Local Outlook

Area Industry Professionals Share Views on Upcoming Year

Tom Parsons
Vice-president and general manger
Opus Northwest, L.L.C., Bellevue, Wash.
Developer

Q: How do you see the Oregon and/or Washington construction market in 2004?
A: The market is very soft with few significant private projects in the office or industrial sector. Multifamily and public projects comprise the bulk of new construction.

Q: What markets look strong for 2004 (public and private)?
A:The only potential change (to my answer above) is the resurgence of industrial BTS and spec construction. This seems to the case in Seattle but not in Portland. Strong financial companies are taking advantage of current interest rates and soft construction costs to implement a relocation or consolidation strategy.

Q: When do you see the industry coming out of the current recession?
A: If I knew ……

Q: What is going to pull us out?
A: There does not seem to be a sector where jobs are going to grow at a rapid rate. Frankly, more jobs are leaving the U.S. than ever before in the manufacturing sector. In the Puget Sound, intellectual property seems to be our most significant asset. As corporate America begins to see a brighter future, purchase in equipment and software will fuel some market strengthening.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: We are more cost conscious in our general purchases for ongoing business activities. We have tried to maintain a consistent core staff, however, we have fewer people today than three years ago when things were booming. Most of our reduction is from relocations, career changes, retirement versus lay-offs.

Q: During the last industry downturn, what did your firm do to survive?
A: Opus has a core competency in general construction as well as development and design. We are currently active in doing third part construction/development management for fees and we are aggressively pursuing additional opportunities in this arena.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: We are more aggressive in looking at both residential and retail development. We have projects in both categories underway and are excited about finding market share opportunities in what have not been our traditional core businesses.
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James D. Paras
President
Paras General Contractors, Inc., Spokane, Wash.
General contractor

Q: How do you see the Oregon and/or Washington construction market in 2004?
A: I believe that 2004 will remain mostly the same as 2003 in terms of Construction Dollar Volume. There may be a small increase based upon national economic indicators.

Q: What markets look strong for 2004 (public and private)?
A: The private sector could start to make a small rebound. Company cuts should be over, profitability should be gaining, and investment in facilities and expansion will begin…but slowly.

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Q: When do you see the industry coming out of the current recession? What is going to pull us out?
A: I think we are out of the recession right now … at least the general economy is. I don't think construction will gain strength until 2005, and only then if the overall economy continues to grow.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: No. We have always stuck to our business plan.

Q: During the last industry downturn, what did your firm do to survive?
A: We have done nothing different. As was stated in the previous question, we have remained true to our business plan.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: No.

Eric T. Overton
Vice-president and COO
Sparling, Inc., Seattle, Wash.
Electrical engineering firm

Q: How do you see the Oregon and/or Washington construction market in 2004?
A:This past year, we have seen a slow climb out of a recession that hit the Pacific Northwest pretty hard. Sparling is fortunate to have experienced moderate growth this year. There are positive signs that the Northwest is beginning to see a recovery. Many local developers are talking about potential projects such as Vulcan at South Lake Union and Nitze Stagen in the SODO area of town, where development of commercial, retail and even a basketball arena are being discussed. Portland has development ideas of their own, including the South Waterfront Development and associated work with OHSU.

Q: What markets look strong for 2004 (public and private)?
A: There are varying degrees of expectation here. With the recent opening of Seattle City Hall, the new Justice Center, Marion Oliver McCaw Hall, and the Seattle Public Library nearing completion, the large public work may be drying up for a while except for a few projects such as the Monorail. In Portland, the opening of the new addition to the convention center will attract new, large groups, which always impacts the service industry in a positive way. Depending on the strength of the Portland economy recovery, there could be strong movement there as well. Projects that have been pending for several years may come out of files.

Private projects continue their slow climb out. Both Seattle and Portland suffer from over-built office cores with not enough demand.

