Though the construction industry was deemed an essential service and given a green light to keep working early in the pandemic, some of its clients were alarmed and delayed or even canceled projects until the virus’ impact on their finances became clear.
Still, Kentucky construction firms are reporting that overall, work came in steadily and most projects are moving forward as planned, even in the hard-hit restaurant industry.
“I think we’re going to have our best year ever,” said Paul W. Hemmer Jr., president/CEO of Paul Hemmer Co. in Fort Mitchell. “This is our 100th anniversary year, and I’ve challenged our team to make it the best.”
Over the past five years, Hemmer said his construction, design/build and construction management services firm has worked with an increasing number of manufacturing/distribution clients, and about 10% of revenues stem from the health care sector. Renovation and repurposing projects also remain strong across the board.
Still, after experiencing some project delays, the company’s 2020 revenue projections were off about 30% but Hemmer said he expects to make that up this year.
As far as developer-driven distribution building projects, “there was just a pullback for let’s say, six months, and now we see the acceleration again,” he said.
Current and recent projects for Hemmer Co. include a recently completed spec distribution center in Louisville’s air commerce park for Molto Properties, and work has begun on a building for Xebec in Louisville, west of the airport. A groundbreaking took place for a Prologis project in Cedar Grove, and physicians’ office projects were completed for St. Elizabeth Healthcare in Dry Ridge and Taylor Mill.
Signs of a rising tide
With about 75% of clients located in Kentucky, Buckner-based industrial/civil contracting firm East and Westbrook Construction Co. works primarily on buildings and equipment foundations, President Jonathan Westbrook said.
He reports food processing, distilleries, utilities, chemical manufacturing and processing clients are moving full steam ahead with building expansions and new construction.
Westbrook sees one sector in particular—new projects for utilities—as a harbinger of better economic times ahead.
“Those are always signs that infrastructure is being built for economic development,” he said. “When businesses are being attracted and growing, it kind of creates this rising tide effect for all industries.”
Westbrook’s firm was recently awarded a bid package for a University of Louisville residence hall, and is bidding to be a part of building a new Veterans Affairs hospital in the Louisville area.
In fact, the company actually experienced growth in 2020.
“We’re still here to fight another day and excited for what we have to look forward to in front of us, which is the pandemic winding down, vaccines being in place” and returning to a semblance of normal, Westbrook said.
For Miranda Construction LLC, a Louisville general contracting, design/build and construction management firm, recent projects include downtown Louisville offices for Baird, a roughly $15 million project, and an addition to the Ville Grill at UofL, Chief Operating Officer Ricky Browning said.
A new Goodwill was completed in St. Matthews, with another starting in Elizabethtown; the company is working on new sites for Jeff’s Pizza and Biscuit Belly; and it has also landed several jobs for The Kroger Co.
In the health care realm, Miranda Construction finished three Crossover Health sites—two in Kentucky and one in Southern Indiana, as well as a facility for UofL Physicians. Retail is also going well, he said, as is new multifamily and hotel construction.
While a few projects were postponed, Browning said he’s keeping in touch with those clients, betting they’ll rematerialize.
“I want to knock on some sort of wood here,” Browning said of the recent workload. “We were very fortunate. We have stayed busy and had good projects to pull us through. We’ve had the best first quarter Miranda Construction has ever had.”
Big projects keep marching forward
Design/build projects from hotels, office buildings and education dominated recent projects for D.W. Wilburn Construction, a Lexington general contractor, construction management and design/build firm.
President Doug Wilburn said recent projects include City Center in downtown Lexington, Tates Creek High School and a science building at Asbury University.
Among notable projects ahead are a $40 million Kentucky State University dormitory project and a new Horse Soldier Bourbon facility in Somerset, boasting a $100 million construction budget.
Even so, some projects have been put on hold or canceled altogether.
“For instance, we had a courthouse project in Madison County that was on schedule to be started last year that didn’t get started because the funding got pulled because of the virus,” Wilburn said.
Gray Construction Executive Vice President of Business Development Jeff Bischoff said the bourbon industry “just continues to provide project after project,” including the $130 million Diageo Lebanon Distillery opening in Marion County this year. It is Marion County’s largest project ever.
