It could be worse as commercial construction moves ahead "cautiously"
The downturn in the nation’s economy has affected construction in Connecticut as well, with new residential construction spending rising only 1.2 percent in December 2011 following a 1.9 percent increase in November 2011, according to the latest information provided by Reed Construction Data (RCD). Single-family construction spending increased 1.5 percent here multi-family construction spending fell by 0.2 percent in December 2011, says RCD.
RCD also reports the total pre-bid phase value of all commercial construction projects in the state currently is close to $9.5 billion, while there is nearly $139 million in bid phase values, and over $25 billion in post-bid phase values.
A sample of projects on the drawing board include a $5 million pre-design project for Natchaug Hospital in Tolland, a $25 million pre-design project for the Woods At Newington condominiums, a $25 million pre-design for a multi-use office building planned for New London, and a $20 million plan for the proposed North Water shopping center in Fairfield. The University of Connecticut has begun the bid phase on the $20 million Bousfield psychology building in Storrs while the state is considering a renovation of the Judicial Branch Building in Hartford valued at nearly $2 million.
Area contractors have differing opinions on buy tramadol online the state is headed regarding construction, though the general feeling is one of optimism.
F. Todd Renz, president of O, R & LÂ’s construction division located in Branford, says the market began to slide downhill after 2008.
Â“I think that, in 2010, the market bottomed for a lot of companies,Â” says Renz, noting that his company employs about 800 people within four divisions, with 35 directly involved in construction. Â“We began seeing a pickup in 2011 with a little more activity. A lot of those projects that were on hold now are starting to resurface. In the corporate and industrial areas, weÂ’re beginning to see more planned-type work, looking at efficiencies in adding additions to existing structures.Â”
Renz says that though local construction companies seem to be the hardest hit, he sees some activity in the building needs of the healthcare industry and those companies that are international with facilities in Connecticut.
Â“I would say that the projects are generally smaller and more sporadic,Â” says Renz. Â“WeÂ’re not getting a great amount of calls from new companies. The calls are specific to our past clients who are looking for integrated projects, where weÂ’re combining design and construction while looking at energy efficiencies of the project.Â”
Renz says most projects with which he is involved are under $1 million and are focused on fit-outs of existing facilities.
Â“I think that constriction on the liquidity markets for a company that wants to borrow money is just not an option,Â” adds Renz. Â“The companies weÂ’re involved with are working out of their own funds that they have accumulated from earning, whether itÂ’s from fundraising or some other source. If they have a strong balance sheet, then we can work with them on financing.Â”
As for negative worldwide economic issues, Renz says they have an effect on peoplesÂ’ confidence in money matters.
Â“We are seeing companies that want us to quote on certain improvements or renovations, and then they put them on hold,Â” says Renz. Â“Everybody is a bit nervous. I would characterize the market as very cautious. Projects are determined by whether there is an absolute need for it. When I talk with my brethren, they are all feeling the same way. In those that are heavily involved in retail construction, I think theyÂ’re feeling it more. Those that work within the healthcare industry, higher education or the corporate area, they have enough business to hold steady. Those like us that provide integrated services that include design and construction are doing better.Â”
Renz summarizes what he thinks is holding the construction market back: overall lack of confidence in the world and national economies, and liquidity.
Â“Borrowing requirements by the banks are very strict. The margins are very tight, so the companies that are involved must be at the top of their game,Â” adds Renz. Â“They have to work very hard and client expectations are very high. And we all have to be optimists.Â”
In the northern part of the state, the views expressed by Gary Capitanio, vice president of Borghesi Building and Engineering, Inc., in Torrington, echo those of Renz but add more to the picture.
Â“Our company is doing okay,Â” says Capitanio, adding that he currently has about 20 full-time employees and employs sub-contractors to fill in where needed. Â“We have work ongoing so I would classify it more as staying busy but itÂ’s not really ramping up. It is getting better though Â– itÂ’s not getting worse, for us anyway. Though we donÂ’t do residential projects, I think the residential side is lagging. Foreclosure rates are up again in Connecticut and that is going to take some time to recover.Â”
Capitanio, noting that his company earns between $17 and $20 million annually, says the calls they get are from those who want to expand or need work on existing buildings.
Â“There is still a lot of caution from business owners wondering what to do,Â” says Capitanio, echoing one of RenzÂ’s opinions. Â“I think that their businesses are doing a little bit better and theyÂ’re feeling a little better about that, but theyÂ’re still not convinced to go into a capital improvement project yet due to the state of the economy.Â”
Capitanio says that, although there arenÂ’t many complaints about banks, they are requiring that clients make a large down payment before loaning capital for a project.
Â“Appraisals still havenÂ’t caught up with market values,Â” says Capitanio. Â“When they get a price for construction, the appraisal will come in at 60 to 70 percent of the cost of construction, so the banks will require 40 to 30 percent equity from the business owner. ThatÂ’s helping to stagnate things on that end.Â”
Capitanio agrees with RenzÂ’s observation about a loss of confidence in the market caused by worldwide economic downturn.
Â“The global economy every year, every month, every day seems to be getting smaller as far as being interconnected,Â” says Capitanio. Â“Healthcare, satellite medical offices and hospitals are still markets that are active. Goodwill Industries is continuing to grow, and we just completed a retail and redemption center in generic valium. WeÂ’re renovating a building in Hartford that will be their corporate offices. TheyÂ’re in a growth mode.Â”
Capitanio added that rebounds have begun to occur in church building projects and even with some manufacturing projects.
Â“WeÂ’re starting construction on a retail strip mall in Wallingford,Â” says Capitanio. Â“ThereÂ’s not just one area that there the construction industry for us. ItÂ’s a broader market now, which is a good sign.Â”
Â“Cautious optimism is the thing,Â” adds Capitanio.
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