Builders Forecast a Welcome Calm
Alabama’s big builders plan modest workforce expansions and could even get effusive about market stability.
Russ Hale, vice president of business development at Hoar Construction, at the Powell Avenue Steam Plant in Birmingham. Hoar is general contractor for the project to renew the old steam plant as a mixed-use development surrounded by an urban plaza.
A tour of Alabama’s larger general contractors’ websites reveals construction activity at locations throughout the state, the Southeast and across the United States. Alabama contractors are even doing work internationally in places like Bosnia and Herzegovina, Chad and Moscow.
It isn’t at the peak level of a few years ago, and the skies aren’t sunny for all builders. But the state’s construction industry has clearly crawled out of the post-recession rubble.
According to the Associated General Contractors of America, total construction spending as a seasonally adjusted average in the United States was $1.12 trillion in November 2015, down 7 percent from peak spending in February 2006. But overall construction spending in the U.S. in 2015 increased more than 10 percent, reaching its highest level in eight years.
Alabama contractors, in general, are adding employees, and revenues are generally looking up, as private sector developments, boosted by the growing number of mixed-use projects, have carried the load.
Alabama construction employment was up 6 percent last November, compared to November 2014. Of firms responding to an Associated General Contractors survey, 67 percent expect to add employees this year, with 33 percent expecting no change. Forty percent of those contractors expect to see increased business this year, whereas 10 percent see less and 50 percent expect the same.
“We’re expecting an increase in the number of employees — it will not be a decrease,” says Russ Hale, vice president of business development at Birmingham-based Hoar Construction. “As far as volume and revenues go, most of the larger contractors have a healthy backlog right now. It’s bigger than the previous year, and we see 2017 being bigger than 2016.”
“We added 53 employees last year, which was a record for our organization,” says Alan Chandler, senior vice president of business development at Birmingham-based Doster Construction. “We have addressed demand for the next 24 months but still see a need for 20 or so new employees. We expect to grow considerably in 2016 and 2017.”
At Birmingham-based Brasfield & Gorrie, “We anticipate expanding our workforce by as much as 10 percent over the coming year to keep up with opportunities in the market,” says Jeff Stone, the company’s executive vice president. “Likewise, we anticipate revenue growth to be 10-15 percent year-over-year.”
Despite the positives, construction activity in the state is spotty. Building activity in several Alabama metro areas is lagging, and contractors remain concerned about the challenge of finding and properly training new workers.
The AGC notes, for example, that the Huntsville area added 1,400 construction jobs in 2015. That made Huntsville the second-fastest growing metro area in America last year in terms of construction industry job growth among 359 metro areas the AGC tracks. Birmingham/Hoover construction employment increased 11 percent last year, Decatur 3 percent and Mobile 2 percent.
Florence/Muscle Shoals, on the other hand, saw construction employment drop by 14 percent; Anniston/Oxford/Jacksonville took a minus 13 percent hit; Gadsden minus 8 percent, and Tuscaloosa minus 2 percent.
Across the board, contractors find it challenging to find and hire properly trained employees. Many workers in the construction industry are retiring, others left after the recession, and relative economic prosperity in recent years has led workers to seek higher pay in other industries, according to industry experts.
“I think one of the biggest issues that we all face is access to high-quality subcontractors,” Hale says. “Making sure we have a good subcontractor on each project is one of the biggest issues we have right now.
Grandview Medical Center in Birmingham was one of two major hospitals completed last year by Brasfield & Gorrie.
“At the subcontractor level, it’s a long-term process. You can’t just take a worker and make him qualified in a short period of time. It takes a long-term outlook,” Hale adds. “We support organizations like the AGC and their efforts to bring more people into the work force at an earlier age.” He also praises training programs like those offered by AIDT and Associated Builders and Contractors of Alabama.
Chandler says that Doster has been able to find the workers it needs but that it’s not easy finding them. “It’s been harder in the multifamily sector, because there are not as many seasoned employees there, because the demand has not been this great for many decades,” he says. “It has taken a dedicated recruiting strategy in order to keep up with demand.”
Where the new business comes from in the near future depends on contractor capabilities and experience, relationships with owners, the economy and other factors. Overall, however, contractors say they expect an increase in multifamily developments, more of which are now part of mixed-use developments that include office and retail space.
Contractors, in general, see more business coming from the private sector, as cash-strapped governments deal with budget and political issues. And, for the most part, large hospital construction is on the wane although health care remains a growing sector for construction.
But there are exceptions to everything, and contractors are forever preparing to seize what opportunities might come. Brasfield & Gorrie, for example, is seeing a return of activity in municipal water and wastewater projects and has begun work on an $83 million water treatment plant near Huntsville.
And the company completed two major hospitals last year, including Grandview Medical Center in Birmingham and a VA Hospital in Orlando. It also was named general contractor for a $300 million project at Piedmont Atlanta Hospital, with construction slated to begin in 2017.
“In Alabama, we are not seeing some of the mega projects as in the past,” Brasfield & Gorrie’s Stone says. “But in other markets such as Atlanta, Nashville, the Carolinas and Texas, we are experiencing significant opportunities in the large project category. These projects include office, healthcare, multifamily and mixed use projects.”
It is no bed of roses for Alabama’s contractors, but it’s better than the thorn bushes from a few years ago. “I don’t think we’re going to keep riding a good wave back to pre-recession levels,” says Doster’s Chandler. “I think there will be some dips along the way. I think there are some holes in the armor as far as everybody hiring people and growing and growing.
“I’m not super rosy, but if I had to check a box by better or worse, I would have to go with better. If you want to put the words ‘cautious optimism’ next to my name, that’s OK.”
Says Hoar’s Hale: “It’s good to see jobs for everybody. Employment conditions are stable, and (employees) are able to make plans and have a good personal life. It’s not like the turmoil, unemployment and uncertainty in the workforce during and after the recession.”
Charlie Ingram and Cary Norton are freelance contributors to Business Alabama. Both are based in Birmingham.