Construction outlook: Local general contractors lean into ‘niches within construction’
By Stephen MacLeod – Reporter, Memphis Business Journal
May 29, 2023
Memphis-area general contractors are seeing a market change around them as BlueOval City’s impact begins to materialize.
Area contractors have seen some slowdown, rising subcontractor wages, and new possibilities in the 2023 construction market.
MBJ spoke to three local contractors to see how things are going. They are: Brett Grinder, managing principal of Grinder Taber Grinder; Beau Yarbro, vice president and general manager of F&F Construction; and Scott Taylor, vice president and area manager of Flintco.
BlueOval increasing subcontractor wages
BlueOval City’s general contractor, Walbridge, has previously stated that construction employment at the Ford site should reach its employment peak this summer.
Related to that, area subcontractors are not seeing cost increases in materials, but rather in labor costs.
“It’s been more on the wage side, skilled wages, because even with Ford’s impact, you still can get your materials nationally,” Grinder said. “They have less sway over the national commodity prices, but they have a pretty good sway over local wages.”
While challenges in finding labor have waned, subcontractors have had to raise wages in order to compete with BlueOval’s wages. However, contractors agree that workers can be kept by simply matching higher pay.
“Electrical, plumbing, mechanical, they’ve had to bump up their rates a little bit in comparison to some of the work that had been going on here in the past [due to] the work that’s happening out at BlueOval,” Taylor said. “Having worked around the country, it’s a [wage] number that’s maybe newer to Memphis, but it’s not a number that’s out of line by any means.”
Contractors drive home existing projects
Area contractors are seeing more interest in education projects plus work outside Shelby County, as BlueOval rises in West Tennessee.
In a slower period, contractors normally hone in on what works within their particular focus areas.
“There are so many little niches within construction,” Yarbro said. He noted that while new inquiries are slow, old contacts are providing steady interest.
Projects keeping contractors busy involve fewer mixed-use apartments than in 2022 and more publicly funded or community impact projects, echoing what architects are seeing in the local market.
For example, Grinder Taber Grinder has the Brooks Museum’s new Downtown location coming out of the ground; the redevelopment of Northside High into Northside Square; and the restoration of historic Melrose High School. Flintco is finishing the Downtown Mobility Center and starting to go vertical on two new high-rise office buildings on St. Jude Children’s Research Hospital’s campus. F&F is seeing a lot more education work in Arkansas.
“The construction market still continues to be strong, and it surprises us sometimes because we would normally expect high interest rates to start a little bit of cooling off [in construction],” Grinder said. “It just hasn’t happened, at least in the Memphis market, which is a good thing.”
New demand begins to surface
BlueOval City’s impact isn’t just driving wages, but also new demand and markets.
Grinder Taber Grinder is seeing a lot more interest in Jackson, Tennessee, than it used to in the past — likely due to proximity to BlueOval City.
“We would normally get a project in Jackson every five years, and we’ve got one or two planned every year for the next two years,” Grinder said.
F&F is seeing new interest in the metro’s Mississippi suburbs in terms of mixed-use and isn’t worried about a slowdown there, saying the key to succeeding in that market is quality, not quantity.
“You just have to be very selective. There are opportunities there,” Yarbro said. “Anytime you have a trend, you’re gonna have folks who jump on that bandwagon who really aren’t well versed in that market sector.”
Even with a slightly slower market, all three construction executives spoke about the excitement of architects being busy. Grinder Taber Grinder and Flintco said that since architects run a bit ahead, activity could pick up significantly later this year. Both aren’t waiting and are taking the opportunity to do some pre-development planning work.
“Architects are busy out of their minds. That’s a good sign for construction when architects are going [like that],” Taylor said.
