Over the last few years, Chicago’s building boom has extended beyond the city’s red-hot neighborhoods to close-by suburbs and beyond. While building permits have been at record highs, shopping center construction is at an all-time low. Rising interest rates, a volatile stock market and recent changes to federal tax laws have had their impact, as has technology and a growing shortage of certain types of skilled labor. Just last month, Chicago began updating its building code for the first time in 70 years, and changes to workers’ compensation are being considered in Springfield.

Local executives on the forefront of the area’s changing skyline shared their insights with Crain’s Custom Media.

How is your organization involved with Chicagoland construction?

Morris Gershengorin: We’re a professional construction and restoration team, and have worked on thousands of residential and commercial properties throughout Chicagoland. We’ve built new homes, restored homes—from fire, wind, mold and water damage—and otherwise remodeled homes all over the area. Likewise, we’ve built or rebuilt offices, restaurants, retail centers, nightclubs, industrial parks and countless other property types. We’re native Chicagoans, involved daily with projects that are changing the city’s landscape, as well as preserving some of the beauty and culture that we love and call home. From hospitality to multi-family, we instill values company-wide in hopes of achieving the best results for our clients and friends.

John Donahue: Powering Chicago is made up of the International Brotherhood of Electrical Workers Local 134 and the Electrical Contractors’ Association of City of Chicago. We represent over 9,000 apprentices and journeymen and women in the field plus over 600 electrical contractors who bid work in the Chicagoland area. Our members are highly trained and highly skilled in any and all types of construction, including high-rise buildings, office parks, residential and general maintenance.

James McConnell: I do public and private construction contracting and litigation throughout Chicagoland. City projects have included Harborside Golf Course, the Mexican Consulate, JCDecaux’s bus shelters across Chicago, a Chase Bank building in the Loop, the recent addition of 23 stories to the Blue Cross/Blue Shield headquarters, residences at the UIC Campus, City of Chicago Central Police headquarters, renovations at Soldier Field, International Port District facilities at Lake Calumet and affordable housing at Chatham Club. In the suburbs, I’ve worked on office construction in Oak Brook, condominium conversions in Evanston, International Village apartments in Schaumburg, an industrial park in Crest Hill, a power plant in Zion, and privately developed apartment complexes and single-family home subdivisions in Cook, DuPage, Lake and McHenry Counties.

What are you currently working on?

McConnell: We’re working on construction of single-family subdivisions in Grayslake, Hawthorn Woods, Libertyville, Mettawa and North Barrington; a small industrial subdivision in Gilberts; a manufacturing plant in Bedford Park; cannabis cultivation facilities in Albion, Illinois, and Indiantown, Florida; and condominiums in Glendale Heights.

Gershengorin: We’re working on numerous multi-family projects in Chicago and the surrounding suburbs. Our restoration division found itself at the forefront of the resulting damages caused by the deep-freeze that occurred a few months ago. We were inundated with calls and emails from both residential and commercial clients that sustained heavy damages from the storm. We’re also working on numerous tenant improvement projects involving retail, hospitality and schools.

Donahue: Our members have a hand in the majority of projects going up throughout Chicagoland, from the renovations at Willis Tower and most of the high-rise construction that’s reimagining the city’s iconic skyline to the transportation systems at the CTA stations to the O’Hare Field Expansion Project. Because our electricians and contractors are among the most highly trained and experienced available, they’re helping to update and improve the electrical systems throughout all of Cook County.

How has the industry changed in the last decade?

Donahue: Technology has dramatically changed the way electricians and contractors work. In the past, hard copies of blueprints had to be given to electricians in the field to understand the layout of a building and get the work done. Now, iPads and computer screens are the norm at many job sites and this has increased efficiency, productivity and workflow processes exponentially.

Gershengorin: The new technology platforms allow us to work more efficiently, and they allow owners to resolve issues as they arise. Technology also serves as a great tool for forecasting and scheduling work, allowing us to scale and grow while giving the client a much better experience over the course of the project.

McConnell: Certain skilled construction trades like paving, plumbing and roofing have moved away from separate industry segments toward the concept of a single contract for both new construction and maintenance of the project after construction is complete. In design/build projects, owners now want the design, pricing and construction to happen at the same time. Governments are attempting to put together public-private partnerships in efforts to draw in private capital to supplement ever-declining government funding of needed public works. Consolidations of housing developers, general contractors and skilled trade contractors have reduced competition and driven up the cost of construction.

What’s the status of skilled labor in Chicagoland construction trades – is there a shortage?

Gershengorin: There’s definitely a lack of skilled labor. Most millennials don’t want to be carpenters, unlike when I was growing up and saw a certain pride among skilled tradesmen and women. I would love to help educate the youth to understand that there’s is a big world of demand out there for skilled technicians and skilled labor across the board in the construction industry.

McConnell: During the last recession, many skilled tradespeople left construction to find jobs in other industries. A lot of them are never coming back, given the seasonal and geographic disruptions commonplace in the industry. Some of my contracting clients are having difficulties finding skilled and experienced project managers for their work. Also, it seems new workers have been enrolling in apprenticeships with the skilled construction trades at a reduced pace, suggesting that journey workers in several skilled construction trades may be in short supply well into the future.

Donahue: Unlike other regions of our country, there’s no shortage of available electricians to serve our area. Our apprenticeship program takes applications every Wednesday, and every quarter we test over 500 potential apprentices. Our industry keeps a watchful eye on the labor market. We’re always looking for skilled workers to join IBEW Local 134 or work for the Electrical Contractors’ Association of Chicago as estimators, project managers and office staff.

What factors can hinder the profitability of a construction project?

