The Forecast is Sunny for Gulf Coast Construction

You'd think the Gulf Coast would be a hotbed of construction a year after Hurricanes Katrina and Rita hit Louisiana, Mississippi, Texas, and Alabama. Well, you'd be right • but not for the obvious reasons. The tide of construction that is keeping cranes of all kinds busy along the nation's southern coastline has more to do with economic health than recovery.

“Regardless of hurricanes, people will always flock to warm climates and beaches, so we see no real slowdown in construction activity in the region,” says Larry Freckman, general manager of ALL Crane Rental of Georgia. In fact, he adds, heavy industry is booming east of Mobile, Ala., all the way into Florida, which bodes well for crane companies.

Go west, young man

On the western Gulf Coast, there's no slowdown in activity either. Galveston, Texas, which has not seen this rate of growth since a hurricane called the “Great Storm” destroyed the island's landscape in 1900, is being developed at a rapid clip. More affordable housing and less congestion have driven a construction boom in high rises, shopping malls, restaurant chains and new businesses there.

And that means higher demand for cranes of all kinds. But if you ask the folks at Lewis Equipment of Prairieland, Texas, the demand for tower cranes in particular is greater this year than it has ever been. Reno Russell, from Lewis' Sales & Marketing department, says places that traditionally were tourist spots are now home sweet home for many people.

“From Miami to San Diego, throughout the southern half of the U.S., • Florida, the Gulf Coast, Texas • they are finally starting to develop these areas as more than just vacation destinations. People are starting to live in these places now.”

Tower cranes are in high demand in these areas, says Russell, because of the lofty path development is taking: “Space is at a premium, so developers are building up instead of expanding outward.”

A storm of reconstruction

Hurricane reconstruction progress is as diverse as the areas the storms damaged when they rained down on the Gulf Coast last August and September. While several states were hard hit, except for the French Quarter and the levee system, New Orleans has managed little turnaround in the last 12 months.

“The story is different in the three states,” says Ken Simonson, chief economist for the Associated General Contractors, Inc. “Alabama quickly got back to normal. Mississippi's casinos began rebuilding as soon as they had permission to put up permanent structures, but housing is stuck in very un-repaired condition.”

And, though the tourism and infrastructure sectors look the healthiest in the Crescent City, most all other construction is still in the demolition stages. Those who have toured the city themselves say new construction in New Orleans is not even a blip on the radar.

Simonson, who got a firsthand look at the city by small plane and car this summer, says there's great diversity among the areas that have been brought back to life. “In some ways it's impressive • the levees and infrastructure for the Port of New Orleans, bridges and railroads have been repaired,” says Simonson. And, hotels, restaurants and tourist areas, including the New Orleans Convention Center, are back up and running with a lot of vigor and, hopefully, a lot of strength.

“There is progress on those fronts, but in the large residential areas almost nothing has been touched,” Simonson reports. That means thousands of houses still need to be demolished, just as many immobile vehicles wait to be towed from underneath elevated freeways, and underground utilities demand overhauling because of breakage and corrosion from salt in the water that flowed into the city. “A huge amount of work is required even before those areas can be rebuilt.”

If you're into demolition, there's plenty of work to keep you busy along the hurricane-stricken Gulf Coast • as long as you go in with your eyes wide open. The problem, say many, is a lack of organization in the rebuilding efforts. Because major pre-construction decisions have not been made, projects are stalled. Add to that the fact that many crane owners and contractors who did rush with heavy equipment have not been paid, and you understand why progress is sluggish at best.

FEMA is widely criticized for slow payment and refusal to pay for work, says Simonson. But FEMA isn't the only group on the no-pay list.

“Natural disasters bring out everything good and bad in people,” says Camile Landry of Deep South Crane & Rigging in Baton Rouge, La. Landry's family-owned business manufactures and markets giant VersaCrane lattice-boom machines for the petrochemical industry. “One of our cranes went to Slidell, La., for four weeks. We lifted a bunch of boats for a guy there, and he never paid us.”

