Prairie Business Construction 2016

CONSTRUCTION A SPECIAL EDITION OF PRAIRIE BUSINESS

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Adam Barnett, an architect and project manager with JLG Architects (left), and Tom Behm, director of construction services, discuss project plans for the Watertown (S.D.) Community Wellness Center.

IMAGE: JLG ARCHITECTS

FEATURES

CONTRIBUTIONS

Q&As

18 DESIGN

ROGER KRUEGER

Architects, engineers stay busy through the entire construction process

Area economic development organizations discuss projects in their communities 8 BISMARCK-MANDAN

22 WORKFORCE

10 FARGO-MOORHEAD

Construction companies are feeling the labor shortage

12 GRAND FORKS-

ROGER KLEBE

14 SIOUX FALLS

32 ADVICE

16 MINOT

Senior Director of Planning and Construction

On Top of the Trends

In Demand

24 FINANCE

Building a Business

Specialized loan programs can make construction projects more affordable

38 CONSTRUCTION DATA

EAST GRAND FORKS

FROM THE EDITOR 6 Our 13th Edition

ON THE COVER: Mortenson employees work on the roof of the Sanford Fargo Medical Center.

IMAGE: MORTENSON

CONSTRUCTION 2016/2017

28 HIRING President

JOHN KRUEGER

Vice President Great Plains Benefits Group Inc.

30 ONSITE Project Superintendent Sioux Falls Construction, Journey Group

PHIL SIEK

JEFF HOSS

Executive Director of Development Sanford Fargo

34 INDUSTRY

STACY SCHUMACHER

Project Manager, Garon Construction President, Forx Builders Association

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FROM THE EDITOR

OUR 13TH EDITION Welcome to 2016’s extra edition of Prairie Business. We’ve dubbed it our 13th edition, even though chronologically it’s our 10th.

As a monthly publication that covers all aspects of business and every sector that falls under that category, our options for a topic in this extra edition were wide open. We wanted something relevant to all sectors, applicable to all business sizes and intriguing to any business owner, executive or employee — construction.

So here we are. Presenting the first 13th edition in Prairie Business’ 16-year history. We’ve discussed building designs (see page 18), project financing (see page 24) and how the labor shortage has affected construction (see page 22).

We’ve also incorporated contributions from economic development organizations in Fargo, Grand Forks, Minot, N.D., Bismarck, N.D., and Sioux Falls, S.D., highlighting some of the major construction projects going on in their cities and how they’re affecting economies. Those start on page 8.

On page 28, you’ll find the beginning of the Q&A section, where a hiring firm, a construction worker, a building trades group executive and a health care group that is wrapping up construction on a major new facility share their insights into their jobs, experiences with construction and words of wisdom.

There’s something for everyone in this 13th edition of Prairie Business, and we’ve designed it to be relevant to you and your businesses for a year. If you’re contemplating a construction project, beginning one, or even looking back on one to learn for the future, you’ve come to the right place. Dig in.

KORRIE WENZEL, Publisher STACI LORD, Ad Director LISA GIBSON, Editor KAYLA PRASEK, Staff Writer BETH BOHLMAN, Circulation Manager KRIS WOLFF, Layout Design, Ad Design Account Managers

NICHOLE ERTMAN 800. 477.6572 ext. 1162 nertman@prairiebusinessmagazine.com GARRETT RICHIE 248.202.8955 grichie@prairiebusinessmagazine.com Prairie Business magazine is published monthly by the Grand Forks Herald and Forum Communications Company with offices at 375 2nd Avenue North, Grand Forks, ND 58203.

Qualifying subscriptions are available free of charge. Back issue quantities are limited and subject to availability ($2/copy prepaid). The opinions of writers featured in Prairie Business are their own. Unsolicited manuscripts, photographs, artwork are encouraged but will not be returned without a self-addressed, stamped envelope.

Subscriptions Free subscriptions are available online to qualified requestors at www.prairiebusinessmagazine.com Address corrections Prairie Business magazine PO Box 6008 Grand Forks, ND 58206-6008 Beth Bohlman: bbohlman@prairiebusinessmagazine.com

LISA GIBSON

Editor 701.787.6753 lgibson@prairiebusinessmagazine.com CONSTRUCTION 2016/2017

Online www.prairiebusinessmagazine.com

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BISMARCK-MANDAN

PROOF OF A GROWING COMMUNITY

BY BRIAN RITTER

BRIAN RITTER

IMAGE: KYLE MARTIN PHOTO

CONSTRUCTION 2016/2017

Consumer confidence was one of the most recent challenges facing the business community in Bismarck and Mandan in North Dakota. For a time last winter, it seemed as though low commodity prices had caused residents and businesses alike to reconsider whether our economic future was as bright as originally believed. Despite a litany of positive economic indicators, they needed physical proof that our community was still growing.

Enter the Bismarck-Mandan construction industry.

It’s impossible to quantify every single construction project underway in this one article, but we have numerous examples that illustrate our continued growth. Take for instance a couple of expansion projects in our growing technology sector. National Information Solutions Cooperative in Mandan is nearing completion of a new 33,000-square-foot building that will include office space, meeting rooms, a dining facility and fitness center.

As a result of this $7.5 million project, this company expects to add another 70 full-time employees over the next five years. In Bismarck, Dakota Carrier Network is already expanding its network operations center by adding another 30,000 square feet of space. The $6 million expansion will provide 12 times the current server floor space, provide state-ofthe-art security and be built to “Fort Knox”-like specifications that allow it to withstand F4 tornado-force winds.

At the same time those expansions are happening, another one of our major employers is expanding and renovating its facility as well. Basin Electric Power Cooperative provides electricity to 2.8 million members across nine states, but its headquarters is right here in Bismarck-Mandan. With more than 550 employees in our community alone, Basin has started work on an expansion and renovation of its headquarters, which will add more than 90,000 square feet to the existing facility while providing an updated, modern work space for its employees.

As our community grows, so too does the demand for educational opportunities and no place is that more evident than the University of Mary, where three large projects are under construction. The first is a new 276-bed residence hall for freshmen students. The second is a new fieldhouse to accommodate on-campus activities such as intramural sports, NCAA-sanctioned activities and more. And the third is a renovation of the current fieldhouse into a campus center that will serve as the center of campus life, encouraging students to socialize and participate in campus activities while also serving the greater community.

