THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, January 21, 1996 TAG: 9601200389
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Long : 142 lines
In some cases, it may be a faulty estimate for the price of concrete. In others, it could be an unexpected jump in the cost of steel.
``You hate to admit it, but any contractor who has done a lot of work will tell you that he's lost money on a job because of wrong estimates,'' said Robert T. Lawson, chairman of the Newport News construction company W.M. Jordan Co.
But with the upswing in demand for new factories, stores, schools and jails, employees who make the estimates for local construction companies can breathe easier.
For the 11 months through last November, the value of commercial building permits in Hampton Roads jumped 34 percent to $682.68 million from the comparable period in 1994.
Because of the budgetary battles in Washington, H.C. Hoy, chairman of H.C. Hoy Construction Inc., expressed concern about the timeliness of payments for work on federally funded projects. Still, the veteran Norfolk contractor said he was optimistic about the prospects for 1996.
``You continue to see new companies coming into the area,'' Hoy said.
One of these is a Japanese-owned paper manufacturer, YUPO Corp., that last week announced plans to build a $100 million plant in Chesapeake's Greenbrier Commerce Park. Several other multimillion-dollar projects are scheduled to get under way in the region in coming months, including the $300 million MacArthur Center shopping mall in downtown Norfolk.
Meanwhile, the recovery in construction elsewhere in the eastern United States has eased the competitive pressures from out-of-state bidders, who flocked to Hampton Roads hungry for work in the early 1990s.
``In the recession of 1991 and 1992, conditions were bad everywhere, so a lot of people were taking work at cost or below cost to keep their doors open,'' said Louis Haddad, president of Armada/Hoffler Construction Co., a construction management company in Chesapeake.
``With the loosening up of economic conditions in 1994 and 1995, a lot of those folks have stayed home.''
In contrast to the recovery in commercial construction, conditions in Hampton Roads' home-building sector have been lackluster.
For the 11 months through last November, the value of residential building permits had fallen 9 percent from the comparable period in 1994, according to the Builders & Contractors Exchange Inc., a Norfolk-based clearinghouse for construction information.
``Nineteen ninety-five was not a very eventful year for local home builders,'' said Albert E. Viola, president of Viola Building Corp. in Chesapeake and president of the Tidewater Builders Association. ``We just didn't have the buyers.''
Last year's decline in home building was especially pronounced in Chesapeake, where prospective buyers apparently were discouraged by the brackish quality of local drinking water.
More recently, some area builders have seen a resurgence of buyer interest, said Viola, who expects to build 38 to 40 homes this year. That would be up sharply from the 24 homes that he built in 1995.
Part of his optimism is based on the likelihood that interest rates will remain stable or even decline, making home purchases more affordable, Viola said.
For Hampton Roads residents in the building trades, the rebound in commercial construction has been especially welcome.
From a peak of 40,400 jobs in 1987, construction employment in the region plunged to 31,300 in 1991, according to the Virginia Employment Commission.
By last November, construction employment in the region had climbed back to 37,855. That was up 12 percent from the average for 1994 and a 21 percent increase from the depressed level of five years ago.
The scarcity of local construction during the early 1990s did more than put people out of work.
``A lot of good subcontractors were forced out of business,'' said Haddad of Armada/Hoffler Construction.
Even with a rebound in demand for their services, skilled tradesmen apparently have been slow to start up new companies. While they have not yet caused delays in the pace of work, shortages are developing among subcontractors doing masonry, dry wall and steel-erection work, Haddad said.
At W.M. Jordan, finding the necessary number of skilled carpenters, electricians and plumbers has been a constant concern, said Lawson who launched the company in 1958 with his late partner, William M. Jordan.
``Today, you might get two bids (from subcontractors), where you used to get four or five,'' he said.
With a growing volume of construction activity under way, some companies also have to worry about holding onto key employees.
``You have to continually create opportunities for your talented people or they will go somewhere else to be successful,'' Haddad said.
After a period of unusually low prices during the early 1990s, construction companies have had to contend with rising building materials prices.
Two years ago, the steel that Hoy Construction needed to build stores for an auto-parts retailer cost $18,000. By last January, the cost had jumped to $25,000, said Adam Ritt, a Hoy Construction vice president. More recently, the prices increases of steel and other materials have moderated, he said.
The biggest commercial construction project in years - the $300 million, 1.2 million square-foot MacArthur Center shopping mall in downtown Norfolk - is scheduled to get under way later this year. It's being built by Hoar Construction of Birmingham, Ala., and Armada/Hoffler Construction.
Several entrants into the Hampton Roads retail market, including supermarket chains Harris Teeter Inc. and Hannaford Brothers Co. and the Target discount chain, also are having stores built in the region.
Meanwhile, an assembly plant is being built in Hampton for personal-computer manufacturer Gateway 2000, and construction of a $3.4 million reservations center for Trans World Airlines Inc. has begun in Norfolk.
But the rebound in local construction has been fueled largely by the demand from municipalities and government agencies for public works projects.
``If not for schools, jails and roads, the construction market would be very soft,'' said Armada/Hoffler Construction's Haddad.
When bidding for some larger public-works jobs, Hampton Roads construction companies still encounter stiff competition from out-of-state contractors and management companies.
Fifteen companies, including some from as far away as Arkansas and Illinois have indicated that they will bid on construction of a regional jail due to be built in Portsmouth, said Bob Lyons, executive director of the Builders & Contractors Exchange.
What has generated so much interest from out-of-state companies is the project's $50 million price tag and the specialized nature of jail construction, Lyons said.
That sort of competition, along with volatile swings in the availability of local work, prompted Armada/Hoffler Construction to expand beyond the Hampton Roads market in the late 1980s.
Today the company is managing a mix of projects in Texas, Georgia, Pennsylvania and Maryland and relies on Hampton Roads for only 30 percent of its work, said Haddad, the company's president. Even with the recovery in local construction, Armada/Hoffler probably will hold its dependence on Hampton Roads projects to about 30 percent of the company's annual revenues, he said.
Across the James River in Newport News, W.M. Jordan still concentrates on projects within a radius of 50 miles from its headquarters.
Even in the face of competition from out-of-state contractors, W.M. Jordan weathered downturns like the one in the early 1990s by taking on a mix of commercial and public-works projects, Lawson said.
That's not likely to change, he said. ``We built our organization with local people.'' ILLUSTRATION: Graphic
Text and research by TOM SHEAN, graphic by ROBERT D. VOROS/The
Virginian-Pilot
RECENT MAJOR REGIONAL PROJECTS
SOURCE: Builders & Contractors Exchange Inc., Norfolk
[For complete graphic, please see microfilm]
by CNB