Concrete Growth

Southern Pan Services Co. is one of the Southeast's largest concrete contractors

By Debra Wood

One of the Southeast's top concrete formers and framers predicts an upturn in construction starts, as the country rebounds from a post-9/11 economic slowdown.

"We are seeing owners now decide it is a good time to dust off the plans and get stuff built," said Gerry Harkins, chief financial officer and co-owner of Southern Pan Services Co. of Lithonia Ga. "We're seeing a lot of activity in the markets, from Virginia through South Florida."

Brack Maggard, CEO for Southern Pan Services Co., added the recent slowdown could lead to a future surge.

"Because of the slowdown in Atlanta, the Carolinas, central and north Florida and Virginia, there is a larger pipeline of projects coming out for bids than there has been in the past five years," he said. "The high-rise market in south Florida has been very strong for the last eight years and it seems to continue to increase annually. The Atlanta market has been weak since the dot-com bust and 9/11, but we are seeing a significant rebound in the third quarter and into 2005."

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Harkins, Maggard and Larry Harkins started the forming company in 1987. Larry, Gerry's brother, retired in 2000.

In 1996, company leadership saw the trend toward poured-in-place structures and construction-manager-at-risk pricing and established Cadence Structures, a total frame division.

The market segments with strong growth vary by state and within some states. Colleges and institutions are building in the Carolinas. Atlanta remains relatively subdued. South Florida's global economy has kept condominium starts strong and Southern Pan busy building at least 20 million sq. ft. during the last eight years. Tampa, much more reliant on the national economy, lags in comparison.

To date, owners have not stopped or slowed projects due to the cement shortages and other price hikes for materials, but that remains a possibility.

"Any problem this causes, in terms of owner mentality problems, won't show up for another year," Harkins said.

Material Shortages

Southern Pan bids most of its jobs one year out, and the rising price of steel and cement have pinched the bottom line. The competitiveness of the current market puts a downward pressure on prices. Southern Pan and Cadence have not been able to charge more even though material costs are up.

"The contractor is being squeezed from below by suppliers and from above," Harkins said. "Normally in a market where demand is increasing, you find the owners are giving better prices for the building. That is not the case."

"It is still a buyers' market and unfortunately some potential customers are looking at price above all else," added Maggard.

Harkins said steel prices peaked late last year as China's building boom subsided. But prices remain high. Cement problems continue, with regional differences affecting supply. Small suppliers in rural areas do not have the buying power to negotiate raw material prices as effectively as a large, vertically integrated company, such as Lafarge in Atlanta, which can control its cement supply. In addition, large metropolitan areas have more ready-mix competition.

"If you have a global situation, like the cement problem, I don't think the frame contractor should bear the liability," Harkins said. "It should be the owner. If you bind somebody to a contract that forces them to be unprofitable, I don't think that is a fair contract."

Harkins does not expect material prices to come down significantly but hopes owners begin paying more.

"When supply and demand come closer together, you are not going to reduce your prices to what they were before the spike," Harkins said. "Prices are still higher than they were a year ago and will remain so unless we go into a building recession."

Ready

Harkins does not anticipate a building recession; instead, he projects a steady rise in business. For the past three years, annual revenues have stayed at about $57 million.

"We expect that within 10 years, we will be doing $100 million to $120 million in revenue and about 70 percent of that will be frames," he added.

Currently, about half of Southern Pan's volume comes from framing. In addition, much of its forming business results from jobs on which Cadence does the framework.

"In many cases, we would not be doing the form work if we were not also doing the frame," Harkins said. "It gives us an opportunity to get into the market. The future growth of Southern Pan and Cadence will largely be as a result of growth in the frame business."

About 40 percent of the company's work is in Florida, 40 percent in Georgia and the balance from the other states, primarily North Carolina. The company has about 75 full-time personnel. In addition, about 400 craftsmen work full time, and more are hired for specific jobs.

One of Southern Pan's highest-profile jobs is its framing of Disney's Saratoga Springs Resort & Spa for Hardin Construction Co. of Orlando. The 12-building project will keep Southern Pan crews occupied for two years.

David Gibson, general superintendent with Hardin in Atlanta, worked with Southern Pan on the recently completed SouthTrust Tower at the Atlantic Station development in Atlanta. The owner added floors and made other adjustments once construction was under way but kept the original schedule.

"Southern Pan worked as early as they needed and as late as 10 p.m. flying tables to achieve the schedule," Gibson said. "Their field staff went over and above to make sure we topped out on time."

Southern Pan has had crews at various jobs for different general contractors at Atlantic Station. The company has performed between $30 million and $50 million in forming and framing at the brownfield redevelopment project.

"It's a wonderful opportunity we have been given at that site," Harkins said. "It's one of those things you run across every decade, where you get into one site and stay busy for years. That is every contractor's dream."

Useful Sources:

Southern Pan Services
http://www.southernpan.com