With few new business projects in the works, competition for
what little is out there is growing fierce, according to
electrical contractors. They point to the combination of tight
credit availability and lack of confidence in the economy for
"a precipitous drop" in commercial, industrial and
institutional construction projects, and in turn for the
conduit used in the projects.
"We started to see the commercial and industrial
construction market really start to weaken in December or
January to the point that we are now doing about 50 percent of
the business that we were doing last year across the board,"
Dan O'Brien, president of Current Electrical Construction Co.
in Portland, Ore., said. "I think there is still some pent-up
demand out there, but until money starts flowing again we will
have some serious issues. We had been going great guns through
the end of December with a number of projects in hand, and then
it slowed. A number of buildings that we were going to build
were canceled, largely due to credit issues."
Terry Cole, president of Hamer Electric Inc., Longview,
Wash., agreed. "There are businesses that want to build but
can't because they can't get credit. It is amazing how many
projects have been put on hold or were canceled altogether
because they couldn't get a loan or because their market has
essentially gone away."
The roots of the problem actually extend to the housing
market, even though housing uses little conduit in most regions
of the country, he said. "If someone loses their house or a
job, they can't afford luxury items, so what happened in the
housing market eventually affected retail sales and
construction of retail space. And what happens to the retail
market affects the industrial market. It is a snowball effect,
and one that at this point has affected everything in the
Thomas Anderson, executive vice president of Bergelectric
Corp., Escondido, Calif., noted that commercial construction
has been especially hard hit, falling about 70 percent year on
year. Industrial construction is down a lesser, but still very
steep, 30 percent. "I think the decline in commercial
construction is a reflection of the financial state of
consumers and of consumer confidence," he said.
Anderson described manufacturing projects as "few and far
between" and construction demand overall as slow. "We are
finishing up some projects that were begun or planned before
2007, but we are seeing very few new projects being started up
and a number of projects that have already begun now being
canceled," he said. "One big shock was the Ritz-Carlton Palm
Desert Hotel, which just stopped construction after being about
90-percent complete because it lost its financing."
However, some sectors are faring better than others. O'Brien
pointed to a lot of school projects that are being bid on, "but
these are mostly remodeling projects, not full-blown new
projects." There also continues to be demand for other
municipal projects, like wastewater treatment plants and
hospitals, which generally are perceived as less risky and,
therefore, more likely able to secure funding.
Cole noted that these also are areas that likely will be
helped by the American Recovery and Reinvestment Act, which he
is hopeful will give the industry the push it needs to start
things going again. Despite governmental efforts, there is
little evidence that credit is starting to flow any freer, he
said. In fact, there have been some reports that banks have
become more restrictive in their lending practices.
"Right now there are government projects that have been
sitting on the books for 10 years because they have not been
funded, but now with the economic stimulus monies they are
viable options," Cole said. "Once these projects go forward,
that should help to prop up the economy and bring other
business with it. I think the public sector will pull up the
private sector and we should all see an increase of
But this will take time, Anderson warned. "It will likely be
well into 2010 that some of these projects being funded by the
economic stimulus program will roll out, and many of them will
be for things like roads and bridges that use very little
In fact, he said there could be a black hole for
construction projects-and conduit demand-starting sometime next
year once the current backlog of existing projects is worked
down, given that there aren't many new projects available to
take their place. The earliest the industry will likely see a
strong commercial construction economy will be 2011, he
O'Brien was more grim in his estimate, saying the market
will unlikely be back to last year's level for another four or
In the meantime, Cole said everyone is living off their
backlogs, and competition for the few jobs that are out there
is getting ever more fierce. "There used to be four to six bids
for each job. Now we see 14 to 20," he said. "But I think we
have been through the worst of it. I think we are hitting
bottom and starting to come out of it now."
The contractors acknowledge that the current business
environment hasn't been hard just for them, but for everyone in
the supply chain including the conduit producers, especially
given the diminished prices for their product.
"But I am not worried about any of the major conduit
producers failing," Anderson said. "When world demand rises,
the cost of conduit and other commodities double. When it
falls, costs are cut in half. I believe our suppliers will be
there when it picks up again."