Q: When do you see the industry coming out of the current recession? What is going to pull us out?
A: I believe we are on our way out of this recession. I agree with the experts that this is a jobless recovery due to the impacts of technology, particularly in the manufacturing business, however signs are good. Many firms like Sparling had to trim the sails a few years back and have slowly added new staff to meet the growing demand for new projects. This past year, our firm added 11 more staff and we expect to continue this trend. This is primarily due to a growing work load and to a growing demand for our niche consulting services around the country. The Northwest will likely see a stronger recovery in late 2004 and into 2005. There is too much demand being held back due to skeptics in the market place, but it will come.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: Several years ago, Sparling grew so rapidly we realized that to continue the growth trend we must expand our services out of state. We have had a great deal of success in target markets and in our niche practice services. Our firm now receives over 30 percent of its revenue from out-of-state clients, from Denver to Houston and places in between.

Q: During the last industry downturn, what did your firm do to survive?
A: As a market-focused firm, Sparling was fortunate to not experience negative effects from the recession in the 1980's.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: Opening an office in Portland will open up new opportunities for Sparling in 2004. We are also looking at markets where we continue to have success in our core markets, such as Denver, Houston, Los Angeles and Phoenix.

As part of our strategic plan over the next four years, we have identified several other key market sectors to focus our marketing efforts. We have always been a very nimble firm with a strong variety of market expertise and we will remain very flexible.
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Kevin Spellman
President
Emerick Construction Co., Portland, Ore.
General contractor

Q: How do you see the Oregon and/or Washington construction market in 2004?
A: I'm hopeful, but not yet convinced, that 2004 will be a transitional year for the Oregon construction industry. There certainly appear to be promising economic signs on a national level recently, but it is an open question as to whether Oregon can immediately participate in a national upturn. Conventional wisdom would have us believe that we will lag somewhat, and the fact that we still need to deal with pressing regional issues like fiscal uncertainty and a deteriorating public educational system would definitely support that view.

Q: What markets look strong for 2004 (public and private)? When do you see the industry coming out of the current recession and what is going to pull us out?
A: Because of restricted budgets and fewer successful bond measures, public building construction will be reduced in 2004. Of course, the state transportation package will provide a significant stimulus. However, for a recovery to be sustainable, the private sector will also have to join the party. The medical market still seems strong, but there are few other sectors that appear ready to lead the charge. The North Macadam development, of course, may ultimately play that role, but it appears unlikely that it can move fast enough to have a wide-ranging effect. In the absence of a breakout in private construction activity, 2004 will be another challenging year for the building industry.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: Emerick's strategy remains to focus on projects where our core strengths that have been developed and refined over many years can add significant value for our clients. While we have experienced some growth even during this recent downturn, we have not sought it through deliberate expansion. We have limited hiring to a minimum, and have instead worked to continually improve the productivity of our long-term staff through technology upgrades and systems reengineering.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: Although 2004 will not be a year of major expansion for our industry in this region, I believe that it will be a turnaround year. In 2005 and beyond, I'm optimistic that we will finally see the underlying advantages that make Oregon such a great place to live and work really take hold.
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David L. Coffman
President
Coffman Engineers, Inc., Spokane, Wash.
Engineering firm

Q: How do you see the Oregon and/or Washington construction market in 2004?
A: We see a modest improvement, if any, over the last year for the construction market of 2004.

Q: What markets look strong for 2004 (public and private)?
A: The markets that seem to exhibit strengths for 2004 are the military and the healthcare markets. We anticipate an increase in military spending and a continuation of health care expenditures. All other markets will show minor increases, if any, in their activity.

Q: When do you see the industry coming out of the current recession? What is going to pull us out?
A: We do not anticipate any significant recovery until 2005. The continued validation of the optimism we feel today with unemployment dropping and the continuation of low interest rates will be strong factors in the turnaround of the current economy.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: We approached the slow economy with traditional measures. We cut unnecessary costs and made very modest reductions in staff. We have had a large reliance on design work from our offices in other regions such as Alaska.

Q: During the last industry downturn, what did your firm do to survive?
A: We took advantage of our regional geographic and market diversification. Our company's diversification across market sectors and state lines has been a key factor in our success in the Northwest over the past 25 years.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: We are looking at more fully entering the market of design and restoration of piping for existing facilities. We are going to focus on a higher level of base isolation and seismic retrofit upgrades of structures with an emphasis on the base isolation techniques. We are also contemplating very selective international work as opportunities arise with existing clients.
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Bill Polis
Director of Business Development
D.W. Close Company, Seattle Wash.
Electrical contractor

Q: How do you see the Washington construction market in 2004
A: Because D.W. Close does think and act strategically, our company has weathered the slow economy fairly well. Slow times have taken a toll on many of our competitors and recovery remains elusive to many. We have diligently stayed the course following our strategic and marketing plans and see 2004 as the year of opportunities.

