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Building industry professionals on Tuesday said they expect business to remain steady in 2024, and offered insight into what can be done to finance projects and spur development growth.

At a Builder Breakfast event hosted by the Daily Journal of Commerce, experts in construction, real estate, development, and the economy provided a forecast for the year ahead. Approximately 100 people attended the event, which was postponed from last month due to stormy weather.

The discussion, moderated by Schwabe, Williamson & Wyatt shareholder Josh Dennis, focused on some regional projects in process as well as predictions for 2024. Panelists included Metro Fiscal & Tax Policy Director Josh Harwood, HP Civil Inc. President Larry Gescher, AGC Oregon-Columbia chapter Executive Director Mike Salsgiver, and JLL Executive Vice President Cayla Wardenburg.

State of the economy

鈥淲e鈥檙e trying to thread the needle in terms of lowering inflation without seeing changes in labor markets,鈥� Harwood said of current conditions nationally and locally.

Typically, urban areas drive growth, but they are lagging now, Harwood said. In 2024, people can expect an election year economy, where there is typically not a big swing one way or the other, he said.

For the real estate market, however, there is still a search for stability, Wardenburg said. She predicts more defaults and distress-driven sales to write off debt.

鈥淥n the positive side, this could really be a reset of values, a reset of rates after these distress sales happen,鈥� she said. 鈥淚t can be positive as rates reset with tenant expectations.鈥�

Tolling

With talk of the Oregon Legislature mandating formation of a tolling program for bridges such as the Interstate Bridge replacement, Gescher said he would be a proponent of tolling if Oregon gas taxes were eliminated. Currently, the state gas tax is 40 cents per gallon and the Portland gas tax is 10 cents per gallon. He added that if tolling does not come to fruition, then governments need to do something else drastic to fund road and bridge improvements.

Technological advances

Salsgiver encouraged people to study artificial intelligence (AI) and then look for opportunities to use it. He also said he believes robotics can help the construction industry address its workforce shortage and assist learning and training of existing systems to maximize use.

Construction materials

Prices of key construction materials may level off, but likely won鈥檛 come down, according to Gescher. The industry鈥檚 new normal includes equipment delays and completion dates being pushed out, he said. Owners are starting to include in contracts language stating they will adjust completion dates due to equipment supply delays, he added.

Growth potential

Portland-metro areas ripe for growth include the Vancouver (Washington) waterfront, Wardenburg said. She cited the city鈥檚 Terminal 1 development as an example of a good mixed-use site. Industrial property prices and availability, meanwhile, are reportedly driving that development to the fringes of the metro area or even outside it.

As for the prospects for a rebound in downtown Portland, Wardenburg said that the most important thing is supporting the recommendations of the governor鈥檚 task force and returning people 鈥� including city workers 鈥� to offices. In 2020, she said, 70 percent of leasing activity was happening in the suburbs. In 2023, it was fifty-fifty between urban and suburban activity. Urban leasing is coming back (tenants鈥� demand increased at the end of 2023), she added, but not at pre-pandemic levels.

To spur growth of leases and purchases of offices and retail properties, the market must reset a little, Harwood said.

Environmental factors

Salsgiver said he has not seen new environmental laws that would disturb the building industry. People are mostly looking into what can be done legislatively to deal with climate change, he said.

Meanwhile, the Oregon Department of Environmental Quality (DEQ) is becoming more active on project sites, Gescher said. HP Civil Inc. is now reporting directly to DEQ when there is heavy rainfall and discharge of pollutants. The firm has reported discharges, received fines, and then made corrections. Such enforcement by the DEQ wasn鈥檛 happening previously, he said.

Also, HP Civil Inc. is now using renewable diesel in old equipment and finding that it runs clear and burns the same way as nonrenewable diesel, Gescher said. It could be a silver bullet for the industry, he said, because firms wouldn鈥檛 need to spend money to replace equipment.