Building on the past
In good times, Doug Allen’s company needed to beat only two or three other contractors to win an industrial construction project. But when Asheboro-based J.H. Allen Inc. recently went after a job in Eden, it was one of 60 companies looking for work. It failed to make the approved list of seven bidders.
Not every job is that competitive, but it isn’t unusual these days for 10 or more builders to battle for projects that often wouldn’t make them much money — and in some cases, might lose them some. “It’s about as bad as bad gets,” says Dave Simpson, North Carolina building director for Charlotte-based Carolinas AGC Inc., an association of general contractors. “Except for a little bit of help with the stimulus money for highway construction, it is about the toughest environment that there has been in decades.”
J.H. Allen will struggle to gross $10 million this year — less than a third of its record $35 million in 2007 — and even some larger companies have felt a pinch. Among the state’s 25 largest general contractors, North Carolina revenue for the 12 months that ended June 30 is down 1% from 2007, and the revenue required to make the cut fell by more than $10 million.
Banks have tightened their lending, and people are afraid to build, Simpson says. Some owners have abandoned projects because of financing problems, leaving general contractors and subcontractors unpaid. Next year could be even worse for subs because many have worked down their backlog. “The work that’s going on now, for the most part, is work that was contracted a year or two ago,” says Linda Burkett, executive director of the American Subcontractors Association of the Carolinas.
J.H. Allen finished the new home of Elon University’s College of Arts & Sciences last summer but hasn’t won a bid since turning dirt on that project in early 2008. The company, founded by Allen’s dad, initially focused on industrial projects, especially textile mills. But as jobs in that industry went overseas in the 1990s, it shifted to institutional buildings. The poor economy has forced another adjustment: Employment has dropped from 75 a year ago to 18. The company stays afloat by fixing up foreclosed properties and trying to resell or rent them. “I read things that say we’re coming out of the recession,” Allen says. “But for construction, I don’t see it returning for a year and a half or two years.”