As a result, Landry says, his company is sticking to what it knows best: the petrochemical industry. “We're anxious to serve our good customers and the people in that industry and not anything else.” One other thing his company learned the hard way: “If there were another hurricane tomorrow, I would not send a crane out afterward.”
 

Building with a southern exposure

However, many believe solid reconstruction plans are in the works, and once they gel, there will be lots of work for crane owners. While the housing construction market is experiencing a slowdown in places like Miami, it is likely to be one area where cranes will be in demand in New Orleans. Heather Jones, an economist with FMI, says that affordable housing will keep half the residents from returning to New Orleans, but the federal government is trying to help.

More affordable housing is planned, Jones says, to lure evacuees back to the city. In July the U.S. Department of Housing and Urban Development announced it would pay more than $5 billion into a program to help residents rebuild or sell houses.

To compensate for the area's hurricane-prone climate, says Larry Freckman, General Manager of ALL Crane Rental of Georgia, architects are replacing wood structures with concrete and steel, “which is good news for crane companies.” Plus, he says, new buildings are being designed with parking on the first two levels to minimize loss to homes and businesses.

According to a July article in New Orleans CityBusiness, one company proposes to start a steel plant for housing and business construction in the city. L&L Steel Builders Inc. of Prairieville, La., wants to be Louisiana's largest manufacturer of residential steel studs, joists and other framing material.

“Louisiana is traditionally a lumber state but the post-hurricane dynamic may create room for alternative products,” Jon Luther, executive vice president of the Home Builders Association of Greater New Orleans, was quoted as saying.

Last Spring, Toni Wendel of the local HBA huddled with members of the Steel Framing Alliance to talk about how steel could be used in area residential rebuilding. Alliance President Larry Williams says steel framing is resistant to mold, mildew, warping, fire and insect damage, and can withstand speeds up to 200 mph, according to the CityBusiness article.

The Alliance reports about 12,000 homes in Florida and 11,000 homes in Hawaii have been built using steel materials. But, Wendel tempers the enthusiasm for steel with reminders that steel costs a lot more than lumber, which is dropping in price this year. And, he points out, labor costs will be higher in New Orleans because workers will have to be trained to use the unfamiliar material.
 

Growing the rank and file

More critical than labor costs, though, along the hurricane-damaged areas of the Gulf Coast are labor shortages. With the mass pre- and post-storm evacuations went much of the local construction force. Because their homes were destroyed and have yet to be rebuilt, many have not returned.

AGC's Simonson reports worries that Louisiana would become a “magnet for labor” were misplaced. “Living conditions are too unappealing, and the initial displacement of 27,000 construction workers from Louisiana by Hurricane Katrina means that state has exported far more workers than it has drawn in.”

And immediately after the storms, many unaffected workers left good jobs they had to help with the reconstruction efforts. “Katrina created a lot of activity and turmoil in the labor ranks in that a lot of people (thought they) could leave what they were doing and go make decent money working for FEMA,” says Landry of Deep South Crane & Rigging.

The Business Roundtable, an association of 160 CEOs of leading U.S. companies, has proposed to rebuild the Gulf Coast construction ranks with a broad-based effort to recruit and train up to 20,000 new construction workers there by the end of 2009. The Roundtable is launching The Gulf Coast Workforce Development Initiative.

Working with local businesses, construction trade groups, labor unions, community organizations, academic institutions and federal, state and local government to reach their goal, Roundtable companies are committing $5 million for early funding to assist in recruiting participants. Funds from the U.S. Department of Labor's Pathways to Construction program and national emergency grants will be used to implement the training.

“This partnership between government and business will be a powerful catalyst for recovery in the Gulf region, retention and development of the local population, and a model for future disaster recovery,” said Riley Bechtel, chairman and CEO of the Bechtel Group, Inc., who serves as co-chairman of the Initiative.