With growing inflation, rising interest rates and supply chain issues, it may come as a surprise that the construction industry in Arkansas marked positive numbers in the last 12 months of published statistics. A recent analysis published by the Associated General Contractors of America (AGC) showed 32 states added construction jobs over the course of a year, including the state of Arkansas. The growth occurred despite a labor shortage that some believe could have made gains even higher if more workers had been available. According to the AGC report, from September of 2021 to September 2022, the number of construction projects in Arkansas rose 1.3%.
Stephen Lane, one of the vice presidents at Clark Contractors, calls the economic trend “a perfect storm.” His company is a prime example of a construction company that has been able to grow despite the challenges surrounding the business in the last couple of years. Lane notes that although the industry does seem to be slowing down, the scenario is not at all like the crash years ago. “In 2008-2009, it seemed like there were fewer projects coming out, but for whatever reason, this time, the frequency of new jobs coming out hasn’t really decreased yet.” he says. “It’s almost like you have a perfect storm. We have cost increases, material availability shortages and the frequency of new jobs coming out is still really high. So, I think when you have all these things in unison, that’s tricky and makes it difficult to recover.”
Kris Fluger, also a vice president at Clark Contractors, agrees with Lane. “In general, I’m starting to see things slowing down a little bit, but there are definitely opportunities out there,” he says. “And then, if you’re looking at it in terms of commodities or material availability like copper and steel, that’s definitely starting to plateau and trend downwards. I would say construction pricing is reflected to where it was almost two years ago around November of 2020.”
Fluger explains the structural materials Clark Contractors mostly employs – metal and steel – are slowly coming back to the level availability they were accustomed to before the COVID-19 pandemic. Some items continue to be harder to find and are taking longer to come in – such as joists and deck material – but, overall, supply issues have improved in the last six months.
Inflation has certainly affected the construction industry, as it has other industries across the spectrum. Lane notes Clark Contractors has been able to meet that challenge head-on, thanks to the foresight of the company’s owners. According to Lane, the Clark family anticipated the price increase and was able to prepare for it. The one thing no one was expecting were the delays and limited availability of supplies. “It’s almost across the whole gamut every time you turn around,” he notes. “Still to this day, we still get surprised with something new that’s no longer available. Maybe they’ve run out of their inventory or they’re just not producing as fast as we’re consuming, but that’s really been one of the trickiest things for us.”
Along with the consequences of inflation and supply shortages come difficult conversations with customers. Companies like Clark Contractors find themselves having to explain to a client that the building they wanted to build two years ago will now likely cost 30% more than before. Not only that, but some of the major components of the project won’t be in place on time. Nowadays, it’s common for critical items like generators, switch gears and air handling units to require a full year’s lead time.
The comparisons Lane and Fluger draw between the challenges of today and those of 2008 come from a unique perspective. Clark Contractors was founded by the Clark family in 2009. Fluger joined soon after in 2010, and Lane joined in 2011. The two men joke that starting a construction company in the midst of those difficult years there was nowhere to go but up. Lane maintains that the years following the pandemic have been vastly different. He hasn’t seen this level of spikes in cost and availability before.
“I don’t see things going in the direction of a 2009 spiral,” Fluger asserts. “I think we’re going to see a slowdown, and it’s probably going to plateau at the end. I just don’t know how far we will go down before it plateaus.”
Fluger explains that over the years, he’s witnessed the market rise and fall, but always remaining stable at a point for a while before moving again. “If you look at the trend and the history over the past 10 to 15 years, you see that it goes up and stays there for a while and then goes down and stays there for a while. You get these areas of plateauing up and down.” He anticipates that the next plateau will come in part from a shift in demand.
Lane and Fluger have noticed the market shifting away from private clients toward more jobs in the public sector. This could be due to the rise in interest rates. Private developers who now face higher lending rates seem to be cutting back on projects. Lane, who focuses more on the company’s health care projects, says he is finishing up some current health care projects – including two outpatient facilities with imaging and surgery capabilities – but he hasn’t seen much new business come in from the medical side. “It looks like several hospitals have master plans that they’re holding onto and not rolling out yet,” he says. “I think there’s big stuff on the horizon with hospitals, but with everything that has happened recently, they’re a little reluctant to do anything major right now.” He suspects this category will pick up again in a couple of years.
Fluger anticipates a series of hospitality projects coming down the pike after having come to a halt during the pandemic. Hotel brands, in particular, are subject to property improvements every few years. Many of them were granted extensions under the special circumstances, but now hotel owners will need to complete those deferred projects.
With its main headquarters in Little Rock and offices in Rogers and South Lake, Texas, Clark Contractors is also currently working on a number of cultivation facilities across a few states. “That work has been a large contributor to our growth over the past two years,” Fluger notes. Despite all the challenges, the company has seen record growth with an increased revenue of 30% over the last two years. Last year was its best year ever in terms of revenue, and 2022 will top that. The rise in projects has also led the company to hire more salaried employees. They currently have 120 people on staff, an increase of 25% since 2020.
Other notable projects for Clark Contractors include two Windgate art buildings for the University of Arkansas as well as a new school building for McClellan Magnet school in southwest Little Rock. The construction firm has also handled an expansion for Arkansas Urology and the renovation of an old Kmart building into a sleek medical office plaza for Premier Medical.