Facing a building threat
Central Oregon’s construction boom squeezes the
region’s manufacturers.
By Oakley Brooks
Outside the headquarters for climbing wall manufacturer Entre
Prises USA in Bend is a white tented sign that blares, HIRING
TODAY. Inside on the small factory floor, jumpsuited workers
fill molds for the wall pieces while the acrid smell of
fiberglass and resin wafts over everything. And deep in the
head of CEO Eric Meade, seated in a corner office, some
strained calculations are under way about how to keep Entre
Prises humming in the toughest labor market in recent
memory.
His company may be the nation’s leading manufacturer of
sport climbing walls, but
workforce issues bear down on Meade from all directions.
He’s combating drug use among workers and potential
employees — he fired three workers in March for doing
meth on the job, and he says about half of applicants
disqualify themselves by failing a pre-employment drug test.
The outsourcing trend has put cost pressure on him and others
in his industry.
But at the heart of Meade’s struggles is his competition
with Central Oregon’s red-hot construction industry for
bodies. He’s been down eight people on his 70-person
staff for more than six months, while the construction
industry, as he puts it, “is snarfing up all the
workers.”
He’s not alone.
With Bend and surrounding areas at the top of
everybody’s list as the place to buy a second home and
retire, a building boom is exacerbating a labor shortage.
Thousands of housing units are under way or planned, and as
workers flock to homebuilding in new resorts and subdivisions,
they are draining the limited workforce. Manufacturers, who
typically pay workers less but offer a little more stability
than construction, say they are losing out.
“There is this pressure from construction and home
building,” says Steve Williams, an economist with the
Oregon Employment Department. “When construction is hot,
it pays well and offers plenty of overtime, and it’s hot
right now.”
Economic development officials acknowledge that the growing
worker shortage is
a serious situation that jeopardizes the region’s
economic health. “If we don’t address it,
it’s just going to get worse,” says Roger Lee,
director of Economic Development for Central Oregon. Combined
with the high cost of industrial land in the area and the
rising cost of housing, Lee says, the labor situation could put
a damper on his and other officials’ efforts to diversify
the region — efforts that have already yielded Columbia
Aircraft Manufacturing (formerly Lancair) and Epic
Aircraft.
As the construction industry kicks into high gear this summer
and unemployment dips to 6%, some in the manufacturing sector
have blunt words of caution for potential new business in the
region.
“If you’re thinking of moving your business here
now, you had better bring your employees with you,” says
Meade. “If it has any labor component to it, it’s a
tough road. I really don’t think it’s sustainable
to have that sort of business here anymore.”
THE CONSTRUCTION SECTOR IS QUICKLY MOVING ahead of
manufacturing in hiring. Construction added 800 positions in
the region over the year ending in February, a 13% increase in
a labor force of about 7,000, according to the Oregon
Employment Department.
Over the same period, manufacturers added 110 jobs, or 2%, to
their regional labor force of 6,000. But officials in all sorts
of fabrication industries, from specialized wood products to
the region’s growing aerospace cluster, would have liked
to add more workers over the last 12 months.
Last summer, after Monaco Coach laid off 500 workers in Bend
while moving its local production line to Coburg, officials at
Epic Aircraft, which builds a six-passenger plane in Bend,
figured they would be able to get 150 people to ramp up
production. But the company only attracted about one-third of
the workers it was after. Nearly a year later, Dave Hice,
Epic’s general manager, says he’s still about 50 or
60 people short of what he needs to get production to full
tilt.
High turnover has hurt Hice’s company: He says only half
of new hires stick it out past a month either because they
can’t build skills or they want to quit and collect
unemployment. Meanwhile, he says, his potential worker pool is
shrunk by all the young laborers going into construction.
Summer, when clear skies spell good building weather, has been
a particularly lean time for getting workers around the region.
Last year, companies including Columbia Aircraft and Fuqua
Homes (a prefab home assembler) had to boost starting pay or
increase overtime for existing staff to deal with the paucity
of summer workers.
Other manufacturers looking to add workers in the coming
months are bracing for an uphill battle. At Prineville’s
Pioneer Cut Stock, a wood products company that supplies the
window industry, CEO Brian Davis wants to grow by 20
workers.
“Within the next month it’s going to be a huge
crush, as everybody is fighting over the same people,”
Davis says.
The construction industry appears to be winning out for a
couple of reasons. The industry generally offers hourly pay in
the $12 to $15 range to start. Sun Forest Construction, for
instance, was offering labor-
ers $12 to $17 per hour initially in a job advertisement this
spring. Hice says Epic Aircraft starts in the $9 to $10 per
hour range, typical for manufacturers. Younger workers may also
be drawn to a job out-doors as opposed to an indoor
manufacturing post.
