Editor's note: This article is part of Construction Dive's 50 States of Construction series, in which we talk with industry leaders across the U.S. about the business conditions in their market.
Virginia's construction market thrives on stability. With federal agencies and several major universities located within the state, construction companies can expect a steady stream of work in Virginia. And now, similar to the rest of the country, that demand is booming.
With increases on the demand side, however, comes challenges involving supply. The tight subcontractor and skilled-labor pool, combined with rising material prices, is contributing to inflation in the industry.
For John Lawson, president and CEO of Newport News, VA–based W.M. Jordan Company, though, this is just a temporary stage in the cyclical construction business. W.M. Jordan, one of the state's largest construction managers, works in a variety of sectors, including higher education, senior living, government, hospitality and retail.
Construction Dive spoke with Lawson about the steady nature of the state's construction industry, as well as the impact of a new presidential administration and the challenge of a supply–demand imbalance.
Editor's note: This interview has been edited and condensed.
How does the construction industry in Virginia differ from that of other states?
LAWSON: It’s an interesting mix. With the federal government in Northern Virginia, there are a lot of federal work opportunities and a number of military bases. We’ve also got some of the best higher education institutions in the country here. There’s always building going on at those campuses. The economy is very good. We’ve got a number of strong, good employers. Across the board, we’re as busy as we’ve ever been.
We’re a very resilient state because we have a high percentage of college graduates, and we have a lot of areas that are almost recession-proof because — regardless of what happens to the local or national economy — the Norfolk Navy base is not going away. A lot of the intelligence agencies associated with Washington are not going away. Government may grow a little bit, it may shrink a little bit, but it’s always going to be there. [It's the] same thing with higher education.
Which sectors are seeing the strongest demand right now?
LAWSON: Higher education, medical, senior living and federal are probably the strongest sectors. Hospitality is strong, too, but that’s been hot for the last few years, and I think that’s going to slow down.
Why is that?
LAWSON: Just like anything, you can overbuild the market. There was a need for a lot of new [hotel] product, and a lot of it has been built, so that need has been met. It’s kind of like the multifamily segment. There was a big need for apartments, and they were going very strong, but a lot of the millennials that populated the multifamily market are now looking at the attractiveness of having their own single-family residence and raising a family.
Which sectors do you have your eye on as future growth areas?
LAWSON: All the areas we operate in, they’re not going to go away, so we can maintain a presence in each one. Medical will continue to be strong. The Department of Defense is going to be stronger, if you can believe some of the things being said in Washington. For senior living, there’s a huge amount of baby boomers that are going to be of retirement age. That’s strong now and that will be stronger. Medical goes hand-in-hand with that.
Have you seen any change in federal work under the new presidential administration?
LAWSON: The government is big and slow, so it takes a while to change direction of the federal government. Indications are positive, but it doesn’t happen in three months.
Even though you don't work in the transportation sector, how would a massive federal infrastructure plan — like the one touted by the president — impact your business?
LAWSON: What is going to be advantageous to everybody is having better transportation, having better and more roads, and being able to more efficiently access our various sites and offices. That helps everybody. When the economy is the recipient of a large cash infusion — it doesn’t matter whether it’s buildings or transportation — each dollar that’s spent usually supports four or five other jobs. The people working on new roads have to shop, eat, have homes, and on and on. If you infuse a large amount of construction money in any area, it picks up the entire economy as a result.
How do you view the current regulatory environment, and do you see it changing in the future?
LAWSON: It seems like every month we have a new federal regulation or state regulation. They’re not interpreted uniformly across all areas and all states. What’s acceptable in one area is not acceptable in another. The current administration’s effort to reduce regulation and simplify the tax code is very beneficial to our industry. In some cases, it takes longer to get all the permits than it does to build the building. And that’s wrong.
What are the biggest challenges facing your business right now?
LAWSON: The biggest obstacle is finding good people and the [overall] supply–demand imbalance. As things heat up and as the demand for construction services is greater, the supply of workers and the supply of materials is not as available, and therefore we see inflation in our industry. Inflation is a key concern.
We also need subcontractors. When you have a prolonged recession like we had, a number of companies went out of business. The strongest ones that could weather it downsized their operations. Having gone through that tough period, a lot aren’t willing to expand back to the size that they were. That creates a supply–demand imbalance in that area of our business.
Is the rise in material prices a recent trend?
LAWSON: Yes, it’s mainly [happened] since October. It’s across the board — in drywall, metal studs, insulation, really everything.
How does that supply–demand imbalance impact your business?
LAWSON: We try to be more selective, both in who we work for, who we work with — when it comes to designers and subcontractors — and, of course, on profit margins. When you have to take a job to keep your people busy, your profit margins contract. When you’re able to be selective because you don’t want every job and you only want to work for the best people, you can demand a premium.
Do you see that imbalance shifting soon, or will it be an ongoing trend?
LAWSON: Everything that I’ve seen in my 42-year career shows that it comes in cycles. Currently, we’re looking at a problem with inflation and not having enough people. But because we are an industry that is hiring and paying good wages and good benefits, more people will come into our industry, and that should change.
What is your company doing to draw in qualified employees?
LAWSON: Being a construction manager, most of our employees have four-year and postgraduate degrees. Our intern program is very active, where we take kids in college in the summers and place them in different positions in our company. What we’re doing is growing our future workforce. If they stay with us during school, they’re engrained in our culture and our brand, so we can more quickly get them to an upper management role.
Looking ahead, what are you most excited about in the industry overall?
LAWSON: I love the industry’s attraction to and commitment to innovation. The modeling and simulation we do is just fascinating. The upside potential for gains and efficiency in productivity is significant. A lot of the younger people are very attracted to that type of career. We use a lot of drone technology to do 3-D scanning, infrared mapping, lots of things that you didn’t do in the past, and that certainly has a strong future. Innovation is something that is exciting and creating a lot of opportunities.