The general contracting business was nearly dead in the water during the recessionary years, but the companies that hunkered down and held on strong are starting to reap the benefits.
For many contractors, the last couple of years have been a true reversal of fortune. And for a representative rags-to-riches story, look no further than Rampart Construction. The Grapevine, Texas–based company is new to the Top 50 list but landed the No. 1 spot nevertheless, with 4,433 units started in 2012.
“One of the things we’ve really focused on over the last four years is the visibility of the company, getting the name out,” says Johnny Yates, head of preconstruction services and business development at Rampart. “Some true, hard marketing.”
Since the Great Recession, many nontraditional developers have entered the multifamily business for the first time, putting a general contractor’s relationship-building skills to the test. In fact, first-time multifamily developers made up a significant portion of Rampart’s clientele last year.
Summit Contracting Group also credits an aggressive marketing campaign to its ability to stay afloat. The Jacksonville, Fla.–based firm rose to No. 2 on the list, up from No. 10 last year, with 3,434 new starts in 2012.
When Summit’s business slowed down, the team put all hands on deck to create a larger-than-life marketing campaign and maintain client relationships. As new projects began to roll in, the company reintegrated employees back into their original roles.
For many general contractors, 2012 was the year that investments and expansions into new markets began to pay off handsomely.
“I think what’s happening is the tremendous investments we made in resources, for sales and marketing, are paying off in a manner consistent with what we expected,” says John Thompson, president at Terre Haute, Ind.–based Thompson Thrift Construction. The company soared from No. 25 to No. 12 on this year’s list, starting 1,459 affordable and market-rate units in 2012.
Thompson expanded its operations in Houston with a permanent on-site staff to keep up with several projects coming on line in the Southwest.
“It’s allowed us to more efficiently manage projects in that portion of the U.S.,” Thompson says. “It allows us to have our staff on site more than they were before.”
Thompson doesn’t expect to replicate its incredible 210 percent growth this year, but it does plan to start about 1,974 units this year, a bump of about 500 units.
“We’re fortunate to have half a dozen or so clients that are experiencing growth at the same time we are,” Thompson says. “And our staff [is] prepared to handle more units as time has elapsed.”
Beyond marketing efforts, though, the growing liquidity in the capital markets hasn’t hurt either. A builder would build all day long if it could, but ultimately, it’s the lenders that determine deal flow. And right now, many lenders are stepping on the gas.
“I think for us as a contractor, a couple of our clients went dormant for a while; they couldn’t get financing,” says Marc Padgett, principal at Summit.
Soaring Labor Costs
This year, however, contractors will grapple with other challenges. A tremendous amount of the labor workforce was lost during the downturn, and much of it still hasn’t come back, making it difficult to find subs.
“It’s a tough battle,” says Rampart’s Yates. “The direct impact on labor directly impacts cost. Crews are running at 60 percent manpower … it takes longer to get the same scope of work completed.”
The costs contractors must absorb nowadays are forcing them to be much more diligent about how they guarantee pricing. And as the for-sale industry returns, prices on materials are skyrocketing as well, making some projects suddenly nonviable.
“It’s starting to get really expensive, and it’s hurting some developers’ budgets right now,” Padgett says. “That’s going to govern how much work we’re doing in the next few years.”
With the labor shortages and cost increases looming, Padgett says Summit “isn’t trying to grow as much as we grew in the past year.”
That sentiment rings the same for Rampart.
“We won’t grow this year at the same rate, but there’ll still be a trend and an upward curve,” Yates says, predicting 3,800 starts for Rampart in 2013.