While our economy continues to expand and add new jobs, community leaders are working to enhance our already-envious quality of life so that Bismarck-Mandan remains a place where employees want to live. For instance, Sanford Health and the YMCA have partnered to develop the new Family Wellness Center. Located in Mandan, this $13 million facility will offer numerous amenities including a large gymnasium, a suspended indoor walking track and wellness center with workout equipment. Farther west, work continues on the new Starion Sports Complex which will include a two-rink hockey arena, gymnastics facility and an outdoor track and field. This voter-approved, $22 million project is expected to be complete by September 2017.

These are all strong signs that our economy is still growing, but they’re not the only ones. There are still more than 2,000 open jobs throughout the metro area, the community’s unemployment rate is below 3 percent, our manufacturing and retail sectors are growing and the number of passengers flying through the Bismarck Airport continues to increase. Suffice it to say, yes, our economic future remains very bright and our tremendous community of contractors is helping us show it.

Brian Ritter President and CEO Bismarck-Mandan Development Association Bismarck, N.D. britter@bmda.org

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FARGO-MOORHEAD

CONSTRUCTION REFLECTS A GROWING ECONOMY

BY JIM GARTIN

JIM GARTIN

IMAGE: DAVE SAMSON, FORUM NEWS SERVICE

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It’s a great time to live and work in Fargo-Moorhead. For an economic developer, it couldn’t get much better. If you drive almost anywhere in the metro, you’ll see schools, businesses and houses going up. Roads are being put in for new development. In a nutshell, business is booming in FM. It only seems to slow when we run out of workforce to build.

One of the more notable structures going up is Sanford’s hospital, a $500 million dollar facility that will be a level I trauma center. Incidentally, during construction, $34 million was spent by construction workers with local businesses in the Fargo -Moorhead metro. Sanford has more than 600 doctors and 2,400 nurses. In 2015, it welcomed 70 doctors. Sanford’s 2016 goal is to recruit 80 more doctors and several hundred nurses to keep up with patient demand.

We’ve seen a lot of activity across the metro in both retail and business construction. Border States Electric recently put up a new 96,000-square-foot building and has remodeled an existing building. Discovery Benefits expanded its footprint by 26,000 square feet. Integreon expanded by 34,000 square feet. Aldevron spent $8 million on a 45,000-square-foot building. DS Beverages in Moorhead added 22,000 square feet. Some of the construction in West Fargo includes strip malls, a hotel, a new pub and an industrial park. Eventide Living Center recently opened a new facility in south Fargo. Bethany Living Center also increased its footprint. A couple new banks have gone up in Fargo and Essentia Health added a clinic in south Fargo.

There’s a new professional office building in Fargo. The list goes on.

Head to downtown Fargo, and you’ll soon see a much different landscape. The Kilbourne Group will soon start construction on Block 9, an 18-story, high-rise building. They spent $5 million turning the former St. Mark’s church into the Sanctuary Events Center. Finally, Kilbourne is activating underutilized urban spaces. Brews on Broadway includes theater and art and is in the old Goodyear site, and the Sudden Urban Park transformed the old Sahr’s Sudden Service Station. That’s a small sampling of the changes downtown with more to come in the next several years.

Single- and multi-family housing continues strong, going up across the metro.

The Regional Workforce Study committees are working hard to ensure we are including affordable housing in the mix of residential construction. The committees are also focused on adequate and affordable childcare.

The entrepreneurial scene is growing quickly and creating a young, vibrant atmosphere attractive to people considering Fargo-Moorhead. A healthy entrepreneurial community also helps ensure future business development.

We certainly are blessed to see so much activity going on around the metro — new businesses, beautiful clinics and world-class hospitals, hotels and new schools.

It’s easy to forget, but we truly have access to world-class everything. As we work to help companies expand and grow, we continue to look for ways to recruit the needed workforce. We also work to align education and industry so our young people are getting the skills they need to be successful and will hopefully put those skills to work at an FM company. And we will continue that work because the growth continues. And that’s a good thing.

Jim Gartin President Greater Fargo Moorhead Economic Development Corp. jgartin@gfmedc.com

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GRAND FORKS-EAST GRAND FORKS

HUB FOR UAS GROWTH

BY KLAUS THIESSEN

KLAUS THIESSEN

All around greater Grand Forks companies are growing and the region is growing along with them.

Most notably is Grand Sky. The nation’s first aviation and business park has cemented our region’s stake as the premier hub for unmanned systems business growth. Drive west of the Grand Forks Air Force Base and you can’t miss the rise of the anchor buildings Northrop Grumman and General Atomics are constructing. That’s just the beginning of what will quickly begin occupying this 217-acre park.

With nearly 1 million square feet expected to be constructed once the park is complete, the highly skilled technical jobs directly created at Grand Sky alone are projected to exceed 1,000, which will create more spin-off opportunities for entrepreneurial startups.

Approximately $11.5 million has already been invested in infrastructure at Grand Sky, and employment to support that construction is approaching 300 people.

Minnkota Power Cooperative’s impressive $60 million, 250,000-square-foot corporate headquarters in south Grand Forks will open in 2017. It’s a retention project that ensures one of our region’s major employers continues growing here.

Infrastructure enhancements might not have the sizzle of new buildings, but it’s those investments to build out roads, water and sewer that attract greater private investment.

In recent years, the city, county and state have invested in planning and infrastructure to prepare areas identified for future development. We have visionary leaders at all levels who recognize the importance of creating areas for development as a means to business attraction. Grand Sky is just one example of the impact that investment has and will have on our region’s growth.

Another example of the impact of visionary investment is the city’s 125-acre business park. About $15 million in new construction is complete in the park, which opened three years ago. Within six months of the opening, Acme Tools’ distribution center broke ground, followed by FedEx Ground’s center.

Despite the downturn in commodity prices, agribusiness continues to be a strong driver in the Grand Forks region’s economy. The availability of development-ready land has been instrumental in attracting projects that are preparing to build in north Grand Forks, including Northern Plains Nitrogen, the widely publicized $2.1 billion fertilizer plant.