A Lexington-based international firm, Gray provides engineering, design, construction and smart manufacturing services for food and beverage, commercial, manufacturing, automotive, distribution and mission-critical sectors.
Distribution companies are also creating new construction projects in Louisville and Northern Kentucky, he added. Though the automotive sector isn’t as active lately, he predicts the emergence of electric vehicles will spark it back to life.
His colleague, Gray Construction Manager of Business Development Jeff Hodges, added that three or four projects in the first quarter of 2020 were put off until 2022 or 2023. And material cost escalations and lead times are up substantially.
“A lot of our lead times on these buildings has increased, almost doubled from this time a year ago,” he said. “Hopefully this will level out.”
Some delays, but lots of progress
Dominating the to-do list at Messer Construction Co. are industrial, federal military and science/technology projects, Vice President and Lexington Region Leader Mark Hill said.
And health-care projects remain strong: Messer was just awarded a new project for Ephraim McDowell Health in Danville and they’ve been wrapping up on Turfland Clinic for UK Healthcare.
And after some project postponements, Hill feels higher education projects are poised for a return.
The Central Bank Center Rupp Arena project, whose renovation and expansion cost tops $230 million, has been one of the most sizeable endeavors for Messer.
“Pretty exciting to start seeing some of those larger spaces, and hopefully some of their events getting to happen down there,” Hill said.
K Norman Berry Associates Architects Managing Partner Bob Haffermann said the Louisville-based firm has a diverse portfolio, which is particularly beneficial when certain sectors are sluggish. About half of projects are renovation work, he said.
Major projects the past several years include University of Kentucky College of Design, Old Forester’s Paristown Hall, The Galt House Renovation, Speed Art Museum and the Historic Fayette County Courthouse.
“I’ve been pleasantly surprised at our growth in the multifamily market,” he said, as the tight housing market channels more people into apartment living options.
He expects the education sector will schedule more projects soon once the pent-up demand during COVID-19 bursts forth. And while church construction seems cyclical, a few of these projects are on the firm’s plate.
Overall, Haffermann said, business has been brisk.
“We’ve been really lucky,” he said. “We’ve maintained our staff and have had enough work to keep everything moving forward, which has been a great thing.”
Managing labor, materials, supply chains
Some challenges remain, however.
Browning said some delays occurred in supply chains, including specialty lighting fixtures, premanufactured doors and HVAC equipment. Material prices have spiked for lumber, metal and petroleum-based items, and material pricing guarantee windows have decreased to as little as 24 hours.
In addition to some shipping delays, Wilburn said fuel prices have risen, increasing operating costs.
He said workforce needs are being met for now.
Hemmer said over the past few months there have been very volatile pricing swings in the steel and lumber markets that trickled down to affect products made with steel, such as HVAC equipment. Copper wiring products are also more expensive, he said.
“We’re seeing unusual inflation that’s affecting our ability to hold pricing,” he said. “With these swings, it’s potentially going to delay owners from starting projects, just the shock of it I think.”
Along with some minor interruptions in lumber and steel market deliveries, Westbrook said other specialized items like flat ties used in forming concrete walls, have been an aggravation, mostly for those working in residential construction.
To stave off a future workforce challenge, younger people are being encouraged to pursue construction careers. Westbrook said selling points are good earning potential, the ability to start right away without a lot of student debt, earning a good trade and satisfaction in seeing the progress of work unfolding.
Construction equipment of the future may include equipment operators not sitting in the cab of heavy equipment but in a nearby project trailer operating virtually via headset and remote control systems. Young people whose hand-eye coordination has been honed from gaming and computer experience may excel in these roles, Westbrook said.
“That will translate well to the construction industry,” he said.
Bischoff said with extremely healthy bottom line and sales figures, he sees the U.S. economy continuing to recover through 2023, with high output and robust activity to look forward to.
“We’re very optimistic, very excited about the future,” he said. “We think the markets that we serve will continue to produce great opportunities.”
Shannon Clinton is a correspondent
for The Lane Report. She can be reached
at [email protected]