Orange County’s largest commercial construction companies took in the most revenue since the Great Recession, although a shrinking backlog and ominous economic reports raise questions about the industry’s continued growth.
The 30 largest companies doing work in OC increased local operations revenue by 17% during the year ended April 30 to $7 billion, based on this week’s Business Journal list.
That’s a nearly $1 billion increase over revenue reported on last year’s list and the highest total on the ranking since 2009, when local construction companies were wrapping up a series of large public-sector projects, and private-sector development was close to shutting down in the last economic downturn.
The list ranks companies by revenue from OC operations. This week’s edition has 16 companies that reported year-over-year revenue increases, including seven of the top 10 whose combined revenue represents about 72% of the list total.
Seven others reported declines, and the remaining seven entries are Business Journal estimates.
Ranked companies employed about 5,300 in OC as of May, a 1.7% increase from year-earlier levels. Local employment in the industry, as reflected on the list, now stands about where it was in 2009.
The Newport Beach office of St. Louis-based McCarthy Building Cos. retained the No. 1 position with $741 million in revenue reported for the year, up 2% from a year earlier.
Many of the company’s notable projects were outside the county. It worked on the new 90,000-square-foot Central Utility Plant at Los Angeles International Airport, a four year-project that it wrapped up last year at a reported cost of $424 million.
McCarthy worked on Chapman University’s Musco Center for the Arts, an 88,000-square-foot venue that held its grand opening a few months ago.
Turner Construction moved up two spots to No. 2 with $711 million in revenue, a nearly 63% increase from a year earlier.
The company’s Anaheim office is working on the expansion of Anaheim Convention Center, which will add 200,000 square feet of event space, 700 parking spots, and a connector bridge.
Anaheim city officials place a $190 million value on the expansion, which will allow the center to serve 250,000 more visitors a year. The project is scheduled to be finished next year.
Turner also headed construction of the largest hotel to open in OC in the past year, the 603-room Great Wolf Lodge in Garden Grove that features an indoor water park.
The Irvine office of Hensel Phelps also moved up a pair of spots to No. 3 with $689 million in revenue, a 77% increase. The company generated local revenue from work at LAX, in addition to a student housing project at University of California-Irvine.
Rounding out the top five were Clark Construction Group California LP, with $574 million in revenue, and the Newport Beach office of DPR Construction, with $539 million.
DPR is working on the largest construction project to start in OC last year, a campus initially designed for Irvine-based Broadcom Ltd. near Orange County Great Park. The multibuilding office project is valued at $390 million, according to trade publication ENR California, which ranks it as the ninth largest construction project to start in California last year. It also was the only OC project to crack the publication’s list of the top 24 construction starts in the state last year.
Broadcom is expected to sell a pair of the buildings and excess land as a result of recent cuts to Irvine operations.
Backlog Down
A lack of projects on the horizon on the scale of the Broadcom campus—with one notable exception—could soon have an impact on the local construction industry.
The backlog of project awards in the past year reported by companies on the list declined by about 5% from a year earlier to $7.4 billion.
The largest project in the works is the expansion of Disneyland Resort, highlighted by the 14-acre Star Wars Land, as well as a new 5,000-spot parking structure and other related infrastructure work to the park. The project, which began this year, will cost an estimated $1 billion to $1.5 billion, according to Anaheim city officials.
The construction outlook appears healthy, despite the slowdown in backlog, when compared to regional and national construction data, which indicates a slowing of new projects is under way.
Nonresidential construction starts in Los Angeles and Orange counties combined declined by about 12% in April from a year earlier to $281 million, according to data from New York-based Dodge Data & Analytics. Such starts for the first four months of 2016 were about $1.2 billion through April, down 16% from year-ago levels.
Residential construction in the region is up 3% so far this year to nearly $2 billion, according to the market tracker.
National nonresidential construction spending fell 2.1% in April, according to U.S. Census Bureau data released this month. Residential and nonresidential construction spending combined fell by 1.8%, the biggest drop in five years.
“Nonresidential construction spending growth continues to struggle to maintain momentum,” said Anirban Basu, chief economist for Associated Builders and Contractors, a Washington, D.C.-based trade association.
“The amount of non-residential construction value put in place has expanded by just 2.5% over the past year, with private spending up 3.4% and public spending up just 1.4%,” Basu said.
The slowdown may be a result of “growing skittishness among private developers, who have become increasingly concerned by possible overbuilding in commercial, office and lodging markets,” among other factors, Basu said.
Some of that skittishness can be seen in the local office development market, where only Newport Beach-based Irvine Company has pulled the trigger and begun erecting steel for the nearly 3 million square feet of area speculative buildings in the pipeline.
