Construction. Well, that’s what we’re hearing from contractors across the country—commercial construction is faring well. The top contractors are feeling positive about construction, and work in general, for the upcoming year. Lower gas prices, steady commodity prices and no new regulations have a calming and stabilizing impact on the market.
And while commercial construction continues to thrive, an interesting dichotomy is happening. While construction job growth increases in most sectors across the country, many energy producing metro areas are experiencing big losses. Construction employment increased in 234 out of 358 metro areas, was unchanged in 52 and declined in 72 between February 2015 and February 2016, according to a new analysis of federal employment data released by the Associated General Contractors of America (AGC). Association officials noted that many energy-producing areas experienced job losses during the past year.
“Many parts of the country continue to see robust construction job growth as demand for projects rises,” said Ken Simonson, the association’s chief economist. “Construction employment in many energy producing areas, however, appears to be suffering as lower prices for products like coal, oil and natural gas cuts into demand for construction services.”
But let’s focus on the positives. For instance, the Colorado short-term construction outlook is strong, says Marc Paolicelli, VP corporate business development, RK Mechanical, Inc., Denver. According to the AGC-Colorado 2016 Construction Outlook Survey Results, respondents anticipate increased project volume across all types of facilities. Respondents also plan to increase manpower throughout 2016. “This holds true for RK Mechanical, as well. We have a significant backlog for 2016 and 2017 and the rate of construction appears to remain strong over the next two years,” said Paolicelli.
“With a pipeline of $7 billion worth of projects currently scheduled to break ground yielding 14 million square feet of new development, there is no question that Boston is riding the wave of a construction boom,” said Tom Palange, director of marketing, J.C. Cannistraro, Watertown, Mass. This work is more diverse than ever, including a reimagined TD Garden, luxury apartments and hotels, office skyscrapers, hospital and university expansions, and perhaps the city’s first casino. “By all indications, we’re hopeful that the draw of living and working in metropolitan Boston will continue to drive construction for at least the next few years,” continued Palange.
According to Daryl Blume, president LEED AP, BCH Mechanical, Largo, Fla., “We’re at an eight-year high in backlog, with a promising short-term outlook including strong demand due to numerous large local Tampa Bay market projects at airports, Pinellas County Jail, Raymond James Stadium, plus significant upswing in pent-up demand for new hotels, secondary school construction—dorms, classroom buildings and support buildings.”
The John W. Danforth Company began 2016 with the largest backlog in the company’s 132-year history. “Our collaborative approach and numerous competitive advantages have allowed us to continue booking profitable work for Danforth while providing our customers with industry leading quality. Danforth continues to be ‘on the move’ both geographically and entering new markets. Our bid list is long, our acquisition team is full speed ahead and Danforth is looking to have a record year,” said Josh LiPuma, director of marketing, John W. Danforth Company, Tonawanda, N.Y.
The John W. Danforth Company began 2016 with the largest backlog in the company’s 132-year history.
With strong inquiries from healthcare, mission critical, entertainment, and higher education sectors of the economy, the market outlook is very positive, said Dave Cimpl, CFO, MMC Corp, Overland Park, Kansas. “Our business development teams are seeing an abundance of opportunities around the country. Even markets that struggled during the ‘Great Recession’ are picking back up,” said Cimpl.
“Due to the large size and multi-year nature of many of our mechanical contracts, we consistently maintain a backlog of contracted work,” said Paolicelli. “We currently have a large backlog of awarded work through the end of 2016 and into 2017. In the past year, we have increased our win ratio on bids and are experiencing a higher volume of awards to RFPs.”
Is there some trepidation heading into the fall’s election? “All eyes are on the presidential race. We can expect the uncertainty surrounding the election will have a negative impact on the economy in the second half of the year,” says Denny Terrell, president, Ivey Mechanical, Kosciusko, Miss.
“We do expect things to slow as we get closer to the fall elections and to hold there until Spring 2017.”
While Terrell notes that while manufacturing across the Southeast has been the hot market that continues to thrive and healthcare has finally gotten some life, military work continues to be slow in the Obama administration and, of course, no change is expected until a new administration is in place.
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The markets
In the Boston area, the busiest market sectors appear to be in the life sciences and high-rise multifamily residences. Boston and neighboring cities like Cambridge and Somerville are attracting new businesses, and thus, new residents who want to live near their workplace. “We’re working on multiple state-of-the-art institutional laboratories for clients like MIT, Northeastern University and on the residential side, our most noteworthy project is the Millennium Tower, the city’s new 60-story luxury residential and retail facility,” said Palange. The new construction market in the Boston area is currently very strong. “With that said however, we’ve also experienced consistent growth in our service group,” said Palange.
In the Rocky Mountain state, RK Mechanical is currently experiencing the most success — and a high volume of projects — in office buildings, aviation, healthcare, hotels/convention centers and multifamily residential. RK Mechanical was awarded the mechanical contract for the Gaylord Rockies Hotel and Convention Center project, currently one of Colorado’s largest and most prominent projects.
