Immigration has become one of the main issues in the 2016 presidential race, and some real estate developers in Charlotte are watching the debate with a wary eye toward possible effects on construction costs.
The price of building new projects has already risen substantially in the past several years, driven by increased demand for workers, materials and land. Now, Republican frontrunner Donald Trump is promising to build a wall along the U.S.-Mexico border and deport the estimated 11 million undocumented immigrants in the U.S.
The Pew Research Center estimated last year that undocumented immigrants make up about 14 percent of laborers in the construction and extraction field, behind farming, where they accounted for 26 percent of workers, and building and grounds maintenance, where they make up 17 percent.
At a Thursday real estate forecast hosted by Bisnow, the commercial real estate news site, the development community’s unease with a massive immigration clamp-down was on full display. And this wasn’t exactly a left-leaning crowd.
The labor market, they said, is already tight – a product of so many projects under construction at once.
“Our expansion has been built on the backs of people who came to our city seeking low-paying jobs,” said Jensie Teague, a principal at Selwyn Property Group, during the forum at Fillmore Charlotte. He said a “reasonable” immigration policy needs to take that into account.
North Carolina’s presidential primary is scheduled for March 15.
George Dewey IV, president of Aston Properties, quipped about Trump’s proposed 2,000-mile wall along the southern border. Trump, himself a developer, has made the wall a centerpiece of his campaign. He has said building a wall and deporting undocumented immigrants will help U.S. citizens in the job market by removing lower-paid competition.
“Hopefully there are a few doors in that wall,” said Dewey, whose company is a partner in the redevelopment of Sedgefield Shopping Center on South Boulevard.
To understand why they’re uneasy, take a look at the construction costs they’re finding. Chris Epstien, president of BECO South, which owns Innovation Park in the University City area, said hes has seen construction costs jump 20 to 25 percent in the six years they’ve been active in Charlotte.
Teague said it’s not uncommon to see construction prices for a prospective development rise 10 percent to 15 percent between the time a developer puts a piece of land under contract and obtains financing.
“Labor is certainly what is driving the increase,” Teague said.
The cost to hire workers is going up primarily because they’re in such demand right now, especially skilled laborers. Tightening the supply of workers could drive costs even higher. Some developers think that could help moderate the real estate boom and prevent fevered over-building.
“It’s becoming more and more difficult to make the math work on a lot of development deals,” said Bryan Kane, senior vice president of Federal Capital Partners, a Washington, D.C.-based company that invests in real estate throughout the mid-Atlantic.
And so the question of who will be the next president looms in the background of the real estate boom, a question mark hovering over projects sitting on planners’ drawing boards. For now, developers are watching and waiting, said Brian Leary, president of Crescent Communities’ commercial and mixed-use division.
“November may freak everyone out,” Leary said. “Who knows what happens in Washington?”