Industry Outlook, Southeast Construction

Rob Crowe, president of Elkins Constructors, Jacksonville, and president, AGC of Greater Florida

In 2002, most thought that 2003 would begin the economic recovery we all had been waiting for. The tragedy of 9/11/01 was still on our minds, but the economy was beginning to show positive signs.

However, new world events in Iraq continued to stifle the recovery. At long last it now appears that those that were "holding" on capital investment in the private sector are beginning to be less fearful and more positive of the future. At this time, 2004 is shaping up to be a very good year.

Tom Schwarzer, senior vice president, Berkel & Co., Atlanta, and president of the Atlanta Chapter of the American Subcontractors Association

What I think is going to happen is pretty much more of the same - a good, healthy construction industry, largely due to the condominium market, bolstered by industrial work and public work.

2004 is going to be better because of those markets, plus the fact that we seem to be coming out of the doldrums. The economy is beginning to spark up a little bit. We've got a nice backlog, a good bid schedule, so we're optimistic about 2004.

There's a lot of strength in the Florida market with multi-residential - South Carolina to the same extent because of the building along its coast. North Carolina will probably be the same as it was in 2003, and Georgia will stay pretty much the same.

We're growing, and that's what you need. I think it's going to be a good year.

Charles E. Garbutt, president, C.E. Garbutt Construction Co., Dublin, Ga., and president of the Georgia Branch of Associated General Contractors

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It's all looking to trend upwardly. From talking to other contractors, everybody's looking for things to trend upwardly, but not ramp up at a steep pace - sort of gradually get better through next year.

It's going to be awhile before the available space in Atlanta is absorbed and construction goes back up. As I talk to people in other markets, they're fairly optimistic about things the way they are right now, and getting better.

Everybody's looking for the market to be moderately better next year.

Steve Parks, executive director, Georgia Highway Contractors Association, Fayetteville, Ga.

We have the same kinds of uncertainty here (as nationally). Our revenues - particularly general sales tax revenues - have been down, and we've had quite a burden on federally matched funds right now. We're hoping that we'll be able to maintain the same (activity) level, or slightly better, as we have in the past.

Current (bid) levels seem to be down a great deal. We're told by DOT that is going to get better by the end of the year, but we've not seen that trend yet.

We hope to see some kind of (additional) financing that will keep a very diverse and broad program in effect. I can't say right now whether that's going to occur or not.

The interstate reconstruction program is very strong, and there's a lot of interchange reconstruction that's happening. But we're still seeing a large shortage in local government aid, which is the bread and butter of smaller projects for some of our smaller contractors.

All facets of work for the highway contractors in Georgia seem to be down right now, including private site work.

William R. (Rick) Derrer, president of James A. Cummings, Fort Lauderdale, and 2003-2004 president of the Construction Association of South Florida

We think it's strong. We've done our projections, and 2004 looks strong as far as construction starts. We think the awards are going to be very strong. There's a lot of big work coming out. The industry in general is very sound, and can look to a very bright 2004.

I think it's going to be as strong as 2003, maybe a little stronger, but not significantly. The major change I see is that there's going to be any number of large-volume projects in 2004. In general, the industry will fare well in '04.

Robert Burleson, president, Florida Transportation Builders Association, Tallahassee

The outlook for 2004 is good. Obviously a couple of question marks are still up in the air - the federal reauthorization which should take place (in) February, and the attempt by the Florida legislature to take money from the transportation fund in order to balance our state budget. Even with those things lurking - the potential for them, actually, from the federal level - 2004 will be a good year. We need to watch what happens after that, particularly if there's an effort to take money out of our trust fund.

David Barrett, president of Dudley Barrett Construction Co., Alpharetta, Ga., and chairman of Associated Builders and Contractors of Georgia

We have seen a significant increase in activity in this last quarter. That activity hopefully will translate into real jobs starting with the first quarter of 2004. And frankly most of the people that I talk to seem to have the same feeling.

Even though the war in Iraq doesn't directly affect our business, it indirectly affects it because it's just a general sense of comfort that people have. Once all of that stabilizes, I believe people have a good sense of where the politics of the country are going. And when they do that they get a more positive feel about everything, and tend to start to spend money again. You see that in the fact that people are willing to make capital investments in facilities and buildings.

There's no one sector that's got a significant jump in activity. It's just an across-the-board increase.

We still have that headache from 2002 and 2003, but I can feel it subsiding.

Charles (Chuck) P. Brandt, project executive, Turner Construction Co., Orlando, and 2004 chairman, Central Florida Chapter of Associated Builders and Contractors

The Central Florida nonresidential construction market is well into recovery from a low point of 2002. However, the competition for those projects and the skilled workers necessary to build them will remain stiff.

Leading the recovery are public school projects, funded by new sales tax revenues in every one of the five Central Florida counties. After passing a half-cent sales tax in late 2002, Orange County has started a $2 billion renovation and expansion of its aging inventory. With a growth rate of 5,000 new students every year, and a constitutional mandate to reduce class sizes, this work will be ongoing for many years.

