Specialty contractors, whether steel or electrical or masonry, struggled through another year of steep revenue declines in the Southwest. The top 80 firms saw the value of work performed in Arizona, Nevada and New Mexico drop 28% to $2.5 billion in 2010, compared with $3.4 billion in the previous year. And that was just the firms that were willing to report revenue—many chose not to, leading to the lowest participation for this survey in more than a decade.
Arizona subcontractor revenue tumbled 28% to $1.4 billion in 2010, but it was Nevada that took the biggest blow, dropping below $1 billion in revenue for the first time since 2002.
“The current state of affairs is unlike any that most of us have ever experienced in our professional careers,” says Michael Stanfield, senior vice president with the Chandler, Ariz., office of Comfort Systems USA Southwest (formerly Tri-City Mechanical). “I believe that the current state of the economy will be the catalyst to propel us into a new way of doing business. As margins continue to stay low, we will have to embrace and invest in the methods and technology that will allow us to do more with less.”
Despite a drop in revenue for 2010, Comfort Systems moved up four spots to the 10th position overall on the strength of such projects as the Salt River Fields at Talking Stick in Scottsdale, Ariz., for which the firm performed $15.5 million of work.
Many firms used the slowdown as an opportunity to make improvements. “We knew that margins would get tighter, so our estimators upped their already high level of accuracy to look at every bolt, every foot of conduit,” says Scott Muller, vice president with Tempe, Ariz.-based D.P. Electric, ranked ninth among electrical contractors. This new level of detail will position the company for success once the economy improves, he adds.
Other electrical contractors are finding work in new sectors. The Las Vegas office of Helix Electric, ranked fourth in Nevada among all types of subcontractors, has seen growth in the renewable energy, infrastructure and high voltage sectors.
“We have learned to identify niche markets that further diversify our experience and strengthen the talents of our personnel,” says James Gunther, vice president of preconstruction and design/build services. He adds that “anyone operating with a business-as-usual attitude will surely be left behind.”
The top-ranked electrical firm, Tempe-based Rosendin Electric, is also seeing opportunities in solar, along with significant growth in Arizona's semiconductor construction market well into 2013, according to Michael Greenawalt, vice president, Southwest operations. But the region needs a dramatic increase in private funding and investment to truly see a turnaround in the building sectors, he says. “Federally funded projects have done a good job keeping the construction market on life support, but the billions of dollars in private money sitting on the sidelines needs to be put in play,” Greenawalt adds.
Energy projects—from transmission lines to gas pipelines—have lifted Coral Gables, Fla.-based MasTec Inc. to the top spot in the overall Southwest ranking in the firm's first year of participating in the survey; the company reported nearly $236 million in regional revenue in 2010. Formerly specializing as a communications contractor, MasTec began diversifying in 2007 into energy, high voltage transmission and gas pipeline infrastructure, says Ben Gilbert, vice president of business development. After a “spectacular” year as a result of a massive gas pipeline project built for El Paso Gas in Nevada, Gilbert says the firm is still seeing modest growth in the Southwest region for the coming year.
Henderson, Nev.-based SME Steel, the second-largest steel contractor in this year's ranking, also expects market conditions to improve, seeing potential in the industrial, medical, educational and commercial sectors in addition to bridge work, says Wayne Searle, company president. “We are pursuing work in excess of $100 million,” he adds.