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Forum on the Future 2017 Report

Introduction: Forum on the Future 2017

With the recession in the rearview mirror, Idaho’s economy is going strong.

Unemployment is low (2.9 percent in Idaho, compared to 4.1 percent nationally, according to the Bureau of Labor Statistics), which is good news for job seekers but bad news for businesses looking for qualified employees. The Associated General Contractors has said a shortage of skilled laborers is actually suppressing growth.

The Department of Labor says Idaho’s population will grow at three times the national rate between now and 2025. With that, several sectors of the economy will grow.

On Dec. 5, The Idaho Business Review gathered a panel of experts in technology, real estate, construction, food processing, and cybersecurity to talk about what the coming year will bring for Idaho businesses.

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Forum on the future panel (l-r) Moderator Anne Wallace Allen, editor of the Idaho Business Review; Idaho Associated General Contractors CEO Wayne Hammon; AppDetex founder Faisal Shah; Reid Stephan, associate CIO at St. Luke’s Health System; economist Brian Greber; and Carleen Herring, senior vice president and COO of Region IV Development Association, Inc. Photo by Glenn Landberg.

Recruiting workers is still a struggle, and wages will rise accordingly

Wayne Hammon

Sheet metal workers. Construction companies are having so much difficulty finding skilled workers that they’re leaving positions unfilled, suppressing growth in the economy, said the AGC’s Wayne Hammon. File photo.

Sheet metal workers. Construction companies are having so much difficulty finding skilled workers that they’re leaving positions unfilled, suppressing growth in the economy, said the AGC’s Wayne Hammon. File photo.

For two-thirds of the last two years, Idaho was in the top five [states] and the Boise metro area was in the top six or seven [metropolitan areas for construction job growth] continually, every month, month after month. And it wasn’t just Boise; Lewiston and Pocatello and other areas [were too], and we were leading the nation in construction job growth – new people entering the construction field.

And about six months ago, it stopped and we went from like second to 27th, and now we’re at, like, 45th. The question this month when the numbers came out was what happened to Idaho?

Well, nothing’s happened. We haven’t lost jobs – we haven’t lost very many jobs—but we ran out of people. About six months ago, the number of construction jobs that were left at the end of the month unfilled eclipsed the number that were filled, and now it’s almost two to one. … For every new person entering the construction field in Idaho, there are two more jobs that are left unfilled.

So recruiting that next generation of talent is definitely of high concern, not only for the agency but for all of our members and for anybody who works in a building or drives on a road or sends their kids to a school—those things don’t take place unless there are tradespeople there to build the facility.

We have seen in Idaho, with the state unemployment where it’s at, and in our field and in the trades, it’s even lower than that. If there’s a welder out there that hasn’t got a good paying job, we haven’t found her, because we’ve looked everywhere we could to find her. If there’s a CEL driver out there that’s not happy with their job, they’re not looking hard to find another one because if you can drive a truck, we can get you a job tomorrow.

Faisal Shah

Faisal Shah, Founder of AppDetex

Faisal Shah, Founder of AppDetex

I think Boise has the same problem … and the Treasure Valley has the same problem that a lot of other cities are seeing: We also have a shortage of programmers. When you really think about it, there are two things you really need to be successful in a potential startup. You need people and you need capital. Without one of those two things, you’re not going anywhere, especially in a startup.

So when you look at technology startups and you’re taking them from ground zero all the way to a large company, you have to start with the developers all the way at the very beginning, and you’re growing that company and you need additional developers as you’re growing up, so how do you do that? …

The great thing about being here in Boise is that you have the institutions like Boise State University, Northwest Nazarene University, College of Western Idaho, and University of Idaho – all these great schools that are putting out computer science graduates.

If you really think about it, when I started MarkMonitor, Boise State – I’ll use the number as an example – put out 20 graduates. Today they’re actually graduating 90 students in computer science. For this city, that’s not insignificant. With additional funding, they can probably get to 120, and their goal is to get to 200.

