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.
The southeastern U.S. is seeing an uptick in manufacturing and industrial activity thanks to its many ports, distribution centers and low business and living costs. That has the region’s construction industry looking up, says Jeff Bischoff, executive vice president of business development for Lexington, KY–based Gray Construction, which specializes in industrial construction.
Kentucky is one state poised to benefit from the renewed growth. Bordering the industrial Midwest, it has a strong automobile manufacturing industry and is home to major distribution hubs that are driving construction activity.
Construction Dive spoke with Bischoff about Kentucky's growth markets, the impact of the state’s new right-to-work law, and the state of labor there.
Where in Kentucky are you seeing the strongest activity now?
BISCHOFF: Right now we’re seeing it in Louisville, Bowling Green, Elizabethtown — basically the I-65 corridor. Automotive is very strong in Kentucky and that drives our economy from a manufacturing standpoint. Food and beverage remains consistent, as well as distribution with the UPS Worldport hub in Louisville.
What are the biggest challenges to building in the state today?
BISCHOFF: It's [maintaining] the skilled workforce. Our No. 1 priority is safety and then second to that is quality. Both of those are a direct result of the skilled labor that our subcontractors employ. As demand increases throughout the construction market and subcontractors get busier, we are seeing a little bit of price creep in our markets as some of those better subcontractors are busier and perhaps harder to get on our job.
What are you doing to bring in new labor?
BISCHOFF: We're actively recruiting at numerous colleges, universities and technical schools in Kentucky and throughout the U.S. We also work with high schools to communicate educational requirements for recruiting. On our website, we keep an updated list of career fairs and other recruiting events that we have coming up. We also have a robust internship program, bringing in 50 or so college interns at the start of every school year as well as during the summer months.
How do conditions in Kentucky compare to the other states in which Gray builds?
BISCHOFF: I'll use the Southeast as my benchmark. Kentucky is on par with the rest of the region as it relates to labor availability. Certain market segments and areas are different. Down in Houston, for example, the petrochemicals and heavy processing work makes that an extremely challenging market for finding pipefitters and folks on the mechanical side of the business. Kentucky is a good state to do business in; the permitting and regulatory approvals processes are pretty quick. Right-to-work is a big plus for us, but we don't have a problem with working on union or nonunion jobs.
What impact has that new legislation had on construction in the state?
BISCHOFF: Right-to-work is a huge shot in the arm for the recruitment of industry to the state. We've seen it in other states. For years, Kentucky was one of the only non-right-to-work states in the southeast and that hindered economic development. Now that it does have right to work, I think we are seeing a measurable increase in the number of companies that are looking to do business here.
The new presidential administration has pushed manufacturing investment. What kind of impact are you anticipating?
BISCHOFF: The "Trump effect," if you will, has [already] had an impact on our business, specifically when it comes to foreign direct investment. We have seen manufacturers want to locate in Kentucky, and in the U.S. in general, for fear of tariffs that might be coming down from the Trump administration. We are seeing a little bit of a bump there and we remain optimistic the trend will continue. Typically, 70% of our annual volume is from companies headquartered outside of the U.S.
Where are the opportunities ahead in Kentucky?
BISCHOFF: We are still very bullish on the food and beverage market. We think there's a lot of growth yet to be had there. We like the metals market, certainly on the aluminum side we see a lot happening there. Aerospace is another market that we think offers some promise. There is still large demand for distribution space and we are excited about what that market holds.
Kentucky is centrally located in the U.S., and so it has always been an attractive place to do business. Toyota coming here in the 1980s fueled an influx of automotive suppliers to the region. The industrial wave has moved into the Southeastern U.S. to take advantage of cheaper labor, cheaper energy costs and just a good solid skilled workforce. Kentucky has benefited from all those factors.
What makes construction in Kentucky different from other U.S. states?
BISCHOFF: There is harmony among union and nonunion contractors here and we seem to work well together. That’s a refreshing and somewhat unique aspect of doing work in Kentucky.