Helene floods in East TN could cause construction backlog in Knoxville

Knox County didn't suffer any of the devastating flooding from Hurricane Helene that other East Tennessee counties did. But the long-term effects of that destruction could be felt here as construction projects around Knoxville see material shortages, backlogs, delays and increased labor costs as contractors make flood-ravaged communities their top priority.

As prices for certain goods and services spike in the recovery phase of a natural disaster, businesses are incentivized to work in hard-hit areas where demand is high.

Building owners, property managers, developers and anyone doing renovation should prepare to be flexible, said Mohamed Abbas, senior project manager for Denark Construction. If certain materials are not available in the coming months, he said, industry workers must be prepared to consider alternatives to help avoid delays.

"Now, contract work. That's going to be a little harder to do because the work that's going to need to be done in these disaster-stricken areas − it's going to take a long time, and it's also very labor intensive," Mike Kofoed, a University of Tennessee at Knoxville economics professor, told Knox News. "With short, tight labor markets like we have right now, it going to be longer wait times, probably for a few months.”

Knoxville-based Pipeline Inc., which specializes in underground utility infrastructure, has been working in Greenville to help restore water and natural gas. Spending time in Greene County, where at least one person was killed in the flooding brought on by Helene, has caused backlogs back home in Knox County.

Customers have been understanding of the need to shift resources, Pipeline Inc. President Tracy Hayes told Knox News, but “we’re probably going to be about a month behind.”

As local Knoxville companies begin to take on more regional work to repair and rebuild flood-damaged counties, forecasting and quantifying anticipated supply chain challenges is a challenge in itself.

"If you could determine what's going to happen in the future, you'd be able to just tell and plan for it," Abbas said.

But examining how material shortages have caused delays in Knoxville's past could shed light on challenges that await.

Denark has led construction on the downtown Knoxville baseball stadium, which has jumped in price from $80.1 million to more than $114 million, in part because of rising construction and material costs in the aftermath of the COVID-19 pandemic.

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A. Gordon Heins III told Knox News at the time that his family-owned AG Heins business, which has provided building materials in Knoxville for more than 100 years, was seeing price increases of up to 15% − much higher than the typical 3%-5% increase on all products the company anticipates in the first quarter of each year.

In early October, price-reporting agency Fastmarkets published an article attempting to project Helene's impact on steel prices, referencing how the bimonthly rebar price jumped by 7.37% in the immediate aftermath of Hurricane Harvey in 2017.

"So far, no shortage in materials. ... The only thing we see is maybe a few days to a few weeks longer (for arrival) because they are having to make different routes," Heins said in October about his company's experience post-Helene. "I could certainly quantify that the highest and, as always, the most volatile price is lumber."

Lumber price increases would be driven by the demand to rebuild homes after the hurricane and subsequent floods, but we're not at that point quite yet.

In late October, the big needs for flood-damaged counties were excavation companies, grading companies and demolition companies as property owners continued "cleaning up the mess," Abbas said.

Depending on the county, it will be at least a few months before homes in East Tennessee are ready to be rebuilt to the extent that lumber and other materials experience an increase in demand substantial enough to create a price shift.

"After another year or two, that’s when things will start to develop into something that we’d be able to work on,” Abbas said.

At that point, materials could be moved away from Knoxville into other East Tennessee counties, which could create local shortages and additional price increases here.

Even short-term price increases for materials can have long-term effects, including through cost-push inflation, a term for the overall increase in prices caused by an increase in the cost of wages or raw materials.

"If a large disaster causes unexpected damage to a production facility and results in a shutdown or partial disruption of the production chain, higher production costs are likely to follow," according to a 2024 article by Investopedia. "A company might have no choice but to increase prices to help recoup some of the losses from a disaster."

While the dollar amounts and percentages of price increases will continue to reveal themselves in time, Abbas said one thing people can expect is "limitations" on products being sourced and supplied, in part because of logistical challenges and road conditions.

UT professor Lance Saunders, who teaches in the school’s renowned supply chain management program, previously told Knox News how interstate closures have a compounding effect that can back up traffic on roads beyond disaster areas.

Plus, as out-of-state construction businesses travel to Tennessee for profitable rebuilding work, more supplies and vehicles will be on the road. And the more moving parts, the more challenging logistics becomes.

Saunders told Knox News that returning full function to I-40 and I-26 will be key. Both interstates are "big lanes from a logistics standpoint," he said, especially I-40.

"When those are knocked out, it's going to create a bottleneck on ... I-81 and I-75," he said. "Everybody has to go around, especially big trucks are going to have to go around the mountains, which is going to create more traffic on those roads and make those lanes longer."

Construction services always will be needed. In East Tennessee, perhaps, now more than ever.

Myron Thompson reports on public safety for Knox News. Email: [email protected].