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Thursday, Sep 28, 2023

Construction Firms: Beating Back the Headwinds

As construction firms continue to grapple with ongoing challenges—material and labor shortages, supply chain issues and inflation, to name a few—local firms have several strategies to make sure they can keep up with demand.

Companies that have diversified product offerings, clear communication with clients and a pipeline of contracts in the works will come out on top in the coming years, local firms told the Business Journal.

“Lead times for materials are twice what they used to be, so we’re making sure we work with clients to get those long lead items out early,” said Chris Morris, president of Irvine-based Morris Construction. “The same goes for pricing, and we are trying to hold the line with material suppliers.”

Even with no shortage of headwinds, local construction firms largely kept up in 2021, reporting another year of gains.

The 28 biggest firms with work here posted $9.5 billion in local revenue last year, up 2% from a year ago and up nearly 10% from two years ago, based on this week’s Business Journal list. Eleven firms on the list saw year-over-year increases in work, 10 saw declines, and six entries are Business Journal estimates.

“There are a lot of aspects that have been more challenging since COVID hit, but we were blessed to have a solid amount of preconstruction agreements in place before the pandemic,” said Ed Slater, co-founder of Costa Mesa-based Slater Builders Inc. “We have a fair amount of backlog going into 2023 and even 2024.”

UCI Leads Starts

The Irvine office of Hensel Phelps saw a 10% jump in annual revenue to $1.2 billion, overtaking the top slot from McCarthy Building Cos.

Both firms were behind some major construction starts last year.

The largest local project that started last year was the Irvine Campus Medical Complex on a 25-acre site on the north end of the University of California, Irvine. Construction kicked off in June and is set to wrap by 2025.

The $1.3 billion project is the third-largest construction start in the state last year, according to data from construction trade publication ENR California. The project is led by design-build team Hensel Phelps and CO Architects and comes nearly a decade after Hensel Phelps completed the $375 million UCI Douglas Hospital in the city of Orange.

ENR also puts UCI’s Center for Advanced Care Medical Office Building & Parking Structure at around $158 million. McCarthy Building Cos., No. 2 on this year’s list with a 4% decline in 2021 revenue to $1.1 billion, kicked off work on that project in April 2021.

The largest construction start in the state was a $2.6 billion airport terminal at the San Diego International Airport.

60% Surge

Morris Construction, a newcomer to this year’s list, saw the greatest jump in revenue of nearly 61% to $52.3 million.

The firm primarily focused on healthcare contracts when it was founded in 2012, but started diversifying into different sectors in 2017.

That diversification paid off.

In addition to healthcare, the firm now focuses on life science, manufacturing and automotive facilities.

The latter market surprised Morris during the pandemic.

“The automotive facility market exploded last year,” Morris said. “Everyone was buying cars, which made it a very profitable sector.”

Now, the company is noticing surging demand for new electric vehicle facilities, from manufacturing to charging sites.

“Almost every manufacturer is beefing up its EV line, if not doing a 100% conversion to EV,” Morris said.

The company expects to double revenue this year.

“Diversifying and balancing out our portfolio has really paid off for us,” Morris said.

Slater Builders

Having a diversified client roster has also boosted revenue for Slater Builders, which reported a 50% surge in revenue to $51.9 million.

The most active sectors for Slater over the past two years have been senior living, hospitality clubs and private education.

It recently wrapped work on a new gym and multipurpose center at Our Lady Queen of Angels Catholic Church in Newport Beach, as well as a 40,000-square-foot creative office renovation called Quay Work in Newport Beach.

The woman-owned business is led by CEO Liz Slater, also Ed’s wife.

“We’re in a volatile time in history. Awareness and open communication with subcontractors and clients is more important than it’s ever been,” Slater said. “Still, we’re on pace to have our best year ever.”

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