Kansas contractors upbeat about 2013

Area general contractors joke that they have no crystal ball when it comes to business expectations.

Still, they said they think they have an idea of what’s ahead for their industry, which was hit hard by the recession.

They think business in 2013 should be steady to growing.

Uncertainty about the so-called “fiscal cliff” and the presidential elections slowed decision-making in the latter half of 2012, but now companies are more confident about moving ahead.

That doesn’t mean 2013 won’t have its share of challenges.

Competition among general contractors will likely be intense as construction activity begins to pick up. And there are some concerns about fuel prices and the effects of pent-up demand on construction materials. That’s not to mention unresolved national issues such as national debt, federal spending cuts and unresolved economic issues in Europe, they said.

Still, the year looks to be as good or better than 2012, according to local contractors.

Ben Hutton, president of Hutton Construction, said his 160-employee company expects an increase in work in 2013.

He thinks Hutton will add to its workforce, though he said he doesn’t know how much.

“We do know that we are going to need more help,” Hutton said. “We’re just not exactly sure when or where, yet.”

He said he sees his company’s business this year coming from sectors such as health care, schools, manufacturing and industrial, and warehouse.

“We expect 2013 to be a good year for us,” Hutton said.

Rick McCafferty, executive vice president of Key Construction, said the outlook for his 200-employee company has improved significantly in the past four to five months.

“If I was to compare today to a year ago, things look more encouraging as far as what we’ve secured as well as what’s out there to look at,” he said.

Key is looking to add between two and four employees by the end of spring or early summer, he said.

“In the markets we serve, we’ve been fortunate enough to hopefully have weathered the storm and have some better success as far as growth opportunities for our company,” McCafferty said.

Mike Grier, president of Eby Construction, said his company added 15 employees in 2012, bringing its total employment to 155.

“I think ’13 offers opportunity as well,” Grier said. “There will be some fairly significant projects in town and across the state that should go to bid so we’re optimistic.”

But Grier wouldn’t commit to adding more employees this year.

“We hope for (employment) to stay pretty stable,” he said. “If we land a few projects we may see a little bit of growth. We’ll do everything we can to keep things stable and grow at a sustainable pace.”

Stable also is the word Tom Dondlinger used to describe his company’s business expectations in 2013.

Dondlinger, president of Dondlinger & Sons Construction Co., which has 235 employees, said the company grew “a little bit” last year and “I think ’13 is going to be about the same.”

Dondlinger said he expects “little upticks” in commercial office projects, higher education facilities and multi-family housing. “I don’t know about retail,” he said. “It seems to be a little bit iffy. Transportation (it) depends on funding.”

Dondlinger said he also wonders about activity in health care projects – and if or how those projects would be affected by federal health care laws.

“It’s been very strong in Wichita for a lot of years,” he said.

According to the Associated General Contractors of America’s 2013 National Construction Outlook Survey, 31 percent of 1,328 respondents — including 19 from Kansas — expected to add employees, while 9 percent expected to lay off workers. Twenty-eight percent expected their employment to remain the same, and 32 percent said they didn’t know if they would add or lay off employees.

Costs of materials

The survey, results of which were released Jan. 14, also asked about expectations for the cost of construction materials. Thirty-eight percent expected costs to rise between 6 and 10 percent; 33 percent expected a 1 to 5 percent increase; and 16 percent expected costs to rise between 11 and 25 percent. Three percent expected material costs to jump more than 25 percent, 9 percent expected them to remain the same, and 1 percent expected a 1 to 5 percent decrease, the survey said.

Hutton said his company generally expects a 5 percent increase in materials costs annually.

He said the material that he is closely watching is lumber. So is Dondlinger.

“We’re already seeing increases in lumber prices,” Dondlinger said. “On the reverse, were seeing a little decline in structural and reinforcing steel.”

Eby’s Grier said he thinks fuel prices also are pushing up the prices of some materials such as concrete.

“I still think it’s a great time to build,” he said.

Key’s McCafferty said he kind of expected materials prices to increase at some point. He said suppliers and subcontractors — just like general contractors — have been trying to keep construction costs down for so long to win what business was out there that they feel the financial pressure to raise prices.

Along those same lines, McCafferty said that the economic downturn was so deep and long that it cut into the number of subcontractors that he and other general contractors depend on. He said if business gets brisk quickly, it may be hard to find all the subcontractors needed for projects.

“It will be a challenge if we get into that position,” he said.