Contractors are navigating mixed markets across the West Coast. Despite that, regional revenue was mostly on the rise among the firms included on the 2024 ENR California and Northwest Top Contractors lists.

Across ENR’s 10 separate regional Top Contractors surveys, the average overall revenue increase among the top 25 firms was 7.3%. The Western regions of California, Northwest, Mountain States and Southwest collectively saw a similar increase of 7.5%. The top 25 firms in ENR Northwest and in ENR California did not meet those averages, but both continued to show growth.

The top 25 firms on ENR California’s Top Contractors list—which includes Hawaii—reported revenue of $33.9 billion for 2023, a 4.4% overall gain compared with the prior year. A year ago, that same group reported a 10.9% revenue increase, after a 6.4% decline in 2021.

The top 25 firms on ENR Northwest’s list reported $10.7 billion for 2023, a 5.4% increase over 2022. However, that increase follows a nearly 20% decline from 2021.

Chart by ENR

A Mixed Bag

The theme of 2023 was uncertainty, says Rob Westover, Bay Area co-business unit leader at DPR Construction, Redwood City, Calif. “We have great projects in our backlog, but the state of the market around speculative work has caused clients to reconsider the timing of their projects,” he says.

While that uncertainty still remains, he sees the markets becoming more focused in 2024. “The evolution of AI is driving the data center market [and] increased demand for power to fuel these projects. Securing power commitments from utility providers is a priority, and we expect that trend to continue,” he adds.

Across California, development in the commercial and life science core markets continues to be sluggish, while slowing tenant demand and elevated interest rates are affecting almost all markets, Westover says. But the advanced technology, advanced manufacturing, mission-critical and health care sectors are growing.

“The CHIPS Act funding has fueled new technical projects within the battery, semiconductor, clean energy and aerospace sectors,” Westover says. “Health care has been bolstered by new capital projects, many of which are active or in design and have start dates in 2025.”

Completed in 2023, 400 Westlake is among the first projects to participate in Seattle’s Living Building Pilot program. Lease Crutcher Lewis led construction on this 15-story net-positive-energy building.
Photo by Cheryl McIntosh, courtesy of Lease Crutcher Lewis

DPR is working on two major University of California health care projects now: the four-story, 268,000-sq-ft University of California-Davis Health 48X Ambulatory Care Facility in Sacramento and the six-story, 255,000-sq-ft UC San Diego Health McGrath Outpatient Pavilion.

In 2023, the firm saw a 2% uptick in revenue across California, to $2.57 billion, as a significant number of its backlog in the advanced technology/mission critical and health care markets proceeded to construction.

Although the economy has contracted in some ways, Irvine, Calif.-based Hensel Phelps is viewing the region’s “still thriving” design and construction markets with cautious optimism, says Damian Buessing, regional vice president. “California is a resilient market where health care, life sciences, education, aviation, hospitality, power, water and other markets are still thriving,” he says.

Hensel Phelps’ revenue grew 5.8% in 2023 to $2.54 billion across California and Hawaii. One of the firm’s standout projects, done in partnership with CO Architects, is at UCI Health-Irvine, where the firms are delivering the nation’s first all-electric hospital, set for completion in fall 2025.

Meanwhile, many office markets remain depressed, particularly in Northern California, says Terry McKellips, senior vice president and region manager at Swinerton, Concord, Calif.

“Elevated interest rates have sidelined multifamily and other private construction,” he says. “Nevertheless, health care, education, aviation and affordable housing markets are strong. Despite the sluggish Bay Area rebound, Central Valley and North State revenue continues to increase as these populations continue their growth. The design-build market also remains strong.”

Swinerton posted 2023 revenue of $2.9 billion, up 4% year over year. Some of its current projects include 555 Bryant, a mixed-use apartment building in San Francisco and the historic renovation of the Hotel Del Coronado in San Diego, both set for completion in 2025.

For Turner Construction Co., 2023 was a standout year; the firm completed the most work in its history and its regional revenue grew 20% to $2.45 billion. Active 2023 projects included San Diego International Airport’s Terminal 1, the Capital Annex Project in Sacramento and UC Berkeley’s Gateway Project.

“Our strategy to build a diverse portfolio of work facilitated our growth,” says Lisa Ballantyne, senior vice president at Turner. “Our focus on public and private sector work, health care, advanced technology, renewable energy and emerging markets will provide further growth.”

DPR is leading the 48X Outpatient Surgery Center, a design-build project in Sacramento. This four-story, 268,000-sq-ft facility will help address an operating room capacity shortage at the UC Davis main hospital.
Rendering courtesy of SmithGroup

Slow and Steady

In the Northwest, elevated interest rates and evolving remote and hybrid work models led to a significant slowdown in commercial construction, says Bart Ricketts, CEO of Lease Crutcher Lewis in Seattle.

“Even in Seattle’s once booming life science market, many developers have reduced plans to expand their portfolios,” he says. “This comes amid a wider slowdown in venture capital funding and a variety of mergers and acquisitions in the local biotech space.”

Also, Ricketts adds, “an influx of new projects over the past few years has created a glut. These market forces have curbed new life science development.”

Chart by ENR

However, Portland’s urban core has yet to fully rebound from the pandemic, he says. With high office vacancies, the downtown building climate has been sluggish. There have been some positive signs, however. At the end of July, law firm Schwabe, Williamson & Wyatt selected Lewis to remodel its downtown Portland office. The contractor also saw its revenue reach $975.8 million in 2023.

Lewis has expanded into the Vancouver, Wash., market on jobs such as the 150,000-sq-ft ZoomInfo global headquarters, a major tenant-improvement project.

“We’ve expanded into the data center market through our recently formed data center and advanced technology division,” Ricketts adds. “Projects like the 420,000-sq-ft HI2 data center for NTT in Hillsboro, Ore., have helped Lewis sustain a consistent volume despite economic uncertainty in the market.”

Other sectors showing consistent growth across the Northwest include education, health care, infrastructure and technology, says Jim Link, regional executive officer at Skanska. The firm’s teams across three regional offices in Seattle, Portland and Bend, Ore., have also seen increased client investments in environmental initiatives such as energy-efficient buildings and sustainable design.

A combination of these factors, along with the start of several large projects, helped boost the firm’s Northwest regional revenue 8% in 2023 to $1.7 billion.

“Investments in infrastructure construction are steady and growing, particularly in the Northwest,” he continues. “Decarbonization efforts are evident on all levels of transportation planning and construction.”

The state of Washington’s infrastructure and transportation plan has created opportunities for Skanska, Link says, helping to establish partnerships on new megaprojects such as the I-405/Brickyard and Portage Bay Bridge projects, together totaling more than $2.2 billion.

The Eight, located in Bellevue, Wash., will feature 541,000 sq ft of Class A+ office and retail space.

Skanska has been busy completing the Sound Transit Lynnwood Link Extension, which should begin service in late August. Other projects include the Terminal Core modernization at Portland International Airport and the Eight office tower in Bellevue, Wash.

Although each sector is facing its own headwinds, speed-to-market challenges continue. Delayed project starts are another unwelcome trend across the West Coast region as well, DPR’s Westover says.

“We view the region’s design and construction markets with cautious optimism,” adds Hensel Phelps’ Buessing. “While the economy has contracted in some ways, our region is still thriving. The financial markets hold the key to where we will go over the next couple of years.”