San Francisco’s competitive employment market is causing many construction companies to lose workers and driving a trend towards more expensive housing, according to an article by Alison Vekshin for Bloomberg.
The city is in an office and condominium construction boom to accommodate the technology boom in the area, and these builders are contracting out construction workers by offering them $2, $3 or $4 more per hour than the residential real estate construction pays them, the article states.
From the article:
“Everybody’s fighting for the same labor force,” said Sean Keighran, president of the Residential Builders Association of San Francisco. “There’s so much work going on. I would say this is a new high-water mark for work activity in San Francisco in decades, perhaps ever.”
The jobs report released Friday showed that jobs are up nationwide, however construction jobs are still lagging.
Because of this increase in competition, single-family residential builders have been forced to move into a new market: luxury homes.
From the article:
In San Francisco, costs are particularly high because access to the city is constrained by bridges and congested highways, making it difficult for contractors to come from outside the city, said Gregg Nelson, Trumark’s co-founder. There’s also a shortage of skilled workers who can handle large-scale commercial projects, he said, estimating that direct building expenses have increased 50% to 60% since 2012.
The result is that developers are forced to build luxury homes, Nelson said. His company, which has four San Francisco condo projects, has to project revenue of $1,400 to $1,600 per square foot to get a loan underwritten.
“Because the costs are higher, you can’t deliver product at an affordable price in those markets,” he said.
Technology jobs caused a boom in San Francisco’s market, but that could change as prices rise, and workers can no longer afford to live in one of the most expensive cities in the U.S.