Is commercial construction on a comeback for real?
As the manufacturing industry slowly glided back to its rightful place since the recession, commercial construction is likewise making a strong comeback, felt especially this year.
2014: Good Year For General Contractors
While the industry was beset by the cement shortage, it has been a good year for many area general contractors. In fact, some construction companies are saying that the scenario was similar to 2007, just before the recession hit the country.
Back To Pre-Recession Years
In Racine, Wisconsin, Bukacek Construction couldn’t be happier with how their business is doing so far. Jim Cairns, CEO of Bukacek said that during recession, most construction companies would consider it a good year with 2 or 3 projects. Bukacek had enough projects in 2014 to make a banner year, including:
- Racine Dental Group office building
- $10.5 million jobs at 1101 S. Airline Road
Impact On Local Tradesmen
For these two projects alone, Bukacek had ensured employment for 20 people daily and a total of 80 to 90 workers until completion. Cairns said that the huge impact is on the local tradesmen as they didn’t have to worry about having any work. With many companies requiring building additions, it meant more work in the area.
A good example is the expansion plans of Unico, Inc., a manufacturing company that specializes in control systems and AC/DC drives which included building an additional manufacturing facility which created around 175 jobs for the locals. Bukacek started the project in 2012 and completed it in October this year. Another Bukacek project is the extensive renovation for Cree, a lighting company at 9201 Washington Ave. As Bukacek got busy the entire year, Cairns said they were able to have nearly all of their staff back to work.
Great Year Of Opportunities
Another construction company based in Kenosha, Riley Construction, like Bukacek, had a great year in terms of opportunities. According to the company chairman, Dave Riley, the company was back to a pre-recession time with slimmer profit margins.
The company was still able to get good deals even though the construction field remains highly competitive. What’s good for construction companies is that the lease rates remained at their level and have not increased in years.
Riley said they make their ROI by getting construction done cheaper but without sacrificing quality and structural integrity. Cheaper construction does not mean replacing concrete and screw anchors with cheaper alternatives. It’s more of proper construction management.
More Commercial Construction Projects
Riley’s projects included:
- Addition/renovation to David A Straz Jr Center for the Natural and Social Sciences of Carthage College valued at $32 million
- United Hospital Systems’ medical offices project worth $8 million to $9 million
- 176,000 square-foot building in Pleasant Prairie
For Riley Construction, they felt the comeback of commercial construction in early 2013 as they took in about $105 million. They expect to make from $140 million to $150 million at the end of 2014.
Challenges: Labor And Material Shortage
With commercial construction increasing its activities, the construction industry faced a couple of challenges.
It had to deal with the shortage of tradesmen. The recession had got most of them out of the trades, so when commercial construction boomed, the number of available tradespeople was a lot less. It wasn’t easy for Riley Construction to find the required manpower for their projects. Even the unions did not have extra workers.
There has been a notable shortage of concrete finishers as they were required in several highway constructions and very large projects such as the distribution center of Amazon in Kenosha County. Any construction company could have hired more people as construction activities peaked this year. But there were just not enough tradesmen for the projects.
The industry also had to deal with cement shortage. The limited supply and availability of cement have affected and restricted the flow of concrete including precast concrete panels to various construction projects. Some construction companies were forced to postpone some projects because of materials supply level, specifically concrete.
Bukacek ordered precast panels four months in advance. Even aggregate stone for concrete and haulers were at very low levels – a clear indication of increased construction activities. It has become difficult to get the materials when everyone is busy with their own projects.
Despite the challenges, the construction industry has every reason to be smiling, right?
2 thoughts on “2014: A Good Year For Commercial Construction”
The strains on labor capacity in oil and gas construction markets worldwide are becoming increasingly well known. These strains continue to affect projected project costs, and several large capital projects have already been delayed or cancelled as a result of rising costs and questionable long-term profitability projections. To keep up with this extremely dynamic and competitive – if not unprecedented – business environment, U.S. energy infrastructure construction firms need to develop a robust talent pipeline to tackle the industry’s many business challenges in the coming years.
If contractors wrote a screenplay based on what has happened to the construction industry the past few years, the title could be “The Incredible Shrinking Profit Margin. The sustained decline in private- and public-sector projects has meant more builders and subcontractors are chasing after less work, and cutting their bid prices to win jobs. I hope the reports are correct that business is turning around for this all important industry.
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