Near there, North American Green Pulp expects to break ground next year on a $6 million plant that will convert wheat straw to pulp for paper products. And J.R. Simplot continues to expand and grow with a new $30 million high bay freezer being considered.

To benchmark this activity, last year the Grand Forks Region Economic Development C orp. surveyed its primary sector clients. In 2015, those who responded reported more than $99 million of capital investment and plans in the next three years to invest more than $250 million. That investment is not only new construction, but includes equipment purchases as well. In addition, these companies reported that in 2015 they reinvested more than $68 million locally through purchases of goods and services in the region.

I share this because it’s representative of the impact primary sector employers make on a region’s overall economy. The growth in our region’s primary sector is also supporting the surge of commercial and residential construction and initiatives to explore adding even more housing options as we look toward growth at Grand Sky, our Grand Forks Air Force Base and professional and technical services.

All of this growth is indicative of our region’s diverse and robust economy, which shows no signs of slowdown anytime soon.

Klaus Thiessen President and CEO Grand Forks Region Economic Development Corp. klaust@grandforks.org

IMAGE: KRIS WOLFF, PRAIRIE BUSINESS

CONSTRUCTION 2016/2017

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SIOUX FALLS

GEOGRAPHIC AND INDUSTRY EXPANSION

BY SLATER BARR

SLATER BARR

Three major projects underway in Sioux Falls, S.D., are part of another year of record-setting construction in the area and stand out as examples of the elements fueling the consistent progress of the Sioux Falls metropolitan area. A $30 million mixed-use project in the heart of downtown, a $125 million medical innovation center on one of our two health care campuses and infrastructure development at the state’s first economic development megasite illustrate the diversity of growth in South Dakota’s largest city.

The revitalization of downtown Sioux Falls, marked by the rehabilitation of historic buildings alongside the construction of modern loft condominiums and a blossoming of retail shops, has brought a new focus to this part of the city. More than 15,000 people now work downtown, with 5,000 downtown residents adding to the mix. Services from an upscale green grocery to a state-of-the-art drug store retrofitted into a historic corner are happening in the downtown area, catering to downtown loft occupants. With destinations like the Washington Pavilion, one of the community’s main cultural attractions, and a growing diversity of restaurants and nightspots, downtown draws a crowd every night of the week.

Capitalizing on that excitement is the Washington Square project. The $30 million, eight-story mixed-use building across from the Washington Pavilion will feature 22 luxury condos, 7,000 square feet of retail space, 22,000 square feet of office space and nearly 200 additional public parking spots. From its luxurious rooftop terrace to new dining options on the street level, Washington Square is a groundbreaking concept for Sioux Falls, with places to work, live and play all in one location.

Construction activity at Sanford Health and Avera Health has consistently added tens of millions of dollars to the building permit totals annually. The 72,000-square-foot, $25 million Avera Emergency and Family Health Center, located west of Interstate 29 in Sioux Falls, is wrapping up construction this fall. In addition to an innovative freestanding emergency center to serve the fast-growing western sector of the city, the clinic will house family practice physicians and OB-GYN services, including mammography and maternal-fetal ultrasounds.

The 102,000-square-foot Imagenetics building, now rapidly going up on the Sanford Health campus, links health care to research, genetics and education. Imagenetics will be home to medical geneticists as well as genetic counselors to address health care in a bold new way. The $125 million project will house an internal medicine clinic, cytogenetics lab, molecular genetics lab, radiology, clinical lab, clinical research, patient access management and dialysis, with a planned completion date in fall 2017.

In northwest Sioux Falls, construction is moving forward in Foundation Park, South Dakota’s first economic development megasite. With 820 acres divided into sites in a wide variety of sizes, the park features railroad service, access to Interstates 90 and 29 — the crossroads of America — and proximity to the regional airport and Port of Entry. As the sculpting of terrain and the development of infrastructure proceed, companies are already lining up to be part of this next major corporate address in Sioux Falls.

The diversity of these projects, in downtown Sioux Falls, on medical campuses and in a rapidly growing, newly developed corner of the community, is one of the reasons for consistent economic growth in Sioux Falls. Construction projects like these, which are making 2016 another year of record-setting building activity, will continue to fuel economic development in Sioux Falls throughout the last half of this decade.

IMAGE: SIOUX FALLS DEVELOPMENT FOUNDATION Slater Barr President Sioux Falls Development Foundation Sioux Falls, S.D. slaterb@siouxfalls.com

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MINOT

SHAPING THE FUTURE

BY STEPHANIE HOFFART

STEPHANIE HOFFART

IMAGE: MINOT AREA DEVELOPMENT CORP.

CONSTRUCTION 2016/2017

The Magic City of Minot, N.D., is certainly in a spotlight of transformation. Minot’s infrastructure projects for 2016 and 2017 range from mandatory updates to accommodating growth and preparing for future opportunities.

Minot secured a nation-wide accomplishment in 2016 when it was awarded $74.3 million from the U.S. Department of Housing and Urban Development’s National Disaster Resilience Competition. Out of 67 communities in the initial running, Minot was the smallest city in the U.S. to compete, and one out of four cities to be awarded. This huge achievement will have a significant role in building a diverse and resilient economy and preparing Minot for the future. The money will go toward a hazard protection system, affordable housing, a robust transportation system and other vital needs for the Minot community in the years to come.

Minot succeeded with another noteworthy project in 2016 — the Minot International Airport. Minot became home to the largest airport in the state, with approximately $85 million put toward a new terminal, a new 12.4-acre apron, new airport parking and other capital improvements to make the Minot International Airport the most efficient airport in the state.

Other major construction projects north of town include the recent completion of water and sewer lines under the 55th St. Overpass and County Road 10, followed by a new lift station completed in summer 2016. And downtown Minot is in the midst of a three-year renovation. With 75- to 100-year-old underground infrastructure, Minot’s downtown upgrades are greatly needed to keep the heart of Minot thriving.