Graduating 200 students and putting them into the ecosystem here in Boise is what I think is nirvana for all of us. As a CEO, you really want to see that. And let me explain to you why I think that that is really important. When you’re a startup and you don’t have a lot of money, …  you have to rely on the students, the interns that are coming into your particular company that’s going to help you out. You don’t have to pay them as much as you’re paying a senior developer, so they’re charging you less and they’re training with you, … [and] your money actually extends a lot farther.

The key is, how do we continue that trend? One of the things I’ve seen Boise State do that I think is pretty remarkable is reaching back into the high schools … and trying to get everybody excited about computer science so more people are applying to the computer science department.

About three years ago I think they had 44 students that were taking computer science in Boise and Ada County. Now, today, they have 1,400 students taking a computer science course.

Reid Stephan

Reid Stephan, Associate CIO at St. Luke’s Health System

Reid Stephan, Associate CIO at St. Luke’s Health System

We’ve seen, certainly in my career, a huge uptick in qualified candidates coming out of universities in the state of Idaho just in general. Cybersecurity still is an area that needs more rigor around the curriculum, perhaps even an information assurance major. We will take someone who is a graduate and they may have a technology interest but really nascent when it comes to cybersecurity discipline and principles. We have to train them from the ground up.

As we interview and recruit, our play is very much that there’s a hidden paycheck in health care; it’s a calling more than a career. We make sure people understand going in what that emotional attachment is to that field of health care. That is effective to a degree, but there still is the very real challenge of, [for] a lot of these folks at the end of the day, it really is that paycheck that drives employment decisions.

Brian Greber

Brian Greber, adjunct professor of economics and management at Boise State University

Brian Greber, adjunct professor of economics and management at Boise State University

When I was with Weyerhaeuser, I had … the full suite of STEM-type disciplines. We moved into the Trust Joist R&D facility on Amity Rd. in Southeast Boise. I had facilities in Vancouver, British Columbia; Seattle, Boise, Denver and a small one over on the coast of Oregon. On the software side, when I tried to get new talent, everybody I interviewed tried to negotiate for one of the other locations.

We think Boise’s great; that’s because we self-selected Boise. It is great for us. Unfortunately, when I was out trying to recruit the engineers, the programmers, and others, particularly when you’re looking for diversity, Boise doesn’t fit that bill for a lot of folks.

I had a wonderful time posting jobs for Boise and placing people into Denver. It became an issue. Weyerhaeuser ended up, a couple years after I retired, shutting down the facility here.

It’s a good case in point. This emphasis on homegrown – we like it here, we’ve self-selected here. A lot of the fields we’re having to homegrow the labor. That’s pretty tough given our inherent population growth. We’ve historically been driven by in-migration; unfortunately, the people that migrate into the state don’t necessarily fill what a lot of us are looking for in the STEM fields.

Carleen Herring

Carleen Herring, senior vice president and COO of Region IV Development Association, Inc.

Carleen Herring, senior vice president
and COO of Region IV Development Association, Inc.

If you take a look at the comments about Boise not having diversity, not offering enough to some of the folks – downscale that to Twin Falls. In the next 12 to 20 months, we have confirmed 1,200 new positions coming online. At this point in time, region wide, there’s only 1,900 people unemployed.

If you do the math, our food cluster – and some of these are food, some of these are supply chain – has about a 2.3 multiplier. So if we’re having 1,200 new positions coming online in the next 12 to 18 months, I’ve got 2,760 positions opening up with 1,900 people unemployed – and they may or may not be employable, especially in the skill sets that are required here. ….

Back in 2015, College of Southern Idaho and the Economic Development Administration partnered on an $8.9 million technology center. That building is called the Applied Technology Innovation Center. …. That particular facility has a number of different training opportunities in it. It has all the classrooms for biofuels, solar and wind power – so taking a look at alternative generation. … The  agricultural process has a lot of residuals that we can use for different products, but it also has the industrial technology portion of it.

