Based locally and working internationally, McCarthy Building Cos. and Alberici Corp. got through the recession’s first year on their deep backlogs of commercial construction contracts.
But now St. Louis’ Big Two of general contracting expect leaner times ahead as they cope with the worst economic downturn in decades.
Commercial construction is a lagging economic indicator, meaning that recessions hurt general contractors later than most companies during tough economic times. Thus general contractors are among the last to recover when the economy improves.
"Once owners start to build something, it’s very rare that they stop a project," said Greg Kozicz, Alberici’s chief executive.
As a result, Alberici had a "very significant backlog" of work for 2006, 2007 and early 2008 even as the economy cooled, and company revenue grew steadily, reaching $1.3 billion in 2008. Completion of some projects and a smaller backlog of new jobs will mean a slight revenue drop this year, Kozicz said.
"And we think ‘11 will be softer than ‘10," he said.
Alberici currently has about a year’s worth of jobs in the works, down from 18 months in more normal times.
"When the economy was roaring along at its peak, we were closer to two years," Kozicz said.
Whether commercial construction is in rebound mode is unclear, he added. The U.S. market is unique because of public stimulus spending, said Kozicz, adding that for the first time in Alberici’s 90-year history, government work makes up a "disproportionate" share of the company’s business.
"On the surface, the numbers look like recovery," he said. "But look at the mix of work and you get a question mark. The government just can’t spend money indefinitely."
By far the region’s largest construction company is McCarthy, which had more than $3.1 billion in revenue last year. Even though that amount was down $380 million from 2008, the company had its highest gross margin ever in 2009, said Derek Glanvill, McCarthy’s president and chief operating officer.
"We still had a lot of good work in the pipeline," he said best payday advance. "The bad years are yet to come. If we could stay flat over the rest of 2010, ‘11 and ‘12, that might be a good thing. That would be favorable not only for McCarthy but for the entire industry."
With projects in more than a dozen "core markets" spread across 40 states, McCarthy’s U.S. business has benefited from a recession-produced 30 percent plunge in the cost of construction, Glanvill said.
"The second thing is that the pent-up demand is starting to come slowly, with more aggressive owners starting to build," he said.
Absent "creative financing," hotel and office construction remains slow although public university construction is "steady" despite the budget stresses felt by many states, Glanville said.
"There are some bright spots but they’re few and far between and not in our traditional market of major cities," he said.
To help deal with the lean times, McCarthy is venturing into smaller cities and bidding on jobs that it would have passed on in better economic times.
"Before, if there were four projects, maybe we’d get two," Glanvill said. "Now, if there are 10 out there, maybe you swallow hard and go after eight and maybe, if you’re lucky, get one."
Len Toenjes, president of the Associated General Contractors of St. Louis, said most construction companies of all sizes are struggling to get over the recession.
A few big projects — such as the St. Louis Art Museum expansion, the Mississippi River bridge — are helping spur a slow turnaround, Toenjes said. Regardless, some area construction companies are looking for work farther from home.
"We’re going to see more of a national footprint in our construction industry," he said. "Now that we’ve learned to work out of town, I think there’s going to be more of a tendency to follow a type of work or a client regionally or across the country."
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