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Specialty Contractors Search for Construction Niches

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After weathering several years of revenue declines, staff cutbacks and shrinking margins, California specialty contractors say they are finally seeing rays of hope, especially in some regions along the coast.

Photo courtesy of Schuff Steel
Schuff Steel recently wrapped up a job at the Camp Pendleton Naval Hospital in Oceanside for the Clark/McCarthy joint venture.
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"Our members are a lot more positive this year than in years past," says Brett Eckles, vice president at Eckles Construction, Huntington Beach, and president of the American Subcontractors Association of California.

Eckles and other specialty contractors point out that the Golden State is a mix of diverse economies. Regions such as Riverside-San Bernardino-Ontario are still reeling from the economic downturn, but other areas, such as San Francisco and Silicon Valley, are in the midst of a construction boom.

Though combined revenue for 2011 for the top 10 firms in this year's ENR California ranking fell 6.2% compared with the previous year's top 10, some companies posted amazing gains. For example, Schuff Steel, San Diego, saw its California revenue soar 85% to $145 million from $78.4 million the year before. San Jose-based Cupertino Electric, this year's Specialty Contractor of the Year (see p. CA24), also had an impressive year, reporting an 81% revenue increase.

Rustin Roach, executive vice president of Schuff Steel's Pacific division, says the health care market in California has "kept us strong," accounting for 65% to 70% of the company's statewide revenue. The steel fabrication and erection company is currently working on two high-profile projects: the Camp Pendleton Naval Hospital in Oceanside for the Clark/McCarthy joint venture and the Scripps Cardiovascular Institute and Central Energy Plant in LaJolla for McCarthy Building Cos. The Camp Pendleton project calls for 4,000 tons of steel and the Scripps project, 5,600 tons.

Roach says Schuff Steel's San Diego and Stockton facilities "have been at full absorption so far this year." He adds that Schuff has seen a short-term spike in its Northern California business, thanks to commercial projects for Apple and Google in the San Francisco Bay Area and data center work in Silicon Valley. Schuff moved up 11 slots in this year's ranking, to No. 8.

Mechanical engineering firm Southland Industries, Garden Grove, climbed two slots, to No. 6, in this year's ENR California list, propelled by a 13% hike in Golden State revenue. Southland CEO Ted Lynch attributes the upturn to work in the health care and education sectors and, particularly, in the data center market in Northern California.

In the past year, Lynch says Southland was awarded contracts for several projects, including the Martin Luther King Inpatient Tower renovation in Los Angeles with Hensel Phelps; the University of California, San Francisco Mission Bay Medical Center with DPR; and the Google Bayview campus in Mountain View with DPR and Turner.

Lynch says Southland planned well during the economic slowdown so it could absorb hits from the down market. He adds that the company also has been looking for potential acquisitions so it can pursue some self-performing work.

Southland also recently completed a new main headquarters for itself in Garden Grove in order to combine Southern California operations. The headquarters office build-out was designed to achieve a LEED-Gold level for commercial interiors and uses displacement ventilation, chilled beams, skylights and mezzanine and exterior glazing for abundant natural light.

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