Continued Growth Signals Positive Outlook For Region
While business conditions are softening nationwide, the South is experiencing continued growth, and design leaders across the region are reporting another year of gains in their markets.
The top 100 companies on ENR Texas & Louisiana Top Design Firms list represent nearly $7.3 billion in reported regional revenue, compared with the $5.9 billion the top 100 firms reported in last year’s ranking. ENR Texas & Louisiana’s regional coverage area includes revenue from work in Arkansas, Mississippi and Oklahoma.
According to the American Institute of Architects, billings in the South grew between March 2018 and 2019. The region’s AIA billings score was 54.2 in March 2019, up from 53.2 in 2018. A score above 50 indicates an increase in billings.
Business conditions remain strong, although public sector work is soft, and construction costs are likely to continue to rise, says Lynn Robertson, executive director of AIA Louisiana.
“Many indicators of future work at firms remain positive, with both inquiries into new work and the value of new design contracts continuing to grow,” Robertson says.
One firm that illustrates this trend is Garver, which is marking its 100th year in business in 2019. The North Little Rock, Ark., firm works on major infrastructure projects across an 11-state footprint, and more than $98 million of Garver’s $123 million in revenue in 2018 came from projects in the region, marking a 12% increase over the previous year.
Garver’s continued growth in the region is organic. The company recently opened a new office in Oklahoma City. “We have confidence that we’re in the right markets and providing our clients with the right services, and we’ll continue to move forward with that in mind,” says Brock Hoskins, Garver president.
Garver is program manager for the Arkansas Dept. of Transportation’s 10-year, $2-billion Connecting Arkansas Program designed to improve highways across the state. The firm is also supplying program management, design and environmental services for the $475-million Kaw Lake Water Supply program, with key elements being the design of a 70-mile pipeline and water treatment facility to replenish the diminishing water supply in Enid, Okla.
In Mississippi, state lawmakers last year agreed on a bond package of nearly $250 million to pay for various projects including bridge replacements, improvements to colleges and universities, upgrades for Ingalls Shipbuilding and sewer and water projects. But there is concern that there isn’t enough money to complete all of the projects, says Brian Cabunac, AIA Mississippi president. “I know the state is trying to get to where they have enough money to maintain their building stock, beyond new construction,” he says.
Gains for Texas
Texas continues to be a strong growth center, with firms from the state occupying the top nine spots in this year’s Top Design Firms ranking. Houston-based S&B Engineers and Constructors Ltd., which previously ranked No. 2, topped this year’s list with $579 million in regional revenue, up 55% from last year.
“Texas is growing by leaps and bounds,” says John T. Hamilton, Parkhill, Smith & Cooper’s chief operating officer for engineering. The Lubbock-based firm saw revenue increase $6.2 million from 2017, reaching $56.1 million in 2018. Some of that growth has come from the firm’s water resources group. “The biggest struggle these municipalities have is where they are going to find water in these existing communities,” he says.
Halff Associates Inc. of Richardson, Texas, saw an $18 million gain in regional revenue from 2017, up to $135.2 million in 2018. President Patrick Kunz attributes that increase to a combination of factors, including the strong state of the Texas economy and the firm’s mid-2018 acquisition of the 15-person firm Marlar Engineering in North Little Rock, Ark.
Halff experienced a steady workload across all of its practice areas including transportation, public works, water resources, water utilities, planning and landscape architecture. Halff designed the $9.8-million replacement for the Trinity River Authority Lift Station No. 1 in the former Texas Stadium arena area. “Leadership emphasized employees taking ownership of their projects, resulting in increased successful management and execution of projects,” Kunz says. “There was little time lost to projects getting behind schedule, and there were no financial losers.”
Another booming sector is education, which continues to be a major source of activity for Parkhill, Smith & Cooper Inc. Much of the demand for institutional projects stems from population growth in Texas, says Dan Hart, a principal with the firm and national American Institute of Architects board member. “That really drives schools to respond with facilities, and I think there are still a lot of people coming from other parts of the country in Texas,” Hart says.
