Chicago Beats the Odds: Construction Growth Despite Budgetary Headwinds

The City of Chicago has earned some bragging rights. By the end of 2017, its crane count stood at 60, bested only by Seattle. As Mayor Rahm Emanuel posted on Twitter: “Chicago’s 60th crane marks a 5x increase from 2010, when the City had 12 operating cranes. The City is also experiencing a 5-year high for building permits, with 40,000+ permits issued to date.” ELECTRICAL CONTRACTOR asked a number of ECs that serve Chicago how this activity affects them.

“I think, if you speak to a number of contractors, you’ll find varying stories,” said Mark Thomas, manager of the Electrical Contractors’ Association of City of Chicago. “It’s been a respectable market at 13.5 million man-hours in 2016 and 2017 and tracking the same this year. That’s a steady improvement from a 2010 low of 10.5 million hours but short of what I would term the real boom year of 21 million in 2001.”

Many electrical contractors that serve Chicago and greater Cook County would describe activity as healthy and solid.

“There was a pulse in the Chicago construction community after 2012 that hasn’t gone away,” said Richard Jamerson, co-president of Jamerson & Bauwens Electrical Contractors Inc., based in Northbrook, Ill. The firm averages $70 million in billing and employs 230 IBEW/NECA electricians spread out over Chicagoland’s Cook and Lake counties and downstate Champaign. It largely focuses on core and shell electrical work, pipe, feeders, panels, generator installations and the like.

Contractor outlooks are influenced by the sectors they serve, major work completed, and successful diversification of markets and services. Chicago isn’t yet being impacted by labor shortages, though contractors are worried it will come. Safe to say, the variety of work and big projects has helped make Chicago an attractive city to pursue work.

“The last five to 10 years of our healthcare core market [80 percent] was booming,” Jamerson said. “Most of our big projects have been completed [such as Ann & Robert H. Lurie Children’s Hospital, representing an estimated $100 in electrical work], but our current accounts are steady and some good projects lie ahead. Crane counts are especially good for concrete and steel contractors.”

In terms of manpower, Jamerson added, “Because we are at full employment, workers can pick and choose who to work for and move around, too. That does have an impact. Projects in Chicago also continue to have tight margins.”

The new Chicago office for McDermott Will & Emergy international law firm. Courtesy of Continental Electrical Construction Co.
The new Chicago office for McDermott Will & Emergy international law firm. Courtesy of Continental Electrical Construction Co.

One of Jamerson & Bauwens’ recently completed projects (shared with other ECs) was Northwestern Medicine Lake Forest Hospital, which opened in March 2018 in a northern suburb of Chicago. The firm also completed power and distribution work with Northwestern Medicine Prentice Women’s Hospital in Chicago.

David Witz is the owner of Continental Electrical Construction Co., based in the suburb of Oak Brook. His firm billed $175 million last year and has a labor force averaging 500–550 workers. Continental’s biggest markets are commercial interior work and data centers.

“Because our interior build-outs have tighter schedules, we’ve deployed larger crews,” Witz said. “Big crew work for us has also involved data centers, industrial projects, airport terminals and stadiums. In Chicago, the market is strong, but not the boom we are seeing in other regions, especially parts of the Southwest and Southeast.”

For Continental, mid-rises (10–15 floors) have been an opportunity. The redeveloped West Loop largely comprises such buildings. Oprah Winfrey’s Harpo Studios was a pioneer several decades back. After being sold by the television magnate, the building was torn down to make room for McDonald’s new headquarters.

According to Crain Business Chicago, at least 46 companies based in the Chicago suburbs have relocated part or all of their operations to the city.

“We have won a number of projects in the West Loop developed by the same developer of McDonald’s headquarters,” Witz said. “Two are mid-rise offices supporting McDonald’s operations. We are also working on the new boutique, 11-story Nobu Hotel and are doing interior work for several other West Loop buildings.”

Nagging challenges

David A. Hardt, president of Chicago’s Hardt Electric Inc., has felt a Chicago construction boom, but it hasn’t come without challenges for his 50-man shop.

“We largely focus on office renovation work and some residential,” Hardt said. “Ten years ago, we added photovoltaic [PV] and some wind-turbine installation. My son has joined the business helping guide—with the help of a consultant—a $1.5 million modernization of our operations. Meeting ever shorter project deadlines is one of our challenges.”