Solid business for RK Mechanical has consisted of new construction and major renovations for office buildings, aviation, healthcare, hotels/convention centers and multifamily residential. Additionally, RK Mechanical specialize in prefabricated and modular construction, and the demand is increasing rapidly. Finally, RK Mechanical’s Service unit is growing rapidly and expanding its facilities services footprint across Colorado.
“We are seeing quite a few healthcare opportunities, both with construction of large hospitals and smaller community facilities. The mission critical (data center) market is very strong because of all the data we use these days—more data storage space is needed. In Texas, in particular, K-12 education is a booming industry because of the growth in many of their communities,” said Cimpl.
Cimpl also reiterates that the company is seeing growth in its mechanical service groups across the nation. These teams have built great relationships with its clients, and it’s a sold part of its business that doesn’t fluctuate the way construction can.
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Skilled workforce
The lack of qualified trades people, lack of good educational and vocational program and limited interest in young people getting involved in the trades will continue to pose a drag on the market. “Labor and lack thereof is a continuous challenge,” said Blume.
With the robust economy, the demand for good talent is exceeding supply.
“We are beginning to see the shortage of experienced workers across the board including project managers, superintendents, plumbers, welders, etc.,” said Terrell. “As we continue to grow, we see this as one of our greatest upcoming challenges.”
With the robust economy, the demand for good talent is exceeding supply, says Cimpl. Because recruiting and retaining great talent is a top priority for the company, “we’ve developed internal training programs to grow our people, we’ve introduced best practice groups to share information, and our Employee Ownership Stock Program (ESOP) allows our folks to share in the success of those efforts,” said Cimpl.
Yet, according to RK Mechanical’s Paolicelli, “the oil and gas downturn had a slightly positive impact on hiring as we were able to employ some skilled trade workers who were laid off from this industry.”
Technology in action
Competition forces companies to be at their best and use all of the tools at their disposal. Keeping up with advances in technology can only help in the long run.
Cannistraro, for instance, strives to continuously improve in every facet of its business, from preconstruction through field operations on through to closeout, and then service and maintenance. “This constant curiosity convinced us to be an early adopter of BIM back in the early 2000s, inspired us to double-down on prefabrication, and is driving us to think differently about how we work. This includes everything from developing innovative modular piping assemblies to creating a mobile safety portal for all foremen and project managers to access important safety documents and notices via their iphones and ipads,” said Palange.
The 3-D/BIM capabilities and the ability to plan and coordinate all aspects of major projects provide a huge benefit to BCH’s production efforts. “The technology in our company has afforded us the ability to more accurately meet/exceed labor goals and allows us to plan our projects more efficiently,” said Blume.
For Ivey Mechanical, since technology is playing a bigger role in the industry, its BIM coordination group now has 11 coordinators. “Our in-house coordination has allowed us to take over half of our field labor hours and replaced them with work done through fabrication either at one of our four fabrication shops or at a specific project prefabrication shop. Our field is much more productive with the usage of programs such as Autodesk 360, BlueBeam, CxAlloy, Plangrid, etc.,” said Terrell.
Danforth’s LiPuma says that the advanced technology market has taken New York State by storm. “With major manufacturing and research facilities popping up across the State, we made the strategic investment in the Ultra High Purity Fabrication Facility located in Victor, N.Y. This state-of-the-art facility is equipped to fabricate materials to be installed all over the state,” said LiPuma.
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Integrated delivery
In commercial contracting industry today, it’s clear that there is a desire and a need for more collaborative delivery methods— Integrated Project Delivery (IPD), Design-Assist or Design-Build type projects. There is no question that to achieve the optimal benefits of these project delivery methods, early collaboration for all members of the project team is necessary. Unlike the past, which was driven by two-dimensional drawings, the three-dimensional models used today require that schematic design and construction documents to be developed concurrently. Doing so expedites the delivery of the coordinated drawings prior to the commencement of construction.
Measurable benefits quickly become evident in the form of a more efficient building process and quantifiable cost savings.
“Though it’s a different way of thinking from the traditional construction approach. Being able to make a strategic investment in planning up front—with all trade contractors at the table with the design team—measurable benefits quickly become evident in the form of a more efficient building process and quantifiable cost savings,” said Palange.
Others echo that key to success. “We’ve successfully participated in several IDP engagements where all members of the construction process are brought in early and motivated to deliver a successful project,” said Cimpl.
Danforth’s key to success is its ability to collaborate internally, with project team members and with building owners/operators. Danforth’s Building Modeling Team works hand-in-hand with our in-house engineers, as well as our engineering and construction partners to facilitate planning and implementation of our projects.
“Our collaborative approach and numerous competitive advantages have allowed us to continue booking profitable work,” said LiPuma.
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