General Contractors Say Uncertainty Is in the Forecast
For an industry that boasts sturdy materials and powerful machinery, construction can be a delicate business. Especially when the weather doesn’t cooperate.
“Last year was kind of an odd year,” said Thomas Zabel, president of the O’Leary Co. in Southampton, recalling the late onset of spring in 2006. “The weather kept things slow in the beginning, but then we got busy toward the end of the year.”
This year, however, right out of the gate, “we see a lot of opportunities with various types of projects across the board.”
Such a difference can be credited to more than just weather, of course. In fact, said Richard Aquadro, president of Aquadro & Cerruti in Northampton, the way the winds of supply and demand blow tends to be more important.
“I think the climate is getting better for contractors,” Aquadro said. “The last few years, it was a business owners’ market, and they were getting deals of a lifetime. Now, we’re getting to a point where we can pick and choose what we’re going to build.”
More than one of the contractors who spoke with BusinessWest this month brought up the term ‘cautious optimism,’ only to chuckle about it; they know it’s an overused buzzword in a region that tends to stay on an even keel even when other areas of the country alternate between frenetic building booms and periods of economic drought.
Still, some builders are indeed feeling optimistic for 2007, reporting a thaw in what has been for some a relatively cool couple of years — even if spring was a bit late showing up again.
Laying a Foundation
William Crocker, president of Crocker Building Co. in Springfield, said activity has been slow thus far in 2007, but he expects opportunities to present themselves throughout the year.
“We’re starting off slower than usual, but our estimating and bidding activity is probably higher than usual for this point in the year. So there are more prospects out there even though there’s less work on hand,” he said.
“We’re coming off four very busy years in a row,” he added, “so we do anticipate the next year to shape up pretty well, although there is a fair amount of uncertainty from business owners.”
McGraw-Hill Construction, an informational resource for the construction industry, projects a modest 1% decline in total activity nationwide this year, calling the overall forecast “a mix of pluses and minuses.”
However, that projection includes an estimated 5% decline in single-family housing construction. The commercial side is stronger, with activity in institutional buildings projected to increase by 7%, manufacturing by 14%, and public works by 5%, following a 10% surge in 2006.
In Massachusetts, meanwhile, “the builders who were busy last year are busy this year, and those in a strong niche market are going to be healthy,” said Mary Gately, director of market services for Associated General Contractors of Mass. Those strong markets include health care, higher education, and small retail.
“We’re finding from our membership that those in the college and university marketplace or in health care seem to be fairly busy; those seem to be the primary markets,” she explained.
Aquadro & Cerruti, for example, has taken on work recently at Amherst College and Smith College, and will begin a job next year at Mass. College of Liberal Arts in North Adams, reflecting a decade-long surge of work for companies in the Pioneer Valley that specialize in higher-education projects. “We’re seeing more opportunities,” Aquadro said. “The colleges are pretty active.”
Meanwhile, virtually every hospital in Western Mass. has recently launched or finished a major building project, including Holyoke Medical Center’s recent $11 million expansion, Cooley Dickinson Hospital’s just-opened $50 million patient building and surgery center, the $14 million ICU and ambulatory care unit being built at Mercy Medical Center, and Baystate Medical Center’s planned $259 million expansion.
At the same time, “I think there’s some capacity being reached in the manufacturing and warehouse market,” said Peter Wood, vice president of business development for Associated Builders of South Hadley. “I do see the medical and service sectors doing pretty well and expanding. So while I do think capacity has been reached in certain areas, other areas are opening up.”
Meanwhile, Crocker said conventional building throughout Western Mass. is generating more activity than the pre-engineered metal side of the business, but added that such trends can shift quickly.
Back to School
Aquadro said builders who compete for public school work could start to see some positive rumblings from that sector after a few years of stagnancy.
Massachusetts was no different from the rest of the country in seeing diminished school construction. According to McGraw-Hill, education-related projects totaled 273 million square feet nationally in 2001, but fell to 209 million, or 23% less, by 2004. In Massachusetts, the decline over the same period was closer to 50%.
“My guess is that will start to change this year,” Aquadro said. “There was a moratorium put on a lot of it years ago, and public school building has been pretty slim, but with the new governor, the projects that have been lined up for years could start to move forward.”
Aquadro & Cerruti picked up one of the higher-profile jobs in that sector, winning the bid to build the new Holyoke Catholic High School near Elms College in Chicopee.
Meanwhile, for companies that don’t rely on publicly funded work, the flow of jobs looks to be steady, Crocker suggested.
“We mainly operate in the private sector, and a large portion of our work is referrals, so we’re not necessarily chasing government work,” he said. “There are several contractors of our size in this area, and we compete with them for those jobs.”
It helps, he said, that Crocker tends to shun very large-scale projects, which have not presented the same opportunities in recent years as the smaller jobs the company prefers — those ranging from “$500 to $5 million, and anywhere in between,” as he put it.
Aquadro agreed that major projects are slow to emerge off the drawing board. “We’d like to take projects ideally from $10 million to $30 million, but there haven’t been a lot of these around, so we’ve bid for smaller projects,” he said. “But we’ve still found enough work, and we’re competitive. The climate has the all-around appearance of being better and providing more opportunities.”
Hammering It Home
Gately said many of her organization’s members are more hopeful this year than they were during a slow patch last summer.
“We were holding our breath last year,” she told BusinessWest. “The architects’ boards weren’t moving, and construction is about six months behind the architects. But by the fall and the beginning of this year, those projects were starting to filter down to the construction phase.”
“We see a good forecast this year,” Wood said. “We’re coming off a very strong period, and we have additional projects coming to the construction phase by the summer. I’m looking forward to continued success.”
Maintaining a diverse slate of projects is key, said Zabel, whose company recently broke ground on the St. John Pastoral Center in Ludlow and is also building a new hangar for AirFlyte at Barnes Airport in Westfield, among other jobs. He said the aerospace industry and machine shops are showing active growth in the region, among others. “There are many different things out there for us, quite a few opportunities.”
Time factors have contributed to the stress that many construction companies are feeling, Crocker said.
“Business owners want projects done sooner than they used to, while town planning requirements take longer and cause delays. But we anticipate doing about as much as we did last year,” he said, noting the Belchertown courthouse and a United Rentals facility in Ludlow among the recent projects. “All in all, we’re tentatively optimistic.”
Yes, there’s that word — optimistic — again, as ubiquitous in the spring as hopeful feelings at Fenway Park. But in construction as in baseball, the dog days of summer will be the true measure.
Joseph Bednar can be reached at[email protected]