The commercial real estate (CRE) industry, like many others, is facing a significant labor shortage. This shortage affects all areas of CRE, from construction and property management to leasing and project development. With demand for new developments on the rise, a lack of skilled workers not only slows progress but also drives up costs and introduces operational challenges. Here’s a look at what’s driving the labor shortage in CRE, its impact, and how industry professionals are adapting.
1. Labor Shortage Drivers in CRE
Several factors contribute to the labor shortage in commercial real estate, particularly in construction, property management, and skilled trades.
- Aging Workforce: CRE relies heavily on trades like plumbing, electrical, and HVAC, where the workforce skews older. As experienced professionals retire, fewer younger workers enter the trades, leading to gaps in expertise.
- Pandemic Disruptions: COVID-19 led to an exodus of workers across industries, and CRE was no exception. Many workers who left the field during the pandemic haven’t returned, especially in construction and property management.
- Fewer Apprenticeships and Training Programs: Over the years, vocational training and apprenticeships for trades and property management have dwindled, leading to fewer qualified new entrants.
- Shift in Workforce Preferences: With rising interest in flexible, remote work options, many potential job candidates are opting for roles in tech, finance, or remote-friendly fields over more physically demanding, site-based jobs in CRE.
2. Impact of the Labor Shortage on CRE
The labor shortage poses challenges for the CRE industry, affecting timelines, budgets, and the quality of property management services.
- Construction Delays: For developers, the lack of skilled labor translates into longer construction timelines and delays in new builds and renovations, leading to increased costs and, in some cases, lost revenue.
- Increased Costs: With limited labor availability, the cost of hiring skilled workers has risen. Higher wages, coupled with the need to source talent from a smaller pool, strain project budgets.
- Strain on Property Management: For property management teams, fewer available workers mean challenges in maintenance response times and upkeep quality, impacting tenant satisfaction and potentially driving up operating costs.
- Limitations on New Developments: CRE relies on a steady workforce to complete new builds. The lack of labor forces some developers to limit projects or adapt plans to accommodate shorter timelines and smaller workforces.
3. Adapting to the Labor Shortage in CRE
The CRE industry is finding creative ways to adapt to the labor shortage, from embracing technology to investing in training initiatives.
- Emphasis on Automation and Technology: As labor costs rise, CRE firms are increasingly turning to technology to offset the need for manual labor. In construction, advancements in 3D printing, robotics, and modular construction allow for faster build times with fewer workers. In property management, automated building systems and AI-powered tenant service portals streamline maintenance and improve efficiency.
- Upskilling and Training Programs: Some CRE firms are establishing or investing in workforce training programs to build a skilled pipeline. By partnering with local trade schools and offering in-house training, companies aim to cultivate new talent and help current employees advance.
- Outsourcing and Contract Work: To manage fluctuating labor needs, many CRE companies are outsourcing specific tasks or hiring contract workers. While this solution offers flexibility, it can also lead to variable labor costs.
- Higher Wages and Benefits: In an effort to attract and retain workers, some CRE firms are offering competitive wages, signing bonuses, and enhanced benefits packages. These perks can make CRE roles more appealing to a broader range of candidates.
4. Long-Term Solutions for CRE Labor Shortages
To create a sustainable workforce in the CRE industry, companies, governments, and educational institutions are working toward longer-term solutions.
- Revamping Vocational Education: Vocational training programs are being reevaluated to better align with modern workforce demands. By introducing CRE-specific courses and apprenticeships in high schools and community colleges, the industry can cultivate talent early on.
- Immigration and Skilled Labor Visas: Some industry leaders are advocating for reforms to allow more skilled workers into the country to address shortages in construction and property management. This can alleviate gaps in talent and support CRE’s ongoing needs.
- Industry Partnerships: By collaborating with trade associations, educational institutions, and community organizations, CRE companies can contribute to workforce development initiatives and reach potential employees early in their career paths.
Final Thoughts
The labor shortage in CRE is an ongoing challenge, but the industry’s adaptability has spurred innovation and strategic solutions. While immediate responses such as increased wages and outsourcing offer temporary relief, investing in technology, education, and training promises to help address workforce issues in the long run.
As CRE professionals navigate these shifts, building an efficient, adaptable workforce will be essential for sustainable growth and project success.
