Construction industry improving slowly, more sustainably
Hawaii County is emerging from five years of economic doldrums that saw construction projects plummet, with contractors, consultants and labor unions now looking forward to a slower, more sustainable rise in development.
“We can see the transformation happening right before our eyes, right now,” said Craig Takamine, president of the trade group Hawaii Island Contractors Association. “It’s exciting.”
Takamine’s optimism is backed by first quarter 2013 data recently released by the county. Led by North Kona and South Hilo, the value of Hawaii County building permits increased 37.4 percent over the first quarter of 2012. Also bouncing back, but to a lesser degree, were Puna and South Kohala.
Building permit value peaked in 2006, a year that saw first-quarter permit values reach $282.7 million, an astounding 219 percent increase over first-quarter permit values of six years earlier. Values dipped 74.2 percent to $72.8 million by the first quarter of 2012, before rebounding to $100.1 million this year.
The totals include the value of all building permits from data provided by the county Department of Research and Development, including public and private work for construction and photovoltaic installation. Permits for electrical, plumbing and signs are not included in the totals.
More precise breakdowns for this year are not yet available, as the Department of Public Works is transitioning to a new system for tracking permits.
“I think the Big Island is slowly seeing a little more optimism,” said Jason Fujimoto, senior vice president of building material supplier HPM. “I suspect we may be the last island to witness a recovery from the five-year downturn.”
“We do think that 2013 is going to see more activity in terms of building,” Fujimoto continued. “Existing inventory is decreasing and prices are increasing. That should offer home owners more incentive.”
Kevin Mitchell, senior vice president for Rider Levett Bucknall, sees building really taking off in West Hawaii by early 2014. RLB provides cost management, project management and advisory services, so it is in a position to see projects very early in the planning stages, long before permits are pulled for the work.
The hospitality industry in particular is showing a lot of activity this year, Mitchell said.
“We definitely have a very positive outlook for later this year and on into 2019,” Mitchell said. “We believe the recovery has solidified on the Big Island.”
With construction second only to tourism as the primary economic driver on the island, Hawaii Island took an especially hard hit when the real estate bubble burst in 2007 and the economy took a nosedive in the ensuing half-decade.
With private construction dollars drying up, it was only the presence of public-sector projects that kept the county from experiencing an even worse recession than it did. Many credit the late U.S. Sen. Daniel Inouye, the Hawaii Democrat who chaired the Senate Appropriations Committee, with keeping federal dollars coming into the state.
Money from the American Recovery and Reinvestment Act, along with state money for universities and a fast-tracked county construction calendar kept at least some construction workers employed and money trickling into the economy.
While government took advantage of the construction lull to do projects while labor and materials were more affordable, an uptick in private construction will likely make it harder for government to finance projects as labor and materials become more scarce.
An ideal mix is 50-50, said RLB Associate John Dill.
“The local government and capital improvement projects start getting less bang for the buck,” he said.
Dean Au, field representative for the Hawaii Regional Council of Carpenters, a statewide union of carpenters and drywallers with more than 220 signatory contractors, said he’s also seeing more activity in the hospitality industry. A lot of hotels took advantage of lower occupancies to do renovations, he said.
Au said there is more private development on the west side of the island, and private projects are picking up.
“It is not going to get better overnight,” Au said. “But it’s slowly coming around.”
Au said there are still about 100 journeymen and 50 apprentice carpenters and drywallers on his ready-to-work list in Hilo alone.
“The government was kicking in, now it’s time for private investors to do their part,” Au said.
Leslie Isemoto, president of Isemoto Contracting, said smaller public works projects generally get off the ground in late spring as governmental agencies use up the last of their funding before the new fiscal year begins July 1. But he also sees a slowdown in public works projects as the year progresses.
“I think it will pretty much remain status quo or slow some,” Isemoto said of the big public works and commercial and industrial projects that are his firm’s bread and butter.
Dill reiterated that balance is the key to a sustainable recovery.
“We’re optimistic, but it comes with cautions,” Dill said. “We’ve got to as a whole learn from the experiences of several years ago where it was boom and then bust. The goal is to be sustainable.”