Construction leaders see slow release of pent-up demand
For perhaps the first time since construction activity ground nearly to a halt in the Great Recession, leaders with local construction companies say they’re seeing signs of recovery.
While most local leaders temper their optimism with caution, figures reported for Springfield Business Journal’s annual list of largest commercial general contractors (printed in the Oct. 31-Nov.6, 2011, issue) indicate a few companies are rebounding in 2011, with expectations of continued but slow progress in 2012.
For the 10 companies on the list, billings between 2009 and 2010 dropped about 30 percent to $205.6 million from $291.8 million. Billings typically represent work that has been completed and billed to the customers, and amid that drop, only a few companies reported steady or increased amounts.
Nine out of the 10 listed companies reported more than $188.5 million in combined current backlog, which can include projects under way as well as projects that have been agreed to but haven’t yet started, suggesting that crews will have work to do in the months to come.
Announcements of large projects, such as the St. John’s orthopedic hospital and at least three Neighborhood Markets for Wal-Mart Stores Inc., are positive signs for the broader market, said Kenny Ross, co-owner of Morelock-Ross Builders Inc.
“As the big jobs start to show life, they have a trickle-down effect into the marketplace where we make our living,” Ross said, referring to “medium size” projects in the $1.5 million to $4 million range.
Randy Ganz, president and CEO of DeWitt & Associates Inc., noted an uptick of building interest in the health care sector. He also said his company is interested in numerous public school jobs coming up for bid in the next six months in the Springfield, Branson and Joplin areas.
Bill Killian, chairman of the board and owner of The Killian Group, said the company is working on projects nationwide in the recovering hospitality industry, with some local jobs in that sector and others.
During the recession, public jobs were the main source of activity, he said, and, at long last, he’s seeing increasing interest in the private sector.
“You have to recall, for a year and a half to two years, there was almost nothing going on,” Killian said. “That pent-up demand is starting to be released.”
Pockets of activity As the recession took hold and construction jobs diminished, general contractors worked harder to acquire jobs in areas that were still active. While private sector jobs, especially speculative development projects, dropped off severely, public sector jobs remained.
Ross said his company concentrated on sectors that recovered early, such as banking and some aspects of light manufacturing. The company’s recently completed projects include the roughly $2.5 million expansion of the Regions Bank building on Battlefield Road for owner Aaron Sachs, whose law firm has relocated there. Ongoing projects include a replacement branch for Great Southern at Kansas Expressway and Kearney Street and new corporate headquarters for SRC Holdings Corp. A project expected to start soon is a 15,000-square-foot building near Battlefield Mall that will house FM Stores and have space available for lease.
Morelock-Ross stands out on SBJ’s 2011 general contractors list as the only company with billings that have steadily increased since 2008, when they were $25 million. That figure rose to $35.1 million in 2009 and to $52.2 million in 2010. Ross projected that 2011 billings would be level with 2010, and while he noted the company already has several substantial projects on the boards for 2012, he declined to disclose specifics.
Killian said his company responded to the recession-fueled downturn in the hospitality industry – a longstanding niche for the firm – by pursuing university dormitory projects. The company made a smooth transition, he said, with projects under way on campuses in Washington and Pennsylvania.
Killian Construction’s 2011 billings are projected to be $120 million, Killian said, compared to $37.8 million reported for 2010 and nearly $88.6 million in 2009. The company’s current backlog is at $90.5 million.
Killian Construction recently completed the $9.8 million, 140,000-square-foot Hilton Garden Inn at 4155 S. Nature Center Way for O’Reilly Hospitality Management LLC. The company’s ongoing projects include the $10 million AG Financial Solutions headquarters in Springfield’s Chesterfield Village, as well as a truck terminal expansion for Springfield-based Prime Inc. in Pennsylvania., and a casino expansion in Biloxi, Miss. The company will soon begin work on a $33 million hotel/events center project in Pennsylvania and a $12 million hotel in Salt Lake City.
DeWitt & Associates Inc. reported 2010 billings of $36.3 million, down from $56.3 million in 2009. Crews worked this summer on jobs including $11 million in dorm renovations at Missouri State University, and Ganz projected that DeWitt’s 2011 revenues will return to 2009 levels, between $50 million and $60 million.
For Bales Construction Inc., education is an important sector, said President Jim Bales. The company’s 2010 billings were $19.7 million, down from $24.5 million, with current backlog of $17 million.
In addition to a $1.3 million HVAC replacement at Springfield’s Rountree Elementary School, Bales Construction’s ongoing jobs include $8.5 million dorm renovations at the Missouri University of Science and Technology in Rolla; a $1.6 million dorm renovation at Missouri Southern State University in Joplin; $5.3 million in elementary school renovations in Waynesville; and numerous Fort Leonard Wood projects, including classroom buildings, totaling roughly $8 million.
Retooling and diversification During the past few years, construction companies have engaged in major transformations to adapt to a changing market. Before the recession hit, for example, much of Killian’s business consisted of negotiated projects with long-term clients, notably John Q. Hammons Hotels Inc., said Killian President and CEO John Ghirardelli. As early as 2007, however, Killian leaders anticipated that bond projects would be critical for the company’s future.
“We have realigned ourselves into a bonding market that we didn’t participate in before,” Ghirardelli said.
At the same time, Killian has pressed on with its negotiated business. This two-pronged initiative to revitalize the company, along with difficult decisions on belt-tightening and layoffs, began to pay off in 2011, Ghirardelli said.
For Q & Co. LLC, consulting services helped the startup bring in construction jobs, said President Rick Quint, who launched the company in mid-2010. He projected that the company’s 2011 billings would land at $5.1 million for this year, up from $200,000 in its first year.
The company this year finished a $1 million project comprising two buildings for Emery Sapp & Sons Inc., and ongoing projects include the John Deere Reman Core Consolidation Center and consulting and renovations at the former Solo Cup plant for Warren Davis Properties.
Q and Co. is renovating approximately 225,000 square feet of the more than 900,000 square-foot property, which will be ready for use in six months, Quint said, noting that while renovations are being done with a specific company in mind, no official announcement has been made.
The rest of the property is being subdivided, Quint said.
For Morelock-Ross, the company’s real estate holdings helped cushion the blow from the recession.
Other companies, including Bales Construction and DeWitt, have broadened their reach, with Bales opening an office last year in Rolla and DeWitt expanding its service area into Arkansas and Kansas.
Another safety net, akin to diversification, is money in the bank, which Bales said is one of his company’s strong points, as he’s amassed capital through the years enabling the company to take on new projects without borrowing money.
“We haven’t borrowed any money in 18 years,” Bales said.[[In-content Ad]]