Pace of Work Holds Steady for Region’s Subcontractors
Specialty contractors in Arkansas, Louisiana, Mississippi, Oklahoma and Texas reported healthy revenue levels in this year’s ENR Texas & Louisiana Top Specialty Contractors ranking.
The list, based on self-reported 2017 revenue, varies by state, but for the most part, the market remains vibrant into the final quarter of 2018. However, the industry also faces continuing skilled-labor shortages.
The 80 respondents in the five-state region posted $11.2 billion in 2017 revenue, down from the $11.8 billion reported by the top 80 firms in 2016.
Construction employment was particularly strong in three Texas metro areas, according to a Nov. 29 report by the Associated General Contractors of America. The Houston-The Woodlands-Sugar Land area added the most construction jobs between October 2017 and October 2018 (25,600, up 12%), followed by Dallas-Plano-Irving (13,100, up 9%) and Midland (7,200, up 25%).
In its Nov. 2 report, AGC of America noted that Texas added the most construction jobs among all states in the year from October 2017 to October 2018 (49,900, up 6.9%), based on Labor Dept. data. Oklahoma, however, lost 500 jobs ( down 0.6%) and Mississippi 300 (down 0.7%) in the past year.
On a month to month basis, construction employment in October declined in Louisiana by 1,900 jobs (-1.3%) from September, the largest statewide loss. Oklahoma saw a decline of 900 (-1.2%) jobs, followed by Mississippi, which lost 700 jobs (-1.6%).
Louisiana Steady, Texas Strong
During the past five years, growth in the commercial construction sector has been steady, and industrial work should increase over the next five years, says David Dupré of DonahueFavret Contractors, Mandeville, La., and 2018 board chairman for the New Orleans/Bayou Chapter of the Associated Builders and Contractors.
“Upstream opportunities are continuing to drive work in the Central and West Texas regions, and gas and oil midstream work is expanding in areas of Oklahoma,” adds Grady Saucier, senior vice president at Baton Rouge-based MMR Group Inc.
He adds that megaprojects are being developed and constructed from Donaldsonville, La., to Belle Chase, La., with more than $26 billion in new work. The electrical contractor’s largest 2017 completion was an offshore platform built in Texas for placement in the Gulf of Mexico.
Specialty contractors in Texas are reporting strong project schedules, and most contractors have both a full workload and sufficient backlog into next year, explains Russell Hamley, president of ABC Greater Houston.
Midrange projects dominate the market, and the industrial sector continues to expand. Many refineries and chemical plants are being built across the state. “There is so much big work here we sometimes get jaded as to the size of the industry in greater Houston,” Hamley says.
Key projects in other urban areas include oil-processing work in the Corpus Christi area, mixed-use high-rises in Austin and multiple projects at Austin’s airport, notes Rosendin Electric’s John Colley, director of Texas operations in Austin.
Rosendin’s portfolio includes a $9.1-million contract for the Texas A&M Bio Research Facility in College Station and the University of Texas Welch Hall renovation in Austin, a $10.6-million job for the company.
Data center construction also is growing in Texas. These massive projects typically have fast-paced schedules that demand high levels of expertise and resources, including experienced tradespeople and project managers, Colley adds.
This year, Rosendin will complete a $123-million contract at a large-scale data center for a social media company in Fort Worth. The high-tech market demands the use of more productive delivery systems, including lean, prefabrication, modularization and cutting-edge technology, he says.
For neighboring Arkansas, recent Bureau of Labor Statistics data indicates that employment in construction, manufacturing and trade, transportation and utilities is increasing, says Joey Dean, executive vice president of AGC Arkansas, Little Rock.
In Mississippi, the construction industry is “up in several metrics year over year, but still lags [behind] some surrounding states,” says Lee Nations, president and CEO of ABC Mississippi in Jackson. “Our construction unemployment is one of the five worst in the country, but it remains low relative to years past.”
Major trades are busy with large projects statewide, including an expansion for Blair Batson Children’s Hospital in Jackson, Ingalls Shipbuilding’s expansion on the coast and several major highway and bridge projects.
In Oklahoma, the construction industry also is strong, says John Smaligo, president and CEO of ABC Oklahoma, Tulsa.