The City of Tacoma continues to be a promising market and continues to invest in the education, arts and manufacturing sectors. Developers all over the state are investing and moving ahead with new projects or projects that were put on hold. This combination of reinventing developments put on hold and new projects promise to make 2004 an exciting year.

Q: What markets look strong for 2004 (public & private)?
A: Tacoma will be a strong market place in both private and public projects as we see the result of over a $1 billion dollars invested by the state, city and private investors. In Seattle, the high-rise residential market is continuing to flourish and our involvement in multiple projects is promising. University Washington has major projects slated to start in the next two years as well. Biotechnology seems to be the key word in the South Lake Union area and there are several hospital projects scheduled to start as well. This diverse mix of projects presents multiple opportunities for experienced specialty contractors in the region.

Q: When do you see the industry coming out of the current recession? What will pull us out?
A: We are definitely seeing the beginning of an industry recovery. Developers are planning and building new luxury condominiums and office towers and major renovation projects of boarded up earthquake damaged buildings. This infusion of projects types will continue into the next few years resulting in increased work loads for local contractors.

Q: Has your firm changed it habits or practices in response to the slowing economy?
A: We have pretty much stayed the course and have been faithful to our business plan. This is a strength which allows us to move in a steady business direction, not jumping from one market to an other which usually results in lost revenue and poor performance. We have had to sharpen our pencils on bid day, continue to operate as efficient as possible and tighten our belts where it makes sense.

Q: During the last industry downturn, what did your company do to survive?
A: D.W. Close Company is known for its renowned service department specializing in industrial and commercial services. This steady customer base helps smooth out the dips and valleys in the major projects division. By balancing our marketing efforts we have continued to sustain a consistent volume and profit during the current slowdown.

Q: Will you firm enter new market sectors in 2004? Has it already?
A: We continue explore new markets and have already taken our telecommunications department up several notches. With over 80 telecom technicians on staff and several new clients we are continuing to grow in this sector. We are also looking at some new developing markets in the transportation industry that have been successful with some of our sister companies around the nation. As part of the MYR Group of companies we benefit from a national group of industry leaders sharing both technical and marketing information.
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Robert G. Packard
Managing Partner
ZGF, Portland, Ore.
Architect

Q: How do you see the Oregon and/or Washington construction market in 2004?
A: Projections are for the construction activity in both states to remain relatively flat overall. Most states around the country are competing for the same type of work, and dollars. However, "cautious optimism" summarizes our outlook. We're hoping that there will be new job generators in the Northwest to create demand for the existing buildings as well as new facilities.Nationally, things appear to begin to be turning upward and the hope is that the Northwest will follow suit.

Q: What markets look strong for 2004 (public and private)?
A: We continue to see activity in the healthcare market. There is some continuing public sector work, as well as work in higher education and infrastructure.There is also still some activity in retail and housing.

There are big "visionary" plans being suggested for major parcels in both Portland (South Waterfront) and Seattle (South Lake Union, Downtown Waterfront, Pioneer Square, SODO, Port Property). We are involved in some of this planning and we are optimistic that both the public and private sectors are going to develop strategies that can be implemented.

Q: When do you see the industry coming out of the current recession? What is going to pull us out?
A: It appears as though, nationally, things have leveled off, but there is a growing sense of cautious optimism and recognition that new jobs are what will make it work.

There is continued pressure on state and local governments to attract business to the region and reverse the current trend. We are all more directly impacted by the global economy, not just our local economies. This has the potential to expand opportunities, but also adds to the complexities of doing business.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: The Northwest, in particular, has always been subject to cyclical downturns. Being based here, we have intentionally built up a broad based practice, and have been able to compete successfully for a wide range of project types as a result. We continue to infuse into the culture of our firm and our younger staff the importance of doing the best work possible, and being responsive to clients at all times, especially in a globally competitive market.