Wayne Hammon

Wayne Hammon, CEO of Idaho Associated General Contractors

Wayne Hammon, CEO of Idaho Associated General Contractors

A friend of mine called … and said, “You know, my son is a heavy equipment operator in Vegas, and he doesn’t like living in Vegas anymore and wants to move home, except he’s afraid that the wages in Idaho are so horrible that he doesn’t think he can move here and still support his family.”

So I [asked] her where does he work, and he works for one of those big international firms, and I said, “Well if he works there, he’s probably a member of the union,” and she said yeah.

So I said, “All right, give me a day.”

By the end of the day, he had four job offers, two in the union, two not in the union, all four that paid more than he was making in Vegas, and he could start tomorrow.

In the construction field nationwide, not just Idaho, total spending in construction has now surpassed the peak of 2006. … Employment is 11 percent lower than it was in 2006.

So we have less people doing more work and being paid more money than we did in the boom years before. Yes, construction costs have gone up – that’s been up about 3 percent over the last 12 months. In Idaho, construction labor has gone up more like 50 percent.

We’re now seeing hourly employees getting signing bonuses; we’re seeing hourly employees getting paid vacation days. … Already 86 percent of the construction workers in Idaho have employer-provided health care; that number’s going up. So we’re seeing not only wage increase but also fringe benefit increases.

Faisal Shah

Wages are going up. As an employer, we’re not only competing against other employers here in the valley, but you’re seeing other companies coming here and poaching the students prior to the time they graduate, so they end up going to Silicon Valley. So as a result, you’re starting to see a reaction in terms of wages.

Wages are starting to go up because there’s so much competition locally, but there’s also competition from out of state.

Reid Stephan

One of the challenges of Saint Luke’s is, as a nonprofit, you talk about the wage challenge – so we’re competing against Micron or HP or Simplot – we’re just not going to offer the same type of wages; we don’t have the bonus structure they do. So we have to do other things to try and attract and retain talent.

One of the challenges that we see, that I think is going to continue to grow – Boise is not viewed as a technology hub across the country. We compete with Salt Lake, … Portland, Seattle for sure, and so we do have employers that come and poach talent to those areas that are still in the Northwest.

More employers will offer the option to work from home. So we have health care providers in the Bay Area, where it’s a high cost of living and much higher wage structure, they’ll come here, they can offer twice as much as what we’ll pay for a system analyst, and let that person live here in Boise and work from home, and that’s pretty appealing.

And that’s not a wage structure that we’re going to be able to compete with or keep up with, nor are we going to try.

We need to recognize that that’s just the reality of our world today where there really are not geographic boundaries to the workforce.

Carleen Herring

The quality employees are essentially able to go to the highest bidder. We had a company come in from out of the country that acquired a company in the Magic Valley, and immediately upon taking control of the company, they increased all the hourly wages five bucks an hour in order to keep the staff in place while they made whatever changes they wanted to make corporately. That rippled everywhere. …

Those kinds of pressures are really causing some heartache in the local economy.

In the Magic Valley, food manufacturing growth leads to supply chain improvements

Carleen Herring

In the last few years, we’ve seen a number of new companies come into the region.

The Magic Valley survived the Recession pretty well. People still have to eat. Since that time we’ve seen an increased number of food manufacturers, food processors, and food science.

[They choose the Magic Valley] because of the large scale of food manufacturers going on. A lot of the companies we have are looking at value-added processing. So if you’ve got somebody like Glanbia, which is an international company based out of Ireland, they have three facilities in the Magic Valley. … Each of those plants has a different focus. What they’ve done at their science center in Twin Falls is take a look at both the cheese side of the equation and the whey side.

So if you’ve ever seen commercials for Biotene – that mouthwash – believe it or not, there’s a Glanbia whey protein in that product. It’s not something you would have equated with a cheese processing plant, but what they’ve been able to do is bring some of that research into it to take a look at some of those byproducts. Cheese is the main product, but however, currently whey proteins and their uses [are] actually the larger proportion of their operation now.

