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Layoffs, Withdrawals and Closures Belie the Strength of the Phoenix Construction Market

By Rebekah Morris for Arizona Builder’s Exchange

Go for a drive any Saturday morning through commercial construction hotspots like Downtown Tempe or between the 7s (Ave & St in Phoenix), and you’ll see crews racing through framing and other trades visible from the street. Market sectors from highways and transit to multifamily and industrial are seeing high levels of activity. Then why are companies like CSW Contractors, McGough, Turner Construction and Johnson Carlier seeing staff reductions? It’s complicated.

Bad Deals Back East

One day in last month CSW Contractors unexpectedly ceased operations, laying off approximately 200 people in the Phoenix Metro. The cause didn’t originate here locally: According the CSW executive team, via a written response to emailed questions, “Various out of state projects suffered significant challenges and remain uncollectable. CSW is currently in a wind-down phase to successfully transfer open contracts to other quality contractors as well as liquidating the assets of the company.” The statement went on to highlight the thousands of successfully completed projects locally, the hundreds of thousands of dollars raised for charities, and the employment of thousands of employees for so many years.

Acquisitions and Mergers Create Overlap

In October 2017, Big-D Construction acquired Johnson Carlier, expanding their footprint in the Phoenix market. Thursday, April 5, seven people were laid off from the firm, mostly due to overlap created in the acquisition process. Johnson Carlier continues to be active in the market however, with growth for the combined Phoenix office of Big-D and Johnson Carlier aimed at north of $200M within the next three years.

Phoenix is Good, but other Markets are Better

That could be said for the other two: Turner Construction and McGough, both of which are rumored to be withdrawing from the market. McGough appears to have merely dabbled in the Phoenix market, announcing an expansion into the Valley in August of 2015. They were successful at becoming one of the chosen three to work on the Phoenix campus of the Mayo Clinic. A representative from Mayo Clinic confirmed McGough is wrapping up a small project in May, , and they were told the company is streamlining focus on regions in the Midwest where they are strongest. The Phoenix office is no longer listed as a location on the company website, and a receptionist in the Minnesota office confirmed the office in Phoenix is closing in June, 2018.

Turner has recently landed billions (Yes, with a ‘B’.) in construction and pre-construction contracts, including the Las Vegas Convention Center, a $520M new headquarters facility for California Department of Natural Resources, and the Expansion of Denver International Airport. The current staff we’ve talked to indicates positions are plentiful in other markets, but locally the company is changing strategy and will pursue projects for national clients and a very select few local clients such as Phoenix Mesa-Gateway and Sky Harbor Airports.

An emailed response from the corporate media contact only confirmed that a staffed office in Phoenix remains and that the, “Construction industry is dynamic, staffing levels on our projects and in our regions are established to best meet the needs of our people and clients.”

Strength of the Market not in Question

The strength of the current market cannot be denied. Local construction companies have built a good backlog of contracts and demand appears to be solid across the board. Fundamentals of population and employment growth are present. Finding four companies not doing well in this local market wasn’t hard; there might even be more we’re not aware of. But don’t let that fool you for a second, the market is strong and this might even be welcome news for those who are desperate for good people; a few more candidates just hit the market.

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