Optimism Reigns for Region's Contractors
In a building boom that challenges the industry’s ability to think of new superlatives to describe it, California’s largest contractors tallied $35.9 billion of work during 2016. That represents a 9.3% increase over the previous year. In just four years, revenue among the 90 firms responding to ENR California’s annual survey has jumped more than 60%.
This year, the ranking expands to include nearly $2 billion of revenue performed in Hawaii, producing a regional total of $37.9 billion.
The region’s top-ranked firm, Swinerton Inc., posted $2.3 billion in revenue, the first firm to exceed the $2-billion threshold in the nearly 20-year-old survey. Focusing on red-hot sectors such as multifamily housing, health care, education and renewable energy, Swinerton expects similar, if not better, results in 2017, says Eric Foster, the firm’s president and COO. “We have diversified our business lines quite a bit over the last few years with a focus on really growing our self-perform capabilities,” he says.
Survey respondents reported a nearly 50% jump in multifamily residential revenue, totaling $4.9 billion in 2016. Los Angeles has been a peak market, with a first wave of projects delivered in the past six months. “An even larger second wave of product will be delivered over the next 24 to 36 months, with a third wave on the horizon that is still in planning and entitlements,” says Mike Concannon, general manager of Los Angeles for Lendlease.
However, Concannon warns that the sector’s boom may not last forever. “We anticipate some resistance and scale back on the projects that are still in planning, specifically due to developers cautiously monitoring absorption rates with the influx of product coming on line, as well as early signs that financing is starting to tighten,” he adds.
With multiple megaprojects in the region being funded and greenlit, both in the private and public sectors, contractors have had to look at new ways to staff and manage the backlog. “In my 32 years in the California market, I’ve never seen a scenario where general contractors and subcontractors are developing joint [ventures] and tri-ventures in order to deliver these mammoth projects,” says Jim Madrid, executive vice president with McCarthy Building Cos.
The pursuit and procurement for these large projects can be “expensive, risky and absorb a significant amount of intellectual capital that may otherwise be used in the actual execution of work,” says Daniel Dumke, senior vice president and California district manager for Sundt. In addition, “from estimating to preconstruction and into construction and operations, availability of people and subcontractors is becoming a limiting factor in our ability to pursue certain projects that would otherwise be an unquestionable ‘go.’ ”
To draw in new talent and leadership, firms not only recruit recent engineering graduates from universities; some are thinking outside the box. “Our focus has stretched into developing an untapped market of young women that until recently rarely considered construction management as a career option,” Madrid says.
Contractors are also looking to begin developing talent at ever- younger ages. For example, Millie and Severson “participates in several activities each year, including the ACE Mentor Program as well as career fairs at local middle schools, high schools and colleges,” says John Grossman, the firm’s senior vice president.