Hanging on and Hoping for a Rebound
Durr says 2011 will be another “banner year,” but 2012 is “a big question mark.” He is particularly hopeful that stalled power projects could move ahead.
“Our bid volume is as low as it has ever been, but our hit rate is as high as it has ever been,” he adds. “We've been able to price ourselves competitively, but we need more work to come out in 2012. I'm burning backlog and need to refuel some of it.”
Given the overall drop in construction activity and the increased level of competition, specialty contractors find it difficult to project how their businesses will move forward.
“We believe we're at the bottom of the market, but things are up and down,” says Tom Holmes, vice president of sales and marketing at High Concrete Group in Denver, Pa. “Success or failure is driven by each project. There are so few that if you win a few you feel OK, and if you lose a few you feel lost in the wilderness.”
In New Jersey, where High Concrete does most of its tri-state work, the firm has seen some signs of hope. It completed $21 million in work on residential buildings at Montclair State University last year. Although Holmes says he saw momentum in the market at the end of last year and early this year, he fears that the market is running out of steam again.
“Talking to architects about what's on the boards, the general feeling in this area is that the design activity at the beginning of the year has declined,” he says. “That spark of optimism I felt in the architect community has dissipated.”
While the New Jersey market may be sluggish, Bob Mann Jr., chief executive officer at E-J Electrical Installation, Long Island City, is hopeful that New York City will rebound. The firm has held up well in recent years, with year-on-year revenue rising 9% to $168 million in 2010. Much of that success is based on big projects, including its $65-million contract at Yankee Stadium, which was completed last year, and a $75-million contract at Barclays Center in Brooklyn, which broke ground last year.
Mann is eyeing the corporate community to step up activity in the coming years and keep opportunities coming. Projects at the World Trade Center and Hudson Yards, in particular, could serve as hubs of activity in the near future.
“For quite a while, there was so much sublet space that developers didn't want to build new, but a lot of that is filling up,” he says. “Companies are looking for new space, and it may need to be built space. That will bring the high-rise market back.”
Donaldson's Parrish says he sees more stability in 2012, noting that the region's large interiors contractors have hunkered down and trimmed operations while some small contractors have ramped up, merged with other companies or closed their doors. “I don't think we'll see any more casualties right now,” he adds.
Parrish also notes that prices could improve for developers in 2012 following recent concessions from unions to cut labor-related costs. Much of the year's bargaining was framed by concerns that the developer community could not afford to build using union labor in today's market. Some negotiations yielded agreements that could reduce some costs by 20%.
Parrish is hopeful that by reducing its costs, developers will be more likely to move ahead on projects in the coming months.
“The unions and their locals have done their best for the health and welfare of their constituents as well as their employers and the people that hire their employers,” he says. “It's been a fair process, and we'll see how this goes. The carpenters have bent about as much as they possibly can now. We have to have faith in the development community to bring more work to the market.”