Although 2005 holds the record for number of hurricanes within a given season at 15, it appears that 2017 will also go down in history as one of the worst all-time active hurricane seasons. 2017 saw multiple Category 5 storms that resulted in billions of dollars in damages. In addition to rising energy costs after storms like these, hurricanes also have an impact on other parts of the economy, including the construction industry. From the countless homes that are damaged due to flooding to those business completely destroyed by the wind; the destruction left in the wake of recent hurricanes affected both residential and commercial construction alike, and the owners are left with very few options but to rebuild.

Labor Shortage Grows

The demand for skilled labor, like carpenters, plumbers, electricians, etc., continues to climb in the wake of recent storms, and a growing number of contractors are not only finding it difficult to enlist qualified workers, but are also struggling to recruit workers who can pass their initial drug tests. According to a recent survey conducted by Associated General Contractors of America, 70 percent of construction firms nationwide report they’re having a hard time filling openings for skilled construction workers. In an effort to recruit and train more qualified workers and solve the labor shortage, many construction firms are increasing wages and offering other incentives like bonuses.

Construction & Energy Cost Inflation

The price for many of the most common building materials used in the construction industry including lumber, plywood, wallboard, structural steel, rebar, etc. all typically spike in the months following major hurricanes. For instance, some forecasters have predicted that the price of lumber could increase upward of 10.1 percent in the foreseeable future. Hurricane Harvey also caused a disruption to steel imports resulting in higher prices. In addition to impacting the cost of housing materials, the price for natural gas, crude oil and gasoline was also hit hard by recent hurricanes. According to the Bureau of Labor Statistics, the building cost has increased on all of the following construction projects in 2017:

• Single-Family Homes: +5.68%
• New Warehouses: +4.07%
• New School Buildings: +3.81%
• New Office Buildings: +1.64%
• New Medical Buildings: +2.37%
• New Industrial Buildings: +4.48%
• Power Plant: +5.89%

What’s Covered by Insurance?

There are those hurricanes, like Irma, where most of the damage is caused by the wind, and insurance companies are more likely to cover that type of damage. But, there are also water storms, like Harvey, that result in substantial flooding. For instance, some parts of Texas, and Southeast Louisiana, received over 60 inches of rainfall which triggered flash flooding that resulted in properties being submerged in water. Unfortunately, many insurance policies don’t cover damages associated with flooding, so many properties are left to deteriorate until the owners have the means to complete the repairs. As many new projects in healthcare construction and higher education construction are being planned across the flooded states, some of them are being delayed to poor worksite conditions.

Based upon several resources, the recent hurricanes resulted in both temporary and lingering impacts to the construction industry.

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