While specialty contractors across much of the West Coast continue to see steady work, company leaders agree that the markets they serve have slowed since 2023. But as specialty firms continue to work with arrears in 2024, they are looking ahead to 2025 with optimism.
The top 10 companies on ENR California’s list of specialty contractors reported total revenue of $4.88 billion in 2023, down 4% from the same group’s revenue in 2022. However, the companies experienced a smaller decline than in 2022, when the region’s top 10 specialty contractors reported a 13% decline compared to 2021 revenue.
The top 10 companies on ENR Northwest’s list of specialty contractors also reported a small decrease in revenue from the previous year. The group’s combined total for 2023 was $1.49 billion, down 3.5% from the same group’s 2022 combined revenue, in contrast to the significant 19% growth reported in 2022.
On average, the top 10 specialty contractors in each ENR region reported a 13.5% increase in regional revenue during 2023. In the Western regions (California, Northwest, Mountain States, and Southwest), the average increase was 2.96%. California and the Northwest were the only two ENR regions where the top 10 specialty contractors reported a decrease in revenue, and while some of the change can be explained by slightly fewer companies responding, the slower growth recorded in ENR’s western regions as a whole suggests that conditions are tougher for specialty contractors on the West Coast.
Graph by ENR
Some sectors have been more affected by market changes than others. Over the last year, “commercial/office was pretty much dead for us. The only big concrete job we had in office/commercial was a job we won in 2022 — it was an office building of $100 million in Sunnyvale that took us through the third quarter of 2024,” says Ron Yen, president and managing partner of San Francisco-based structural concrete contractor Pacific Structures Inc. “Since then, there has been very little activity in the new offices and commercial areas. Then in terms of the residential market, what I’ve seen is there’s some selective market-type stuff, but mostly in the suburbs and then some affordable housing work.”
Tremendous cost pressures on projects are playing a big role in the private sector and the multifamily market in particular, adds Jason Pengel, executive vice president of San Diego-based Helix Electric.
“The cost of money is too high and the projects do not pencil. Businesses and individuals are also very cautious right now. People are not spending money freely and there has been a sense of insecurity permeating the markets. This has put a lot of projects on hold,” says Pengel. “Many of these projects are already shovel-ready with the full design and labor ready to build these large buildings. However, I am very confident that with the contentious presidential election now behind us, many of these projects will begin to be released.”
Company leaders agree that commodity prices have continued to weigh heavily across the region over the past two years, and they remain hopeful that price certainty will help get more projects off the ground heading into the new year. But another factor is labor: organized labor costs are rising faster than the market will bear, Yen notes.
Graph by ENR
“It seems organized workers are more willing to talk about concessions, so I’m optimistic, but it’s still difficult. For a while, the price tolerance of our contracting customers and their developer partners was falling. Meanwhile, my costs were increasing due to labor and freight,” he says. “And so I think for us, the commodity and labor sector right now is starting to cooperate a little bit more and hopefully that will unlock projects.”
Yen believes there will likely be some renegotiated deals once the market reaches an inflection point.
As 2025 approaches, business leaders expect to see the robust mix of public and private work. There are some positives on the horizon that could make that happen.
In November, California voters approved Proposition 2, Bond Authorization for Public Schools and Community College Facilities, a $10 billion state education bond that will give the state the ability to to borrow up to that amount to fix “dilapidated public education campuses.”
“So we know that there will be work in the education market. There’s been a lot of emphasis on affordable housing in California and Washington state, so keep an eye out,” says Yen. “There’s a lot of pent-up demand for housing in general on the West Coast. We’re going through a period where a lot of market-rate housing isn’t going to be built, but the demand for housing isn’t going away and we’re not adding more supply. I think infrastructure work will also come back strongly, especially at the airport.”
Pengel expects costs and delivery times to stabilize for both equipment and goods, and also believes that projects that have been on hold for a couple of years will return and new builds will begin new year