[Chobani has] finally decided the time is right to build an actual research facility for the company. Monsanto does their wheat breeding in Filer. There are a number of different aspects to the fact that the Magic Valley has such a strong cluster of everything from the production side to the processing side that a lot of these national and international companies are looking at it as the place to be.

What we’re seeing currently is pressure on employment, pressure on housing. The values of the cost of living are going up. We’re seeing wage pressure from companies cannibalizing each other.

We’re trying to engage the industry partners to jointly solve the problem. The Southern Idaho Economic Development Organization works on recruitment strategies, and they were principally responsible for a lot of these expansions coming to the valley. However, the focus now has to change to that employment picture.

We’re going to see continued growth, as I mentioned in the opening comments – another 1,200 jobs coming on, and those are the ones we know about. There are several projects that we’re working on now that aren’t public, that aren’t disclosing the number of positions coming online. There are new companies coming into town.

Some of them fill the supply chain, some of them are additional processors, some of them are cold storage or logistics companies that are adding to our marketplace.

Transportation is a huge piece. We’re an outbound economy. We can’t eat everything we grow, we can’t eat everything we process. So one of the neatest projects coming online now that you may have heard about is Watco, our short line railroad. They’re in conjunction with the Norfolk Southern and Union Pacific Railroad, which runs through the valley.

Watco has a facility in Burley that is taking a proprietary process to load freight rail cars – refrigerated cars. It used to be that it would take about 30 days to get a rail car from the Magic Valley to the East Coast and back – not because of the rail congestion but because we didn’t command the rail cars.

We didn’t have the volume that would essentially get Union Pacific to get those cars back to us. Well, Watco has been able to work with some local processors on getting their product packaged, palletized, loaded into rail cars, shipped down to Salt Lake and out on Union Pacific Railroad to the coast and back, and they’re whittling it down to seven to 10 days now. That is a huge impact on the local economy, which is going to spur more logistics companies – cold storage primarily.

As their processing capacity continues to increase, we’ll need to stage those products prior to shipment to markets on the East and West coasts.

That is currently happening right now. They started a pilot project earlier this summer, which has proved successful, and they are now working with a number of producers in the region to start scheduling those loads.

We’re going to see some additional growth at the College of Southern Idaho to accommodate workforce development. We’re working on a proposal to add 49,000 square feet. We’re trying to come up with additional classroom space and work with some of the industry partners on bringing some of their equipment into the facility to train workers.

They’re taking those folks who do not have those technology skills today and bringing them up to speed so that they can take on some of those newer positions that are opening up.

The only way we’re going to be able to do it is to make sure those public-private partnerships are in place. We’re working quite diligently with the College of Southern Idaho, which has a workforce development function for us.

A robust technology industry, but a lack of capital

Faisal Shah

Computers at an area hospital. Boise State University, Northwest Nazarene University, College of Western Idaho, and University of Idaho have all raised the number of computer science majors they are graduating. Computer programming wages and benefits are starting to become more competitive with those in other states, said Faisal Shah, who started his technology company, AppDetex, in Boise. File photo.

Computers at an area hospital. Boise State University, Northwest Nazarene University, College of Western Idaho, and University of Idaho have all increased the number of computer science majors they are graduating. Computer programming wages and benefits are starting to become more competitive with those in other states, said Faisal Shah, who started his technology company, AppDetex, in Boise. File photo.

I don’t think we have to go farther than what happened today to understand what’s going on in the technology market, with TSheets selling to Intuit for $340 million. … That’s a big deal here in Boise, and it really brings prominence to the city and the area. I believe that we do have a robust technology industry here. One thing that I think is missing in the area is capital. We don’t have the VCs here that are located here to actually put money into companies.

Let’s do a little analysis here. So when you start a company, the way that it works in terms of financing is you go to the angels, and then potentially the super angels, and then you go to the venture capitalists, and then after the venture capitalists you might go to the PE firms, and then maybe IPO or whatever. … So we have a strong angel network here in the valley, but there’s a gap. After that, you’re missing the VC money located here.