The heart of Minot is also undergoing aboveground upgrades, including the Ward County Administration Building and the Ward County Jail expansion. The new Ward County Administration Building was desperately needed to accommodate the growth of the Minot area. Just shy of $20 million, this new building was built with future growth in mind and the opportunity to expand its departments. Minot’s downtown will also have a new $37 million Ward County Jail expansion. The expansion will consist of 200 cells, nearly triple the size of the existing jail. Once the new jail is completed in 2017, the remodeling of the existing jail will take place, including medical and administrative services, to further improve the function of the jail. The remodeling of the existing jail is expected to be completed in 2018.

In addition to mandatory updates and accommodating Minot’s recent growth, plenty of other exciting projects are ongoing. Minot’s AGT Foods facility completed its multi-million-dollar expansion in 2016. This facility went from three processing lines to six, as a result of the increased demand for pulse crops.

As our anchor tenant at the Port of North Dakota, AGT’s expansion is one of the most exciting milestones for Minot. This expansion truly opens more doors for our industrial park to reach its full potential. Since 2015, Minot Area Development Corp. has invested more than $8 million in the Port of North Dakota. MADC will continue to develop Minot’s industrial park and secure primary sector businesses that will better the Minot community and state of North Dakota.

Minot’s construction projects for 2016 and 2017 will truly shape the future of Minot, with the revamping of downtown, growing industrial park, new Ward County Administration Building, new Ward County Jail, and the needed infrastructure improvements. The Magic City of Minot strives and continues to be the location of choice for businesses and families.

Stephanie Hoffart President and CEO Minot Area Development Corp.

Minot, N.D. shoffart@minotusa.com

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DESIGN

ON TOP OF THE TRENDS Architects and engineers don’t just draw up blueprints and hand them off to construction crews. Today’s projects require involvement from start to finish and incorporate multiple trends as they evolve

BY KAYLA PRASEK When a developer envisions a new residential community or business park or a company starts planning for a new building, eventually an architect and an engineer will be brought on to the project to bring those visions to life. From designing the building itself to figuring out where plumbing and electrical wiring will go and planning the site the building will sit on, architects and engineers are part of each step of the process.

They’re also the people on the frontline of design trends. While some clients want the bare minimum for the lowest price possible, many want the details to be beautiful, comfortable or useful, depending on the building type. Many also want to incorporate the latest trends both in the interior and on the exterior.

Site Planning

Workers from AJ Construction of Horace, N.D., lay concrete in a parking lot at North Dakota State University in Fargo, a project that Brian Pattengale of Houston Engineering helped design.

IMAGE: HOUSTON ENGINEERING

CONSTRUCTION 2016/2017

Civil engineer Brian Pattengale leads site development and municipal efforts for Houston Engineering Inc. in Fargo. When a client has a building he or she wants built on a specific site, it’s Pattengale’s job to create a site layout that meets all the zoning codes. “It’s a very client-centric approach, but we’re always working within those regulating codes,” Pattengale says.

Commercial sites usually include a “big, square building and a truck dock on a functional site,” Pattengale says. Residential apartment sites “are sometimes more utilitarian, but others want more unique showpieces and go above and beyond on landscaping.” The same is true for residential subdivisions, Pattengale says. “More and more, clients are not wanting to do just the bare minimum. Some do just a little extra or put more planning in for the site to make

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19 Mortenson employees smooth out a concrete floor in the Sanford Fargo Medical Center. IMAGE: MORTENSON

it look a little nicer. Developers are realizing people want to live or work somewhere nicer.”

While site designs “tend to be a little more basic due to city zoning codes,” Pattengale says they can push the codes to meet what the developer wants as long as it still falls within the codes and Pattengale has seen some trends emerge. “We’re fitting more buildings onto smaller sites. More people are going with buried stormwater systems versus a stormwater pond, which can be ugly, so they’re burying their system and landscaping the resulting green space.”

Pattengale has also seen Leadership in Energy and Environmental Design (LEED)-certified buildings become more popular. “It’s not new but it’s an expensive process, so you have to go into it saying you want to be LEED certified. We’ve done a few LEED projects recently.”

Overall, Pattengale doesn’t seek out trends to incorporate in site designs. “We’re very dependent on the clients and their wants and needs,” he says.

“Our site designs run the gamut from utilitarian to image conscious, but those are the designs that have higher rent and tend to draw in more renters.

Our driving force is an owner with a vision. We ask what they really want out of the building and sketch out their grandiose plan into something that is workable and fits their budget without compromising their vision too much.”

Interior Trends When it comes to the design of commercial buildings, more architects and building own-

ers are incorporating glass into the designs, says Andy Bartsch, principal and director of electrical engineering for Obermiller Nelson Engineering in Fargo. “We’re seeing glass being used a lot more, so there’s a lot more natural light in these buildings.”

The increase of the use of glass affects the layout of electrical and heating, ventilation and air conditioning systems in a building. “We have to make sure we’re designing lighting systems that work with all the natural light,” Bartsch says.

Energy-conscious lighting designs have also become more prevalent, Bartsch says. “The lighting industry has really focused on that. LED lights are becoming the main source of illumination in many buildings.”

Obermiller Nelson Engineering of Fargo led the solar panel installation at the University of North Dakota’s Gorecki Alumni Center in Grand Forks.

IMAGE: OBERMILLER NELSON ENGINEERING

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DESIGN

Integrating more glass into buildings is one of the top design trends right now, as can be seen at Watford City High School in Watford City, N.D. IMAGE: OBERMILLER NELSON ENGINEERING

Joanna Slominski, construction executive for the Sanford Fargo Medical Center and leader of the Mortenson Fargo office, walks through the project to check on its progress.

IMAGE: MORTENSON

Other trends Bartsch has started incorporating into designs include smaller lighting fixtures, more creative lighting fixtures and being able to better hide the less-attractive aspects of lighting.

Most states have energy codes that encourage energy efficiency, Bartsch says. “Some trends are driven by the codes but the industry is just evolving. We’re learning more about how people use the buildings we design and making them more conducive to using the space.”

Health Care Trends As the health care industry has evolved, so have health care facilities. Stan Schimke, director of health care services for EAPC Architects Engineers in Bismarck, N.D., says the industry has focused on wellness and holistic care and patients are self-directing their own wellness. “They’re redesigning the whole care model based on the collaborative care approach,” Schimke says. “They want their facilities to be more flexible to reutilize spaces if their needs change.”

