Designers Predict California Construction Surge Will Continue
Architectural, engineering firms serving public and private sectors see cause for optimism
It was another year of revenue growth for many architectural and engineering firms in California. Respondents to ENR California’s latest Top Design Firms survey billed $4.27 billion of work in California in 2015. That tally is nearly 6% above the reported total of $4.04 billion in 2014 and 17% higher than the $3.65 billion that firms reported for 2013.
Sixteen of the top 20 firms on this year’s ranking reported higher revenue in 2015, with 14 of those tallying double-digit percentage growth. One firm reporting significant growth was Gensler, which tallied a 17% increase in regional revenue for 2015. Robert Jernigan, Gensler’s regional managing principal, expects that positive trend to continue.
“We’re incredibly bullish with regards to the Californian market,” he says. Recent high-profile Gensler projects include the $1-billion, 4.3-million-sq-ft Metropolis mixed-use development in Los Angeles.
Steve Burrows, director of buildings and West region leader at WSP | Parsons Brinckerhoff, echoes that upbeat outlook. “Urban growth in the major cities continues to be the engine of the California economy for construction,” he says, citing strength in the creative, technology and commercial sectors. After posting a 4% improvement in 2015, Burrows notes that “public-policy awareness of resource efficiency and the coming connectivity of high-speed rail is leading the market into a period of unprecedented success.”
Paul Woolford, design principal in HOK’s San Francisco office, says many of the market sectors the architectural firm serves are thriving, including corporate, commercial, health care, justice and science and technology, among others. The firm’s regional revenue rose to $90.2 million in 2015 from $64.7 million in 2014. Recent major HOK designs include a 240-ft-tall office tower planned in San Francisco.
However, Woolford says there are concerns over the outlook for global growth. “We have found that a key challenge has been the impact of the downturn in China, which has softened our economy,” he says. “It has affected the tech sector, which drives much of the Northern California economy and our office’s work in that sector.”
Some firms are particularly enthusiastic about the health care market. Kenneth Lee, managing principal of Perkins Eastman’s Los Angeles office, says “the stronger hospital organizations” continue to grow and expand their reach. “They are looking at growing their bed complements and patient-care markets,” says Lee, who was a founding principal of LBL Architects, which merged with Perkins Eastman at the beginning of 2015. “Progressive health care organizations are also growing their range of services to include post-acute care services so that they have more control over the continuum of care and the quality of overall patient outcomes.”
Perkins Eastman’s largest project to break ground in 2015 was the $400-million Marin General Hospital expansion in Greenbrae.
While demand for outpatient services and programs is on the rise, inpatient hospital growth is more restrained. Lee also notes a continued increase in use of design-build and integrated project delivery in health care.
Dallas-based HKS, which earns nearly half of its revenue from health care work, greatly improved its presence in California last year, increasing revenue to $65.3 million, up from $19.7 million in 2014. However, Dan Noble, HKS president and CEO, sees opportunities to expand in other markets, including aviation and sports. Early this year, the firm released renderings of the proposed $1.8-billion L.A. Rams football stadium in Inglewood.
Despite some funding uncertainty in the transportation arena, top firms serving the sector remain cautiously optimistic. After a 21% drop in revenue in California last year, Art Hadnett, West division president at HNTB, sees the potential for heavy investment in infrastructure in the coming years. “With several funding ballot measures in the works and the new five-year federal transportation bill in place, we expect agencies to have additional confidence in planning for future infrastructure projects,” he says.
Teri Zink, West region business manager at WSP | Parsons Brinckerhoff, also sees a robust market in California on the horizon. “The predictability and stability provided by the FAST Act will make large, complex projects more feasible,” she says.
Last year, construction started on the firm’s Fresno River Viaduct project, a 1,600-ft section of the California high-speed rail project in Madera. The project is expected to be completed this summer.
Tom Kim, California transportation business group manager at HDR, also sees an unfreezing of infrastructure work. “Many needed transportation projects throughout the state that were previously delayed are now coming to fruition, including the construction of rail lines, subway extensions and the building of bus rapid transit lanes,” he says. Kim adds that the firm sees stronger collaboration from major transportation agencies and municipalities to deliver a mix of highway and roadway projects designed to improve mobility and air quality.
California’s broad mix of water infrastructure demands is also driving work at top firms. Philip Tringale, managing principal and director of Langan’s Western region, says the state’s recent drought has helped prioritize water resources projects. “These projects focus on sustainable groundwater management, water quality protection, water storage, stormwater treatment and water reuse,” he says. “The biggest impact we have seen is helping clients understand their resources and storage and quality options through analyzing and modeling water flow and contaminant transport.”
MWH, which was acquired by Stantec last year, foresees ongoing demand in dams and hydropower, says Simon Bluestone, the firm’s vice president and division director of energy and industry in the Western U.S. “California continues to see demand for repair and replacement services, driven by aging infrastructure and water-scarcity challenges,” he says.
Recent MWH projects in the dam sector include the San Diego County Water Authority’s San Vicente Dam Raise project, which raised the existing 220-ft-high concrete gravity dam by 117 ft, doubling the capacity of the reservoir. It is the final part of the Water Authority’s $1.5-billion, 10-year Emergency Storage Project.