2 min read January 2023 — San Antonio’s construction industry has had a hard time keeping up with the region’s demographic growth, combined with the ongoing talent shortage. Srinath Pai Kasturi, executive vice president at Cadence McShane, shares his insights with Invest: on these challenges and opportunities for the region.
What is your view on the labor shortage and the current state of affairs for the local talent pool?
The challenge with human resources is that there is a significant shortage of qualified workforce in all industries. Generally, you will find that COVID has had a significant impact on the availability of human resources. We have witnessed folks that were probably on the verge of retiring within a five year +/- of 2019 prior to COVID, have accelerated that timing for themselves and are opting for an early retirement. Some others are choosing to shift careers and/or opt for part time work in order to lessen the impact of job-related stress on their lives. There is a clear shift in people’s focus on what is important to them and their personal lives versus carrying on with their profession like generations before them did. When we lost the more experienced staff, whether it was a person pouring concrete on a job site or an executive at a company that had the institutional knowledge about their craft, this created a significant gap in human resources. This pattern is not exclusive to the construction industry, but it is being witnessed in a variety of industries and sectors. The growth came quicker than we thought coming out of COVID, so the lack of resources and the demand for workforce has created a supply and demand deficit within our workforce.
That lack of human resources has forced us to run a little leaner these days, in most instances not by design. By and large, you cannot find qualified people to join the workforce. What we have done internally to maneuver through this shift is expand our internship program and our entry-level hiring program. At the last career fair, we offered about 100 potential college graduates and potential intern positions for next summer. We have found that the best way to grow and develop our people and our organization is to build from within.
What is the construction industry’s role in the growth of the region?
In the United States, both Florida and Texas have been big beneficiaries of people migrating in from other states. The U.S. will need 4.3 million new apartments and multifamily units by 2035, according to a new study commissioned and published by the National Multifamily Housing Council and National Apartment Association. Experts suggest that 40% of that need will be in three states namely, California, Florida and Texas. As far as Texas is concerned, Austin, Houston, San Antonio and Dallas are the four major metropolitan areas that are seeing the most growth. We are hearing about all the influx of people from all over the country moving to Texas, because the Lone Star State has a proven track record of being a business-friendly state, obviously, with all the tax benefits that our governor’s office is offering to corporations. Corporate relocations are happening across many cities in Texas, even in secondary and sometimes tertiary markets/cities. The responsibility lies with us as professionals, developers, architects, engineers and contractors—to make sure we deliver products and buildings to sustain the growth in a meaningful way. You cannot just create a product without a plan and a vision. The obligation is on us to create a lasting legacy of what we build today.
How does the region encourage corporate responsibility?
San Antonio has done a great job on that front as a community and as a society. For instance, the Historic and Design Review Commission (HDRC) gets involved in the approval process of the type of buildings that get permitted to preserve the look and feel of San Antonio. You have to go through the process before you get a building permit, which enables the stakeholders to weigh in on the future legacy of the city. That goes a long way in shaping the future of San Antonio from a building design and material selection perspective.
Quality of life is very essential to people’s well being. Currently, Cadence McShane is involved with several multifamily projects in San Antonio. The focus is on us as a team – our project leaders/developers and owners and the design team – to make sure that we execute to that vision. Additionally, design has come a long way over the past decade with a lot of sustainable initiatives that have been adopted by our industry at large. Our buildings today incorporate a lot more energy efficient and renewable products into our designs than what we did a decade ago. Whereas in the past, a company had to expend quite a bit of energy and resources to meet LEED design standards, now almost every building would qualify for some form of LEED certification based on the current standards of design and construction and the commitment of the entire industry to continue to build with the least negative impact and “carbon footprint” on the surrounding environment.
Where do you see the challenge in DEI, and how can individual firms work to cut out the disparities that are seen in the construction industry?
If you take construction in Texas as a macro-level structure, we are pretty diverse. We are proud of being a family-owned business with Molly McShane as our CEO. We are a top 100 firm in the country as ranked by ENR and a woman being the CEO of a construction company is something we are proud of. We believe that DEI gives us diversity of thought because people come from different backgrounds, cultures and walks of life. What we each bring to the table is the amazing knowledge and individual experiences. When these ideas and thoughts are encouraged in an inclusive environment, we see amazing results and solutions to problems. Our individual backgrounds and cultures have a huge part to play in the solution-oriented business that we are in. San Antonio naturally lends to that landscape and thought process, because there is so much diversity within the city and we are glad to be a part of the community.
What are the most significant market trends that you are monitoring that could affect the construction industry?
At this moment in time, everybody’s buzzword is rising interest rates. A year ago, it was commodity prices and supply chain challenges. In the past year inflation has had a significant impact on our lives. The Fed is trying to get inflation back under control by increasing interest rates. When that is happening, like in the past, these moves from the Fed tend to pause growth and development for a bit. For an industry that has been through a roller coaster ride, I think this is a healthy pause, because it was needed and possibly overdue. Psychologically, the growth we have seen in recent times and the supply chain issues have plagued our industry, and it started to have an impact on all our employees and all of us as a community. The growth was happening at an alarming pace that we could not keep up with. Lack of resources, supply chain issues and growth is a perfect recipe for disaster. That is the biggest trend at this moment within the construction industry. There are still some supply chain issues that we are dealing with. Electrical switchgear, for instance, continues to have long lead times and, in some instances, more than 52 weeks. Some of us have recognized this challenge and are planning for it and some of us are not.
In general, if you read the headlines from the experts, we believe that the fundamentals in Texas are strong. We feel that the growth pattern will continue. Construction as a business is a lagging indicator of the rest of the industries and consumer sentiments. We are seeing signs of slowdowns in other industries and experts are predicting that this will continue for another 12 months or so. The hope is that coming out of it, the developments will happen to where the clients will spend the money to start their planning and development entitlements. The companies that have backlog currently and have planned appropriately will be able to bridge this gap and slowdown by working through the backlog over the next 12 months or so. The next six months will be critical to see how things progress with the economy.
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