Specialty Firms Post Strong Gains, Eye Future Prospects
Most specialty firms enjoyed revenue gains in 2014 and expect more opportunities ahead, but workforce issues are a concern
The economic recovery that has helped lift general contractors since the end of the recession appears to be producing brighter prospects and strong revenue gains for many Mid-Atlantic region specialty contracting firms.
Of the firms that responded to ENR MidAtlantic’s Top Specialty Contractors surveys this year and last, 62% saw their annual revenue rise during that time. In some cases, the increase was considerable. For firms that reported improved 2014 revenue, the average increase was 71%.
Not all firms did that well. Firms that saw their 2014 revenue drop year over year reported an average annual decrease of 12%. ENR MidAtlantic’s survey tallies revenue from work in Delaware, Maryland, Pennsylvania, Virginia, West Virginia and the District of Columbia.
Ike Casey, executive director of the American Subcontractors Association’s Metro Washington chapter, says that most specialty subcontractors are busy, although some are experiencing costly delays. “There seems to be a lot of work that is being planned and bid, but it hasn’t started yet,” Casey says. “We hear companies say they have people sitting around. So the subs have to hold on to costs—mostly labor.”
That situation could worsen firms’ workforce-related concerns. “We’re all worried about capacity,” he says. “There are certain specialties who are already hard to find in this area, like painters and drywall contractors.”
Michael Perle, owner and founder of Perlectric, Fairfax, Va., says he has seen “recent signs of a sustainable improvement in the volume of both private and public sector projects.”
Because of the amount of available work, Perle is also concerned about the local labor picture. “The D.C. metropolitan area appears to be heading toward a trade manpower shortage, which may make its presence felt in the next six to 12 months,” he says.
Perle notes that his company tries to maintain a large percentage of its field workforce as “long-term shop personnel.” As a result, it avoids bidding work that would “require abrupt, and potentially unrealistic, future increases in our aggregate manpower level over short periods of time.”
Fluctuations in materials pricing are also having an impact. Perle says prices of copper and other electrical material are “dangerously low,” which could mean future cost escalations that could affect long-term contracts.
James Patterson, senior vice president of procurement at CentiMark Corp., Canonsburg, Pa., says lower fuel prices have helped reduce the cost of materials that rely heavily on petrochemicals. “Certainly, the lower fuel prices have helped reduce our overall fleet operating cost,” Patterson says.
With more potential construction expected, several national firms that recently entered the Mid-Atlantic market have been able to strengthen their footing in the area. ComNet Communications, which is based in Bethel, Conn., opened a regional office in Rockville, Md., in 2011. In 2014, the company saw its regional revenue rise to $7.83 million from $5.11 million in 2013—a 53% increase.
ComNet, which specializes in telecommunications cabling infrastructure for voice, data, security and wireless integration, has been able to capitalize on the robust data center market, says Dominick Arrigo, the firm’s Mid-Atlantic division manager. The division is based in Loudoun County, Va., a hub of data center activity in the region. ComNet’s largest Mid-Atlantic project last year was a Morgan Stanley facility in that county.
Arrigo says that when the firm entered the Mid-Atlantic market, its work was largely generated through existing national clients. Now he sees the customer list expanding. “We have more feet on the street, more visibility and some past performance [locally] to talk about,” Arrigo says. “That’s translating into opportunities with new clients.”
In some cases, those local clients are seeking to work in regions beyond the Mid-Atlantic and considering ComNet for those projects, too, he adds.
With its increased pipeline of projects, the firm continues to hire. This year, ComNet has seen its Mid-Atlantic workforce increase by 75% from its 2014 level. Arrigo says that the company struggled to find new employees at first, but its prospects are improving. “We were new in the market and people were afraid we weren’t committed here for the long term,” he says. “Now they see that we are and they want to come talk to us about working here.”
Other major national firms have made deeper Mid-Atlantic inroads. Rosendin Electric, which is headquartered in San Jose, Calif., and has a local office in Sterling, Va., saw its regional revenue more than double to $67.44 million in 2014, from $32.5 million the year before.
San Diego-based Helix Electric also saw a dramatic rise in regional revenue last year. The firm reported $47.2 million in 2014 revenue, more than triple its $14.4 million 2013 total. Among the big projects contributing to Helix Electric’s strong gain is $38 million in contracts at The Wharf, a massive multi-use development on the Washington, D.C., waterfront.
Power Design, based in St. Petersburg, Fla., reported 2014 Mid-Atlantic revenue of $94.4 million, up from $74.8 million in 2013. The electrical contractor’s largest project last year was Art Place at Fort Totten in Washington, D.C.
The Roberts Co., which is headquartered in Raleigh, N.C., has also pursued significant prospects in the region. Last year, the firm reported $5.67 million in regional revenue, thanks in part to a $2.51-million head-box replacement job in Hopewell, Va.
Locally based firms also are posting strong results. Electrical contractor Hatzel & Buehler, Wilmington, Del., reported 2014 revenue of $104.13 million, up from $60.6 million in 2013. The firm’s largest regional project was a $2.87-million contract at a data center in Philadelphia.
What’s more, the market may not have peaked yet. “Subcontractors see plenty of work out there,” says Casey of ASA Metro Washington. “Everything looks bright on the horizon.”