Top Projects

By Joe Florkowski

Despite a slumping economy, large projects will continue to be built in California, say architects and builders throughout the state.

But the key will be finding the financing to get some of the projects up and off the ground.

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“There are large projects that need to be built and it’s viable for them to be built, but the financing is becoming tougher to find in this economy’s credit crunch,” says Jack Price, managing director and senior vice president for HKS Inc.’s Los Angeles office.

“It’s really the financial markets right now. The money is not available.”

Every year, California Construction ranks the state’s largest projects to break ground the year before. This year, we asked general contractors and architects to submit projects that broke ground in 2007 that are valued at $50 million or more.

Following are 80 projects, with the top five being the Palomar Medical Center West in Escondido, The Park at Irvine Spectrum Center in Irvine, L.A. Live Hotel and Residences in Los Angeles, Sutter Regional Medical Center in Sacramento and the Central L.A. Learning Center in Los Angeles.

When we talked with architects and general contractors for this story, we found that current demand for $50 million or more construction projects remains high even as California and the nation fight through a sluggish economy.

Despite a slumping economy, large projects are continuing to be built, as seen in our annual rankings of 80 of the state’s largest.

For instance, health care is still a strong market throughout California, says Rick Millitello, executive vice president in Skanska USA Building’s Oakland office.

“I get calls every week for a megahealth-care project,” Millitello says. “The demand will continue to outpace construction resources.”

Most other markets seem to remain strong, says Brian Wolfe, principal with Long Beach-based Perkowitz + Ruth.

Some obvious markets, such as housing, are slumping, and markets tied to that, such as retail, are also tailing off, Wolfe says. Other building markets, such as institutional and hospitality, remain pretty strong in 2008, he says.

But the future after 2008 is less clear.

For instance, while HKS has plenty of projects – big and small – lined up for the rest of 2008 and several projects that will last for a few years, the projects that the firm is seeing for next year are not on the same level as 2008, Price says.

Currently, HKS is involved in two high-profile hospitality projects in Southern California – the Terranea Resort in Rancho Palos Verdes ($250 million) and the W Hotel Hollywood ($187 million).

“The big question mark is: What happens in 2009?” Price says.

As designers and builders work in a struggling economy, they are finding they need to think and work differently to ensure that they get the same amount of work as they did in previous boom years.

For example, contractors may have to rely on alternative project delivery methods to ensure that they can keep working.

Skanska USA Building is hopeful that public-private partnerships begin to take root in California, Millitello says. Many builders are watching the progress of the Long Beach Courthouse, one of the first projects proposed to be built through a public-private partnership, he says (see related story in the Los Angeles/Long Beach Market Report).

“I see Triple P becoming a viable alternative with the current situation with the state budget,” Millitello says.

More joint ventures will also be prevalent, he says.

“JVs will become more prevalent because of the pressures to reduce risk,” Millitello says.

On the design side, architects are also adjusting to the sluggish economy.

We are moving pretty aggressively to international markets,” HKS’ Price says. “That is a hedge against a potential slowdown.”

The devalued dollar makes American architecture firms more attractive and Perkowitz + Ruth is taking advantage of overseas opportunities it wouldn’t normally, Wolfe says.

“We are much more open to it than we have been in the past,” he says.

At HKS, there are no construction markets that are drying up, but staff are talking with developers and monitoring the economic environment, Price says.

But it comes down to whether or not the funding will be available for some of these large projects, he says.

Some projects go through the entitlement phase and then do not go any further, Price says.

“That is a big concern,” Price says. “The potential is definitely there to be delayed.”

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