Recession Realities Settle in Among Top Louisiana and Texas Contractors
For many top contractors in the region, 2010 will be remembered as the year that firms felt the full impact of the recession. Top contractors experienced significant top-line drops last year, as backlogs shrank and revenue from work contracted prior to the economic downturn began to ebb. Among the top 10 contractors that responded to ENR's Texas and Louisiana surveys over the past two years, firms collectively saw regional revenue drop 8.5% to $8.6 billion last year from $9.4 billion in 2009.
Whether or not the market hit bottom in 2010 remains to be seen, but many executives at top firms are cautiously optimistic that better days lie on the horizon. George Pontikes Jr., president and CEO of Satterfield & Pontikes Construction, Houston, says the tough market of 2010 continues in 2011, but he hopes for a better 2012. “Texas historically trails the rest of the country into a recession and, unfortunately, coming out of a recession too, so this could go on for a while,” he says.
In terms of revenue, Satterfield & Pontikes has stayed relatively stable, tallying combined revenue of $461 million in Texas and Louisiana in 2010, compared with $482 million in 2009. But keeping revenue steady is particularly challenging given the competition in today's market, Pontikes says. Although the Texas market is down, it held up better than many other regions, making it attractive for new players, he says.
“We've seen a lot of [firms] coming in from outside the region,” Pontikes says. “Now that the market has turned, a lot of contractors will head home. When that happens, you'll see the market improve.”
The institutional market is particularly troublesome, especially for clients who rely on public funding. From education to health-care projects, Pontikes sees big cuts that will have a lasting impact.
“I'm not familiar with a public institution that's not fighting to get projects going,” he says. “We have clients with bond money to start projects, but they don't have the [maintenance and operations] budgets to open them so they can't move forward.”
At Balfour Beatty Construction, Dallas, a series of well-timed megaprojects has provided much-needed stability. In 2008, the firm won the $325-million Dallas Convention Center Hotel. In 2009, it was awarded the $1.2-billion Parkland Replacement Hospital project in Dallas as part of a joint venture with Austin Commercial, H.J. Russell & Co. and Azteca Enterprises. Last year, it landed the $800-million DFW International Airport Terminal Development Program with partners Azteca and H.J. Russell and CARCON Industries. “There's not a lot of work so it's highly competitive and difficult to win,” says Doug Jones, CEO of the South Central region at Balfour Beatty. “We're very relieved to have a good pipeline of work that creates a stable environment for the next two to three years.”
By the time the contractor's current roster of big projects is completed, it will need more jobs in the pipeline, so Jones says the firm is more concerned about 2013 than 2012. “Hopefully, we'll see a turn in the economy and get some relief in 2014 or 2015,” he says.