Frequent downtime in construction is also seen as a plus.
“A lot of kids want to work when the work is good and go
fishing or skiing when it’s not,” Hice says.
Manufacturers can’t, however, simply pin their woes on
worker habits and the construction industry, says Lee. Home
construction indeed draws a fluid workforce, he says. But some
manufacturers are stuck in a mentality that dates back several
decades, to a period when sawmills were closing and labor was
cheap and plentiful. Some companies may have to increase pay or
jazz up their humdrum corporate culture to be more attractive.
Lee’s also considering a new PR campaign aimed at
recruiting workers from outside the region.
Construction firms have already tapped into subcontractors in
the Willamette Valley, sometimes offering crews upfront bonuses
before any work has been completed. And the hot real estate and
construction market, now a nationally known phenomenon, is
attracting interest from contractors as far away as the
Midwest.
JUST HOW BIG AND POWERFUL is the real estate and home building
machine that manufacturers and other employers are competing
with? The median sale price of a home in Bend jumped more than
$60,000 to $280,000 last year, while in Redmond prices climbed
$40,000 for a median close to $200,000. That’s all
happening while homebuilders add housing at a torrid pace. Bend
issued 1,800 new construction permits in 2004 — more than
the cities of Portland or San Diego did — and then broke
its own record and handed out more last year.
“I’ll give you a number you’ll like,”
says Dennis Luke, chairman of the Deschutes County Commission.
“The county has grown in property valuation about $1.3
billion every year for the last three years. That’s about
the valuation of the city of Redmond every year.”
At the center of the growth surge is destination resorts, the
large golf developments carved out of rural areas where empty
housing lots often start at the price of an average finished
home in Bend. Five new resorts are under way or in the
development stages on the outskirts of Deschutes and Crook
counties. Together, they promise 3,000 new housing units.
Pronghorn sits at the head of the resort class. It’s
Oregon’s first five-star facility, emerging from the
Juniper-flecked desert 11 miles northeast of Bend. The resort
will have just 289 home sites (210 of which have already been
sold, the most expensive for $1.6 million), but its plush
standards make it a huge undertaking.
There are two majestic golf courses, one by Jack Nicklaus and
the other by esteemed architect Tom Fazio; a blasted-out lava
tube on the eighth hole of Fazio’s course, which is big
enough to drive an SUV through and will be used for wine
tastings and concerts; and a former Air Force survivalist who
will lead Pronghorn’s residents on fishing, hiking and
other adventures. Even the disposable bathroom towels, embossed
with the golden horns of the resort’s namesake, feel
luxurious.
Partner Scott Denney estimates that he’s pumped $100
million of investors’ money into the resort already. When
the building phase reaches full tilt in a few years, 700 people
will work at the resort either on staff or in construction
contracting.
With a $2 million-a-year marketing bud-get, Pronghorn has
drawn the wealthiest from around Oregon and the country.
It’s also created a buzz about Central Oregon
that’s further fueling the real estate and construction
boom.
“I won’t say we’re market makers —
Bend has its own cache,” Denney says. “But
we’ve been telling a lot of people about this great
place.”
Other resorts are capitalizing directly on Pronghorn’s
success. Brasada Ranch, just up the road across the Crook
County line, has been taking referrals from Pronghorn and
offering them lots for slightly less money — in the
$200,000 to $450,000 range. Thornburgh Ranch, the 1,800-acre
tract planned for west of Redmond, will play off the newfound
niche for big-name golf design by offering an Arnold Palmer
course.
An even newer wave of resorts may be just around the corner,
with Bend homebuilder Dennis Pahlish, among others, announcing
the purchase of a potential site in Crook County.
Luke, a homebuilder himself for 30 years before entering
politics, sees the region’s growth as inevitable and he
figures destination resorts, with requirements that half of
developable land be open space and which contributed $25
million to his county property tax revenue last year, are a
good place to put newcomers.
“People are coming here anyway and if you can do it with
less environmental impact, great,” he says. “They
don’t put a big demand on services nor do homeowners put
a lot of kids in school. This is good development if it’s
done right.”
As for any potential labor challenges the growth might present
for other sectors, he brushes those aside as isolated
incidents.
“That’s what I pay economic development officials
to worry about,” he says, referring to Deschutes
County’s support of Lee’s organization. He adds:
”Tourism and construction are what are driving the
economy. I think we have a strong, healthy economy.”
But that view may be shortsighted, akin to looking at all the
roofs going up everywhere and declaring the local economy an
unqualified success.
Doing so ignores the real issues many employers across the
region say they are facing in finding qualified people.
Indeed, for some manufacturers, more roofs may mean more
trouble.
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