Hospitality projects, which were shelved following 9/11, are starting to come back as tourism and convention attendance grows. The Orange County Convention Center, nearly doubled in capacity over the past five years, is now online and successfully competing with Las Vegas, Atlanta and Chicago for the largest conventions in the country. There is an "under-capacity" of high-priced hotel rooms in the International Drive area, and the pressure is on from the convention business to build more rooms, like Marriott's new Grand Lakes development of a J.W. Marriott and Orlando's first Ritz-Carlton. Timeshare construction, which experienced a 7 percent growth nationwide, is still a viable market for Orlando tourist development.

Entertainment continues to be soft, with small renovation or expansion projects at the theme parks. Unlike the 1990s, new rides - not whole new parks - will be the rule.

Office projects are smaller, but there are more of them than in previous years. However, multifamily and mixed-use high rise projects are still very popular.

Healthcare continues to be a strong market for many contractors. Both Orlando Regional Medical Center and Florida Hospital have significant expansion projects under way or planned to meet the needs of a growing and aging population.

Transportation projects are not keeping up with development. While the voters passed a constitutional amendment to build high-speed rail, there has been no appreciable funding. Orange County voters turned down a transportation sales tax referendum, setting back plans to accelerate new road capacity.

Retail, aviation, sports, courts and jail construction has been soft but all have indications of improvement.

• New retail construction will be limited to a few "power centers" or "big box" retailers. They will be encouraged as new residential projects spring up.
  
  
• The Orlando International Airport Authority is sitting on plans to build a $760 million terminal, but news reports indicate that those plans are on hold for at least three more years, as the passenger count recovers from a worldwide drop in air traffic. A new international passenger terminal was planned, but that sector is the weakest and slowest to recover.
  
  
• A new federal courthouse is planned for Orlando, and should start in the next couple of years. Jails and prisons will see some additions, but no large new facilities are planned for this market.
  

Central Florida will continue in 2004 to (provide) good opportunities for commercial and industrial contractors with deep bonding capacity, solid safety records, sound experience in a variety of markets and a dependable, skilled workforce.

Gloria Shaw Bruce, president, DSG Foundation Contractors, Charlotte, N.C., and chairman of the Carolinas ABC

The construction market in Charlotte/Mecklenburg during 2003 has been steady with larger University of North Carolina at Charlotte and Central Piedmont Community College university bond construction work picking up some slack left by the private sector. The area is in the last quarter of the construction boom phase where private development is in-fill projects like small retail strips in areas opened up by the new beltway.

The coming year is predicted to hold on at the current level of activity in comparison to 2003. The public works projects just getting under way include the uptown basketball arena, a rapid transit system along South Boulevard, an expansion of Charlotte/Douglas International Airport and the final portions of the Interstate 485 loop around Charlotte. This work should keep local contractors busy for a couple of years while the economy picks ups speed.

Once the vacancy rates in office and retail reduce, maybe in late 2004 or early 2005, the larger private development projects will come on. Construction in the area is steady but below the level of the booming '90s.

Gene Ellison, chief financial officer of Cherokee Inc., Columbia, S.C., and chair of the Carolinas AGC Highway Division

2004's going to be pretty much the same as it was in 2003.

In South Carolina, I don't see much change from 2003, with the exception being they may be doing some resurfacing contracts. It's going to remain stable; there may be a mild increase.

In North Carolina, they let $200 million in the first six months (of 2003), and anticipated letting $1.2 billion in the second six months. That's a very good increase, (but there are) still a lot of projects on the drawing board in North Carolina.

John C. Harrison Jr., president of Harrison Construction Corp., Miami, and president of the South Florida Chapter of AGC

We see a lot of activity. It's pretty much across the board - public and private. (There are) perhaps fewer medical projects, but I think there's going to be some pent-up demand there and more coming. There had been some vacancies in office space, but as that picks up we'll see some commercial office construction as well.

Multi-family residential continues to be strong - there still seems to be quite a bit of demand. Other than that, things seem to be moving along pretty strongly.

Cleve Paul, president, D.S. Simmons Inc., Goldsboro, N.C., and chair of the Carolinas AGC Building Division

Things to be slowly climbing back. What makes me more optimistic than anything else is the bond program here in North Carolina for the university system and the community colleges. That program has been developing, but a large part of it was focused on the larger projects, which was done by the construction management-at-risk method. So a lot of that work was preconstruction services going on with architects and the CMs.

Now (work) is beginning to come out on the street (that) the smaller generals can bid on. We're seeing a lot of them come out in the fourth quarter, and that makes us even more optimistic that the smaller contractors, that have not been able to benefit from this bond program thus far, will be able to bid these work packages coming from the CMs.

So that's one of the biggest things that will give us some immediate relief until we see the full effects of the economy turn around.

Also, a lot of the counties, in their elections in October and November, have passed some large sums of money for school construction. The commercial and industrial markets have definitely been down more than anything else. But the commercial market is slowly returning.

I'm looking forward to some good things this coming year. There's certainly going to be good in the public sector. And I think we'll see some improvement in commercial and industrial also.