The Mountain States construction market is experiencing a dynamic shift, says Rich Hazel, president of Big-D Construction’s Salt Lake City regional office.

Public sector projects, data centers and transit-related developments are witnessing an upward trajectory, attributable to increased public investment in infrastructure and the demand for data storage and transportation facilities, he says. On the other hand, private developer-driven projects, including commercial offices, retail, warehouses and multifamily residential projects—all of which are often sensitive to interest rate fluctuations—are slowing down.

Chart by ENR

ENR annually compiles two lists for the Mountain States—one for contractors working in Colorado, Wyoming and the Dakotas and another for construction firms in the area that includes Utah, Idaho and Montana. The average revenue reported by firms across the seven-state region grew by 7% to $341 million in 2023 from $318.5 million in 2022.

Big-D landed in the No. 1 spot again this year for Intermountain area firms. The firm is currently mid-construction on a renovation project for the Frank E. Moss Federal Courthouse in downtown Salt Lake City and is converting the South Temple Tower offices near the City Creek Center into luxury apartments, the first project of its kind in Utah. Several manufacturing and mission critical projects are in preconstruction, and Hazel says those will be breaking ground soon.

“As we look toward the future, we anticipate the continuation of the current trends. However, Big-D remains optimistic that the expected interest rate cuts in the latter half of 2024 could provide a much needed stimulus to the development market,” Hazel adds.

Big-D recently completed four mid-rise buildings and a two-story retail building in the Post District, a mixed-use project in downtown Salt Lake City spanning more than 750,00 sq ft.
Image courtesy Jared Kenitzer

Steady Growth

While the market is sending mixed signals, the overall outlook is positive, says Derek Hoffine, regional vice president for Hensel Phelps. The contractor is ranked at the top of ENR’s list this year for firms in Colorado, Wyoming and the Dakotas.

Hoffine says that with office vacancy rates high, especially among Class B and C office buildings, that sector will not see much growth. “Class A office space has a demand, but it requires a well-located area with specific features that are in demand beyond modern amenities. Hospitality, on the other hand, appears promising with growth and expansion with many projects in the early planning stages,” Hoffine adds.

Hensel Phelps is currently building the Rocky Mountain Laboratory Comparative Medicine Center, Building J, in Hamilton, Mont., for the National Institutes of Health. The project was awarded under an indefinite delivery/indefinite quantity contract and will provide laboratory, clinical, animal and support facilities for NIH’s emerging scientific goals.

Chart by ENR

Challenges Persist

Hazel and Hoffine say contractors across the seven-state region are still grappling with labor shortages, rising material costs and supply chain disruptions.

“This labor shortage is not just about numbers, but also about the skills and experience that are in short supply,” Hazel adds. “We are investing in training and development to upskill our workforce, but it remains a significant hurdle.”

Like many firms, Big-D and Hensel Phelps are invested in training programs and apprenticeships to attract and develop new talent. “We have partnerships with high schools and local trade schools to transition new talent into the workforce,” Hoffine says.

On the supply chain front, and with mission critical work on the rise, Hensel Phelps is focused on using alternative materials that are more available and less affected by price volatility. “Enhanced planning of projects, to anticipate commodity fluctuations, is a normal practice of ours to aid our clients,” Hoffine says.

Hazel says Big-D has enhanced its prequalification processes to include thorough vetting of subcontractors. “This helps us ensure they have the expertise and resources needed for successful project execution. Additionally, we employ selective insurance products as part of our risk management strategy. This not only mitigates financial risks but also contributes to the smooth and efficient progress of our projects,” he says.

Hazel says private projects located within enterprise zones are a bright spot, consistently breaking ground despite broader market challenges. “This resilience is a testament to the strategic importance of these zones and the robustness of the projects they house,” he says. “We also expect to see an increase in public projects as more government funding is forthcoming at both federal and local levels, [and] this will be particularly beneficial for transit-related projects, renovations of historic or outdated government buildings and civil infrastructure.”