The companies have to go outside of the valley to find that. They have to go to maybe Salt Lake City, Silicon Valley, Chicago. And now there are actually a number of venture capitalists that are … focused on smaller cities that aren’t the LAs and the San Franciscos, and they are willing to come out here.

Normally you won’t have a venture capital firm invest in you in an area that’s outside of where they are. Tey want to be able to walk in the door at any given time and say “what’s going on?” and make sure employees are still here and everybody’s working. And so by not having the venture capital firms located here, I think it puts us at somewhat of a disadvantage.

Yes, we have a strong, and hopefully getting stronger, tech industry here in Boise, but can we sustain it, can we get bigger, can we grow from here if we don’t have the capital to fund that growth?

At the end of the day, you need to get the venture capital firms here in the valley, and we already have them investing here. And we have PE firms, and PE firms have invested in Cradlepoint, they’ve invested in Clearwater, they’ve invested in MarkMonitor – they’re peppered throughout this entire valley. … There’s got to be a way to get them to come and put an office here, whether it’s by providing incentives, showing them the pipeline.

A lot of people that work at venture capital firms actually have homes in, guess where, Sun Valley. A lot of times they fly into Boise. Why not get them to stay for a few hours and come to a board meeting? We’ve got them coming here because of the companies, we’ve got them coming geographically, so let’s get them to set up offices here, and that way I think we’ll spark growth.

I think conceivably it could happen next year, because the Idaho Technology Council is very much involved in trying to accomplish something like that. Whether the ITC does it or whether we can get stakeholders outside of the ITC to do something like that, that is something that really should be front and center to push an effort like that.

‘Employers are going to start making this a performance issue’

Reid Stephan

It’s easy to look at companies like Equifax and want to eviscerate them for this breach that happened. But the reality is we all work for companies that today one person could do one thing unintentionally that could result in something of that kind of scale of breach.

I typically don’t cast too many stones because we all live in glass houses. The challenge is that when you try and defend data or a computer network, you have to be right every single time. An attacker just has to be right one time. So they absolutely have the advantage. It’s unrealistic to expect that the company will be right every single time. What company is right every single time in every part of their business? You’re not. And it’s the same thing in the cybersecurity arena.

So you asked what’s going to happen in the future. We’re going to continue to see these large-scale data breaches. That’s just the reality of the world we’re living in today.

I think what has to happen is there has to be a shift – and I’m not saying we have to resign ourselves to this fate, not at all. But be pragmatic about it.

The approach can’t be, how do we invest more money in technology and people to protect data? Because Equifax – they had a multimillion dollar security structure in their company. It wasn’t for lack of investment. There was a patch that came out in April of this year for a web server called Apache. They had an employee who was assigned to patch that server, and it just didn’t get done for whatever reason. And that one single act of omission led to the breach that resulted in this huge impact that probably impacted most of the people in this room.

We have to get past this approach of trying to throw more money at it and trying to add more technology, more staff. We have to accept the fact that data is going to be accessed by parties that aren’t authorized to see it.

The focus has to be on the data. … [You have to] accept the fact that data out there that you own as a company, that you own personally, is going to be seen or accessed by someone without authorization and focus the security efforts on that.

That’s when we kind of start to pivot and where we make gains in this arena. …

So there’s technologies coming forth – blockchaining you’ve heard of. I won’t get into the details about it. … If you think of blockchain as like an iPhone, then Bitcoin is an app. Bitcoin is an application of blockchain technology.

Over the next five years you’ll see blockchain technology that allows data to be structured and secured and organized in a manner that even if an attacker gets to it, it will be of no value to them. They can’t view it, they can’t alter it, and that’s the only way we’re going to make gains on the world of large-scale data breaches that we find ourselves in today.

On the human side, there’s a thought leader in the security space that I like, his name is Bruce Schneier. And he says, “If you give a human being the choice between dancing pigs and security, they’ll pick dancing pigs every day of the week.” That’s the reality of it.