“Contractors in all trades are now in a position of being rather selective with the jobs they bid on and general contractors they choose to work with,” he explains.
Major projects underway in Oklahoma City include the interior rehab of the capitol building by Manhattan Construction and Frankfurt Short Bruza Architects-Engineers-Planners and construction of the new convention center, led by Tulsa-based Flintco LLC.
“All indicators point to continued growth,” Smaligo says.
Labor Shortages Continue
Finding enough skilled labor to meet market demands has been challenging, says Dean of AGC Arkansas. “It is not a new problem, but it is one that we are continuously working to improve.”
The shortage is even worse in Texas. With the unemployment rate moving downward, the lack of trained craft workers has become a major problem. Some specialty contractors are not taking on new work without qualified personnel, says Hamley of ABC Houston. “The laws of supply and demand will work to raise wages for qualified workers, which will soon be reflected in higher construction costs,” he says.
Higher wages and the workforce development programs such as those sponsored by ABC should help alleviate the shortage, but the lack of skilled workers is a long-term problem that will take years to resolve. “You cannot become a skilled craft worker in a short period of time,” Hamley says. “It takes years of training and experience to reach the standards needed in the industry.”
TDIndustries has responded aggressively to the lack of skilled tradespeople and field management and supervisory roles, says Graham Moore, president of the firm’s Houston, Austin, San Antonio and Arizona markets.
The company invests heavily in training, insists on a safety-first mentality, maintains QA/QC programs and utilizes virtual design and construction (VDC) and prefab to complete its work more efficiently and safely. Its recruiting is focused on women and veterans, and it offers financial incentives to employees and others who refer qualified people. TDIndustries also emphasizes leadership training and offers higher pay with full benefits, including an opportunity to purchase stock after 30 days of employment, Moore says.
In Oklahoma, specialty contractors also report the impact of low unemployment. “We hear from them often about needing workers in order to keep up with demand,” says ABC Oklahoma’s Smaligo.
Tulsa-based Faith Technologies has invested in manufacturing and design technology to enhance its project capability in the tight labor market, says John Gunderson, the company’s senior vice president of construction.
A Good Year Ahead
Nations at Mississippi ABC expects a slight uptick next year as the national economy continues to perform well and state revenue remains positive.
Meanwhile, MMR Group anticipates a strong first half of 2019 in the region, with contracts that include the SASOL petrochemical plant and derivative products in Lake Charles, La.
“The second half should be populated by projects that are in development now and starting construction during the first half,” says Saucier of MMR Group. “These will be ready for specialty contractor construction during the second half of 2019.”
Next year also shows promise for Houston specialty firms, unless the market weakens or the price of oil collapses, Hamley says.
TDIndustries’ construction sectors in Texas and Arizona posted strong sales throughout 2018, which leads it to project strong revenue through 2019, says Moore.
“The Houston construction economy remained flat in 2018; however, we are very optimistic with the oil-and-gas market stabilizing and anticipate an increase in construction by midyear 2019,” he says.
The passage of medical marijuana laws in Arkansas and Oklahoma will increase the demand for specialty HVAC equipment in grow houses, which are pharmaceutical-grade facilities, says Greg Blair, an AGC Arkansas chapter member and vice president of sales and marketing for Little Rock-based Harrison Energy Partners. The company provides commercial and industrial HVAC systems. He believes that the states will eventually pass measures for the sale of recreational marijuana, creating a market for dispensaries and grow houses.
Rosendin Electric’s Colley expects solid market conditions to continue. The data center market in the Dallas-Fort Worth area should remain strong through 2020, and opportunities will develop for military-oriented projects in Corpus Christi and for the high-speed train system from Dallas to Houston.
For Faith Technologies, 2018 has been good year, and based on backlogs in the area, the company projects a strong 2019 for specialty contractors, says Gunderson. The firm is completing a $32-million contract at the River Spirit Hotel and Casino in Tulsa and the 27-story BOK Park Plaza tower in Oklahoma City, a $15-million contract.
‘We’re excited about the innovations we’re seeing in the industry and its extension into the specialty trades,” Gunderson says. “It’s an exciting time in the evolution of construction.”