The U.S. construction industry lost nearly 2 million jobs between 2007 and 2010 as a result of the financial crisis, more than any other segment of the economy. To some degree, this was not surprising, given the numerous pockets of overbuilding that preceded the recession; however, only 40 percent of these workers have returned to the industry, despite seven years of a moderately strong recovery. This is equivalent to a city almost the size of Dallas disappearing from the construction labor pool. With such a massive and prolonged shortage of skilled labor, real estate investors should consider the question, “What happens when you lose a generation of construction workers?”

Counting the costs

A labor shortage impacts construction costs almost immediately. The Turner Building Cost Index (designed to track nonresidential construction) rose 4.5 percent in 2015 and is on pace to eclipse this figure in 2016, which would be the largest total since 2008 an