Economic experts have said that the recession that has muddled business outlooks for most of the country for the past two years could begin to make a recovery in 2010. But experts in the commercial construction business said those companies might yet face lean times for many more months. Construction companies are often the last ones to feel the effects of an economic slowdown, since companies don”t typically stop projects that have already been started once conditions worsen.
Yet, once those projects are finished, commercial construction companies face longer, more difficult challenges. They are often the last group of businesses to rebound from slowdowns, because the trickle-down effect of the slowdown means that those businesses looking to build won”t start until they know they are on solid financial footing. Plans for new facilities can wait several months before ground is broken, leaving commercial construction companies in a waiting game.
Then, as companies wait, competition heats up. Projects that once had only a handful of bidders now routinely get 20 or more. Those bidders can then slash their estimates for projects, if only to ensure that they get some kind of business happening.
It can be a dangerous cycle for construction companies, and it can push some of them out of business. But others, such as CM Black, have learned to adapt to the conditions. CM Black has been around more than 50 years and has been building commercial buildings in the Charlotte region for more than 20 years. President Emmitt Black said the latest downturn has made his company make some changes, but CM Black has maintained its founding principles.
Those principles have helped CM Black earn projects such as the Wingate University College Building of Health and Sciences, and allowed the company to withstand the slowdown that has affected every construction company. Unemployment rates in North Carolina are higher than 10 percent. In the construction business that number is almost 19 percent nationally, the highest of the 11 categories tracked by the Bureau of Labor Statistics. More than 9,000 construction workers in the Charlotte region lost their jobs in September alone. After seeing those figures, Stephen E. Sandherr, CEO of the Associated General Contractors of America (AGC), called the situation “dire” and “devastating.”
“The only green shoots contractors are seeing are the weeds sprouting around their idle construction equipment,” Sandherr told Building Design & Construction. But CM Black is still working. Emmitt Black credits his company”s longstanding reputation in the Charlotte area as one of the top builders in the region. He also credits the relationships the company has built over many years that have helped establish the trust, care and commitment that has helped CM Black continue to get business. “We have a 12-year relationship with Wingate, so they know what to expect from us,” Black said. “When you have that kind of history it really helps.”
CM Black”s established quality and integrity have helped the company, and so has its teamwork pledge. Every project is considered a team project between CM Black, the architects and the owners of the facility. Every facet of the project is negotiated to help streamline communication.
There also may be good news on the horizon. The American Institute of Architects (AIA) had its highest number of contract requests in October in more than a year. That could point to a market comeback during 2010. Emmitt Black said his company is prepared for whatever happens in the coming months. “We are still in a strong position,” Emmitt Black said. “We haven”t had to bid public work below cost to help us try to make ends meet. We will be O.K.”
Cutting Cost, Not Quality
Commercial construction continues to struggle – companies spent 36 percent less on construction this September as compared to September 2008 – and builders are feeling the pinch
With budgets being pinched, that makes a builder”s job that much more difficult, according to Emmitt Black.
“Everybody wants quality, but they want it done at as little cost as possible,” he said. “You understand why that is, but you still have to produce quality facilities.”
Black said that construction companies can do a few things to help alleviate costs. He said builders can substitute cheaper materials at times to help keep upfront costs down. They can also negotiate with subcontractors for better rates that also help the bottom line.
But, Black cautioned, there are few other alternatives. Some builders can try to walk too fine a line between building something cheaply, and building something that looks cheap. “Before we”d lower our quality, we”d lose the work,” he said. “You have to build something that”s sustainable for the long-term.”