Q: During the last industry downturn, what did your firm do to survive?
A: As mentioned above, our diverse practice, the ability to practice on a national and international basis, and focusing on doing good work, have provided us with the means to succeed even in down times.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: As we are a diverse practice already, we don't anticipate entering into new market sectors, although we may experience a potential shift in the mix of work. We have continued to build a more global practice, broadening our relationships and geographic reach internationally. We will continue to focus on what we do well, and improve our knowledge of issues impacting our existing clients in an effort to continue to serve them better.
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Scott Thompson, AIA
Principal
Weber + Thompson, Seattle, Wash.
Architect

Q: How do you see the Oregon and/or Washington construction market in 2004?
A: Based on our experiences in 2003 and our plans for 2004, along with what I have been reading and hearing about the slowly changing economy, I see that in the private sector, single and multifamily/mixed use construction should remain relatively strong. However, construction for the commercial market will remain weak until the over supply of office space is absorbed.

Q: What markets look strong for 2004 (public and private)?
A: For us, single family and multi-family/mixed use markets look as if they will remain strong into 2004. This is provided that the interest rate remains stable and the strong housing market maintains its pace.

Q: When do you see the industry coming out of the current recession? What is going to pull us out?
A: This is a hard one to predict. Idealistically, I see the recession continuing through most of 2004 with a sustainable upturn 4th quarter and into 2005. Job growth and business expansion are key. State and local governments must provide incentives to businesses to set up shop in the northwest and must cultivate a business-friendly atmosphere.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: We are lucky to have clients who viewed the down-turned economy as a chance to move forward on projects and get them ready for the market as soon as the economy turns around. This has kept our firm relatively busy though there has been some down time, which we have profitably used to focus on our internal structures like project management and marketing.

Q: During the last industry downturn, what did your firm do to survive?
A: In the early 1990s, Weber + Thompson was primarily focused in multi family which hit us hard when interest rates soared. As a result we focused on expanding into commercial, interior design (including restaurant, corporate, and retail design), planning and residential high rise, while retaining and strengthening our mixed-use base.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: We are actively pursing a wider geographic area including the entire west coast, Arizona and Hawaii.
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Martin Hogger
Senior vice-president
MRJ Constructors, Seattle, Wash.
General contractor

Q: How do you see the Oregon and/or Washington construction market in 2004?
A: We believe the gradual improvement during 2003 will continue into 2004, however, we do not anticipate any steep improvements. Low interest rates have seemed to be the impetus in keeping the construction market afloat and in particular they have fueled the residential market place.

Q: What markets look strong for 2004 (public and private)?
A: Our focus is primarily on the private marketplace and only pursuing the public market on a selective basis. We feel that residential construction has created significant demand for infrastructure to support these new communities. The need for smaller suburban developments such as retail projects, self storage facilities and medical/dental clinics has seen and will continue to see steady growth. The majority of our projects have been smaller in size (up to $2 million). Even in a downturn market, these smaller projects have continued into construction.

Q: When do you see the industry coming out of the current recession? What is going to pull us out?
A: We believe it will be a slow climb over the next couple years. Businesses are beginning to gain more confidence and appear to be willing to spend more money on capital projects and/or refurbishment of equipment and assets. The motivation to this spending is due to the current interest rate environment. Low interest rates will be the key to continuing this climb.

Q: Has your firm changed its habits or practices in response to the slowing economy (e.g. - hiring, purchases, etc.)?
A: Yes, in 2003 we attempted to maximize utilization of our existing project management and superintendent staff as best we can. Major purchases and/or equipment purchases have been delayed until the market turns around. This will most likely continue through 2004.

Q: During the last industry downturn, what did your firm do to survive?
A: Diversity in project types has allowed us to emphasize those markets that have remained stronger during the recent downturn. Our projects include residential construction, multifamily, commercial, retail, medical/dental clinics and industrial facilities. In addition to building projects for our clients, we develop projects on a smaller scale. With our diversity, we have been able to concentrate our efforts in other markets to overcome the industry downturns. So far this strategy has been effective. In addition to our diversity, we have always made a strong effort in marketing. Typically, we will work on projects that are one to two years in the future. Although the effort may be taxing, it has paid off for us.

Q: Will your firm enter new market sectors in 2004? Has it already?
A: We do not have any plans to enter any new markets in 2004. In past years, we have been involved with self-storage, small medical and dental clinics and retail construction and will continue with custom residential construction and residential development. We anticipate that these markets will continue to prosper for MRJ.