Wages in some CRE sectors are declining, and the mixed signals are causing some confusion.
Some analysts believe the construction labor market is hitting an inflection point and starting to soften due to inflation and the ongoing fear of recession.
Residential construction wages fell $0.28 from June to July. Nonresidential wages were flat and specialty trades wages increased $0.14.
Residential construction wages are up 3.4% year-over-year, but annual growth has been higher than usual throughout the pandemic. Growth rates averaged 6%-7% in 2021.
Experts say rising interest rates make it harder for developers and owners to make deals pencil out, particularly as apartment rental rates are falling. The new project pipeline will likely slow and generate a slowdown for labor.
While single-family has seen a high number of starts, completions have remained consistent because of supply chain problems and labor shortages. Experts predict that as starts decrease, the ratio to completions will fall more in line.
The labor shortage, however, is expected to continue, as the pool is not being replenished by new workers to replace those that leave the industry. Some experts expect labor costs to continue increasing until late 2023 or into 2024. Because of the labor shortage, hourly earnings increased 6.2% from March 2021-February 2022. Experts predict raises will continue in the near-term as companies try to stay competitive. (Source)