Engineers, architects start to see improvements
“Things are getting better. There’s a better sense of optimism. Business is not raging, but people are feeling a lot better.” wilfred Barry, President of SJB Group
After a rough few years caused by the national economic downtown, local architecture and engineering firms said they are starting to see business recover.
A number of factors are driving this rebound, including a slowly improving economy, low natural gas prices driving a boom in the chemical industry and companies being more aggressive and proactive in going after projects.
“Things are getting better,” said Wilfred Barry, president of SJB Group, a Baton Rouge-based engineering firm that specializes in land development, construction management, surveying and planning. “There’s a better sense of optimism. Business is not raging, but people are feeling a lot better.”
This increase in activity is a good sign for future construction. After all, if a business, developer or government agency is willing to pay professionals for engineering or architecture work, they must be pretty committed to building something.
Revenue at SJB was flat from 2011 to 2012, but Barry said the company had “a whole lot more inquiries” and “substantial more work” during the year compared with the past two years.
SJB was booming until a few years ago. About 30 to 40 percent of the company’s business was commercial real estate development, Barry said, including work on projects like the Super Target store on Millerville Road.
But when the recession hit, big retail projects were put on hold. And another pillar of SJB’s business, public works projects, also took a hit because of state budget tightening, Barry said.
“Those projects are handicapped financially, unless state and local governments are willing to put on new taxes to take care of infrastructure needs,” he said.
In response, SJB has had to become more aggressive and moved away from just dealing with its longtime clients. The company has become proactive in pushing projects, like redeveloping University Lakes and improving the infrastructure of the west bank of the Mississippi River between Baton Rouge and Gramercy.
“Right now, we’re looking to create those projects and calling attention for the need,” Barry said. “Most of those projects we are thinking and looking at have funding problems, so we’re bringing together interested parties to address this. A lot of what would be used to pay for these projects would be tolls.”
Like SJB, Jacobs Engineering saw its fortunes improve during 2012. Jacobs, headquartered in Pasadena, Calif., has a major office on Essen Lane, focusing on construction maintenance.
The company released its quarterly earnings about two weeks ago. For the period ending Dec. 28, Jacobs posted nearly $2.76 billion in revenue and a $16.2 billion backlog of projects. That’s nearly 5 percent better than the $2.63 billion in revenue recorded for the quarter that ended Dec. 28, 2011, and nearly 12 percent better than the $14.5 billion backlog.
“Work has picked up over the past year,” said Nate Aulbs, director of business development for Jacobs’ Baton Rouge office.
The biggest thing driving the activity has been the low cost of natural gas. Chemical companies use natural gas as a feedstock in processes and a fuel source to power their plants. Low gas prices mean lower operating costs for the plants, which improves their profit margins and allows them to develop more products.
Aulbs said the long-term forecast for Louisiana natural gas prices makes him bullish for the future.
“We are looking forward to a good year,” he said. “We’re still a little bit nervous that the market will continue to improve, but we don’t necessarily see it slowing back down.”
Ann Forte Trappey, CEO and president of Forte & Tablada, said her company topped $7 million in gross earnings during 2012. That was the best year ever for Forte & Tablada, which was founded in 1961 and focuses on civil and electrical engineering, land surveying and mapping.
“So many opportunities came up throughout the year,” Trappey said.
Her company worked on a variety of projects, such as serving as a sub-consultant on some work for the East Baton Rouge Parish School System and doing engineering work for the SNF Flopam plant in Plaquemine and the Benteler Steel plant at the Port of Caddo-Bossier.
While industrial projects don’t account for a significant portion of Forte & Tablada’s business, Trappey said her company is feeling the benefits of the booming oil and gas industry in Louisiana.
“Oil and gas are putting a lot of people back to work,” she said “And when those activities are up, sales tax collections go up.”
That gives local governments the resources to build infrastructure projects that help engineering firms like Forte & Tablada, Trappey said.
John Graves, one of the principals of Evans-Graves Engineers, said his company has had a strong “eight to 10 years.” His company concentrates on environmental and municipal projects and has been busy with Hurricane Katrina rebuilding projects and doing work for the U.S. Army Corps of Engineers.
“Our profit margin has more or less been the same,” he said.
While the Katrina work is winding down, Evans-Graves is moving into other areas.
Graves said the company is trying to get some work in New York and New Jersey as part of the Hurricane Sandy rebuilding process. Close to home, Graves said his company is pursuing work with local levee districts who want to do flood protection projects.
“All of these governments have BP settlement money, so they can pay for the work,” he said. “This is an emerging opportunity.”
Mike McGaugh, a senior principal with Stantec in Baton Rouge, said his company had flat revenue in 2012. Stantec, a Canadian company, entered the Baton Rouge market last year when it acquired ABMB Engineers.
“Flat to us is good,” McGaugh said. “I would love to see increases, but in the current funding environment, that is not always possible.”
Locally, Stantec is concentrated on transportation projects. While federal funds for highway work have dried up, McGaugh said the Louisiana Department of Transportation and Development is being proactive.
“They’re restocking their plan shelves, which got depleted by the stimulus projects,” he said. “It’s smart to have projects in waiting, so they can get built if money becomes available.”
The architecture industry has seen a similar small uptick.
Lynn Robertson, executive director of the American Institute of Architects–Louisiana, said national figures show a 1 percent to 2 percent uptick in billings at the end of 2012.
“I really think we are on the same level in the state,” she said.
Some office building projects that were put on hold because of the recession and tight lending climate are starting to happen, she said.
Dale Songy, one of the partners with Coleman Partners architects, said he’s starting to see money for building projects loosening up.
“People are starting to dust off some of these old ideas,” he said. “I haven’t seen any money get put down, but the projects are starting to circulate. There is a lot of money on the sidelines.