Top Specialty Contractors

Rebound on the Horizon for Subcontractors and Specialty Firms

After several years in which the market for specialty contractors was tight at best, prospects for firms in the New York, New Jersey, and Connecticut markets are much brighter, especially on hopes of a better balance between public and private sector work.

by Katherine S. Robertson

After a decade of consolidations, mergers, bankruptcies, and layoffs, the tide may finally be turning for beleaguered specialty contractors in New York, New Jersey, and Connecticut.

Between $18 billion and $20 billion in contracts are expected to be let over the next year in New York City alone, said Ron Berger, executive director of the Subcontractors Trade Association, which represents nearly 300 union firms out of its Manhattan office.

"We've never seen anything like this," Berger said. "It's enormous."

While New Jersey isn't seeing as bright a horizon as New York, it is showing signs of emerging from its construction doldrums.

"The trend is definitely up," said Doreen Siegel, executive director of the New Jersey chapter of the American Subcontractors Association, which has 200 member firms. "Everyone is hopeful."

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Still, the work hasn't arrived yet for some subcontractors, said Kenneth Durr, president of New York-based Durr Mechanical Construction. Engineers have been extremely busy, but owners have not pulled the trigger and gotten projects to bid.

"Everyone talks about how busy it is, but nobody knows where anyone is working," he said. "After talking with engineers about the amount of work they have, I know we'll have some good years ahead."

Industry data appears to back up the notion that work overall will pick up. According to "Construction Outlook 2005-2007," a report published by the New York Building Congress, construction activity in New York City cooled after peaking at $16.7 billion in 2003. Holding steady since then, the dollars spent on new work will approach $20 billion both this year and next year, the report predicts. It also projects that construction spending will dip slightly to $19 billion in in 2007.

Data from New York Construction's rankings of top specialty firms for New York, New Jersey, and Connecticut show that the past fiscal year didn't yet reflect better times, with flat or slightly lower numbers for the market overall compared to the prior year. The new top 10 list for the three-state region rounds out with a firm reporting $56 million in revenue, while the prior year's top 10 all exceeded $62 million. Of the six firms that repeated in the top 10, five of them reported lower revenues for the past year compared to the year before. Top Specialty Constractors List.

Meanwhile, optimism about the next few years is tempered somewhat by the expectation that public construction projects - including transit, school, and environmental programs - will make up much of the growth. While billions in funds are now programmed to come from the federal government for regional transportation projects and from the New York State government for New York City's school construction plans, neither authority has yet allocated the actual funds or set the amounts.

But some public contracts are being let, giving a breath of fresh air to the people Berger represents.

"Work seems to be picking up," he said. "Jobs are being bid. We're now just waiting for the private sector to kick in."

On the public side, Berger pointed to hope from a $1.3 billion water filtration plant in the Bronx, $2.3 billion in MTA infrastructure work, and $2 billion in new school construction across the five boroughs using city funds.

Private Sector Activity is Uneven

The private sector is also showing strength in certain pockets. Mechanical engineer Durr said that over the past five years, deregulation has changed his historically even split between public and private power industry work. Today, Durr estimates that 80 percent of his company's work is private sector.

Durr Mechanical has managed to rebound since 1999, when the company's niche work in the power and process market took a major hit because of deregulation. After its revenues dropped from about $20 million annually to $13 million in 1999, the company has experienced growth and expects to collect $70 million in 2005.

"The power market has been really hot lately," Durr said.

Another company seeing a private-sector boost is EMCOR Group of Norwalk, Conn., a large specialty contracting outfit with 26,000 permanent employees and 2004 revenues of more than $800 million in New York, New Jersey, and Connecticut.

Private-sector work dried up in the Northeast specialty market in 2002, said Frank MacInnis, EMCOR's chairman and CEO. The company had a 70 percent backlog of public work, far more than it preferred. But today, the balance is back down to 60 percent public and 40 percent private, he said.

"The private sector is making a comeback," MacInnis added. "We're seeing good, solid growth in demand in commercial building retrofits and tenant build-out, good demand for health care, and an interesting new demand for facilities services," that involve managing HVAC and mechanical units in commercial buildings.

In central New York, meanwhile, school construction has buoyed the construction trades. But that work is tapering off, leaving subcontractors looking to the private sector, said Gary Sisto, vice president of Mid-State Door Inc. and president of the Subcontractors Association of Central New York, both of which are based in Syracuse.

One promising gap-filler might be DestiNY USA, a $3 billion hotel-retail-tourist-sports-bioscience park complex proposed by Pyramid Management Co. for its hometown of Syracuse. Combined with state plans to develop Syracuse's inner harbor, the complex would be a boon to local subcontractors, Sisto said.

"We haven't seen any big projects that spur other work," Sisto added. "We're keeping the doors open and waiting for the economy to pick up."

Sisto said diversification was a critical factor in his company's continued profitability during the soft years. "We're diversified enough so we don't rely completely on bid work," he added.

Still, the market has been tight and cost-driven. Contractors have cut business expenses to the bone to compete for public work over the past five years, Sisto said. Subcontractors have been forced to follow suit.

"I know guys who have been around for 40 or 50 years who are saying, 'Yes, this used to be a lot of fun,'" Sisto said. "'Now it's a real grind.'"