Contractors are navigating the mixed markets on the West Coast. Despite this, regional revenue increased mostly among companies on the 2024 ENR California and Northwest Top Contractors lists.
Across ENR’s 10 regional major contractor surveys, the average overall revenue increase among the top 25 companies was 7.3%. The western regions of California, the Northwest, the Mountain States and the Southwest collectively saw a similar increase of 7.5%. The top 25 companies in ENR Northwest and ENR California did not reach these averages, but both continued to grow.
The top 25 companies on ENR California’s prime contractor list, which includes Hawaii, reported revenue of $33.9 billion by 2023, an overall gain of 4.4% compared to the previous year. A year ago, this same group reported a 10.9% increase in revenue, following a 6.4% decline in 2021.
The top 25 companies on ENR Northwest’s list reported $10.7 billion for 2023, up 5.4% from 2022. However, this increase comes after a decline of nearly 20% from 2021.
Graph by ENR
A mixed bag
The theme of 2023 was uncertainty, says Rob Westover, Bay Area joint venture unit leader at DPR Construction, Redwood City, California. the timing of their projects,” he says.
While this uncertainty still remains, he sees markets becoming more concentrated in 2024. “The evolution of AI is driving the data center market. [and] increase in energy demand to power these projects. Securing energy commitments from utility providers is a priority, and we expect this trend to continue,” he adds.
In California, development in the core commercial and life sciences markets remains sluggish, while slowing tenant demand and high interest rates are affecting nearly every market, Westover says. But the advanced technology, advanced manufacturing, mission critical and health care sectors are growing.
“CHIPS Act funding has fueled new technical projects in the battery, semiconductor, clean energy and aerospace sectors,” says Westover. “Health care has been bolstered by new capital projects, many of which are active or in design and have start dates in 2025.”
Completed in 2023, 400 Westlake is among the first projects to participate in Seattle’s Living Building Pilot program. Lease Crutcher Lewis led the construction of this 15-story net positive energy building.
Photo by Cheryl McIntosh, courtesy of Lease Crutcher Lewis
DPR is working on two major University of California health care projects: the four-story, 268,000-square-foot University of California-Davis Health 48X ambulatory care facility in Sacramento and the six-story UC San Diego floors and 255,000 square meters. McGrath Health Outpatient Pavilion.
In 2023, the company saw revenue rise 2% in California to $2.57 billion as a significant portion of its portfolio in the advanced technology/mission critical and healthcare markets proceeded in the construction
Although the economy has contracted somewhat, Irvine, Calif.-based Hensel Phelps views the region’s “still thriving” design and construction markets with cautious optimism, says Damian Buessing, regional vice president . “California is a resilient market where healthcare, life sciences, education, aviation, hospitality, energy, water and other markets are still thriving,” he says.
“High interest rates have sidelined multifamily and other private construction.”
—Terry McKellips, senior vice president, regional manager, Swinerton
Hensel Phelps’ revenue grew 5.8% in 2023 to $2.54 billion in California and Hawaii. One of the firm’s most notable projects, done in collaboration with CO Architects, is at UCI Health-Irvine, where the companies are delivering the nation’s first all-electric hospital, which will be completed in the fall of 2025.
Meanwhile, many office markets remain depressed, particularly in Northern California, says Terry McKellips, senior vice president and regional director of Swinerton, Concord, Calif.
“High interest rates have pushed out multifamily and other private construction,” he says. “However, the healthcare, education, aviation and affordable housing markets are strong. Despite the Bay Area’s slow recovery, Central Valley and North State incomes continue to rise as these populations continue to grow. The design and construction market also remains strong.”
Swinerton reported 2023 revenue of $2.9 billion, up 4% from the previous year. Some of its current projects include 555 Bryant, a mixed-use apartment building in San Francisco and the historic renovation of the Hotel Del Coronado in San Diego, both scheduled for completion in 2025.
For Turner Construction Co., 2023 was an outstanding year; the company completed the most jobs in its history and regional revenue grew 20% to $2.45 billion. Active projects in 2023 include Terminal 1 at San Diego International Airport, the Capital Annex project in Sacramento, and the UC Berkeley Gateway project.
“Our strategy to create a diverse portfolio of work facilitated our growth,” says Lisa Ballantyne, senior vice president at Turner. “Our focus on public and private sector work, healthcare, advanced technology, renewable energy and emerging markets will deliver further growth.”
DPR is leading the 48X Outpatient Surgery Center, a design-build project in Sacramento. This four-story, 268,000-square-foot facility will help address a shortage of operating room capacity at UC Davis’ main hospital.
Representation courtesy of SmithGroup
Slow and steady
In the Northwest, high interest rates and evolving hybrid and remote work models led to a significant slowdown in commercial construction, says Bart Ricketts, managing director of Lease Crutcher Lewis in Seattle.
“Even in Seattle’s once booming life sciences market, many developers have scaled back plans to expand their portfolios,” he says. “This comes amid a broader slowdown in venture capital funding and a variety of mergers and acquisitions in the local biotech space.”
In addition, adds Ricketts, “an influx of new projects over the past few years has created a glut. These market forces have slowed the development of new life sciences.”
Graph by ENR
However, Portland’s urban core has yet to fully recover from the pandemic, he says. With high office vacancies, the climate for downtown buildings has been sluggish. There have been some positive signs, however. In late July, the law firm Schwabe, Williamson & Wyatt tapped Lewis to remodel its downtown Portland office. The contractor also saw its revenue reach $975.8 million by 2023.
Lewis has expanded into the Vancouver, Washington market with jobs such as ZoomInfo’s 150,000-square-foot global headquarters, a major tenant improvement project.
“Even in Seattle’s once booming life sciences market, many developers have scaled back plans to expand their portfolios.”
—Bart Ricketts, CEO of Lease Crutcher Lewis
“We have expanded into the data center market through our newly created data center and advanced technology division,” adds Ricketts. “Projects such as the 420,000-square-meter HI2 data center for NTT in Hillsboro, Oregon, have helped Lewis maintain consistent volume despite market economic uncertainty.”
Other sectors showing steady growth in the Northwest include education, healthcare, infrastructure and technology, says Jim Link, Skanska’s regional executive director. The firm’s teams in three regional offices in Seattle, Portland and Bend, Ore., have also seen increased client investments in environmental initiatives such as energy-efficient buildings and sustainable design.
A combination of these factors, along with the start of several large projects, helped boost the company’s Northwest regional revenue by 8% in 2023 to $1.7 billion.
“Investments in building infrastructure are constant and growing, especially in the North West,” he continues. “Decarbonisation efforts are evident at all levels of transport planning and construction.”
Washington state’s transportation and infrastructure plan has created opportunities for Skanska, Link says, helping to establish partnerships on new megaprojects such as the I-405/Brickyard and Portage Bay Bridge projects, which total more than $2.2 billion dollars
The Eight, located in Bellevue, Washington, will feature 541,000 square feet of Class A+ office and retail space.
Skanska has been busy completing the Sound Transit Lynnwood link extension, which should begin service in late August. Other projects include the modernization of the Terminal Core at Portland International Airport and the Eight office tower in Bellevue, Wash.
While each sector faces its own headwinds, market acceleration challenges remain. Delayed project starts are also another unwelcome trend in the West Coast region, says DPR’s Westover.
“We view the region’s design and construction markets with cautious optimism,” adds Hensel Phelps’ Buessin. “Even though the economy has contracted somewhat, our region is still thriving. The financial markets are the key to where we’re going over the next two years.”
