Southeast Specialty Firms See Slight Slowdown Ahead
While the likelihood of a national economic downturn in 2020 appears to be increasing, specialty contractors working across the Southeast are remaining optimistic that the current demand for their services can remain strong for awhile longer.
“New contracting opportunities continue to be strong and frequent,” says Michael Cannon, CEO and president for Tampa-based wall and ceiling contractor KHS&S. “We’re seeing a pace very consistent to what we have experienced over the last few years. We are not anticipating any major changes.”
KHS&S, which frequently works in Central Florida’s themed entertainment parks and on hospitality projects, among other markets, ranked 15th on this year’s Southeast Top Specialty Contractors ranking, with $120.46 million in 2018 revenue.
Lauren Permuy, vice president of business development with St. Petersburg, Fla.-based Power Design—which works across the Southeast region—says the electrical contractor is actually seeing an increase in demand for its services.
“Opportunities are increasing,” Permuy says. “We have bid almost 40% more projects this year than we did in 2018.” For this year’s Top Specialty Contractors ranking, Power Design—which ranks fifth this year—reported nearly $274.7 million in 2018 revenue from the Southeast, up by about $35 million from a year ago.
Indeed, the region’s ongoing population growth could help propel future construction market momentum while other parts of the country slow. Keith Douglas, who oversees the Southeast region’s operations for Rosendin Electric—this year’s Southeast Specialty Contractor of the Year—sees a diverse mix of still-healthy construction sectors continuing to offer plenty of opportunity.
“The Southeast—particularly the Charlotte and Atlanta area—is one of the healthiest construction markets I’ve seen in the country,” he says.
While the Southeast region’s metropolitan construction markets may not be the nation’s largest, Douglas sees the area as being “the healthiest in terms of diversity,” noting the abundance of transportation, health care, mission critical, commercial interiors work and renewable energy projects as market drivers.
For electrical contractors such as Rosendin, at least, “There’s the ability to build a very diverse business here in the Southeast,” Douglas says. “It’s extremely exciting to see the diverse opportunities that we have here.”
Slowdown, Continuing Challenges
Despite reporting the continuing demand for specialty contracting services, sources commenting for this story see the market beginning to slow in 2020.
While Cannon, with KHS&S, expects “the near future to remain robust for our industry,” he adds: “By (the) mid to the end of next year, I believe opportunities will begin to plateau and level off.”
Permuy, with Power Design, has similar expectations: “We see the market dipping slightly over the next couple of years and starting to pick up pace again in 2022.”
Regardless of a future slowing of the Southeast’s construction markets, the challenge of finding sufficient skilled labor will remain an issue.
“Labor is always a challenge,” Permuy says. In addition to emphasizing training and utilizing prefabrication when possible, Power Design is currently “having a lot of success recruiting veterans.”
Adds Cannon with KHS&S: “Qualified craftsmen are very difficult to come by. We are hiring more people than necessary to vet out unqualified resources, and we are putting more focus on our training and mentoring programs. This drives up the cost of doing business, but it is unfortunately unavoidable.”
Respondents to this year’s survey—roughly 65 in all—collectively reported roughly $6.1 billion in 2018 Southeast revenue. That’s down from last year’s ranking, when firms reported a total of $7.45 billion in 2017 revenue from the Southeast. The Southeast region covers Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Puerto Rico.
A considerable portion of that decline stems from the fact that last year’s No. 2-ranked firm opted to not participate in this year’s Top Specialty Contractors ranking. Additionally, the number of firms included in this year’s Southeast specialty contractors ranking declined sharply. Last year, ENR Southeast ranked 80 specialty contractors, fifteen more than the 65 ranked this year.
On a state-by-state basis, Florida again registered the highest revenue total. For this year’s ranking, 45 survey respondents reported roughly $1.9 billion in revenue from the Sunshine State, or about 31% of all Southeast specialty contracting revenue. For last year’s ranking, firms reported about $2.7 billion in Florida revenue.
The remaining state totals, from highest to lowest, were: North Carolina, $1.4 billion, down from the $1.83 billion reported last year; Georgia, $1 billion, unchanged from a year ago; South Carolina, $709 million, down from last year’s total of $899.2 million; Tennessee, $500.7 million, down from $586.2 million; and Alabama, $296.5 million, a slight decline from last year’s $304 million.
Revenue from Puerto Rico, where recovery work from Hurricane Maria continued in 2018, drove this year’s total even higher than in 2017, when the $136 million reported marked a sizable jump over the $30.6 million reported for 2016. For this year’s ranking, Puerto Rico’s 2018 revenue totaled $241.6 million. And as was the case a year ago, nearly all of that revenue—$239 million—was reported by MasTec, the Coral Gables, Fla.-telecommunications contractor.
ENR Southeast’s Top Specialty Contractors survey lists firms’ 2018 revenue figures earned from projects located in the Southeast. In addition to revenue, the main ranking includes other information about each firm, such as top markets and largest recent contracts. Breakout lists rank firms based on state and specialty market sector revenue.