CM-for-Fee Firms: Markets Are Growing for Agency CM
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The U.S. construction boom has paid dividends for almost all segments of the construction industry and firms providing construction management services on a fee-only basis are no exception. As owners scramble to find qualified people to do their projects while attempting to shield themselves from explosive materials and labor price changes, they are finding an ever increasing need for professional management services.
“There is so much work out there that whoever has the people at the right time will get the job,” jokes Steve Margaroni, vice president of construction management services for Psomas. But, he cautions that many clients are becoming more savvy. “What they want are established firms, not the carnival groups that blow into town following the money.”
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The complete 2006 Top 100 Design-Build / Construction Management special report will be available on Friday, June 9, 2006. CM firms are being called upon to provide a broader array of services, especially in the private sector. “Developers are looking for everything from asset management, permitting, site selection, even help finding financing from their CM partners,” says Bruce D’Agostino, executive director of the Construction Management Association of America, McLean, Va. “We are also seeing some interest from groups in the privatized infrastructure market.”
One market that is beginning to blossom for CM firms is retirement communities aimed at baby boomers. “There is a lot of money available from the baby boomers and they are looking for communities with all the amenities,” says John Fox, CEO of FoxCor, Inc. “These have a significantly higher price point than the normal condos as the level of services is broad—things like aerobics centers, spas, boutiques and the like.”
But for FoxCor, the casino and hospitality market has been a mainstay from the start. “I came out of retirement in the mid-1990s to assist Harrah’s in some casino work and eventually decided to form the company,” Fox says. Its largest current CM job is the $925-million Red Rock Casino Resort in Las Vegas, the largest casino hotel off the Strip, he says.
In California, the land development market has been huge. Psomas has found a lot of work in one of the biggest boomtowns in the state: the City of Lincoln, about 30 miles west of Sacramento. “In 1998, Lincoln had a population of about 8,000,” says Margaroni. “Then [Bloomfield Hills, Mich.-based developer] Del Webb came to town. The city now has a population approaching 36,000 and it has a long-term plan of moving up to 60,000 people. It’s been the fastest-growing city in California for several years,” he says. Psomas works as the city’s public works agent to ensure developers comply with codes and that the promised infrastructure to support the developments are in place.
A big issue for construction management firms is that the volume of activity has made it tough to find top contractors to do the work. “We are an agency CM for the University of Alabama, Tuscaloosa, campus for all jobs over $750,000,” says Mike Lanier, vice president in charge of Hoar Construction’s program management group. The campus is spending about $75 million to $80 million a year to expand its student population from 22,000 to 28,000. “But we find we are spending a lot of time courting general contractors and trade contractors, keeping them informed and enthusiastic about upcoming jobs.” He says that it’s often tough to get three or four bidders on some jobs.
As owners grow in sophistication and increase demands, agency CM and PM firms are finding more opportunities. “There are all kinds of permutations of how to manage the construction process,” says Janet Snyder, director of corporate development for Greyhawk North America. “But in the end, owners are beginning to understand that you should not have nonconstruction companies making construction decisions.”