The “Katrina bubble” is still affecting architecture and engineering firms in Mississippi with many firms throughout the state — not just on the Coast — participating in the post-Katrina recovery and rebuilding.
It has taken time for many of the projects funded by FEMA or the Mississippi Development Authority (MDA) to come to fruition. Firms are just now getting the go-ahead to proceed with some of those projects, said David Hardy, vice president of Guild Hardy Architects and immediate past president of the Mississippi Chapter of the American Institute of Architects (AIA).
“We’re certainly busy right now and we are still working on the Katrina bubble,” Hardy said. “We have recently hired more folks and are looking to hire one or two more people. In the current market, I would say that we are doing well. We keep looking around waiting on the other shoe to drop. Everyone else is nervous, so that makes me nervous. We are going to do a marketing summit next week with all principals to look at what is up coming and look at the forecast. We will know more then. Right now we have been so busy doing work and keeping clients happy that we haven’t had a lot of time to look at that.”
Hardy said the MDA, which has had incentives available for projects that meet requirements for creating jobs and economic impact, has had a major impact on building activity on the Mississippi Gulf Coast.
With it taking time for funding to be approved for public projects, the Katrina rebuilding has been spread out over a longer period of time providing an active market for architects. That has attracted the attention of firms elsewhere in the region that have hungrily eyed work after slowdowns in their area. Hardy said his organization has been approached by firms all over the Southeast, but particularly from Florida, that are looking for work.
“That is particularly true in environmental consulting,” Hardy said. “There has been a major slowdown in these other markets. I certainly feel very fortunate that we are somewhat unique in this market. I think some of the other architects across state who have come into the market are staying busy, as well. I do know talking with practitioners in other firms some are ringing a warning bell that a slowdown is coming. The state doesn’t have bonds for projects at all the universities. When I start hearing things like that, it makes me concerned as they might start coming after my work.”
While Guild Hardy is busy and anticipates being busy to end of year, Hardy said it gets fuzzy when one looks at a longer time period as to the level of business activity.
Credit crunch and material costs
Rob Farr II, architectural principal, Cooke Douglas Farr Lemons Architects & Engineers, Jackson, said tightening credit combined with higher costs for materials is causing some softening of the market. While the demand for construction projects in Mississippi market and the regional market remains strong, Farr said anything that has a speculative nature has been challenged.
“There are still significant needs in the building industry, but people are beginning to pause or delay development due to the ability to receive the right kind of financing instruments,” Farr said. “The Toyota plant has delayed opening a year, and the Marketplace on Lakeland where J.C Penneys is going in across street from Dogwood has been slowed down. Interestingly enough, there is a continuing increase in raw costs. Our materials are being impacted by the international market and fuel costs are beginning to affect projects. With credit restrictions and cost increases, people are beginning to wonder if it is the time to do things even though there is a design and economic component to bring things under construction. Costs continue to increase.”
On a positive note, Farr said the state continues to see benefits from the Katrina recovery and incentives that were placed into the market area. “We are still seeing those come into fruition,” he said.
Another Katrina factor affecting construction activity in the state is the Gulf Opportunity Zone Act (GO Zone) incentives, which covers a large portion of the state from the Coast past the Jackson area. Hunter Arnold, vice president of Waggoner Engineering, Jackson, said while the GO Zone has helped private development in places, it hasn’t been as extensive as he expected and the market expected.
But public sector work in the region has been brisk.
“I think in this region for public sector work, work is actually up,” said Arnold, whose firm also has offices in Gulfport and Hernando. “A lot of engineers practice in the public sector. The recovery is in full swing in the public sector on the Coast, and that extends up into Central Mississippi and beyond. It took time to get projects off the ground. Some were immediate and some were longer timetable work and projects.”
For firms such as Waggoner Engineering that concentrate on public sector work, the slowdown in the national economy may have little impact. Public agencies need to provide infrastructure in order for growth and development to occur. So, work continues on building highways, bridges, water and sewer systems and lighting even in times when there might be a slowdown in home building and commercial construction activity.
On the Coast, Waggoner Engineering is involved in the huge revamping of the Coast’s wastewater and water systems. The Gulf Regional Water and Wastewater Project is providing infrastructure improvements in five coastal counties.
“We are putting infrastructure where people need it to be — out of harm’s way,” Arnold said. “That program is being implemented by the State of Mississippi through the Mississippi Department of Environmental Quality and local utility agencies in those five counties. We are putting infrastructure in place to allow sustainable economic development. Also, the Port of Gulfport is implementing its master plan, which will totally remake the Port of Gulfport.”
Arnold said the Toyota project in Northeast Mississippi is another big driver of demand for engineering services, and very progressive leadership in DeSoto County is investing in infrastructure improvements that will pay big dividends for future growth.
“There is a great deal of work,” he said. “We’ve added staff because of the level of work that our clients are seeing.”
Richard McCarty, CEO of The McCarty Company Design, Tupelo, said while his company not involved in anything related to Toyota, its practice is stable.
“We have not seen any direct reduction in our work based on the economy,” McCarty said. “People seem to be busy. There is a sense there is less work out there so the bidding environment is pretty competitive. What we are seeing is clients are rather overwhelmed with the rising cost of construction right now. So, I can’t help but wonder if some of the projects won’t slow down, which would then affect us.”
Construction costs, especially the cost of materials, has been escalating for several years. And firms are also seeing impacts from high fuel prices. McCarty has a small construction company that has just gone to a four-day workweek to reduce the cost of fuel for their employees.
“Fuel cost is having a lot of impact on a lot of different areas,” McCarty said. “We have had dialogue with our construction group, and they say a lot of their friends in the construction business have been laid off. So, it is happening in some areas.”
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.