Many contractors in the tristate region say that two factors will largely determine the industry's robustness in the year to come—the economy and the upcoming general election. They reason that until the economy gains momentum, owners and developers will not shake their wait-and-see attitudes; and, until the next Congress is elected, federal funding levels for agencies and programs will remain a mystery with many projects left in limbo. Even so, contractors in the tristate region say they expect next year to be similar to 2011 and 2012 in that work will be available, but the volume of projects will not likely match pre-recession levels, and competition for jobs will remain fierce.
The majority of the 50 largest contractors that responded to ENR New York's survey this year kept busy in 2011, posting year-over-year revenue growth in the region (see p. 27). Total 2011 regional revenue for the 50 firms climbed to $10.7 billion, up 15% compared with the prior year.
Regional revenue at each of the top four firms in the ranking far exceeded the $1-billion mark. Top-ranked Turner Construction reached nearly $2.3 billion, up 19% from 2010. Like the majority of firms in the ranking, Turner's largest project to break ground last year was in the transportation sector. Turner and joint venture partners Peter Scalamandre & Sons Inc., Freeport, N.Y., and Lend Lease (No. 6), are working on Delta Airline's $1.2-billion Terminal 4 extension at John F. Kennedy Airport, which is set for completion next May (ENR New York 3/12 p. 16).
Mergers and acquisitions also continued to play a role at some firms, including Tutor Perini (No. 3), whose acquisitions last year included the subcontracting firm GreenStar Services (ENR New York 9/12/11 p. 54).
Tutor Perini has scored some big projects as well, including work on the plaza substation in Queens for the East Side Access project, its largest to break ground last year, as well as the $510-million Resorts World hotel and casino, also in Queens. Major projects like these helped propel the contractor's 2011 revenue to nearly $1.7 billion, from about $483 million in the prior year. The firm appears set for further growth as earlier this year it was named contractor for the $4-billion Hudson Yards development project in Manhattan.
Sector-by-sector, civil/transportation work will continue "to look pretty good" this year and next, says Mike McNally, president and CEO, Skanska USA (No. 2). However, infrastructure work will significantly decline in 2014 if a long-term federal transportation bill is not in place, he says. To make an impact, the bill would need to allow for a $50-billion-per-year spending package, he says.
Skanska USA's regional revenue, which includes both Skanska USA Building and Skanska USA Civil, totaled $1.7 billion in 2011, driven mainly by work in its civil branch, McNally says. This includes the $2.1-billion No. 7 subway line extension project in Manhattan. A joint venture of Skanska USA and Railworks, New York, is working on the project, which is expected to be completed by June 2014. Skanksa USA is also working on the 2-billion-gallon-per-day Catskill/Delaware Ultraviolet Disinfection Facility, the world's largest, under way at Mt. Pleasant-Greenburgh, N.Y. Skanska is part of the project's GC joint venture team with Ecco III Enterprises Inc., Yonkers, N.Y., and J.F. White Contracting Co., Framingham, Mass.
The tristate region has two and a half years' worth of civil work backlog, McNally says. This includes planned projects on the Goethals, Tappan Zee, Verrazano Narrows and Bayonne bridges.
"Investments in infrastructure work will create opportunities for development in the city, such as new office, retail and apartment buildings," says Ralph Esposito, principal in charge at Lend Lease's New York office. Work on the bridges as well as work at LaGuardia, John F. Kennedy and Newark airports are significantly contributing to growth, he adds.
However, after 2013, infrastructure work "doesn't look good because MTA and other agency budgets are being cut," McNally says.
That is borne out by recently published New York Building Congress data showing that New York City construction employment tumbled 32% in the heavy construction and civil engineering sector in the first quarter compared with the year-ago period. The group did not provide total employment figures for this sector, but overall industry employment in the city during this time reached 102,600, down 3% from the same prior-year period.
"The major reason for the decrease is the steady decline of MTA, Port Authority [and other] public works projects. All are just steadily dropping," says Richard Anderson, NYBC president. "While private work is increasing, it is not enough to offset the decline in public work."
NYBC analysis also shows that the city's capital investment during the Bloomberg administration peaked in 2010 with spending at $10.5 billion and remained strong last year at $9.5 billion. The city is on target in the current 2012 fiscal year, which ends June 30, to spend $9.1 billion, NYBC says. However, spending cutbacks are projected in 2013 through at least 2016.
"Once the World Trade Center work is completed, and if Hudson Yards doesn't start as planned, there is definitely going to be a slippage in construction spending in New York," Esposito says.
Nevertheless, this has not been a slow year for industry, says Bob Mullen, CEO at Structure Tone (No. 4), which reported a 6.5% rise in regional revenue to $1.4 billion. Mullen expects his firm's regional revenue to jump 15% by year-end, driven largely by work in higher education, health care and life sciences, hotel renovations and building repositioning. The firm's work includes CM-at-risk for the repositioning of an eight-story building at 330 Hudson St. into a 17-story structure.
In the private sector, "if you had good success in selling work in 2011, you probably have a pretty healthy backlog," he says.
Unlike many of the bigger industry firms, "our mix of work has been in steadily doing projects of a million dollars or less—every day," Mullen says. Structure Tone has about 300 projects of this size or smaller, which "add up" and have helped to push revenue higher, he says. "We are in a lot of buildings."
Many of the top 50 reported that their largest projects to break ground last year were in the education sector.
Higher education is one of the markets set for strong growth, as many universities in the region have major long-term expansion plans, Mullen says. These include sizable projects at Columbia, Cornell, Fordham, New York, Princeton, Rutgers, William Paterson and Yale universities, as well as the University of Medicine & Dentistry of New Jersey, New Brunswick, and the Weill Cornell Medical College, New York. "There's a lot coming, but a lot of that is taking time in getting to the starting gate," he says.
Healing Process
The health care sector is also awash in projects, providing work for such firms as Lend Lease, which is CM for the $316-million Mount Sinai Center for Science and Medicine project in New York. Some of the region's major projects valued at $200 million or more are planned or under way at institutions including Albany Medical Center; Goldwater North Memorial Hospital, New York; St. Michael's Medical Center, Newark, N.J.; Stamford Hospital; the University of Connecticut Health Center, Farmington; SUNY Downstate Medical Center, Brooklyn.; Waterbury Hospital in Connecticut; and Women and Children's Hospital of Buffalo, N.Y.
Another sector on the rise is residential, which is Lend Lease's largest and most profitable market, Esposito says. The firm is CM for One57, a 1,000-ft, 882,141-sq-ft mixed-use tower in Manhattan. The new building, scheduled for completion next year, will consist of 356,467 sq ft of hotel, parking and retail space and 525,675 sq ft of residential space.
New York's residential sector showed some "surprising" growth last year, Anderson says. He is optimistic that it as well as the institutional sector will continue to improve and that the economy, whenever it rebounds, will do so strongly.
"Every recession has a rebound, and usually it is related to how deep the recession was," he says. "New York has had a deep recession, so you can expect [the rebound] to be big."