Johnston Elementary School in Abilene is one example. Built on the same site as the original school, the modern 87,000-sq-ft facility will be able to accommodate 800 students.
Fort Worth-based Huckabee has continued to expand into the higher education market, bolstered by increased interest in establishing K-12/college partnerships. The firm posted a $17.2-million revenue gain to $82.5 million in 2018. One such partnership was the Dr. Gene Burton College and Career Academy, which Huckabee designed for the Rockwall Independent School District. The 154,000-sq-ft campus features a college wing that provides students access to coursework from Collin College and Texas Tech University. Students can earn a high school diploma along with a two- or four-year college degree from a single location. “This type of partnership is on the rise, and RISD is leading the charge,” says CEO Chris Huckabee.
Feast, famine for infrastructure
Roads, bridges and transit are robust sectors for Texas, where the state DOT’s 2019 Unified Transportation Program has identified more than 13,000 planned transportation projects in various stages of development—totaling an unprecedented $75 billion in infrastructure improvements over the next decade. The program, which the DOT updates annually, serves as a 10-year plan to guide transportation projects and programs throughout the state.
“TxDOT has done a tremendous job funding and advancing infrastructure projects, which is continuing to fuel a very robust construction program in the state. That’s driving a trend of increased opportunities in engineering and inspection,” says Scott Haywood, HNTB’s Texas DOT client service leader and vice president.
In Houston and Corpus Christi, HNTB is helping deliver the state’s two largest bridge projects—Harbor Bridge and the Houston Ship Channel Bridge.
Another major infrastructure project is the $110-million, three-mile I-10 frontage road conversion in Bexar and Kendall counties that Halff Associates Inc. worked on in the Texas DOT’s San Antonio district.
Texas is also seeing a surge in plans for improving and expanding transit systems such as VIA Metropolitan Transit in San Antonio and Capital Metro in Austin.
It’s a different story in Louisiana, however, where industry leaders say the state’s greatest challenge is a lack of dedicated infrastructure funding. Compounding the issue is the inability of state lawmakers to pass any significant revenue increase, as was the case with recent failed attempts to increase the state’s gas tax to fund road and bridge projects.
Aging infrastructure is a growing concern, and Louisiana has been forced to close bridges that are judged unsafe. The state has thousands of bridges in varying needs of repair. Louisiana’s DOT is focused on inspecting, rating and rehabilitating or replacing bridges, but the state doesn’t have the money to match federal funds for several projects.
One project moving forward is the $360-million Louisiana 1 elevated bridge, relocated between Golden Meadow and Port Fourchon. HNTB is nearing completion of the design of the project’s second phase.
“As we’ve been hearing, states are looking for their own innovative funding and financing alternatives,” says John Basilica, vice president and HNTB Gulf Coast district leader. After a bill to raise revenue failed in 2017, Louisiana decided to use $650 million in Grant Anticipation Revenue Vehicle (GARVEE) bonds to supplement its infrastructure program.
Absent new revenue for infrastructure at the state level, local governments have been passing tax referendums to upgrade transportation infrastructure, including in Baton Rouge where voters approved a $1-billion transportation initiative to build new roads and sidewalks and manage traffic. HNTB was selected as a major partner with a local firm to lead the management of the program.
Talent, tech demands evolve
Mirroring national trends, the region continues to grapple with an industry-wide labor shortage while also working to adapt to new technologies. Firms are facing the challenge of finding people to do the work and developing more competitive benefits and programs to attract and retain talent.
“Along with the scarcity of talent and demand for higher wages, agencies with larger projects are limiting the rates they are willing to pay, creating the challenge of paying rates needed to attract and maintain staff and obtain a fair and reasonable profit for the firm,” Kunz says.
Technology has challenged industry leaders to keep up with its rapid evolution. Technology has provided opportunities for firms like Parkhill, Smith & Cooper, which is using predictive analytics to help school districts plan for growth. The firm collects metrics such as the number of sq ft needed per student, conditions of existing facilities and cost projections to replace or renovate facilities. Hart believes those types of data applications are where the industry is headed. “We’re going to have to do that kind of work up front to continue to be viable,” he says.