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Setting the Stage
But at the same time, it seems like the market share between the general contractors remains more or less the same. Maybe certain big projects skew that. We were heavy in the retail, and we see retail coming back. Developers are considering projects.
Subdivision lots and commercial real estate have switched hands several times. People got a good bargain on it, so it starts the pencil for them and they start thinking about doing a project. The problem being lately is they’re over budget, once again. We went through a time where we were under budget for quite a while. We said four years ago construction was for sale and everyone is going to get a good deal; and now they’re expecting those prices of 2009. But material costs went up, other costs have gone up, so their projects still aren’t penciling for the budgets they’re putting together.
D. CAMPBELL: We do a lot of retail construction throughout the Western United States, and we’ve stayed busy on renovations. Retailers have taken advantage of the markets. Even though they haven’t expanded a lot of new stores, they’re renovating. And I see that continuing in 2013.
BLANCK: Quite frankly, the Utah market hasn’t seen the downturn like Arizona, Las Vegas, and some of the surrounding states. We’ve been fortunate with City Creek, the data center, other projects that have sustained us through this downturn.
Maybe we’re leveling off. Maybe we’re seeing some improvement, but we don’t see the big projects coming that are going to replace the City Creeks, the Intermountain Medical Centers—those types of projects that have carried our market over the last 10 years. I don’t see them for the next year or two years, and that scares us and makes us a little bit nervous. We’re going to have to find smaller projects, we’re going to have to spread our people to other states, other markets, to sustain ourselves.
MOORE: We do a lot of food and distribution throughout the Western U.S. That market is getting really hot—we’re engaged in that in several states right now. The population is growing, and there’s certain things that needs to happen.
There’s money on the sidelines. We’re seeing some private equity coming into play—rather than going to banks and wanting an 80/20 kind of a deal, there’s private equity out there getting into the marketplace again. And that’s how some of these projects are being funded.
We’ve priced more office buildings in the past six months than we have in five years, and we’re building some of those now. The market has been dominated by government stimulus spending, but now private guys are getting back in the game. Money is out there. There is definitely money out there.
WIXOM: One thing that gives me a little hope is the architectural and engineering community—they went through a very deep slump. But they started to come back midyear this year; they were seeing rehiring. They had work on their boards, and they were feeling like things were moving ahead.
Like Rob, I’m seeing some activity in the private market, where there’s money coming forward and people are starting to invest.
Mike, you bring a different perspective. You’re not bidding on hundreds of million of dollars’ worth of work—you’re kind of a boutique builder. What are you seeing?
TOLBOE: I’m one of the smaller people in the room now, and most of our work is private. We’ve been able to tap into some of the local developers that have a little bit of their own equity, and they’ve been able to put us in a position to do some of their work, which has been strong. And like other people have said, private equity is coming into play, especially for our climate.
Doug, what are you seeing on the insurance side? Regarding bonding, are you writing more or are you writing less?
SNOW: We’d like to think we’re writing more because we have successful contractors, but we are seeing some uptick in it related to financing and banks willing to give that funding if there’s a surety bond behind the construction. That’s a little bit different than what we’ve seen in the past, versus public works projects. So we’re a little bit encouraged by the bond activity related to that funding.
The banks say they’re lending, but I’m not seeing the rubber meet the road on that. What are you seeing?
GRAMOLL: The banks say, “We’ve got all this money to lend.” And you go with the developer to the bank with a project that a couple of years ago was a no-brainer—it has got commitments from people with a lot of money in it—but the banks say no because it doesn’t meet their new guidelines.