Short interval scheduling (SIS) has been one tactic the company introduced to drive efficiency and meet tighter schedules. Under SIS, an electrician lays out what he or she will do over the next three days on a job. Beyond adding clarity and organization, it can also reveal what didn’t get done and why.

“The SIS is not a penal effort but rather one that gives us insight on jobs making or not making money,” Hardt said. “In another effort, a foreman lays out an entire project, collaborating with purchasing and estimating before he steps onto a job site. For added efficiency, we also got rid of all suppliers except Graybar. Someone from their company is embedded with us at our company. He buys everything for us, which expedites the purchasing process.”

One area he has felt pricing pressure most in is solar PV installation.

A recent showcase project for Hardt Electric is a $3 million gut rehab renovation to house the Chicago home offices of Tempus, a technology company using clinical and molecular analytics in cancer research. Hardt Electric’s work included a complete install of LED lighting and controls systems.

Extending the brand

Keeping busy is one thing. Staying busy takes foresight, even in an up market. Chicago ECs have found ways both big and small to diversify.

Malko Communication Services LLC, Skokie, Ill., is a company that switched its market emphasis. Five years ago it was called Malko Electric, but it has transitioned its secondary communications business to a primary effort (70 percent). A rough commercial environment during the economic downturn drove the change.

Continental's distribution center has more than 6,000 square feet dedicated to its prefab operation, which has helped it add efficiency in meeting its busy Chicago project schedule. Courtesy of Continental Electrical Construction Co.
Continental's distribution center has more than 6,000 square feet dedicated to its prefab operation, which has helped it add efficiency in meeting its busy Chicago project schedule. Courtesy of Continental Electrical Construction Co.

“We found success in expanding a niche of our business and getting better at it,” said Steven Diamond, director of Malko Communication Services.

The firm provides installations in audiovisual, low-voltage and structured wire, security systems, distributed antenna systems, and other equipment.

“Stadiums, hospitals, high-rise buildings, schools have all been projects for us,” Diamond said. “It is a stable market right now and work is coming in at a decent level for our 60-man shop. We install in existing or newly constructed buildings. It has been a tremendous advantage for us having the EC background. It separates us from other communication installers. Low-voltage folks generally don’t understand how buildings are built or put together. We have construction technicians and communication technicians.”

Malko Communication Services has felt the pressure of the looming labor shortage.

“We are doing the best we can,” he said. “Though we hire, we have had to pass up on work if we knew we didn’t have the manpower.”

Recent spotlight projects included LED and Visio screens for the newly renovated Wrigley Field and Northwestern University’s Ryan Field House, a 100,000-square-foot multisport facility, where Malko installed a scoreboard, hundreds of LED screens and a complete sound system.

Three years ago, Jamerson & Bauwens entered a new market—food and beverage processing.

“We do the line work including a bottling company where we will help them change ‘the line,’ which requires wiring controls and conveyors,” Jamerson said. “It’s a different market and different markup that is better than healthcare, which remains our emphasis.”

The firm has won work in the higher education sector, recently completing a digital, wirelessly lit platform for classrooms at North Park University in Chicago. The firm is starting to bid on public works as well, such as bridges and other infrastructure, and developed a maintenance program for its customers.

Meanwhile, Continental has gone all-in on prefab construction. The company’s distribution center has more than 6,000 square feet dedicated to its prefab operation, enabling the company to manufacture assemblies for projects off-site in a controlled environment to ensure quality and save construction time at the job site.

“Our prefab shop is a major investment,” Witz said. “We’ve been in it for 10 years, giving us a new skill set as a manufacturer. We also use building information modeling on almost every job, have invested in Leica 3-D scanners, Trimble laser precision surveyors, and Microsoft’s augmented-reality goggles.”

Continental’s alternative-power division is robustly growing, as well. Its solar work has doubled each year over the last six. Work from 50-kilowatt to megawatt utility-grade installations has evolved to include solar battery storage, smart grid and maybe community solar. The firm is regularly installing electric vehicle chargers throughout the city, as well.

Chicago is expected to keep the construction community busy with exciting projects in the pipeline, including a planned $8.5 billion expansion of O’Hare airport, the Wacker Drive Bank of America office tower, and continued redevelopment of the city’s riverfront, to name a few. ECs will play their part, viewing crane count as a metaphor for a city that is open for business.

About the Author

Jeff Gavin

Freelance Writer

Jeff Gavin, Gavo Communications, is a LEED Green Associate providing marketing services for the energy, construction, and urban planning industries. He can be reached at gavo7@comcast.net.

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