Supporting the Great Build-out

Construc tion suppliers race to keep pace with regional building boom

BY ROB SWENSON

Prairie Supply Inc.’s outlet in Bismarck, N.D., is among the construction-supply businesses in the northern Plains that expects a busy building season

“I’ve been with the company four years Each year gets busier and busier,” says Kurt Schirado, branch manager for the Prairie Supply store in Bismarck. “We’re just trying to keep up ”

To help serve the growing demand for its construction supplies in the region, Prairie Supply is building a new facility to house its branch in the state capital. Concrete has been poured, and exterior walls of the metal building are up Schirado hopes to move the store into the approximately 30,000-square-foot facility within a year without disrupting regular business operations

The oil-production boom in western North Dakota has increased demand for the concrete-related construction supplies, which is a specialty of Prairie Supply stores, Schirado says However, demand for construction supplies also is running high in Fargo and other cities in eastern North Dakota, he says. Prairie Supply is based in West Fargo In addition to Bismarck, the company has branches in the North Dakota cities of Grand Forks, Minot and Williston

The biggest concern of many construction-supply managers in North Dakota, South Dakota and Minnesota, including Schirado, is the labor supply. Businesses throughout the region are having trouble finding as many good, skilled workers as they would like

“I haven’t heard a lot about supply shortages of products. Where we hear the shortage is people. It’s labor,” says Russ Hanson, executive vice president of the Associated General Contractors of North Dakota “Everybody has the same concern They’re short of help ”

The AGC is a trade organization based in Bismarck that represents builders and suppliers other than home builders in the commercial construction industry

Despite labor challenges, Hanson expects members and associate members of the AGC in North Dakota to have an especially busy year.

“We’re hoping that Mother Nature will allow us a nice, long construction season, ” he says

Adverse weather, including a cold, ground-freezing winter and a wet, stormy spring, slowed construction throughout the region during the early part of the building season

Regionally, North Dakota’s economy is exceptionally strong, according to most assessments. Several cities in South Dakota, particularly in the Sioux Falls and Rapid City areas, also are growing

Minnesota, which is bigger in population and more industrialized than either of the Dakotas, was hit harder by the Great Recession, a national downturn that officially lasted from December 2007 to June 2009. But Minnesota is on the upswing, too

Labor Challenges

“The economy does seem like it’s coming back,” says Arnold Volker, president of Real Stone LLC, which is based in Bagley, Minn. and also has outlets in the Minnesota cities of Walker and Blaine “Right now we ’ re probably six weeks out in keeping with orders That’s a good problem to have ”

Real Stone sells a variety of cut stone for upscale buildings, floors and landscaping. Before the recession, Michigan was the company ’ s strongest market, Volker says Demand for nice stone has dropped in Michigan, but that state remains one of Real Stone’s best markets The company ’ s primary market also includes Minnesota, Iowa, North Dakota, South Dakota and Wisconsin.

Despite the improved economy, Real Stone is not back to pre-recession levels in sales or employment. The company used to have 24 employees; now it has eight to 10

General challenges confronting Real Stone include transportation costs and tight-inventory practices Trucking stone is expensive, if it’s not done in large volumes, and resellers don’t like to store large inventories of unsold products.

In addition, Real Stone has to compete with imported stone and, as Volker calls them, “fake stone” products. Even so, business at Real Stone is up about 20 percent from last year, and last year ’ s business was up 10 percent from the year before, he says “It’s coming back ”

About half of the precast concrete panels produced by Gage Brothers Concrete Products Inc in Sioux Falls, S D , go to projects in the Minneapolis area, says Tom Kelley, company president.

Gage Brothers has provided precast cladding for Target Field, home of the Minnesota Twins, and for TCF Bank Stadium, home of the Minnesota Gophers. The company also has provided panels for several large office and residential complexes in the Twin Cities and elsewhere in the region

However, the new, nearly $500 million Sanford Fargo Medical Center under construction in Fargo will be Gage Brothers’ single largest paneling project, Kelley says

Kelley says business got off to kind of a slow start in the first quarter of 2014, but “the last three quarters are going to be every bit as busy as we ’ ve ever been ”

The biggest potential problem is the limited availability of workers, he says. Gage Brothers has about 20 job openings. The company employs about 230 people and would like to be at about 250, he says

During the past few years, the Integrity Windows and Doors plant in West Fargo has nearly doubled its workforce to about 700 people. Integrity is part of Marvin Windows, which is based in Warroad, Minn.

