Regional Contractors Sound More Upbeat, But the Project Horizon Remains Flat
People living in mountainous states like Utah, Wyoming, Colorado, Idaho and Montana aren't accustomed to things that are flat. Flat hats. Flatland. Flatlanders. And, especially, flat economic forecasts.
This is boom-and-bust country, where the skyline is filled with hills and valleys. But the plot twist to the regional contractors' story of 2012 is a mostly flat forecast for the remainder of the year—with a few bumps on the horizon.
At first glance, the healthy 2011 revenue reported by the larger regional firms looks promising. But Utah and Colorado builders are benefitting from a handful of large infrastructure projects—some big highway and transit work and lingering federal projects like the billion-dollar-plus Utah Data Center and ongoing base upgrades at Fort Carson in Colorado Springs.
However, mid-level institutional work, especially state and local projects, has dropped off significantly, and, other than a surge in multifamily development in the urban cores, the private sector has not stepped up to fill the void. For contractors not fortunate enough to be part of the region's megaprojects, the horizon is decidedly flat.
"While we have seen some improvement in the market, it has not been distinctly better than 2011," says Mark Reilly, senior vice president and Colorado operations leader with Denver's JE Dunn Construction. He cites a bump in the multifamily, health care and senior living facility markets but points to tight financing and economic uncertainty holding back commercial work.
Okland Construction project executive Jeremy Blanck agrees: "The construction industry and volume of work is about the same from the previous year." Blanck says his Salt Lake City-based firm is seeing slightly more private-sector work this year and "an increase in work from developers with office and industrial projects."
On the horizontal contracting side, firms say they are relieved that Congress finally passed a transportation bill earlier this year but worry about its real impact and two-year duration. "Limited long-term legislation is clearly having adverse effects on state programs and commitments," says Paul Martinez, vice president and Intermountain district manager for Flatiron Constructors, based in Firestone, Colo.
The most common contractor complaints include intense competition, slim margins, sluggish financing, and a bland national economy with high unemployment, weak infrastructure funding, political uncertainty and an annoying "wait-and-see" attitude on the part of investors. Many contractors see the industry's empty horizon stretching much further ahead—well into 2013, some say.
Some Light Ahead
Still, it's not all gloom out there. The road to a happy ending for the downturn may be paved with some surprises, like the continuing improvement in the markets for multifamily, energy (mostly traditional non-renewables), higher education, high-tech manufacturing, data centers, hospitality and health care.