Central Oregon's construction boom draws skilled labor away from manufacturers

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Monday, May 01, 2006

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 laborers $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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