July 16, 2012

Treading water tiring construction firms

Photo / Tina Encarnacion
Photo / Tina Encarnacion
The renovations of the University of Connecticut Health Center have bolstered one sector of the construction industry, but most companies still are hurting.

Hit hard in the economic downturn four years ago, the Connecticut construction industry foresees a dim future where companies must tread water for two more years before any robust recovery.

"They are at pretty bare bones, most of them," said Catherine Flaherty, executive director for the Connecticut Subcontractors Association. "If they have made it so far, I'm guessing they are going to make it."

The good news is businesses have cut to the point where they can survive on the margins for an extended period of time. The bad news is they have to survive on the margins for an extended period of time.

"We are in this seesaw economy, where we get this little bit of glimmers of hope, and then it disappears," said Joanne Carroll, board member of the Home Builders Association of Connecticut.

The construction industry gained 700 jobs from April to May, but remains down 500 jobs from a year ago and 19,000 jobs from five years ago, according to the latest state Department of Labor employment report.

When the downturn first hit, the state construction industry hoped the hard times would endure for only a couple of years, said John Butts, executive director of the Associated General Contractors of Connecticut. Now, the latest predictions are a late 2013 recovery, at the earliest.

The latest labor and material analysis from Glastonbury design and building firm S/L/A/M Collaborative indicate the recovery is coming slower than expected. The number of public projects are decreasing nationwide, and funds for private projects are not being released.

The nationwide unemployment rate for the construction industry is 14.2 percent, indicating workers are leaving the industry's workforce, according to S/L/A/M.

"We are not seeing any boom times coming," Butts said. "Companies are able to stay in business, but they are only staying open because they are doing more with less."

Construction firms have avoided closing up shop with owners and managers performing administrative work in lieu of staff and stretching their labor force onto what few projects they can land, Butts said.

The volume of projects is at the same place as 2011, or maybe a little less.

"We have seen some things that are promising, but we are not up yet," Butts said.

Some industry specialties are seeing better times than others: health care construction is booming, school and institutional building is better than average, but new corporate construction is in the doldrums.

The problem is the recovery can't just be in certain areas, Butts said. For Connecticut to have a robust industry with healthy companies hiring more workers, the whole industry has to come back.

That isn't happening with the little spurts here and there, but not everywhere.

"Companies are busy finding work, rather than busy doing work," said William Cianci, executive director of the industry association Construction Institute. "Everybody is complaining about how long it has been."

While state and municipal construction work such as the new University of Connecticut Health Center, the private sector is where firms are suffering the most, Flaherty said.

When the Connecticut Subcontractors Association started looking for a venue for its annual meeting, Flaherty tried to find a locale to uphold the tradition of having the gathering somewhere recently built by a CSA member. The organization landed at the state Public Health Laboratory in Rocky Hill.

"When we started to look for something that was built by the private sector, we couldn't find anything," Flaherty said.

Home builders still rely on remodeling work for needed revenues because the new home construction market remains dismal, Carroll said. Since the turn of the century, 2011 was the worst year for new home building permits in Connecticut while 2009 and 2010 were the second and third worst.

"People will choose to remodel rather than sell their home," Carroll said. "That still continues to be a very good market."

Some high-demand geographic areas such as Cheshire and Farmington are seeing a return to normalcy, Carroll said, but that is not indicative of the rest of the state. Transit-oriented development is catching on as well, particularly in the southern portion of Connecticut.

"Location is still a huge factor," Carroll said. "It all depends on where you are."

Homeowners have to be willing to sell their houses for the home building industry to loosen up, Carroll said, and that is not going to happen until they are confident their property will fetch a good price.

"If housing prices continue to trend up as they have been, the people will have more confidence they can sell their house," Carroll said.

The robust recovery hinges on property owners, developers and architects releasing significantly more construction work, Butts said. That in itself hinges on bank financing and demand for the types of construction those owners, developers and architects plan to build.

"We like to think that things are going to break," Butts said. "It has got to be healthy across the board."

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