Wildfires and hurricanes impact local construction industry

RENO, Nev. (KOLO) According to the National Oceanic and Atmospheric Administration, there have been 16 natural disasters so far in 2017 costing $1 billion or more. But in the course of two months, the country was dealt a series of devastating blows, starting in the Gulf Coast.

This hurricane season was relentless; three Category 4 hurricanes made landfall all within a month. That is a record for a single year.

The total damage from Hurricanes Harvey, Irma, and Maria is still being calculated, but the storms had an immediate impact felt beyond the Gulf Coast.

“It's put a tremendous pressure on material cost,” Bill Rodgers, managing principal with the Cummings Corporation, said. “Specifically lumber products, visqueen, roofing, and polyvinyl chloride products- PVC pipe.”

Hurricane Harvey wrecked havoc on the country’s crude oil production.

“Harvey hitting the gulf coast affected all the refineries in the area,” AaronWest, CEO of the Nevada Builders Alliance, said. “Those refineries provide the raw materials for the PVC pipe, so there's been an immediate hit on that side of it which has pushed PVC pipe prices over 30%”

Industry experts predict full ethylene production may not pick back up again until November and even then the demand for the product will continue to grow.

“As they get those refineries online and start creating more product, then we have the demand that is pulling it back into those areas as they start to rebuild,” West said.

Construction projects already in the pipeline in Reno are also worried about the rising costs of materials.

A $40 million student housing project near the Circus Circus is slated to break ground in 2018, but developers say they are keeping an eye on the cost of materials.

“This is really the most critical two months; moving forward is to make sure we do everything we can in term so our design and working with our contractors to identify any issues right now or as soon as possible,” Ken Krater, president of the Krater Consulting Group which represents the housing project, said. “We are hoping that by being on the west coast, we're more insulated from those cost increases, but I still don't think anybody has a really full grasp on how much damage occurred in [the Gulf Coast].”

The west coast has also seen its share of disasters. Wildfires in the northwest earlier in the year placed pressure on the lumber industry which is already facing rising prices from Canadian tariffs.

“Between the beginning of the year and now, we're looking somewhere in the neighborhood an average of 36% increase in lumber cost,” West said.

According to West, lumber makes up about 25% of the total cost of a home. Plumbing is less of a cost, but with prices on multiple materials rising, the overall costs of a project goes up.

Rodgers recently gave a presentation to the Washoe County School Board of Trustees, breaking down the projected increases in materials, and how that impacts the total cost of building new schools in the area. During the 2016 campaign for WC-1, the ballot initiative to raise the sales tax to pay for new schools, the WCSD said it would cost about $55 million to build new middle schools and $23 million for elementary schools. New estimates indicate the two new middle schools, in Spanish Springs and Sun Valley, will cost $85 and $80 million respectively. The elementary school in the South Meadows will cost $34 million. Rodgers attributed some of that increase to the rising costs of materials.

But material costs aren’t the only concerns facing the local construction industry. The North Bay fires in California earlier this month destroyed around 8,400 buildings. In Santa Rosa alone, more than 2,900 homes were destroyed. That is 5% of the total housing supply in the area. The region faces years of rebuilding, and that has local contractors worried about Northern Nevada’s labor force.

“We've seen a shortage probably for the last two years,” Bill Miles, President and CEO of Miles Construction, said.

According to Miles, rebuilding from the California wildfires will take time, but when it does, some workers from Nevada will likely head over the state line.

“Typically, California pays very high wages in their construction industry,” Miles said “Everybody is projecting that they are going to see even more labor shortage due to the fires. When you're vying for good, competent laborers, a lot of it is going to be how much pay can they get, and how much money they can make.”

If that happens, costs here will continue to go up and construction schedules will take longer, unless we can draw more people into the local construction industry.

“We're still going to feel the impact,” Miles said. “We're never going to be isolated from the impacts of these natural disasters, but if we can grow our construction workforce here, I believe it will do nothing but help.”

“Honestly, I don't think anybody knows where it's going to end,” West said. “But at the end of the day, all of it is affecting affordability.”

As Northern Nevada heads into winter, West says that may be the break we need get a better grasp on the impact of this year’s natural disasters.

“It's going to be a real game changer for us,” he said. “If we can get into that winter cycle and even though the demand is still there, we physically just can't put out the product. I think at that point we'll see things kind of stabilize on our end.”