Last year marked a milestone for the country’s youngest generation of workers, commonly known as millennials: They overtook baby boomers as the largest workforce segment in America. Employers should be ecstatic that elevated rates of retirement are positioned to be offset by an influx of younger, energetic, tech-savvy workers ready to stimulate productivity.
But in the construction industry, firms continue to wrestle with skills shortages as older workers in occupational categories such as welding and carpentry retire in large numbers with their potential successors disproportionately pursuing jobs in industries such as finance, professional services and health care. In 2002, 11 percent of construction workers were aged 55 or older, according to data from the Bureau of Labor Statistics. By 2015, this share exceeded 20 percent, per the Current Population Survey.
What’s more, despite massive growth in the population of twenty-somethings in recent years, by 2015 the fraction of construction workers between the ages of 20 and 24 was around 7 percent—down from 11 percent a decade ago.
This is hardly where millennials’ impact on construction ends.
Millennials Tend to Congregate
Construction spending has tended to blossom in communities that attract millennials in large numbers. Whereas baby boomers and Gen Xers were looking to move into larger suburban homes, the past decade was dominated by movement in apartments situated in dense, urban environments.
The Great Recession shaped some of these preferences. Having observed the foreclosure crisis and the massive loss in housing wealth between 2006 and 2010, millennials have generally been less interested in homeownership. Many have student debt, but no children or spouse, which also renders apartment living more appealing. The shakiness of employment markets in recent times also has induced younger workers to prefer to rent rather than to tie themselves firmly to a specific region.
Denver represents an example of millennials’ migratory patterns. Attracted by progressive policymaking, a hip western vibe and proximate world-class recreational opportunities, Denver’s fortunes have soared as the city has emerged as one of the nation’s millennial meccas. According to a study prepared for the Metro Denver Development Corporation, millennials comprised almost 25 percent of the region’s population and 35.9 percent of its labor force in 2015.
Not coincidentally, Denver has been home to an abundance of construction, led by its multifamily segment. In May 2016, The Denver Post reported that almost $2.5 billion in construction projects were under way downtown, including 18 residential, commercial and civic projects. At that time, another 14 significant projects were in various stages of planning. In 2016, the Denver metropolitan area added more than 10,000 net new jobs in the segment that incorporates construction.
Other obvious millennial meccas include Atlanta; Seattle; Portland, Ore.; Los Angeles; Austin, Texas; Raleigh-Durham, N.C.; Silicon Valley, Calif.; Boston; Washington, D.C.; Baltimore and Miami. According to an article published in the Puget Sound Business Journal, Seattle’s downtown saw the completion of 37 private construction projects in 2015, with another 39 projects starting the following year. Not surprisingly, the region added nearly 6,000 construction jobs in 2016.
Many millennial markets are characterized by cutting-edge, rapidly expanding firms such as Amazon, Under Armour, Facebook and Google. Helping to fuel this urbanism is millennials’ tendency to adapt to smaller living spaces. These urban dwellers seem to gravitate toward what Glen Kelman, CEO of the online real estate firm Redfin, calls an “on-demand lifestyle.” In other words, millennials place more importance on what surrounds their living space than what’s actually in it.
It Won’t Last
Generational behaviors change. Several years ago, observers snickered as many millennials remained ensconced in their parents’ basements and attics. But since the end of the financial crisis, millennials have steadily left their family abodes in favor of city living.
The next phase will involve marriage and children, though not necessarily in that order. The oldest of the millennials will turn 37 this year. While this is a generation that waits longer to get married and have children relative to prior generations, biological imperatives abound. As such, construction activity is set to migrate more aggressively to the suburbs, including in the form of single-family construction. This ultimately may help shore up the fortunes of suburban malls, which are presently under severe pressure from the growth of e-commerce and the lack of suburban population growth during a period characterized by soft single-family home construction.
Author: Anirban Basu is chief economist of Associated Builders and Contractors. For more information, visit abc.org/economics.
Article originally posted at: http://www.constructionexec.com