Orange County’s construction industry enjoyed another year of strong gains in 2019 and initial part of 2020, with higher revenues, more projects and an increase in local employees.
That was before coronavirus concerns rattled sectors and put a delay on new project starts.
“2019 feels like a decade ago,” said Joel Stensby, president of Brea-based KPRS Construction Services Inc.
What happens next is the million-dollar question.
Many firms say they’re largely continuing business as usual.
“We’re lucky that we haven’t had to stop work on any of our ongoing projects,” said Bill Wilhelm, whose construction firm has 17 current projects under construction.
R.D. Olson Construction, the Irvine-based affiliate of Bob Olson’s R.D. Olson Development in Newport Beach, reported 2019 revenue of $231 million from OC operations, up 12% from the year prior.
“Last year was a very healthy economy with great conditions, which helped us have one of our best years in our history. While I don’t think anyone will be seeing a lot of growth in the next year or two, we are in a stabilized position for the future,” Wilhelm said.
The 30 biggest firms with work here posted $9.4 billion in local revenue last year, up 7.4% from 2018, based on this week’s Business Journal list.
More Competition
As 2019 gains turn into a slower 2020, construction firms that were previously selective about their projects may become less so, notes John Bernardy, senior vice president of Dallas-based Balfour Beatty.
“Coronavirus has definitely tightened the market and has brought some companies into different market sectors that they don’t typically operate in,” said Bernardy, whose firm counts a Newport Beach office. “I see it becoming an owner’s market where it will be extremely competitive for available job opportunities.”
His firm, which saw a 39% jump in revenue to $196.3 million last year, was already on the offense.
“We were more aggressive in the marketplace and adjusted our pricing which led to some major wins,” Bernardy said.
Its larger projects in Orange County include a new 6-12 grade school on the Tustin Legacy base, the Legacy Magnet Academy, a $55 million project that will deliver this fall.
“The majority of our work is in the education sector, but we targeted a few new industries as well, like in the government and aviation sectors,” Bernardy said.
The company, which also handles Los Angeles work from its Orange County base, counted projects at Los Angeles International Airport in 2019 “which gave us a nice boost.”
It employs 128 people here, up from 122 the previous year.
C.W. Driver Cos., which also counts civic and education projects among its top-generating sectors, saw a similar jump in revenue last year.
Work handled from the Pasadena-based firm’s Irvine office surged 38% to $207.7 million, with recent local projects including the $24 million Vanguard University Student Center in Irvine and the $25 million Crown Valley Park Community Building.
Hospitality
R.D. Olson, meanwhile, specializes in hospitality construction projects, a sector that is likely to see a lull in new starts in the coming years (see story, page 1).
Some hoteliers may take advantage of the quiet market to undergo renovation or expansion projects, “as working around the day-to-day operations is one of the hardest parts to a renovation,” Wilhelm said.
“Hospitality construction is not going to come to a complete standstill, but I think we will all be humbled by the next few quarters,” Wilhelm said.
Project pricing may soften to spur the market, notes Wilhelm, though he is optimistic that pent-up demand will jump start the market as well.
Signs of Normalcy
Deemed an essential business, construction has been ongoing throughout the county in the past few months, albeit with new rules and regulations in place.
These safety changes put in place by the Center for Disease Control and Prevention are likely to remain in the wake of coronavirus, notes Stensby.
“Our highest priority is the safety of our employees, and we’ve changed the way we operate in the office and at job sites to ensure that,” Stensby said. “That’s going to be a lasting change.”
Business changes haven’t caused significant delays to project timelines, but additional headwinds, like supply chain delays and labor shortages, could have an impact.
“China has always played a huge role in the supply chain, and many are pushing for an expansion of U.S. manufacturing to help alleviate that in the long-term,” Stensby said.
KPRS handled construction of the sporting facilities at Great Park Neighborhoods last year, and is gearing up to do more work at the FivePoint Holdings community.
“Two weeks ago, I would have agreed with what others are saying about new projects being pushed back as a result of market uncertainty, but I’ve seen recent evidence that contradicts that,” Stensby said.
“Banks, developers and consumers are already getting more comfortable, and that will only increase as more people return to their normal lives—whatever that looks like now.”