Evidence-based design and LEED concepts have also become more popular. “They want to make their buildings as efficient and adaptable as possible,” Schimke says.

With the evolution, traditional outpatient clinics are going away, Schimke says. “The focus is on collaborative care.

Inpatient hospitals are removing ambulatory care and putting that aspect into more of a retail setting. They’re also focused on putting health care more where people live.”

Technology is also important when it comes to designing health care facilities, Schimke says. “We always plan for future changes in the infrastructure so health care organizations can stay on top of the latest trends. We try to make the design as adaptable and modular as possible. For example, a procedure room might be the size of two exam rooms so things can be adapted and moved as needed.”

Kayla Prasek Staff Writer, Prairie Business 701.780.1187 kprasek@prairiebusinessmagazine.com

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WORKFORCE

DESIGN

IN DEMAND The construction industry has not been immune to the labor shortage plaguing the region and country. How are companies handling it?

CONSTRUCTION 2016/2017

BY JENNIFER LU The number of construction jobs in the U.S. declined by 837,800 between 2004 and 2014, according to the Bureau of Labor Statistics, and though employment figures for the next 10 years are projected to return to near 2004 levels, industry groups such as the National Association of Home Builders and Associated General Contractors report that contractors are having difficulty hiring skilled laborers.

In a June 2016 NAHB survey report, 40 percent or more of NAHB members surveyed said there was “some shortage” in finding carpenters, framing crews, bricklayers, masons and painters, and 10 to 23 percent said there was a “serious shortage” in this type of labor.

Meanwhile, 92 percent of the 272 Midwestern firms surveyed by the AGC expected they would need to hire more hourly craft workers within the next year, and 90 percent of the firms surveyed found it challenging to fill these salaried and hourly positions, according to the 2015 ACG workforce survey results for the Midwest.

“There is a shortage of future construction professionals, but we understand our shortage is not any different (from other sectors)” says Russ Hanson, executive vice president of the AGC of North Dakota. “We know we're not alone in that.”

Some of the hourly positions that firms surveyed by AGC had the most trouble filling included carpenters, concrete workers, bricklayers, cement masons and sheet metal installers. For salaried positions, firms reportedly had the most difficulty finding project managers and supervisors, estimating professionals and engineers.

Misperceptions Despite projections for growth, not many young people are entering the construction industry.

Just more than 9.9 million people age 16 and over were employed in the construction industry in 2015, according to data from the Bureau of Labor Statistics. Workers 35 to 44 years old made up about 35 percent of the labor force, followed by the next most plentiful age group, workers 45 to 54. Meanwhile, the number of workers age 20 to 24 has stayed constant at about 7 percent for the past four years.

In North Dakota, the number of 19- to 24-yearolds entering the construction industry since 2005 has decreased by 3.3 percent, according to Job Service statistics, while workers age 25 and older increased by more than 100 percent.

Sally Miskavige, vice president of Opp Construction in Grand Forks, attributes some of the reluctance of young people to enter the construction industry to misperceptions that those who enter the profession have failed in some way.

In reality, those in construction can make a pretty good living, work outside, work with their hands and make something they’re proud of, she says.

The average annual wage for workers in the construction industry has increased in the past 20 years. Job Service North Dakota reports an average annual wage of $64,899, up 160 percent from 1995. “Really, a lot of these people have really great careers,” Miskavige says. “They’re very happy with their lives. It’s not to be looked down upon.”

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23

LEFT: Opp Construction employees pave a roadway in Fargo.

IMAGE: OPP CONSTRUCTION ABOVE: Opp Construction employee Adele Aasen trains new hire Amanda Peterson to use the concrete wet saw. IMAGE: OPP CONSTRUCTION

Increasing the Labor Pool To attract future workers, Brenda Elmer, regional director at Associated Builders and Contractors of Minnesota and North Dakota, says the organization makes it a priority to give career presentations to high school students, especially freshmen and sophomores, while they are still “open-minded” to working in construction.

Both ABC and AGC organize career fairs and offer scholarships and programs for students interested in careers in construction.

ABC also manages an apprenticeship program that allows ABC-affiliated companies train-

ing new employees on the job to increase their apprentices to journeymen status, says Tom Westland, educational director at ABC Minnesota and North Dakota.

Westlund says he’s seen an increase in the number of apprentices and companies taking part in the program in the past year. “We typically will have between 40 and 50 apprentices per year, and now we’re over 60,” he says.

Despite shortages in the labor workforce, Sukhvarsh Jerath, chair of civil engineering at the University of North Dakota in Grand

Forks, says the construction industry is in good shape.

The demand for positions within the industry could change, Jerath says, adding that automation and use of robots in the field likely will increase, but the need for infrastructure remains fundamental to society.

“As long as modern civilization lasts, we are always going to be in demand,” he says.

Jennifer Lu Special to Prairie Business

Opp Construction employees work on a road in Grand Forks.

IMAGE: OPP CONSTRUCTION

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FINANCE FINANCE

BUILDING A BUSINESS Optometrist Jeffery Yunker used the Small Business Administration 504 funding program to construct Lifetime Vision Center in Grand Forks. IMAGE: KRIS WOLFF, PRAIRIE BUSINESS

Starting or expanding a business comes with multiple expenses, not the least of which being construction costs. But a few programs in the region are designed to ease that financial burden and we’ve highlighted the two most commonly used

CONSTRUCTION 2016/2017

BY JASMINE YE HAN Optometrist Jeffery B. Yunker thought he didn’t have enough money to build his own vision center, until he found out about a specialized loan program with a lower down payment and interest rate than other options he had explored.

Through the Small Business Administration’s 504 program, Yunker built Lifetime Vision Center in Grand Forks with only 10 percent of the total cost and opened in October 2003. “Without the program, I would not have been able to get the loan and build the practice I’ve always wanted,” Yunker says.

Eric Giltner, senior area manager of the Grand Forks SBA, says Yunker’s story is not unique, and specialized loan programs often are used to help business owners tackle construction projects more affordably. It’s one of two main programs used for new business construction in the region, along with the Participating in Assisting Community Expansion program through Bank of North Dakota in Bismarck.