So phishing is the attack vector of choice of those criminals that are out there. They know if they can send an email to somebody that preys upon human emotion, human thought process – the email reports to come from the CEO marked “immediate attention,” they want to curry favor with their boss, they want to show that they’re a high performer, they click on a link, they enter information – that’s how these things happen.

That is behavior that is very difficult to change, but there has to be more focus on awareness and education aspects. It needs to start not just in the workplace, but in our schools. And if we can train this rising generation and instill in them good cyber hygiene, practices and behaviors, two things happen. One is as they mature into adulthood, they’re going to bring those skills with them, but they’ll also influence what happens in their home. They’ll train their parents, their siblings, their grandparents, and it will create this rising tide effect that will really strengthen our cybersecurity posture as a nation.

There’s a risk that somebody, because they’re aware of the intense media pressure that comes with companies when they have a data breach, there’s a risk that somebody might know of something and be reluctant to speak up because they know of the potential embarrassing aftermath. So companies have to ensure that they have a “see something, say something” policy and culture in place.

I think that one thing we’re going to see in the next few years – we’ve not seen it yet – when you have these big data breaches, it’s not uncommon for a CIO or a CEO to resign and lose their job, but we haven’t seen any significant criminal prosecution.

I think at some point in the next few years, we’re going to see that with one of these large breaches. That will instill in the culture that we have to be transparent, we have to have an environment where people, one, know how to report things that they see that are odd, and two, that they feel free to do so without any repercussion.

In the coming years, you’ll see nothing that’s not happening today. Perhaps they’ll accelerate or maybe expand the approach, but most companies that I’m connected with and communicate with, they have some sort of regular, ongoing, internal phishing testing they do themselves. Their security team will craft an email, make it as difficult as possible to detect, and send it out company-wide, and maybe they target particularly high-risk employees, like executives, the finance team. And then the employee, if they fall for that phish, real time they can get a response to let them know, “Here’s how you could have avoided this, here’s what potentially could have happened if this were an attacker.”

Employers are going to start to make this a performance issue. If you are a repeat offender, I can absolutely see that jeopardizing your employment at companies.

I think companies also are more and more engaging third parties to do what’s called a penetration test. Hackers are doing it every day, so let’s pay somebody who’s a good guy to try and breach our security defenses so we can proactively identify gaps and close those holes.

Faisal Shah

One of the things that we see is a lot of this happens with social engineering. It’s not necessarily the system, it’s a process. In one scenario, what the hackers did was they compromised somebody’s email. What they do then, because the system requires as a username the email, and then you can get a reset on the password, right? So they know what the email is, they know what the username is, and then coming from their particular email, they say, “Hey can you just reset my password?” And then the system sends back the password reset to the compromised email.

This is not a situation where they’re hacking into the system; they’re taking advantage of how the system is set up [for] people that actually access the system.

To your point, a lot of this may not be the system itself; it could just be the people. Or it could be how we structure. Those are the kinds of things you have to look at to make sure you address those issues so it makes it less likely for somebody to get in.

There’s a host of startups that are coming out around this whole issue. There’s one startup that I know of that is creating hardware to be able to find or sniff out the phishing email even before it hits the employees email address.

Training is probably most effective.  Make sure that you let everybody know what to look for. Send them fake phishing emails. And there are a lot of companies offering training courses around this.

Looking ahead to the 2018 Idaho legislative session

Wayne Hammon

If you like the Donald Trump tax cut, you’re going to love the Idaho Legislature’s tax cut. I expect this to be a short legislative session. I’m guessing March 15 this year.

They’re going to come in, sit down, they’re going to pass a tax bill, they’re going to pass the budget, and they’re going home. They’re not doing anything else.

I’m hoping they do some workforce development stuff, I’m hoping they do some other things, but I’m not holding my breath.

The primary is in May, and at this point, a month prior to the Legislature starting, we have more announced primary challengers than any election we’ve had in the last 20 years. Out of the 105 legislators, a third of them aren’t coming back. Of the two-thirds that are coming back, over half of them already have an announced primary challenger.

They’re going to take as few votes as possible, because every time you vote on something, it gives your opponent something to attack.

