As public sector work continues its downward spiral,
regional contractors are filling revenue gaps with a much more diverse mixture
of project types than in recent years. While several large-scale energy and
transportation projects broke ground in and around New York City in 2013, most
of industry's new construction was sharply focused in the private sector,
executives say. The broader array of offerings, they add, is fueling industry
growth and providing work for more firms that struggled through the downturn.
"The market today is unquestionably loosening up,"
says Pat Di Filippo, executive vice president of Turner Construction, which
tops ENR New York's 2014 contractor ranking for the third consecutive year with
about $2.7 billion in 2013 regional revenue. Regional revenue last year for the
survey's top 50 respondents also strengthened—reaching $20.3 billion, up nearly
10% from the previous year's top 50 total.
"In a recession, everybody's chasing the institutional
work," Di Filippo says. But by 2012, when New York City's residential
tower market began to show signs of life, "everyone got excited and had
false hope that everything would take off," he says. The marketplace
responded more slowly than anticipated, but by mid-2013 more shovels were going
into the ground, especially for major residential projects in and around the
city and in northern New Jersey. "When residential work becomes a constant
in the marketplace, then the overall industry opens up," says Di Filippo,
whose firm is construction manager for the NYU Langone Medical Center's Kimmel
Pavilion. It is Turner's largest regional project to break ground last year.
A strengthening residential sector is reflected in this
year's revenue ranking, with several luxury tower projects getting under way in
and near Manhattan. These include the 57-story, mixed-use tower at 252 East
57th St., where Lend Lease (ranked No. 5) is the construction manager.
On the Upswing
The increase in work also is reflected in a New York
Building Congress study earlier this year. It shows that in New York City, the
region's largest marketplace, construction activity climbed 11% to $18.8
billion last year.
Executives say those are good signs for industry but point
out that revenue does not tell the whole story about regional construction
sector health. They say scores of individual firms still struggle with
profitability and that the industry as a whole has not yet made up for steep
losses racked up during the recession.
That likely accounts for why many firms in the ranking more
than doubled their year-over-year revenue last year, executives say. With such
little industry activity during the down cycle, even moderate size projects
could spike revenue for some companies, they add.
Industry is also trying to restore its fee structure, a
challenge as it emerges from an economic environment where work was scarce and
firms had to fiercely compete with one another on contracts. Owners, in general,
have unrealistic expectations that the fees contractors charged during the
recession will remain in place, executives say.
"The market is improving, meaning more work is
available, and contractors can be more selective and inch our fees back up for
the value we provide our customers," Di Fillipo says.
Many contracting firms say they are in a hiring mode, with
some, including AECOM's Tishman Construction Corp., adding that employment is
back to pre-recession levels.
"Our talent is being heavily recruited by some of the
start-up firms coming in," says Jay Badame, president and chief operating
officer for New York, New Jersey and Pennsylvania at Tishman (ranked No. 4).
"During the recession, nobody steals your people, but when things are
good, everybody tries."
Badame says he's "cautiously optimistic" about the
year ahead. "We are stable [as an industry] now, and employment is good.
But as land costs continue to rise, as well as labor costs, these could dampen
the economy."
Even so, Badame expects the strong rebound to continue in
many private sectors—including housing, hospitals and hotels. Tishman's largest
regional project start last year was the 80-story 30 Park Place/The Four
Seasons, a hotel and residential tower.
He says the hospitality sector is "making a
comeback," especially in New York City and northern New Jersey. Besides
skyscraper hotel projects, mini-hotels in midtown Manhattan and in the outer
boroughs are also on the rise, he says.
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