SBA 504 SBA 504 is designed to assist in building new business locations, Giltner says. It allows the borrower to invest as little as 10 percent of the total cost of a project, while the lender provides

a loan for 50 percent of the cost and the SBA provides the remaining 40 percent through an SBA-approved development company.

The 10 percent down payment, which is low compared with investments for conventional financing, “allows the business to preserve capital for operations and growth,” says Steve Dusek, president and CEO of Dakota Certified Development Corp., one of three SBA-approved development companies in North Dakota.

Other advantages of the 504 loan program include a lower interest rate for the portion of the loan through the SBA, and a fixed interest rate that makes it easier for the borrower to predict overall cost, Dusek adds.

“The majority of our loans done on buildings — which includes construction and purchase of existing buildings — are through 504," says Chuck Hughes, deputy district director of the SBA South Dakota District Office in Sioux Falls.

The 20-year term, however, is not flexible so it can be difficult to refinance, Giltner says.

“When businesses go into a 504 loan, they need to understand that the 40 percent (through SBA) is going to be non-negotiable as far as refinancing,” he says. “They can also pay it off, but it’s difficult to pull back and say, ‘I’d like lower interest and longer term.’”

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FINANCE

Dr. Bruce Pederson is chief of staff of Watford City (N.D.) Veterinary Clinic. The 32,000-square-foot facility was constructed using Bank of North Dakota's PACE program. IMAGES: BANK OF NORTH DAKOTA

PACE PACE is a community-oriented program designed to help create jobs. It has two elements: community-based loans through Bank of North Dakota and a local lender; and a reduction of a borrower’s interest rate through the PACE fund and the local community. The interest rate buydown option can help lower a business’s loan interest rate by 5 percent, or to the floor of 1 percent, says Todd Steinwand, chief business development officer at Bank of North Dakota.

Through the interest rate buydown element, PACE offers up to $300,000, with the requirement of a matching amount from the local community as a loan or grant, Steinwand says. The funding from the community could be from a local development corporation, contributions, community funds or other community sources. “The local community helps drive this, they are the one to approve whether they wanted to do the buydown or not,” Steinwand says. While the loan and interest rate buydown are approved all at once, the buydown does not kick in until construction is complete and the loan is in the permanent financing phase.

“The PACE program is for job creation, so it mainly targets primary sector companies and is not designed for retailing," Steinwand says. But he adds it’s not limited to the primary sector.

It also applies to companies that the community thinks will help bring in jobs. As a criteria, the borrower must demonstrate that one job will be created and retained for every $100,000 of total loan proceeds.

Ask a Banker Apart from PACE and SBA 504, many other local, state and federal programs can help make construction projects more affordable. Businesses usually don’t need to directly deal with the state

CONSTRUCTION 2016/2017

or federal agencies that devised the loan programs, according to Giltner, Dusek and Chris Wolf, northern valley market president at Alerus in Grand Forks. “More often, the bank looks at the business plan to see if there is any specialized program that fits the project.

The bank is the lead and is responsible for bringing in the other parties,” Wolf says.

Dan Jacobson, chief lending officer at Alerus, suggests businesses involve lenders early in the process. “Early dialogue with the bank will help the planning process, so the bank can anticipate the loan request and act,” he says.

Jasmine Ye Han Special to Prairie Business

www.prairiebusinessmagazine.com

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Q&A

HIRING

Q A

How do construction companies recruit employees for all levels and positions successfully?

The four principal avenues of recruitment in the order of productive results are: • Contacting employees who have previously worked for the company and may have had a short seasonal layoff. Clearly the company has a history and knowledge of the skillsets and abilities these employees bring to the table.

• The second most productive process is having existing employees recruit or nominate prospects from their social networks. This may or may not involve paying an incentive for those successfully recruited. The implication that an existing employee is “vouching” or recommending a peer does carry some weight with employers.

• The third modality of recruitment is via print and electronic media advertising and/or organizations such as Job Service. The last five to seven years, with the oil play activities, has not yielded the results traditionally associated with this recruitment process.

The oil patch simply was able to pay a much higher premium for talent.

• The final method which some companies have undertaken involves recruitment via industry training programs or trade schools. This is especially evident in skilled trades, heavy equipment and commercial driver licenses.

Q A

ROGER KRUEGER (LEFT)

PRESIDENT

JOHN KRUEGER VICE PRESIDENT

GREAT PLAINS BENEFITS GROUP INC. BISMARCK, N.D. IMAGE: KYLE MARTIN PHOTO

What types of off-season jobs do laborers take, and do they generally come back to the same company when construction season starts up again?

Interestingly enough, more and more companies are seeking to reduce the seasonal layoffs traditionally associated with the road and building construction industries in the upper Midwest. Two reasons seem to surface most frequently: • What used to be an eight- or nine-month construction season is now much closer to a 10-month season or even year-round activities. This is particularly true in building construction where project management can create greater opportunities for employees to work inside or at least in more heated enclosures as opposed to suffering through the elements. In the road construction realm, crews are also working routinely for 10 months and many companies supplement their traditional “layoff” time with ancillary businesses such as snow removal, allowing a greater number of legacy employees to winter over still employed.

• The advent of the Affordable Care Act has created a new population of employees who previously did not cost the employer insurance premiums. Generally speaking, currently, any employee who has worked in excess of 1,000 hours in the previous 12 months must now have access to employer-sponsored health insurance and retirement benefits. Starting and stopping these benefits can end up being a cost burden to employers, so many choose to make use of the skills and abilities as mentioned above.

Additionally, many of those road construction companies are using the “layoff” time for extensive equipment maintenance and employee training.

CONSTRUCTION 2016/2017

CONSTRUCTION

29

Q A

Who is applying for construction jobs, and are companies seeing an influx of applicants coming from the oilfields?

The applicants for the construction jobs are pretty much the same as the pre-oil boom, skilled workers and laborers for whom construction is a career. Additionally, there is still a noticeable population of college-age students choosing the summer construction jobs as a way to fund some of their higher education expenses. The influx of former oilfield worker applicants is mostly dried up. The transient nature of these workers means they are off to new oil plays in other locations.

Q A

Do applicants come from construction training programs or are they skilled laborers looking to transfer their skills?