Consistent real estate growth in Boise area will lead to consistent housing growth  

Brian Greber: In 2018, I’m going to guess we’ve got the momentum going and we’re going to keep building houses at the rate that we’ve have the last couple of years.

Brian Greber

An auction sign on a Boise property. The Treasure Valley has seen consistent year-over-year growth of 10,000 to 12,500 people per year, or about 2.5 percent population growth. Even with hundreds of houses under construction, the area’s housing market will likely stay very strong at least into 2019, said economist Brian Greber. File photo.

An auction sign on a Boise property. The Treasure Valley has seen consistent year-over-year growth of 10,000 to 12,500 people per year, or about 2.5 percent population growth. Even with hundreds of houses under construction, the area’s housing market will likely stay very strong at least into 2019, said economist Brian Greber. File photo.

As you look at housing, it ends up being a fairly easy market, on a trend basis, to say what’s going to happen.

We’ve been amazingly constant in our year-over-year growth in population. It’s 10 to 12,500 people per year, about 2.5 percent population growth per year. By the way, that’s significant, because nationally it’s 1 percent. So we’re growing at 250 percent of the national average.

If you look at birth and death rates, that only adds a half a percent population to the U.S. with our average demographics, so 2 percent of our population growth is in-migration from out of state.

The U.S. doesn’t tear down and rebuild a lot of houses – a very small percent. Our household starts are new household formations.

Housing starts are pretty easy to estimate. You’ve got population growth of 12,500 people per year, average household formation is about 2.75 people per household: that calls for about 4,500 starts per year in the Boise metropolitan area.

So it’s not rocket science that back in 2005, 2006 when we were hitting 11,000, we were overbuilding infrastructure. We were building more roofs than there were people to live under the roofs. So there was a day of reckoning coming. If you look at the last 10 years since the recession, we’ve been building right at the rate of in-migration to the state. It was in perfect balance up until last year. Now we’re up in the area of new starts, single plus multi[family], this year we’ll come in somewhere around 7,500 … — that’s starts, that’s permitting — versus a need of 4,500.

Last year was about 6,800. Part of that is filling the void of what we saw in 2008, 2009 when we fell off the cliff, but I look at the numbers and say we can’t sustain 6,500 to 8,000 housing unit additions to this area without once again swamping the market.

In 2018, I’m going to guess we’ve got the momentum going and we’re going to keep building houses at the rate that we’ve have the last couple of years. By the end of 2018, you’re going to start seeing inventories accumulating, days on the market increasing, and by – my guess would be – late 2018, early 2019, you’ll see pricing coming off a bit, and you’ll see starts come down, I believe fairly dramatically into 2019, 2020.

I think it’s going to be a coast down, since we’re not going from 11,000 units down to 2,200. If we don’t have unbridled enthusiasm next spring and really overshoot the market, keep doing like we’ve been doing, it’s probably plateauing and I don’t see a big [fall] off the cliff.

We are definitely, I believe, seeing a shift in owner-occupied versus non-owner- occupied. Millennials don’t need to own stuff. They buy experiences. I’m very bullish on rental properties owned by Baby Boomers for the millennials to live in. I do think we’re seeing a fundamental shift in desirability of owning the structure versus having the flexibility to lease and move on to my next experience.

Wayne Hammon

What we’re seeing is that as more single-family homes start, the multifamily market has certainly cooled. Nationwide it’s cooled dramatically. Idaho still has some multifamily projects in the pipeline right now – most of them are in Meridian or Rexburg – you can’t build multifamily housing fast enough in Rexburg.

But we’re not seeing a lot of permitting going on anymore.

You’ve got the Fowler coming online right now in downtown Boise, we had a couple others come online, we had a few small fourplexes going up next to the car wash and the skate park and some other ones.

But I think what we’re going to see is that while the number may come down, it’s going to be multifamily more than single family. We’re still going to see a lot of single-family homes coming online.

Part of that is demographics – you know, we were all told for the last five years millennials don’t want a house. Turns out they do want a house, they just couldn’t afford it until now. Now that they can afford one, they all want a house.

