Niche Markets Help Top Subcontractors Stay Above Water
It was another bumpy ride for the region's top specialty contractors in 2011. Respondents to ENR Southwest's annual survey saw the volume of subcontracting work in Arizona rise, but those gains were offset by steep declines in Nevada and New Mexico. Firms that succeeded did so by finding new niches or adding specialties that dovetailed with their existing skills.
Arizona subcontractors reported $1.4 billion in work during 2011, up 4% over the previous year. But New Mexico subcontracting work fell 27%, and the decline was a whopping 29% in Nevada—on top of the drops already experienced from the early days of the recession.
All together, the 67 surveyed firms performed $2.2 billion of work in the Southwest during 2011, down around 10% from the previous year. In comparison, during 2008—the peak year in the Southwest for subcontractors—the top 67 subcontractors performed almost $5.3 billion in work.
Still, some companies grew in 2011. Top-ranked MasTec Inc., Coral Gables, Fla., saw its Southwest revenue jump 13% to $266.3 million. And many subcontractors were buoyed by Intel's $5-billion Fab 42 plant and other work at the Chandler, Ariz., facility.
Despite the big drop in Nevada work, a few Las Vegas-based firms bucked the trend. Helix Electric managed a 10% gain in revenue by exploiting niche areas that were underserved, such as solar photovoltaics. "We obviously didn't sit here on our hands and wait for the work to come by—we reached out and are doing work in Arizona, Utah and New Mexico," says Victor Fuchs, Helix president.
Southland Industries' Las Vegas office widened its mechanical contracting scope with an expanded fire protection division and aggressive promotion of its service group, especially to owners. "In the past, our primary customers were general contractors, but that's really shifted for us to the end users and owners," says Ted Lynch, CEO.
The firm dabbled in the developer arena as well, joining the ownership team behind the $1.5-billion Union Village campus in Henderson, Nev., which mixes health care with residential and retail. "We've never taken that type of equity position in a project before," Lynch says. "We have a minor ownership in it, but we believed in it enough to put some money into it and move forward."
The health care sector helped Orange, Calif.-based restoration and environmental contractor American Technologies reach its best year ever in the region during 2011, filling a niche in clean rooms, decontamination and remediation. "We're taking on many tasks that the general contractors do not want to be liable for on their projects," says Jeff Moore, general manager.
Declines among New Mexico firms in 2011 stemmed from a drop in public sector work. Keith Wilson, CEO with Miller Bonded, Albuquerque, says that most of his repeat customers—area general contractors—are seeing their backlogs switch from a majority of public work to mostly private work. This will mean an increase in negotiated and design-assist work for subcontractors like Miller Bonded that are poised to leverage their preconstruction services, Wilson says.