There was a time when construction companies would and could recruit workers from trade schools or training programs, especially heavy equipment or specialized equipment operators. We have several of those community college programs in the Dakotas and Minnesota, which are very highly rated. Unfortunately, that high esteem has produced an extraordinarily large corporate recruiting program with which most construction companies cannot effectively compete. In some instances, we are seeing students committing to corporations during their first or second year of training and receiving a full tuition reimbursement and/or a substantial monetary signing bonus.

Q A

Which positions are hardest to fill and why?

Probably those middle management positions usually titled foremen, supervisors or project managers. When the economy was rolling with ag and oil business, these positions, typically salaried, found fewer takers. Salaried managers were working long or longer hours than those they were responsible for managing, who were receiving premium wages which would be impacted by a multiplier of 1.5 for every hour worked in excess of 40 hours in a seven-day work week.

It was not uncommon for the foreman or supervisor to net less than their subordinates.

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30

Q&A

ONSITE

Q A

What do you think are the most important skills a construction worker in your sector of the industry needs to possess?

Carpentry skills are one of the most important skills needed.

All trades and subcontractors on a project are doing some type of carpentry work from framing building walls to electricians setting conduit piping. All trades perform some sort of carpentry tasks. Along with carpentry skills, construction workers need to have current knowledge on how to safely operate tools. As trades persons continue to move forward, they need to understand computer systems, total station systems, Building Information Modeling as well as iPad operation and applications.

Q A

What is your favorite part of being a construction worker?

Most would think the end of a project is my favorite part, but I enjoy seeing all the pieces of a project being put together after foundations have been poured. I enjoy seeing the daily changes of work being done, overcoming daily challenges and working through tasks that need to be done. There is a lot of work involved in building any type of construction project. A lot of people ask why the process takes so long. When I start showing them how many intricate pieces there are in completing a quality project, not to mention completing a project safely and on time, they start to understand the complexities and the durations that are required. Seeing the excitement and happiness of owners when they walk through their projects is very rewarding and I enjoy answering their “How do you build this?” questions.

CONSTRUCTION 2016/2017

ROGER KLEBE

PROJECT SUPERINTENDENT SIOUX FALLS CONSTRUCTION, JOURNEY GROUP CO. SIOUX FALLS, S.D.

Q A

How would you describe the dynamics of a construction team out on a job site?

Having a positive attitude from every member of the project team is very important. The general contractor must lead efforts with a positive attitude as the project moves forward. Every project will have unforeseen conditions arise. Over the years, project schedules have become more compressed, in turn making small schedule delays more critical in the overall project schedule. The project team must work together to solve issues while maintaining schedule and quality expectations.

My current position is superintendent and my main focus is overseeing operations on a jobsite including subcontractors, suppliers and employees. No. 1 priority on my jobsites is safety.

I conduct project-specific orientations for everyone working on site, and the entire project team holds each other accountable for safety. I maintain daily logs of progress and issues, create and monitor daily schedules and coordinate subcontractor team members. As a carpenter, I’m able to complete some of the tasks on the site.

Not knowing exactly what career path I wanted to take, I started as a construction laborer in 1990. Over the first several years, I worked alongside and learned from older, more seasoned employees and picked up trade skills from them. I attended a fouryear Associated General Contractor carpenter apprentice program and continued to pick up skills by working alongside older carpenters. I continued to work my way up the ladder and went through multiple classes and training for “stepping up to supervisor.” I’m currently going on my 26th year with Journey Group.

Q A

Defining space for 40 years.

CONSTRUCTION

Q A

What type of training did your job entail and what is your job title and description now?

31

What are your career goals?

My goal is to keep working with Journey Group. Even though I have been here many years, I’m still learning new ways to construct/build projects. Construction changes every day and I’m learning the tech side of construction, including different programs that help the building process such as BIM. Electronic sharing of information including shop drawings, details, changes and requests for information helps us communicate on a jobsite and keep everyone informed.

I hope to keep being a supervisor of construction projects in future years, but am always looking for opportunities to train for higher positions within the company. As I look back in history to when I started in construction, I used to envision what it would take to earn my current position as superintendent. It took a lot of hard work, but it is rewarding when you can look at your projects and know you built it from start to finish.

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Q&A

ADVICE

PHIL SIEK (LEFT)

SENIOR DIRECTOR OF PLANNING AND CONSTRUCTION

JEFF HOSS

EXECUTIVE DIRECTOR OF DEVELOPMENT SANFORD FARGO

Q A

What would you recommend companies building their first large project be aware of before they get started?

JH: It’s important for companies to be realistic about the project and understand all aspects that will be involved. It can be a major undertaking, but with the right team, proper planning and goal setting, it can be a very rewarding experience.

PS: I would emphasize the importance of planning.

Identifying and gaining buy-in from key stakeholders on scope, schedule and budget is paramount to the success of the entire project process. Not all aspects of a project can be known up front, but the scope, schedule and budget should be. Ensuring these are established and agreed upon initially can greatly reduce the chance for potential issues that could come up through other phases of the project.

CONSTRUCTION 2016/2017

Q A

What is the biggest, most important lesson learned after seeing through a huge project like this?

JH: Planning, planning and more planning. Align your strategy, tactics and timeline. Frequently reevaluate progress against barriers and timeline. Keep your project team aligned and leadership up to date on progress.

PS: Due to the long duration of the project, which will be over five years from initial planning to opening, maintaining a clear vision and buy-in on scope, schedule and budget is of utmost importance to the success of a project.

CONSTRUCTION

Q A

How can a proper budget be built before the project that accommodates for any changes in plans or designs that take place during construction?

33

JH: Plan, design, detail, contingency funding, risk realization and finally, stick to the plan.

PS: What it really comes down to is how you analyze risk. Identifying any potential future risks is a good start, then trying to quantify contingency amounts to cover them if needed. Of course there could still be unforeseeable situations, so having a contingency for unexpected risk is critical as well — typically historical data of like projects can help set this amount. Owner-driven changes are always a risk on projects as well. It’s human nature to rethink things as the project progresses, so you need to be prepared to address these requests with questions: Is it really needed? Are there safety or regulatory impacts if changes are not implemented? Is it a “nice to have” or “need to have?” Those are the important questions to ask in determining whether the owner-driven change is warranted or not.

