economy has undoubtedly been a boon to developers, owners and investors across the commercial real estate industry. Low unemployment has helped support demand for office space and apartment units, and the rapid expansion of e-commerce has contributed to strong demand for warehouse and distribution facilities. However, these trends also present challenges for warehouse owners and for developers, as they and their tenants are finding it increasingly difficult to find enough qualified workers to staff construction crews and distribution centers.

While low unemployment has made recruitment and retention more challenging for employers in most industries, recent trends have contributed to more dramatic workforce shortages in construction and logistics than in other sectors. The construction industry has struggled to recover the workers it lost during the Great Recession. This can partly be explained by declining secondary school resources devoted to vocational education and relatively limited millennial interest in the construction trades. According to John Wagner, national construction director at global insurance brokerage firm Gallagher, most of the 6.2% increase in construction costs in 2018 can be attributed to increasing labor costs.

The logistics industry faces a similarly limited pipeline for new workers just as demand for workers in last-mile distribution centers is at record levels. “Increasingly, development of e-commerce warehouses is contingent not only on close proximity to large customer populations but also on finding increasingly scarce labor,” observed David Egan, CBRE’s global head of Industrial and Logistics Research in a comment for Material Handling & Logistics. As traditional retailers invest more heavily in e-commerce and Amazon and Walmart race to roll out one-day delivery, it's hard to imagine that demand for logistics workers will ease any time soon.

In an upcoming report, the NAIOP Research Foundation will evaluate the origins of the workforce skills shortage in construction and logistics, and identify strategies that employers are adopting to recruit and train the next generation of workers. The report will provide an overview of existing workforce development programs and resources such as employer-provided training programs, career and technical education programs offered by community colleges, and union-administered apprenticeship programs.

The report will draw on interviews with employers, educators and community leaders to profile innovative public-private partnerships that target workforce development in construction and logistics. These include programs to transition veterans of the armed forces into construction careers, train rural youth for entry-level warehouse and construction jobs, and expose teachers to the construction industry so that they can raise student awareness of careers in construction. The Foundation’s research will also highlight how employers are adopting new technologies such as augmented reality, 3-D printers, and wearable technologies to improve worker productivity and safety.

With continued demand for workers in the construction and logistics trades colliding with a wave of worker retirements, employers will need to look for new methods to improve worker training, productivity, and recruitment. The report’s case profiles provide useful models for effective workforce development programs that benefit employers, their workers and the communities in which they operate.

The final report is scheduled to be released in July 2019. Visit naiop.org/research to view the latest Foundation research reports, white papers and forecasts.