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Construction leaders voice guarded optimism Leaders in the construction, architecture, and engineering sectors expressed guarded optimism about growth prospects for an industry that has confronted significant challenges in recent years. Their comments were made at the September 30 State of the Construction Industry event hosted annually by Anchin in cooperation with the New York Building Congress. More than 200 people attended the breakfast event, held at New York’s Club 101. Panelists at the event entitled “From Recession to Recovery: When?” discussed what they saw as the opportunities in the industry as well as the continuing difficulties associated with the current economic downturn. Key themes emerging from the panel included: stability in healthcare and institutional construction, diminishing activity in the commercial real estate space, and the slow pace at which government stimulus funds were likely to be distributed in the near term. The panelists also noted that the decrease in construction costs would eventually lead many owners and other industry stakeholders to begin or accelerate projects in order to take advantage of a low point in the market. The event panel was moderated by Dick Anderson, president of the New York Building Congress. Panelists this year included:
Anderson acknowledged that construction in New York is “not a market that is falling apart, but a market that has stabilized.” However, he tempered this positive outlook with some sobering statistics, noting a decline in the construction industry to $26 billion in 2009 from $32 billion in 2007, with all areas of the industry affected, and with greatest losses in the housing and power sectors. Areas of Opportunity Despite these concerns, panelists noted distinct areas of opportunity that construction industry players could enter in order to sustain business and wait out the recession, including public sector work, green projects, healthcare, and institutional building.
Hayes of Cauldwell Wingate said her firm saw opportunities building hospitals and educational institutions. Singling out healthcare as uniquely attractive, she suggested that firms diversify their skill set to better support healthcare-related projects, such as hospitals, acute care, and ambulatory care centers. Likewise, Greenberger of SCA reported continued activity building educational institutions, citing the School Construction Authority’s current programs as well as expansion programs at NYU, Columbia, CUNY, and Fordham. Resnick of Resnick & Sons further cited growth at all educational levels, not just at large universities, referring to work his firm had done at private schools and even on a campus in Rwanda. Public sector projects represented a greater percentage of overall construction activity than last year, moving from 47% of the New York construction market in 2008 to 60% in 2009. As evidence of this, the New York School Construction Authority is currently completing a $13 billion plan, with $3 billion of that committed last year while an $11 billion dollar plan, divided between new schools and capital projects at aging schools, is starting in July (funding for such projects is usually split equally between the city and state, noted Greenberger). Green projects, and specifically “greening” existing buildings, were also recognized as an important growth area. Bruce Fowle offered that, despite economic contraction, the demand for green has not diminished, typically because there is a regulatory driver in the form of state or local legislation combined with the increasing popular demand for sustainable building initiatives. Strategies for Moving Forward With these market opportunities in mind, the panelists offered a few comments on staying afloat in turbulent times. Hayes summed up the situation succinctly saying “there will be fewer competitors, and fewer opportunities,” and highlighted the need to take projects that are not as high profile or glamorous, but necessary to maintain cash flow.
With commercial leasing flat for the foreseeable future and minimal need for office space (Resnick noted that 42,000 jobs were lost last year in the financial services sector alone, freeing up an estimated 10.5 million square feet of office space), players in the real estate market must find opportunities to offer value to their customers during a period of meager demand. Retrofits, pre-builds, and renovations were cited as potential sources of revenue. Lessors are also doing everything they can to keep buildings full, he said, including renewing and extending leases, offering shorter leases, and giving free rents. Hayes also noted that it is more important than ever to conduct thorough due diligence on your job partners. With up to a 30% reduction in costs on the pricing side, general contractors and sub-contractors are feeling the pinch on their margins just as everyone else. Hayes emphasized that it is incumbent on firms to make sure contractors can finish a project once it has been initiated, requiring heightened due diligence when specifying a contract partner. Hurry Up and Wait As Hayes aptly put it, “hunker down; it will be over before you know it.” The industry is prepared for the right moment to make its comeback, with a number of factors signaling that anticipation is warranted. “There are 40 holes in the ground where people are sitting back and waiting to see what will happen,” Hayes said. |
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