Tri-State Contractors Weigh Options for Future

By Tom Nicholson

In the deepening recession there is a mix of both optimism and wariness among contractors in the Tri-State region this spring as they watch markets slide into recession and wait for a government stimulus bill. While it has been a doomsday scenario for many around the nation as construction markets continue to shrink, contractors in the Tri-State region are reporting relative resilience, thanks in part to institutional and higher education markets which have stayed aloft as commercial and residential projects nosedived.

“It is not complete doom and gloom,” says Mike Kolakowski, president and CEO of Farmington, Conn.-based KBE Building Corp. “But we have certainly seen our clients begin to pull back on projects and we have had to make cutbacks, but no drastic reductions.”

KBE, formerly Konover Construction Co., is busy with institutional and education projects in Connecticut this spring, including a $43.9-million renovation project at W.F. Kaynor High School in Waterbury;  a $46.2-million project at Norwich Technical High School completed last fall; and several others.

As one of the region’s mega-builders, Parsippany, N.J.-based Skanska is among contractors eyeing still-active education markets. The firm is contractor on nearly 60 kindergarten-through-grade-twelve education projects currently underway in the Tri-State region.

“In Connecticut the market for public schools projects is still relatively strong,” says Alan Sparn, senior vice president at Skanska.

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In New Jersey “the markets have contracted but some markets are still strong, and we are looking into the higher education markets as the State of New Jersey continues to let projects,” says Michael Leondi, Skanska executive vice president who manages the firm’s New Jersey projects.

Construction giant Turner Building Corp., New York, is another major player on the New York scene whose size and diversity is a boon in this downturn. “New York construction markets have historically been centered around education, financial, and healthcare projects,” says Pat Di Filippo, Turner executive vice president. “There has been a reduction in commercial work, but higher and lower education will always be there -- although they might see a wrinkle.”

Turner has about 50 major projects currently under way in New York and New Jersey.  The new $1-billion Yankee Stadium project in Bronx and a $743-million project to build a terminal at JFK Airport for Jet Blue Airways are among them. “We are not always doing high-rise towers, a lot of times we are in places people don’t expect,” says Di Filippo, pointing to about 150 interior projects in the region the firm is busy with currently. Despite the downturn, overall “we have remained relatively busy,” he adds.

Still, there have been setbacks even for those well-positioned to face the recession. “We are diversified but we’re not market proof,” says Leondi. ”We  are seeing delays to projects, particularly in commercial projects. There were opportunities we thought we had in casinos and gaming but which are now delayed.”

Kolakowski is confident about his firm’s prospects in the upcoming months, but acknowledges “every sector has been affected, and projects we thought would be in the ground by now are on hold. Owners are taking a step back and being cautious about starting projects now.” Competition among bids on the dwindling number of requests for proposals being offered is fiercer than ever, he notes. “But the contractors who carefully evaluate projects, and whether or not the owner is solid, will be OK in the upcoming months,” says Kolakowski.

Meanwhile, all eyes are on the federal government’s stimulus package, and whether it will boost the region’s markets.  In February New Jersey Gov. John Corzine announced that the state’s construction trades would receive a 17%  boost from the stimulus spending, with more than $633 going for transit, $587 for highways and $316 for school modernization. New York legislators say the proposed stimulus plan could bring to New York about $20 billion for school renovations and modernizations, with $14 billion for elementary and secondary schools and $6 billion for higher education, with tax provisions under which the federal government would pay the interest on construction bonds issued by school districts. U.S. Secretary of Education Arne Duncan has said the provisions would create a “huge” number of construction jobs.

“In New Jersey we are hopeful about the stimulus package,” says Leondi. “Everyone is watching and hoping some of it will come our way.”

The stimulus package offers “hope that it might have a good impact, but I am not as optimistic as some,” Kolakowski adds. “We can only sit and wait and see what happens.”

Congruent with the economic meltdown are drastically lower materials costs, which across the region have plummeted to pre-boom levels. “[Owners] are revisiting projects and they are not bashful about asking us to revisit costs,” says Di Filippo. But with the focus on trimming budgets, the economic climate is serving as a trial-by-fire for the green building movement, which was a prime priority for owners before the recession hit.  Despite speculation that the sustainability movement would take a hit, “green is still going strong,” says Di Filippo. Earlier this year Turner released results of a survey of 754 real estate executives as part of the firm’s Green Market Barometer, which indicated that despite the economic woes, 75% of the commercial real estate executives surveyed said they would not be any less likely to construct green buildings.

Meanwhile, contractors and developers in New York City have new hoops to jump through on future projects as Mayor Michael Bloomberg announced in February new rules for builders intended to “bring new levels of transparency and accountability to New York City’s construction industry,” Bloomberg said in a radio address. Starting in March, developers will be required to post a mockup drawing of every new construction project on the city’s website once approved by the Buildings Department, Bloomberg says.