They don’t want a big, three-bedroom, three-car-garage house, but they want a house with a small garden, a place where their Shi Tzu-cross-whatever can run around, a garage for their bicycles. But they want a house. They don’t want to live in an apartment forever.

So I think we’re going to see a shift from multifamily to single family.

Office, education sectors will continue to see construction growth

Wayne Hammon

Construction workers at the site of the proposed Idaho College of Osteopathic Medicine in Meridian. One of the strongest sectors in commercial construction is education buildings, said the AGC’s Wayne Hammon. File photo.

Construction workers at the site of the proposed Idaho College of Osteopathic Medicine in Meridian. One of the strongest sectors in commercial construction is education buildings, said the AGC’s Wayne Hammon. File photo.

There’s still a desperate need all across Idaho for office space. … We see a huge potential still here in office space and in warehouse space.

Retail is a little different. We’ve all been reading stories about the end of the mall, and that seems to be playing out. The retail that’s being built in Idaho is almost all multipurpose, so it might have retail on the first floor, but then it’s got offices on the second and third floor, condos on the fourth and fifth floor. We see that trend continuing both nationwide and here in the valley.

I mentioned Rexburg – anybody been to Rexburg in the last two to three years? If you’ve not been there, you need to go. It is a whole different place. … They have figured out this retail multistory thing to a max. The whole downtown area is completely different. … They cannot build fast enough over there. It’s amazing what turning a two-year school into a four-year school can do to a community.

The other thing we see a lot is education [building]. The West Ada School District failed to pass their bond; they’re going to come back again in the next election, but with the rising value of homes, all taxing districts are seeing a rise in value of their levies. And so without increasing taxes, Ada County has more money; they can start building more fire stations. Without raising taxes, the school district now has more money. They can start building more schools, do more remodels, and add on classrooms, those types of things.

And then, of course, we keep building hospitals everywhere we can.

And so, on the commercial side of construction, we see a pretty robust 2018. It’s not all sunshine and roses, but projects that are bidding now have start dates for July, August, September. So if you want something built next spring, plan on paying a very hefty, hefty premium.

Nationally, infrastructure construction is down, but not in Idaho

Wayne Hammon

Nationwide, infrastructure spending is down. We’ve seen less water, wastewater, those types of things nationwide.

In Idaho, we’re kind of bucking the trend. I think part of that is in-migration, and secondly, because of what the Legislature has done the last couple years on highway funding.

When I took the job five years ago – ITD bids jobs every week, so every Tuesday there are between two and seven projects out for bid for Idaho road construction. And it used to be that 90 percent of them were federal aid projects – 90 percent of the projects had some type of federal money attached to it. It’s now closer to 60 percent. So the increase in state funds has offset any decrease in federal funding.

We’ve actually raised the amount of infrastructure in the last five years, and more and more that’s being done with state-only funding. …

Nationwide there’s been great uncertainty about what’s going to happen to the highway trust fund.  Last time it was up for reauthorization, they put a bandage on it – we actually took money out of the federal general fund and put it into roads. That’s not likely to happen again.

Secondly, the tax bill that’s coming through, it pretty much sucks all the oxygen out of the room in D.C. for funding.

And finally, with the change in administration there’s been a change in philosophy of how we fund the roads. Currently it’s just being driven by a formula – 80 percent of the money is driven by a formula; the other 20 percent is distributed elsewhere. Under the Trump administration, that 20 percent that is not formula driven has been focused on larger projects, more private-public partnership projects. And so we’ve seen money come out of states like Idaho and go into, say, the Port of Los Angeles or the Port of New Orleans or the new airport in New York. …

I watch permitting data and then I watch the plans and specs that we have to do bidding work [on], and there’s still a lot of work to be done. There’s a lot of projects yet to be built.

We still have good in-migration, we have companies that are homegrown that are expanding, we have companies moving here. I’ve got 15 members working in Chobani right now – there’s still lots of work.

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About Dani Grigg