Hot Construction Market Shows No Signs of Slowing
The annual ranking includes a multibillion-dollar sporting venue, mixed-use developments, transit projects and replacement hospitals
The California and Hawaii construction engine continues to run in high gear. Like last year, the top five projects to break ground in the region during 2016 all topped $1 billion.
The annual ranking features the 30 largest projects to break ground in California and Hawaii during the past year. Collectively, these projects add up to more than $20 billion in revenue for the industry.
The $2.6-billion Los Angeles Stadium at Hollywood Park tops the list. Construction at the site is on schedule for completion in time for the Los Angeles Rams to play their first game of the 2019 National Football League season. The list also includes two projects located in Hawaii, representing ENR California’s widened geographical coverage area this year.
Industry observers see no signs of the building industry slowing down this year. “The building boom we’re experiencing is a combination of the current strength of the economy and the private sector,” says Robert Jernigan, regional managing principal at Gensler. “There is still a huge demand for vertical housing across California. Significant public infrastructure projects at [major airports] are moving forward and rail developments across the state are attracting adjacent transit-oriented developments.”
Looking farther into the future, some pundits predict a leveling off in some markets. The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey, for instance, completed in December, indicates that the 2019 Los Angeles multifamily and office markets will be “no better, but no worse, three years from today,” says John Tipton, a partner with Allen Matkins and one of the study’s authors.
Infrastructure spending, on the other hand, should continue to grow for decades since many municipalities have locked in infrastructure spending.
“California has a healthy pipeline of large-scale infrastructure projects such as the future phases of the California High-Speed Rail, the Delta tunnels, the Transbay Tube, Santa Clara Valley Transit Authority’s BART Silicon Valley extension and all of LA Metro’s Measure M projects,” says Jose Baraja, USA West managing director for Ferrovial Agroman. “Voters overwhelmingly approved a half-cent sales tax in many counties across California last November, increasing the financial viability of many critical mobility projects.”
Ferrovial Agroman is a joint venture partner of California Rail Builders, which is currently constructing the California High-Speed Rail Construction Package 4 (No. 15 on the Top Starts list). Challenges include complex system integration, hundreds of utility conflicts and a remote rural area that limits the availability of skilled labor, says Antonio Canete, CEO of California Rail Builders.
Labor shortages aren’t limited to rural areas, however. “The availability of labor will pose significant and continuing challenges across nearly every trade,” says Rich Henry, president of the Northern Pacific division at McCarthy Building Cos. “Competition for management talent remains high, and the current labor and management pools will likely limit the amount of work any company can successfully do. Recruiting people from outside the Bay Area and throughout California will also be a continuing challenge given the high cost of living.”
McCarthy, which landed three projects in the top 10 on this year’s ranking, combats these shortages by investing heavily in advanced training and leadership programs and by being selective in the projects it chooses, Henry says.