Designers Seek Stability During Slow Recovery
Despite an overall rise in combined revenue among the region's top design firms, executives continue to take a cautious view of the market. The top 75 design firms in Texas and Louisiana saw regional revenue hit a combined $2.97 billion last year, up from $2.57 billion in 2011—a nearly 16% increase. Notably, the top three firms in this year's ranking all performed a significant amount of work in the transportation sector, which has been robust in recent years.
"It's a stable to strong market," says Todd Papes, senior vice president with AECOM's Gulf Coast district office in Houston. Second in this year's ranking of the largest design firms, the firm generated $136.72 million regionally last year with 46% of that revenue from transportation projects. The firm's largest project to break ground last year was a $54.4-million streetcar rail expansion in New Orleans, on which AECOM performed the final engineering.
HDR, which saw roughly one-third of its 2012 regional revenue come from transportation work, once again earned the top spot in our ranking. The firm ranked first overall despite the fact that its regional revenue dropped from $184.52 million in 2011 to $167.64 million in 2012. Among its major projects is the $1.2-billion Interstate 35 design-build project, which it is executing in a 50-50 joint venture with PTG.
"The transportation market is the strongest it's been in several years," says Ramon Miguez, northern Texas department manager for HDR.
Similarly, HNTB remained near the top of the list in third place with $129.72 million in 2012 regional revenue. Its local work includes the $107-million US 290 Segment J1 in Houston, which broke ground last year. With $104.35 million in 2012 revenue just from transportation, the firm is the region's top-ranked transportation engineering firm.
Atkins saw a big rise in regional revenue in the transportation sector, increasing from $49.67 million in 2011 to $61.56 million last year. And the firm could see expanded opportunities in the future. In May, the Texas Dept. of Transportation selected Atkins as program management consultant to assist its Strategic Projects Division and its 25 districts. Under the contract, Atkins will coordinate and oversee engineering, design, survey, utility relocation and right-of-way acquisition projects carried out under TXDOT's design-build contracts and comprehensive development agreements.
A Strong Power Market
The booming oil and gas sector helped significantly boost 2012 revenue. Several firms focusing on that market weren't listed in last year's ranking but appeared this year, including UniversalPegasus International, Houston; Surveying and Mapping, Austin; Eagleton Engineering, Houston; and Keystone Engineering, Mandeville, La.
Keystone Engineering expects continued growth, though challenges exist due to an especially tight labor market, says COO Barry Reed. Since 2010, Keystone's revenue has more than doubled from $16.4 to $36.6 million in 2012; it was ranked No. 31 this year.
Last year, the company's biggest job was a $40-million condensate stabilization project in the Eagle Ford shale formation in South Texas. The company sees ongoing growth in the region's shale oil developments fueling a variety of projects, says Daniel Cantrell, general manager of the firm's Houston office. "We also expect renewed activity in the chemical manufacturing sector due to the low price of natural gas," he adds.
Although shale gas is often the focus of new opportunities in the region, Cantrell notes that strong activity remains offshore in the Gulf of Mexico. "It's not a one-dimensional market," he says.
Some firms aren't focused entirely on oil and gas but are benefitting from that expertise. Jude Comeaux is vice president of business development for one such firm, T. Baker Smith of Lafayette, La., which lists energy, pipeline and industrial among its growing sectors.
"It's a stable market, moving toward a strong market," Comeaux says. The Houma, La.-based company was ranked No. 27 on this year's list, based on 2012 revenue of $38.5 million. Its largest current project is a $2-million design contract for the planned $85-million Bayou Chene Backwater Flood Protection project in Morgan City, La.
Houston Heats Up
The oil and gas boom continues to have an echo effect on design work in Houston. Papes says that AECOM repositioned its office there to better prepare for future opportunities. "We have expanded our presence there in response to the significant market potential and have multidiscipline capabilities to service Houston clients locally," he says.
Among the company's largest current projects in the region is a $46-million design for the Houston Stormwater Management Program.
"Houston is the most robust market primarily due to the energy industry but also because of civic leadership and the high quality of living," says James Furr, managing principal for Gensler's Houston office. Notable building projects include designs for a 34-story Capitol Tower, which will replace the Houston Club building. The firm is also designing a renovation of an historic Houston downtown office tower into a JW Marriott hotel and is also working on numerous charter school campuses across the city. Outside of the city, Gensler's Anadarko Woodloch Tower in The Woodlands broke ground last year.
Furr notes that the vibrant market in Houston is pushing clients to rethink their spaces.
"All of our energy-sector clients are focused on recruiting and retaining top talent," he adds. "To do this, they are looking at additional ways to enhance their workplaces."
Uncertain Building Market
Gensler's Houston work helped the region's top-ranked design firm for general building log $111.63 in regional revenue in 2012—up from $105 million in 2011. "We saw a little softening at the end of 2012," Furr adds, "but we have rebounded since then."
While he sees definite bright spots in the general building sector, Dan Noble, executive vice president and director of design for HKS, Dallas, describes it as an "unpredictable market" that hasn't completely rebounded.
"It wants to be stable, but can't quite get over the hump," he says. "Things are better than they were a few years ago, but after five years of slowed design activity, you'd think the demand might be more robust," he says.
Still, HKS was able to improve its 2012 regional revenue to $58.6 million, up from the $45.56 million it reported in 2011, based on projects such as the $85-million Baylor Medical Center of Waxahachie, which broke ground last year.
Guardedly, Noble expects "more sporadic growth—until banks ease up on lending requirements and our clients feel more comfortable investing in capital projects."
Education specialist SHW Group of Plano, Texas, recently designed the $108-million Klein High School in Harris County, Texas, as well as the $120-million Texas A&M University Veterinary Research Building in College Station. Additionally, breaking ground imminently is the 93,000-sq-ft net-zero energy Pflugerville Elementary School project, which will include photovoltaic solar cells, ultra energy-efficient wall and roof systems as well as innovative mechanical-electrical-plumbing systems.
"We are optimistic about the state of the market but acknowledge its potential volatility due to the politics of funding at the state and local levels," says Marty Sims, project manager for SHW.
On a positive note, a strong housing market has boosted the need for more school activity in the last 18 months, Sims adds. The firm's 2012 Texas revenue was $33.53 million, up 13% from the $29.63 million it reported for 2011.
Sims notes that many K–12 clients are still conservative regarding money, but public funding is starting to improve.
"Pent-up demand is driving some growth, with clients proceeding on projects that have been needed but delayed due to the concern about the dip in the economy and public perception," he says.
