Commercial Property Contractors Competing for Fewer Projects

Commercial property contractors across the country have been competing for fewer and fewer construction projects as the downturn continues. The biggest construction firms which ignored projects worth less than $10 million are now accepting any work, leaving fewer projects for smaller construction firms.

According to James Jenkins, executive at San Francisco-based GCI General Contractors, his firm is surviving during months when there is no work from income from past projects. He added that during the boom, the average contract accepted by his firm brought in about $350,000 to $400,000. Now, he said, the average is only around $100,000.

Jenkins also said that because the number of construction firms bidding for projects has doubled compared to past years, he and other firms have to lower their bids, making the competition for projects very fierce.

Bill Broth, senior vice president of BCCI, said he is seeing more contractors competing for the same project. He added that there are now contractors they have not seen in their marketplace since 2001.

Based on data from the national industry group Associated General Contractors of America, construction costs have fallen by about 15 to 20 percent due to lower prices of building materials and reduced contracting fees.

The industry group is concerned about the ability of construction firms to survive as they continue to accept residential and commercial property projects where they earn only a little or even nothing just to give work to their employees.

Economist Ken Simonson, who works with the trade group, said federal stimulus contracts have rejuvenated confidence in the industry, but the contracts have yet to be made available. Until today, the residential, retail, office, multifamily and hotel sectors have not yet recovered.

Jenkins of GCI General Contractors said his firm had to lay off about 20 employees so the firm can continue to operate. He expects a drop of 50 percent in revenue this year compared to last year.

There are however specialized construction firms which have not seen a decline in work. Mike McDonald, head of McDonald Construction and Development, which specializes in sustainable residential construction, said his firm is even looking for people experienced in green-oriented work in high-end construction.

In another report from the Associated General Contractors of America based on data from the Bureau of Labor Statistics, construction employment declined in 319 of the country’s 336 biggest metro areas. Chief economist Ken Simonson said that construction workers in many communities nationwide have lost their jobs due to lack of residential and commercial property construction projects.