ABC: Industry Makes Gains in Last Half of ’03

Fri October 10, 2003 - Southeast Edition

Georgia contractors are sensing the early signs of a construction recovery according to a survey of the state’s general and specialty contractors. While approximately three-quarters of the state’s contractors report that construction activity was approximately the same or higher than last year, close to 80 percent of the state’s contractors expect the last half of 2003 to be an improvement over the first half.

These are the primary findings from a construction market survey of Georgia contractors completed recently by the Associated Builders and Contractors of Georgia. The survey determined that 42 percent of Georgia contractors found their economic conditions nearly the same as last year, although 37 percent of the participants said the construction economy in the first half of the year improved. Only 21 percent said conditions were worse than last year.

“This optimism comes in spite of lower revenues and profits for the state’s contractors,” said Bill Anderson, president of Associated Builders and Contractors of Georgia. “Approximately 63 percent said their revenues and profits were down over last year, while 26 percent have seen increases in profits and revenues.”

Despite a lackluster first half of 2003, more contractors are reporting a rise in activity, leading them to believe better times are ahead. “We are seeing more work to bid, though the market is still soft,” said Mike Dominici, vice president of The Circle Group Inc., Atlanta.

This sense of cautious optimism was demonstrated by a growing number of the state’s construction executives. “As an industrial contractor, construction in our market is down,” said Larry Williams, Casey Industrial Inc. manager of business development. “However, there appears to be more activity at present in the engineering firms, which is usually a precursor to real construction activity.”

This increased planning and engineering movement may explain why 79 percent of the survey participants expect the last half of 2003 to be better, while only 5 percent expect conditions to worsen. Approximately 16 percent expect no improvement in the last half of the year. “I believe the construction market will improve slightly by the end of the year,” said Gordon Moore, SMI Georgia Rebar Inc. manager of business development.

This was the consensus shared by contractors in most sectors except commercial office construction. “During the last half of 2002, many projects were put on hold,” said Mark Shearon, Georgia regional manager of QORE Property Sciences, a Duluth engineering and environmental sciences company. “Although most major new office development remains depressed, most other sectors are doing well.”

Because of the continued soft commercial office market, contractors tend to see an upswing coming, but it’s looming over a longer horizon. “The commercial construction market is very soft, although bid activity is slightly better,” said Vic Verma, president of Alpha Insulation & Waterproofing Company in Marrieta. “I still see 12 to 14 months before commercial construction activity shows any signs of improvement.”

One factor adding to the generally encouraged outlook, however, is stable prices for construction materials. According to the survey, 53 percent of contractors said material prices are approximately the same this year as last, and 16 percent said material prices are actually lower. This factor is helping contractors better manage their own costs in an economic situation where contractor pricing is the key to obtaining work.

“Prices are very competitive,” said W. W. Scoggin Jr., president of Stasco Mechanical Contractors Inc. in Marietta. “However, more jobs are being bid now than a couple of months ago, easing the pressure on pricing in the future.”

Yet, whether they see their markets turning around or remaining stagnant, one thing is almost universal: a severe caution about their own spending. Less than 17 percent said they plan any new capital or equipment expenditures for their businesses in the next six months. That means the vast majority of the state’s contractors will continue sitting on their own wallets until they see more positive proof of a turnaround.