Downturn Chokes Industry, To Cope Companies Branch Out

Innovative leadership emerges as the industry grapples with the effects of the recession.

By Dipika Kohli

Lane County in central Oregon plans a $41 million transit expansion, paid for with stimulus money. (Photo courtesy of Lane County)

Across the Northwest, people in the construction industry are wondering when the recession will ease up.

Some companies will make it through the slump just as they are, and others are working to adapt and acclimate as quickly as they can. Still others are cutting staff or even closing their doors until stalled projects – from home remodels to high-rises – jump start once again.

People in architecture, construction and engineering generally say they think things will start to change within 12 months.

Portland

One small business owner hoping for a speedy economic recovery is Portland entrepreneur Lawrence Freese, who started his home remodeling company Zenovation after selling another business to work on remodels full time.

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“Last year at this time, I had to turn down projects because I was working at capacity,” Freese says. “During the summer I was beyond capacity. But once November hit, between the jitters of the elections and the dismal economic news, business just hit a wall. People just didn’t want to spend any money until some certainty returned to the market. No one in their right mind is going to start their dream kitchen remodel when a layoff could be just around the corner.”

In May, the Associated Press reported that the seasonally adjusted rate for unemployment in April in Oregon was 12%, slightly higher than the revised figure of 11.9% for March. In Washington, April’s jobless rate was 9.1%, the same as the revised rate for March Unemployment in both states remained the same in May.

Jason Werts, a vice president and operations manager at Unitus Community Credit Union, says his credit union continues to lend despite the current economic conditions. He says credit unions would be in a better position to help businesses if Congress were to remove restrictions on the number of business loans credit unions can make.

Werts says that getting rid of the cap would mean credit unions could lend small businesses across the country up to $10 billion.

Werts adds that those in the Pacific Northwest may feel the impact of the recession longer than people who live in other parts of the country because the Northwest was “among the last regions to feel the effects of this recession. It may take us a bit longer to pull out of it.”

Seattle

Place Architects, an architecture and interior design firm with an office on Denny Way, is closing next year. Place has specialized in residential remodels and the design of custom prefab homes.

Transportation projects , funded with stimulus dollars, are starting to increase opportunities, such as the SR 519 Improvement project in Seatte. (Photo courtesy WSDOT)

Courtney Clarke, the firm’s office manager, says the business decision was due in part to the slow market. It’s anybody’s guess exactly when the economy will pick up again, but when it does, Clarke says her firm will bring back its original employees before taking on new people.

Mary Grace Roske, marketing director at Seattle Bank, says her bank predicts economic activity in the Puget Sound region will continue to reflect weak conditions due to three things: the abundance of real estate single-family residential inventory, continued weakening in the retail sector and recent increases in unemployment. “Stability in these components is not expected until spring 2010,” Roske says.

To some people that sounds like a long time to wait. For others, it’s an opportunity to look into new markets.

For example, two small Seattle businesses – structural engineering firm Integrated Design Engineers and design/build company Case Design and Project Management – are taking on projects in markets outside their home city.

Downtown Seattle-based Integrated Design Engineers is going abroad to Canada and Bulgaria. A small design project in Vancouver, B.C., as well as structural engineering for a power plant in Bulgaria are the kinds of new projects keeping the firm occupied.

In the past, IDE has done structural engineering work for high-rise buildings such as the 36-story residential building First Hill SkyGarden and a four-tower complex of 16- to 24-story buildings called Symphony Mixed Use in Federal Way.

Things are different today, however. “Everybody is pretty much holding out,” says IDE principal Ignasius Seilie. “Commercial projects here are limited.”

Seilie says the hint of a slowdown came after first quarter of last year, when it was starting to be apparent people were going to be more conservative about the kinds of projects they would back. But he adds, “I hope by the end of the year it’s going to be resolved. I hope everybody’s going to be positive.”

Like Seilie, Tony Case of Case Design and Project Management, is changing how he runs his business.

Case says his Seattle firm, which focuses on integrated design-build for energy-efficient buildings, is doing well despite the downturn. “The funding climate has forced us to look elsewhere for clients as well as project financing,” he says. “That’s been a good thing. We’ve had a substantial increase in construction volume over last year, and we’re hiring.”

Case says he sees the market thawing out by the third quarter of this year. “We’ll see some changes in mortgage lending,” he adds. “People still want to move to a place like Seattle for its quality of life, and some parts of the real estate market will strengthen because they speak to that desire.”

Apart from the small firms looking to stay nimble and adapt, there are also large design firms in Seattle thinking about how to emerge as risk-takers and leaders.

“Certainly the world has changed in the last 12 months,” says Allyn Stellmacher, a design partner at Zimmer Gunsul Frasca Architects. Stellmacher says signs of change appeared more than a year ago, with the cooling of larger, speculative projects. Today’s climate is much more volatile than the “exuberant free-for-all” we were seeing then, he adds. “Everybody’s mind is in a different place about how they approach work,” Stellmacher says.

Stellmacher says now is a good time to invest in the future. “There are new investment opportunities in today’s marketplace,” he adds. “If you wade out into the waters a bit, others will follow. We’ll see who the real leaders are.”

Useful Resources:

On June 1 representatives from the Washington State Department of Transportation, the Seattle Department of Transportation, the Washington State Department of General Administration, the University of Washington, Western Washington University and the Port of Seattle discussed their capital project plans with more than 100 Associated General Contractor of Washington members.

The overriding message from the event was that, while no one is claiming the construction economy is out of its slump, there is a lot of public work to be had – from the $166 million Executive Office Building in Olympia to the $58 million Miller Hall renovation at WWU in Bellingham to the $5 million SR 395 repaving project in Spokane. Below is contact info for the presenters and links to their agency websites that include project lists. Department of General Administration

John Lynch,
(360) 902.7227,
jlynch@ ga.wa.gov
https://fortress.wa.gov/ga/apps/EAUpcomingProj/UpcomingProjects.aspx

Port of Seattle

Ralph Graves,
(206) 728.3729,
Graves.R@portseattle.org
http://www.portseattle.org/business/opportunities/index.shtml

Western Washington Univeristy

Sherry Burkey,
(360) 650.3482,
Sherry.Burkey@wwu.edu
http://www.wwu.edu/depts/fm/Services/FDCA/index.html

Washington State Department of Transportation

Jeff Carpenter,
(360)705.7130,
carpenj@wsdot.wa.gov
http://www.wsdot.wa.gov/

University of Washington

Olivia Yang,
(206) 221.4224,
oyang@u.washington.edu
http://www.cpo.washington.edu/html/index.htm