Gershengorin: Poor planning; a set of plans can either make or break your project. One quote that I’ve always loved is “failing to plan is planning to fail.” Scheduling and project supervision are key to a successful project. Another factor is cost of materials; material cost escalation has greatly affected projects that are coming online today, but were budgeted 12 to 18 months ago.

McConnell: The added uncertainty of recently imposed tariffs and quotas on imported steel for construction will further damage profitability. Uncertainty regarding timely government payment for construction puts pressure on contractors’ working capital and can result in loss of profitability. Inefficiencies in resolution of disputes on a project can also add to completion delays and increased costs for both sides of any dispute. When all parties to a dispute are represented by lawyers who have extensive experience both in construction law and in the business of construction, resolution without resort to either lengthy arbitration or litigation can avoid damage to project profits for all the businesses involved.

Donahue: Timeliness, reliability and safety are the biggest things that can hinder a project’s profitability, which is why our electricians are sent through a rigorous apprenticeship program. Our electricians serve a five-year apprenticeship. They learn in a classroom setting and in the field before becoming journeymen and journeywomen. Our contractors put safety and experience above all else and are vital to ensuring a project is delivered on time and on budget.

What are some of the challenges involved with renovating or restoring historic Chicago buildings?

Gershengorin: Many of the building materials used in historic projects cannot be matched and when they are matched, they appear newer. Our company has prided itself on repurposing or reclaiming existing building materials—when the owners are on board with it, of course. Many people are in disbelief when the age of a building comes up, astonished that these buildings are not only still standing, but they have the structural integrity to have withstood time and storm.

Donahue: Chicago’s older buildings were built under a different electrical and building code, which means there’s frequent updating that needs to be done before any new work can be completed. We strive to work with the architects and engineers to provide the most up-to-date technology while preserving the beauty of our past.

McConnell: One of the big challenges is locating skilled tradespeople with experience in stained glass windows, or terra cotta façade maintenance, repair and replacement. Also, lawyers with skill and experience navigating the complexities of historic preservation law, tax incentives, and available government and private grant funds are few and far between.

How will proposed changes to Chicago’s building code likely impact the local construction industry?

Donahue: The new building code aims to align Chicago with other cities’ codes around the country and we believe it’s a positive step. The initial talks surrounding the new code have been encouraging and we applaud the Chicago Department of Buildings for taking on such a monumental task.

McConnell: When it’s completed, it should greatly simplify Chicagoland construction projects for those involved with every field of construction. Up to now, navigating the complexities of differing—and sometimes conflicting—code provisions has caused problems in writing construction specifications, obtaining building permits, preparing shop drawings, dealing with inspections of rough work, and obtaining final occupancy permits for completed construction. The revised code will hopefully eliminate many barriers and delays for all concerned.

Gershengorin: Chicago’s building code has always been one of our country’s best. I believe that the evolution will open doors and state borders for trades to be able to come to Chicago from neighboring states and work with local firms and have an understanding of what’s required of them from a compliance standpoint.

What impact would significant workers compensation reform likely have on Chicagoland construction?

McConnell: The workers compensation reform bill passed last November over Governor Rauner’s veto did nothing to address issues of delays in resolving claims of temporary and permanent disability caused by work injuries. Unless the legislature approves significant increases in arbitrator staffing at the Industrial Commission to speed resolution of disputed workers comp claims, construction companies and their employees alike will continue to be harmed by long periods of not knowing when an injured worker should return to the job, or can be replaced on a project due to lengthy or permanent disability.

Gershengorin: It would definitely have a deep impact on a company’s ability to properly insure itself and provide proper coverage for its men and women. We’d likely see some smaller shops close, consolidate or move elsewhere.

What factors do you see affecting the area’s construction market in the next 10 years?

Donahue: Technology is constantly changing and modeling the way we do work in the electrical industry, and this will continue to be the case over the next decade. The push for renewable and clean energy will also drive Chicagoland construction projects over the next decade and Powering Chicago is already training its electricians and contractors on how to safely work in this new field. Additionally, recruiting the best qualified individuals to perform the work is key to the success of the construction industry moving forward.

McConnell: Positive influences could be TIF incentives attracting new businesses to the city and suburbs; public private partnership incentives for funding construction of infrastructure and other public facilities; increasing diversity in construction trade apprenticeship programs; and stable interest rates on construction working capital. Negative influences could be increasing property tax burdens; burgeoning complexity and expense of construction technologies; uncertainty of tariffs and other trade war casualties; and proposed limitations on EB5 visas and immigration of skilled labor into the United States.

Gershengorin: As real estate deals are harder to put together and properties are trading at inflated rates, it affects all aspects of our industry. Other factors such as interest rates, state, federal and property tax increases will prevent some deals from getting done by impeding investors’ returns.

What’s the outlook for Chicago’s construction boom?

McConnell: While huge, long-term projects like O’Hare Field’s terminal expansion and the Lincoln Yards development may absorb a great deal of capacity for a few years to come, the external forces pressing down on mid-sized and smaller construction businesses will continue to restrict growth in the residential and small commercial construction markets. Everyone can see the empty stores in suburban shopping centers, the subdivisions with paved streets and underground utilities installed but no homes built and none under construction. These are certain signs that construction work in Chicagoland has yet to reach the point where a rising tide floats all boats.

Donahue: New developments and massive overhauls are continually being proposed. We’re hopeful that the new administration will continue the positive trajectory that’s currently in place to make sure these developments get the support needed to move forward. These projects provide our electricians and contractors with steady work and help to improve the city’s economy.

Gershengorin: I believe that Chicago is still booming with opportunity for companies at all levels to thrive in today’s market. As with any business, evolving and embracing current market fluctuations is key; the strong will survive.