Beat goes on slowly for area contractors

Real Estate Weekly, July 7, 1993 by Ray Carlisle

The second half of 1993 gives every indication of being a reprise of the first--except that the brief euphoria associated with the changing of the guard in Washington dissipated and has no reason to be replicated in the next six months.

Despite a first quarter blip which had no sound economic base, 1993 will be at best a hard scrabble year for all elements the real estate and construction industry with the possible exception of those involved in bankruptcies, foreclosure and workouts.

For general contractors of our size who concentrate on commercial/industrial jobs in the $1 million to $10 million range, today's business environment is not just chaotic or even simply distressing. It is rather, downright paradoxical, particularly when it comes to competition.

On one hand, many GCs now range far afield for jobs. No longer do they restrict themselves, as they once did, to specific fixed area--say within 100 miles of their home base--or to focusing on specific types of structures 'manufacturing plants or strip malls or office buildings.

Instead, just to keep their employees and subs going, numbers of moderatelysized GCs bid jobs two or three times as distant and for types of jobs where they lack specific expertise. Further complicating the picture, the giants, those who previously wouldn't consider anything under $50 million now frequently go for jobs one-1Oth that size.

But there is some good news for those willing to look hard enough for it. With the demise in our area of the speculative builders, corporate real estate departments are now virtually the sole private sector business source, show increasing sophistication.

Aware of heightened competition among potential contractors for jobs they are putting out to bid, corporate customers continue to carefully evaluate bids rather than limiting themselves to "low bidders." Besides being aware of the marketplace changes, the end-user client--unlike the speculative builder, or even the commercial developer 'expects to be the long-term occupant of the structure being bid.

As such, that client is still interested in avoiding problems tomorrow than in cutting costs today. In addition, corporate clients are wary of low bids that may reflect contractors' lack of experience as much as they do a desire to get a much needed contract.