Local Businesses Expect a Good Year

If Regulations Don't Stall Projects

The Northwest's reputation as the geographic region with the hardest hit economy after September 11, 2001, is beginning to crumble, if local business owner's economic forecasting is correct.

By Lucy Bodilly

If fate deals Northwest contractors the right cards, 2005 will be a good year, according to an informal survey of local industry leaders.

Wild cards still in the deck are the same as in 2004 - rising materials prices, fuel costs and interest rates. And Oregon and Washington each hold some in their own hands, based on election results and how agencies decide to enforce regulations and new building codes.

Of all the factors, the diciest is fuel costs, which is driving up bids from subcontractors, especially those who rely on heavy equipment, according to Britt Sloane, a principal with Foushee and Associates, a general contractor in Bellevue, Wash.

The Portland Concrete Association predicts cement supplies will hold steady in Oregon and Washington. Steel prices are hard to predict but will definitely be on the rise, especially for contractors working in Alaska because of added transportation costs.

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Both states face legislative and regulatory unkowns. Oregon voters passed land-use reforms in November that require governments to pay owners, or forgo enforcement, when certain land-use restrictions reduce property value. The measure will either cost billions of dollars to enact or force hundreds of government agencies to greatly curtail their regulatory powers.

"Nobody knows what effect Initiative 37 will have," said Tanya Bauer, marketing director with David Evans and Associates, an engineering firm with offices in both states.

In Washington, stormwater regulations will still play a major role in development, Sloane said. Many municipalities are still working to meet stiffer state Department of Ecology regulations that govern site runoff and increase the cost of stormwater detention systems four to seven times. Developers are scrambling to get permits filed in areas where the new regulations are not enforced, so they can be grandfathered in under the old regulations.

The changeover to new building codes in Washington is also expected to have a continued effect on the industry.

All sectors will continue to be affected by a tight labor supply, as skilled tradespeople reach retirement age with few replacements in sight.

"That is one reason contractors continue to work to find faster, more effective ways to build," Sloane said.

There is good news for transportation and road projects. Both states are continuing to use bond funds set aside by voters for work that improves transportation and safety.

In Oregon, Jay Remy, an ODOT spokesperson, said money raised through the Oregon Transportation Investment Act will pay for $1.6 billion in bridge improvements through 2008, the biggest amount of money to be spent on the federal highway system in the state since Interstate 5 was built in the 1960s.

Both states have a backlog of projects waiting for federal funding.

Large general contractors are also looking for a positive year in the two states.

"The Puget Sound area seems very healthy and continues to come out of a recession in all sectors," said Bart Eberwein, marketing director with Hoffman Construction Co. of Portland. "Architects are busy, which is good news for us down the line."
Eberwein expects industrial, commercial and mixed-use projects to lead the way. "Oregon is having a little harder time pulling itself out," he added. "There will be a lot of urban housing, restaurant work and hospitals."

The development at the Oregon Health Sciences University, funded through a sizable land donation and the state's share of the tobacco settlement, continues to reinforce its reputation as a major medical institution.

As the demand for 300 mm computer chips increases, Oregon chip manufacturers such as Intel will be in need of construction services which will trickle through the state's high-tech field.

New trends in 2005 will include a move by owners to further integrate contractor services to include financing, construction and operation, Eberwein said.

Consultants are expecting a positive year as well. "We are expecting to hire new people in 2005 and have a great backlog, the best in company history," Bauer said.

Sparling, a Seattle-based electrical engineering firm, is moving more heavily into the telecommunications field with its purchase of WH Pacific's telecom division in late November, in addition to opening a Portland office. That move is allowing WH Pacific, which already has offices in Woodinville, to open offices in Olympia and Spokane.

Mid-sized contractors are also expecting a good year in all sectors, according to Joe Constance, marketing director with Rafn in Bellevue, Wash. "Right now we are looking at six proposals for major projects, and we have a good backlog," he said.

The company is expecting to pick up a lot of work for churches and private schools, many of which are in the midst of capital campaigns.

"We expect 2005 to be a great year and 2006 will be on fire," Constance added.