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.
Construction in the Mile High City — and Colorado as a whole — is booming, as younger people continue to pour into the area. But that trend has left one big question for local officials and businesses: Will they stay?
The ongoing surge in apartment construction has met the strong demand from new residents, but strict condo defects laws and an overall lack of for-sale supply have made it difficult for those people to put down roots and commit to ownership.
However, that could be starting to shift with new legislation that aims to revive condo development in the state. With a bump in for-sale inventory comes office, retail and other commercial development — and construction companies are optimistic that a new wave of condo and commercial projects is on the horizon.
PCL, one of the nation's largest contractors, has a strong presence in Colorado, with both its national headquarters and Denver District located in the state. The Denver District specializes in the commercial buildings sector and completes the majority of its work in Denver, Vail and Aspen, in addition to projects across Colorado.
Construction Dive spoke with Lucas Mallory, director of business development for PCL's Denver District, about shifting demand in the state, challenges that come with increased activity and the growing appetite for more collaborative project delivery methods.
Editor's note: This interview has been edited and condensed.
How would you describe current demand in the Colorado market?
MALLORY: Demand over the last few years has been focused on apartments primarily. Denver is a great, vibrant location and is among the top places for 18-24 year olds. We’re getting a lot of people out of college moving to Denver — a lot for the lifestyle, and because it’s a very engaging and active community. A lot of people are moving into the city, but they haven’t been the demographic that wants a house in the suburbs. While housing in the suburbs is blowing up, there has been a lot of need and demand for residential downtown development that’s walkable.
The rental apartment market has been incredible over the last couple of years. But because of legislation in Colorado, there haven’t been condos. There have been a lot of issues around condo development and risks. The challenge with that is — people are stable when they own. While there are a lot of people moving to Denver, there’s some hesitation on the infrastructure needs and the office needs when the residences aren’t there for people to live in. Apartments have been very strong, they’re maybe starting to fade out, but then the next market is the for-sale market. It’s such an underserved need here in Denver.
Lawmakers recently sent a measure aiming to revive condo construction and ease the threat of defect lawsuits to the governor. Does that bill go far enough?
MALLORY: More needs to be done, however, after that happened, I got a call from a developer saying, 'We feel the landscape is starting to turn.' People are very optimistic, and they’re starting to move jobs forward because they understand that the landscape is changing. There are still some unknowns around how issues would be tried in court and how insurances would deal with any condo defect claims, but people are getting a lot smarter about it. Municipalities and cities are making it known that they want to figure out how to make it work. We’re seeing quite a bit of condo product being priced and a few projects are getting started. They’re tentative, but they’re starting to move.
PCL completes a significant amount of work for mountain resorts. What unique challenges do you face on those projects?
MALLORY: Ideally, every project would start in May and finish by November so that the revenue of the ski season is there, or that there’s minimal impact on the municipality. For projects that can fit in that [timeframe], you have a few challenges. One is labor. If you look at towns like Aspen and Vail, workforce housing typically isn’t available. You have to bring in workers from outside those regions, and finding affordable places for them to stay and work in those towns is a challenge. There are also logistical challenges. Through the summer, [those areas] will sometimes have no-work periods during [events or festivals]. You have to be cognizant of where their revenue comes from — it’s tourism in the summer and then the ski season — and make sure there’s minimal impact on that area.
You can get 100-plus inches of snow, and you’ll have to know how to continue construction while maintaining the quality of what you are building. How do you deal with potential schedule delays for things out of your control? We work hard to build in contingencies and alternates. We try to work with the clients and designers to understand the impacts that weather and access have so that more money can be spent on the building itself. A lot of collaboration is needed in the mountain environment to talk through all those issues.
Regarding that collaborative approach, do you participate in design-build or public-private partnerships?
MALLORY: [PCL is] very active in P3s in other markets, and we’re pursuing some P3 projects here in Denver. It’s a unique project type and delivery type. We’re very active here in Denver in design-build. Part of our approach is our preconstruction team spends a day a week in the colocation, and we work out of our architect’s office. We’re talking through design details, and we’ll bring in our subcontractors, which helps minimize the risk on all sides. Collaboration can be a buzz word, but the core of it is talking about the risks openly and then working together to minimize them.
Has Colorado overall been open to these alternative delivery methods?
MALLORY: There is an appetite and some hesitation. Transportation is definitely in front of civil infrastructure in terms of P3s. The conversation comes up a lot. The city’s dabbling in using P3 in their upcoming large projects, but everyone realizes a lot more conversation needs to be had to figure out how to do it.
The value of design-build has definitely been realized. It’s a new delivery type, but it’s being used more and more. [Owners are] seeing there is benefit for controlling costs and having everyone at the table early. People definitely want to move forward and find that better way of building the jobs.
Are you experiencing a tight labor market in Colorado?
MALLORY: It is a challenge. There just aren’t people out there. We see that and talk about it with our subtrades. Five or six years ago, if you needed a good crew of 10 and the job was running behind schedule, you could call your sub and say you need five more [workers] to catch up, and that would happen. Now your crew of 10 may be a mix of experienced and inexperienced workers. Not only can you not get that additional crew to speed up the schedule, but sometimes your 10 becomes eight, becomes seven. You have to have those candid conversations with your trades. We have to be much more proactive early on at understanding how our trades are going to staff their jobs, what their workforce looks like, and helping to keep them on schedule.
Do you expect the labor shortage to ease anytime soon?
MALLORY: It’s going to continue to be tight, but it also means more opportunity: Let’s look at how we can be more efficient. Let’s move the industry into looking to modular and prefabrication and how can we minimize the labor needs onsite. How can we be smarter about when we start jobs? If everybody’s only looking after their own project and saying they want to start May 1, then you have this massive spike [in May]. But if clients are willing to look at this and say [they don't need] to start until the fall, then all the crews that just got off doing school work over the summer can level their workforce. You can be smarter and more efficient.
It hasn’t been ideal, but it’s a good thing for us that there’s still work out there — that people want to move to Denver and there are jobs. We just have to make sure we are smart with the available workforce.
Are there any state or local regulations that have a significant impact on your business?
MALLORY: The largest influence is when you have a lot of work, it’s going to inherently put strain on the planning department. We have a great planning department here, but when you double the number of jobs, it’s hard for them to double the number of people or the number of resources. Permits that used to take four weeks can take six, or 10 or 12. Increased work in the region is just going to put a strain on those resources. Inspectors still need to inspect. The city has been hiring third-party services to get some of the easier reviews out, and they have been increasing their staff and resources.
Will Denver continue to draw in new people, or do you expect the boom to slow down?
MALLORY: People want to live here. I can’t imagine that slowing down. But what’s going to hurt us is if we don’t have that affordable housing where people can live here and be able to afford a house or have a condo option or have reasonable rents, that’s going to start changing that dynamic. There are other cities that are really nice that have a lower cost of living. Our risk here in Denver is ensuring that we have enough opportunity to ensure the cost of living doesn’t spike too high [and discourage people from staying here].