For a time, it seemed the only construction activity happening on the northshore was residential, as builders adapted to accommodate the inundation of new residents in late 2005 and 2006. As that market maxed out, you couldn’t drive more than a few miles hereabouts without witnessing the construction of commercial space – offices, restaurants, banks, hotels, and retail centers – being rapidly constructed to accommodate those businesses serving the newly expanded population.
Then came 2008. Things changed, and they changed fast. The “housing bubble” finally burst nationwide. The sub-prime mortgages collapsed and, although they represented only three percent of mortgages nationwide (and a mere pittance in Louisiana), the banking industry went into full-scale panic. Credit lines were frozen or taken away. Mortgage loans became scarce, as did financing of virtually every kind. Retail space sat – and sits – empty. National chains such as Circuit City started closing – for good. Homebuilders in particular were – and are – suffering, with many closing up shop or going into other lines of work altogether.
But it’s not all bleak. For general contracting companies that kept a diverse clientele, business is still good.
Devier Construction, a 10-year-old general contracting firm that moved to the northshore pre-Katrina, had more than $20 million in sales last year. And DonahueFavret, which just celebrated its 30th anniversary, topped the $85 million mark.
Wait. What? In THIS economy? How’d they do that?
For both firms, the answer seems to lie in diversification.
Thad Devier, CEO of Devier Construction, said he and partner Frank Lott have actively sought new clients and worked overtime to make all their clients happy. But they also have a healthy mix of commercial and government projects.
John Donahue, president of the company his father founded, said his firm, too, serves a mix of large- and mid-size projects with both private and government clientele. “We are a general contractor specializing in the commercial end of the construction business,” Donahue said. “We do a lot of retail work, some restaurants, a lot of healthcare facilities, hospitality construction, and we have a category we just call ‘Commercial,’ which covers things like country clubs and banks.”
OK, so looking at the broad spectrum shows not ALL sectors are down. Retail and restaurants may be looking a little slim right now, but hospitals, hotels and banks seem to be popping up all over the landscape.
And, indeed, DonahueFavret is no newcomer. Recognizable projects include the original Louisiana Heart Hospital, Target in both Covington and Slidell, JC Penney in Hammond, the Women’s Cancer Center at Lakeview Regional Medical Center, Banner Ford, and Copeland’s in Covington. Donahue said the company is also on the verge of closing a deal for a major hotel project on the southshore. The company is also redeveloping the City Hall-based Emergency Operations Center in New Orleans.
“The construction activity here is moderate,” Donahue said. “It’s down, but it’s not down as much as in the rest of the country.”
Devier agreed. “The indicators are prices are droppingbut we are remaining competitive,” Devier said. “We work hard to find and maintain clients. We’re doing fine.”
Fine, indeed. Devier has five CVS pharmacies under construction in Louisiana and Mississippi, nine remodels of Kangaroo gas stations, the Administration Building at New Orleans City Park, a fire station in St. Bernard Parish, and a solid waste facility in Plaquemines Parish. Devier also espouses a healthy respect for his competitors, combined with a healthy disregard for how others succeed or fail.
“There are a lot of large government-funded projects coming out for bid,” Devier said. “I don’t know, and it doesn’t matter to me, what my competitors are doing. The majority of our work is private.”
Devier said too many contractors put all their eggs in the recovery basket after Katrina. When insurance money ran out and reconstruction of commercial space was completed – or when building-owners decided not to bother – those companies had missed the boat.
“Indicators are the retail market is down with no end in sight,” Donahue said. “There’s a lot of government work here. In general, construction is down because people are having trouble getting bank loans. I think we’re going to see tough times for another six to eight months.”
But by “we,” Donahue doesn’t seem to mean DonahueFavret but, rather, the economy overall.
Devier agreed, and his “we,” too, isn’t a local pronoun. “I think we’re (the country) is still in a downward spiral,” he said. “I see a couple of indicators that things are turning around. Things might look better, but at the end of the year I think we might see another dip before we have a steady incline. One reason we’re doing well is we are diversified”
So the incline may not be terribly steady or terribly steep, but for both Devier and Donahue, things are looking pretty darn good.
DonahueFavret, in fact, continues to employ 56 people. “That’s not including the subcontractors,” he said. “Our volume last year was $85 million. We’ve been pretty much growing healthily since 2000.”
“I’m extremely optimistic,” Devier said. “We’ve got plenty of work. We’re bidding a lot of work. We’ve got a good reputation and good clientele and we’re growing. Every year it has gotten bigger and bigger. We’ve grown extensively since Katrina, but not because of Katrina.”
And it’s the not-because-of-Katrina that has made a tremendous difference. Devier and Donahue were among the seasoned and wise who didn’t throw all their weight into post-hurricane recovery projects.
Interestingly, too, there is tremendous competition among both contractors and subcontractors these days.
“We have a lot of subcontractors coming to us for work,” Devier said. “We’re in hiring mode. They’re coming from long distances, hungry for work. The rest of America is in a hell of a recession, and they’re coming here.”
“There’s a tremendous amount of competition,” Donahue said. “As always, there are some regions affected more than others, and we are fortunate to be in one of the less-affected.”
Devier employs about 35 direct workers, in addition to dozens of subcontractors. Between these two companies alone, hundreds of people go to work every day – people who might be unemployed if they lived and worked elsewhere…and if the more forward-thinking of contractors hadn’t kept their wits when the recovery frenzy hit the industry, followed by the banking and credit frenzy that has gripped the rest of the country.
“The money is just now starting to flow,” Devier said. “It’s just starting to surface. I’m optimistic. It will turn around. It might get a little worse before it gets better, but I have faith in our system.”