“Clearly being in the Dakotas has increased the challenge of growing our workforce It is a competitive environment We fully embrace this challenge,” says Jeff Johnson, human resources director.

Fiberglass window and door products are in high demand for two reasons, Johnson says First, the building industry is recovering, he says “It is not nearly at the pace that it was pre-recession, but it is up off the lows of the recession, and we anticipate that the general direction of the industry is to continue to expand,” Johnson says

Second, the company has increased its product offerings while maintaining a high level of delivery and service, he says.

“We do feel confident that we can keep up with the demand of our customers,” Johnson says

Despite the tight labor market, Al Schoeneman expects 2014 to be a good construction year in the Sioux Falls area and in other cities in the upper Midwest He is the president of Schoeneman Brothers Co , a lumber and building-supply company with outlets in Sioux Falls and Harrisburg, S.D. and in the northwest Iowa communities of Hawarden and Spencer

“I think a lot of the people plumbers, electricians, framers will be stretched to the max It will be difficult to gain more momentum than we had last year, ” Schoeneman says.

Total construction valuation for the city of Sioux Falls totaled a record high $588 million in 2013, according to the Sioux Falls planning and building services department. That was a 20 percent increase over 2012 and nearly twice the total of the recession-impacted years of 2009, 2010 and 2011 The prior record year was 2007, when construction permit values totaled $523 million

The Fargo-Moorhead area also set a record for total construction value in 2013, according to a report issued by the Home Builders Association of Fargo-Moorhead The total was $663 million

Funding, Location Challenges

Toby Crow, a construction official in South Dakota, agrees that finding good workers is a challenge for many construction businesses Crow is the executive director of Associated General Contractors chapter in Pierre, which represents businesses that work on highways, heavy construction projects and utilities South Dakota’s AGC building chapter is based in Sioux Falls.

Crow does not expect acquiring construction materials and building supplies to be a problem “I don’t think we’ll have any trouble with our suppliers keeping up with demand in South Dakota,” he says

He is worried about federal budget allocations not keeping up with the need for infrastructure improvements in South Dakota and other states The challenge for builders is that projects such as highway construction and bridge work tend to be funded largely by the government through the federal gasoline tax.

“A lot of people the state, some of the larger cities are holding back because they don’t know if they’ll get reimbursed by the federal government,” Crow says.

Bruce Langseth is a veteran construction executive based in Minot as the construction manager for the Hegg Development Group of Sioux Falls. He is overseeing more than $300 million in development projects in the Minot, Williston and Watford City areas.

Langseth grew up in the construction industry in Minot, where his father owned a construction business However, he also has worked in construction-related management positions in Fargo, Kansas City, Mo., and Granite Falls, Minn

The construction boom in the communities on the Bakken shale formation presents tremendous opportunities and unique challenges for developers, contractors and suppliers, Langseth says.

For starters, the population of the oil-producing area is sparse, which adds to workforce and service challenges Weather conditions can be brutal, especially during the winter months. Roads and other infrastructure are lacking Getting supplies to the region can be costly In addition, companies often have to pay a premium for good, qualified contractors

“Everything isn’t as simple as it would be in downtown Sioux Falls,” Langseth says

Corey Schultz, vice president of sales for the Hebron Brick Co in Fargo, senses that the boom in western North Dakota is leveling off.

“It’s more manageable now than it was initially,” Schultz says “Eastern North Dakota and eastern South Dakota are more stable areas to be in We don’t have the super highs, but we don’t have the super lows, either,” he says.

Hebron has sales offices in Fargo, Grand Forks, Bismarck, Minot, Sioux Falls, Rapid City, and Fergus Falls, Minn The company also has a brick plant in Hebron, N.D., and a concrete block plant in Mandan, N.D.

Hebron sells its bricks nationally Roughly 20 percent of its brick production and all of its concrete block production stay in the Dakotas, Schultz says Nationally, market conditions are a little sluggish, but conditions in the Upper Midwest are good, Schultz says.

Schultz’s assessment of the construction season is similar to that of other managers in the contracting and building-materials industry: “We expect our sales in the Midwest will be up from last year, and last year we were up from the prior year. ” PB

Rob Swenson Contributing writer RobSwensonMediaServices@gmail com