June 28, 2010 | last updated May 29, 2012 8:24 pm
FOCUS ON THE ECONOMY

Construction Sector Facing Long Road to Recovery

Times are tough in the construction sector and any real turnaround could be a year or more away, a pair of industry experts agree.

CIVIL 1 Engineers founder and President Curt Jones sees the glass as half-full. He says he sees signs an economic recovery is on the horizon as Connecticut's housing market and construction industry shed high-debt mortgages.

"A lot of businesses, homes and properties were leveraged with high mortgages," says Jones. "As property values continue to fall, people are going to figure out a way to work it out, but that process takes time. I don't think we'll see much of a turn-around until mid-2011."

Gary Capitanio, vice president of Borghesi Building & Engineering Co., Inc., sees a glass that's half-empty — or worse.

He says even if business revenues boomed immediately, at least a year would pass before those businesses started realistically undertaking expansion and new build projects. Then, another year would pass before planning and design undertakings become construction.

"It sucks," Capitanio said. "It is very slow and stagnant."

Borghesi, based in Torrington, works exclusively on private construction projects. As a full service design-build company and a general contractor, Borghesi works with clients throughout the entire process, from planning to design to pricing to permitting to construction. It employs in-house designers and engineers.

The business volume for the company is down 50 percent from three years ago, Capitanio said. Borghesi makes some proposals and fields inquiries, but at levels far below that of a robust economy.

Any interest Borghesi receives from property owners are geared toward future construction, not anything immediate. People want plans and designs hoping to have money for the work when revenues improve, Capitanio said.

Of the interest Borghesi receives for construction projects, the organizations looking to build are manufacturing businesses talking about expansion; office buildings either creating or expanding space for medical facilities; and religious groups discussing new or larger facilities.

"Even with the inquiries we have, there is no sense of urgency," Capitanio said. "If somebody is looking to build now, the sticking point is financing."

Any client wanting to build right away runs into the brick wall of financing, as banks ask for 30-40 percent in equity assurance before giving out the needed loans, he said. Most businesses don't have that level of equity available to secure the financing.

While the economy is showing some small signs of the recession coming to an end, the recovery will be slow and drawn out, Capitanio said. Companies need dramatic increases in revenue, selling and interest in a robust economy before design-build firms are impacted.

"These things really need to improve before we start seeing businesses really looking to build," Capitanio said.

As the real estate market went belly-up, Woodbury-based CIVIL 1 Engineers adapted to a volatile economy by shifting its focus from residential and commercial projects to industrial and brownfield development. The company started in 1993 and posted its highest revenues — a figure Jones declined to share — in 2007.

Today CIVIL 1 does about half the work it did just a few years ago. Money is tight too. The company earns about half of what it did in 2007 and Jones said he had to lay off a few workers last year.

Jones has found success in brownfield redevelopment projects and hopes to build the company's coffers, workforce and portfolio back up to its pre-recession levels.

CIVIL 1 Engineers is working to create a $20 million mixed-use development project, River Falls, in Seymour on the former Housatonic Wire and Seymour Lumber properties, said Jones.

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