The $494 million Sanford Medical Center in Fargo has been a major project and investment for Sanford.

Ground was broken in July 2012 and the facility is scheduled to open in July 2017.

IMAGES: SANFORD HEALTH

Q A

What types of planning team members are crucial for this kind of construction project?

PS and JH: A multidisciplinary team that fosters an environment of collaboration and teamwork is ideal. We brought in all partners internally; including administration, direct patient care and support departments, which allowed us a 360-degree view of how design decisions affected all areas of operations. This was further enhanced with the involvement of the design consultants and construction manager, along with major equipment/technology vendors, community members and also the patient advisory council.

Q A

Were there hiccups along the way Sanford was not prepared for and how were they handled?

JH: With every project there are bound to be some setbacks.

To manage these, first set clear expectations of the planning team and understand scenario planning. It’s so important to develop contingency plans. Also, make sure to confront rumors aggressively and establish a good communication process.

PS: Change management is always important in construction projects, especially one of this size. There will always be changes along the way, but it’s how you proactively manage them that limits the disruption to the project. With a multi-year project like this one, things change such as leadership, regulatory/codes, industry/economic effects, work flow of end-users and technology so there are many variables that must be addressed.

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Q&A

INDUSTRY

Q A

What major trends are you seeing in the construction industry?

STACY SCHUMACHER

PROJECT MANAGER, GARON CONSTRUCTION PRESIDENT, FORX BUILDERS ASSOCIATION GRAND FORKS IMAGE: KYLIE HERLAND PHOTO

CONSTRUCTION 2016/2017

One of the major trends in our region is how our homeowners are truly customizing their homes to their own styles and needs. Our homeowners are coming to the initial meeting with their ideabook folders from Houzz.com or Pinterest, showing us the end results they are looking at for their space.

We are finding the style of today’s homeowners to be more of a transitional style with a modern flavor to it. Homes still feature a great room area with the kitchen, dining and family area open. But the homeowners are leaning more toward a minimal style and are finding that less is more.

They like more clean lines in their home design and accessorizing. Most new homes feature a walk-in tile shower in the master suite. Also, free-standing tubs are very popular in the master bathroom area as well.

For lighting, LED recessed lighting is being used throughout the home. The decorative lighting fixture is being used as the jewelry of the home. Homeowners are using these light fixtures to personalize each room to the needs and style of the room.

The interior of homes are using finishes that are lighter, with wall colors in the lighter gray and beige color palette. White finishes on interior woodwork and doors continue to be the trend as well, with some stained woods as an accent.

For flooring, there is less carpet going into homes and more of the hard surfaces such as wood and tile.

The Laminate and luxury vinyl tile floors are gaining in popularity with the “wood look” that you can get from these products. For the exterior of homes, we are still keeping with the prefinished materials for the siding and using more vertical siding and stone for the accents. Homeowners are looking to keep the entire home as low-maintenance as possible. (continued on page 36)

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36

CONSTRUCTION

Q&A

INDUSTRY

(continued from page 34)

Q A

Which of these trends have the largest impacts on the industry and why?

The internet and Home and Garden Television (HGTV) have had a major impact in our industry. Our customers are coming to their first meetings having done their homework. They are able to check out styles and designs on websites such as www.houzz. com and www.pinterest.com. These sites will allow the customer to set up idea books where they can organize their pictures by room, finishes, interior looks, exterior looks, landscaping, etc. So whether they are building a new home or doing a remodeling project, they are able to narrow down many of the finishes before the project even starts.

Q A Q A

Who benefits most from these evolutions in construction?

Everyone involved in the project really benefits from these evolutions in the building industry. With so much being discovered online and from the HGTV shows, we find that our customers are not waiting for the new trends to come to our area like it used to be. Now we see these new trends at the same time as the rest of the country does and our customers are able to take advantage of that instantaneous information that is out there.

And the customizing of these spaces is also a benefit for us as contractors and suppliers, as we are able to use our creativity to design and build these great spaces for our customers. It is always fun using new ideas and materials in a project.

STACY SCHUMACHER

Q A

What further changes do you think we’ll see in the coming year?

The building industry remains steady in our area. With interest rates continuing to stay low, homeowners are still looking at doing home improvement projects or upgrading to a new home.

We have noticed that more homeowners are looking at simplifying their spaces and designing areas that are more cost effective — getting the most out of every space in their homes. Every project is unique, which makes this such a fun business to be involved in.

What changes have come about in funding for building projects, if any?

One thing that we notice about funding our building projects is that the rules in the banking industry are constantly changing. With these constant updates in the rules and procedures in the lending industry, we find that the funding programs that banks are offering to contractors and homeowners are also constantly evolving.

In our area, the majority of the custom new homes are being funded by a construction loan. These construction loans can either be taken out by the homeowner or the builder. We always tell the homeowners to check with their banks on the home construction and home improvement loans that they offer and find the one that fits their situation the best.

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CONSTRUCTION DATA

AVERAGE WEEKLY CONSTRUCTION EARNINGS

SHARE OF REAL GDP BY STATE 9

1,300

8 7

1,100 1,000 900

— MN — ND — SD

800 2011

2012

2013

2014

Percent of Real GDP

Dollars

1,200

6 5 4  2014  2015

3 2 1 0

2015

US

MN

ND

SD

Year

CONSTRUCTION EMPLOYMENT

TOTAL HOUSING PERMITS 20,000

Number of permits

Annual percentage change

20

15

10

5

— MN — ND — SD

0

2011

2012

2013

2014

15,000

10,000

— MN — ND — SD

5,000

2015

2011

2012

2014

HIGHWAY & STREET CAPITAL OUTLAYS, MAINTENANCE AND SERVICES

CHANGE IN AVERAGE SALES PRICE OF HOUSES SOLD

2

12  2013  2014

2015

10

1.5

8

Percent

Dollars (million)

2013

Year

Year

1

6 4 2

0.5

— US — Midwest

0 -2

0

MN

ND

SD

2011

2012

2013

2014

Year

Data provided by David Flynn, chair of the University of North Dakota Department of Economics. Reach him at david.flynn@business.und.edu.

CONSTRUCTION 2016/2017

2015

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