Cumming’s Work Builds with Recovery

Cumming's Work Builds with RecoverySan Diego Business Journal

By Lou Hirsh

Much of the work of Cumming Corp. is finished long before most of its clients’ construction projects begin sprouting from the ground. But an improving economy is spurring the San Diego-based company to brace itself to serve rising demand for its pre-construction project and cost management services.

The company, which operates from 19 U.S. offices and one in Abu Dhabi, recently announced that it is moving its existing operations at four locations into larger, more collaboration-friendly office spaces this year — first in Orange County, and later in Los Angeles, San Francisco and Washington, D.C.

Company President Peter Heald said the 17-year-old company has seen a significant rise in demand for its services tied to commercial projects — particularly those in the hospitality, government, education and health care sectors — since the company shifted its headquarters from Orange County to a larger facility in the Carmel Mountain Ranch neighborhood in 2011.

The Aliso Viejo office on its own saw revenue growth of 15 percent during the past year, and Southern California as a whole contributed a big share of the company’s $50 million in companywide revenue tied to more than $4 billion worth of construction projects during 2012.

The privately held company currently employs 250, including a net 22 new employees added in 2012. Heald said Cumming this year had made a net eight new hires through the end of April, and was expecting to end 2013 with more new people added than in 2012.

“We’re very bullish on our work prospects, and we believe we are very well poised to capitalize on this improving market,” Heald said.

Reasons for Optimism

He said his reasons for optimism include continued national growth in specialty sectors, such as construction of corporate headquarters, science and technology research labs, and semiconductor manufacturing facilities. In the San Francisco area, for instance, it has recently provided cost and pre-construction services for a new headquarters campus being built by social media titan Facebook.

In the San Diego County market, it’s been involved in projects including several at Marine Corps Base Camp Pendleton, an upcoming new student health and counseling building at Cal State San Marcos, the recently opened Viejas Hotel next to tribal gaming operations in Alpine, and the public square park being developed adjacent to Westfield Horton Plaza in downtown San Diego.

There are other current and upcoming projects nationwide in hotel and gaming sites, community college expansions, and student housing at several universities. Heald said Cumming has recently worked on Disney’s new theme park in the works in Shanghai, and other parks operated by Universal Studios.

According to the industry research firm IBISWorld Inc., the pre-construction services sector is still recuperating nationally from the severe curtailment in commercial and residential projects that occurred during and after the Great Recession, especially in the 2009-11 period.

The sector — which includes cost estimators, designers, engineers and related service providers — saw revenue decline an average 7.2 percent annually from 2007 to 2012, reaching $11.8 billion. IBISWorld projects revenue will grow an average of 4.3 percent annually over the next five years, to $14.5 billion in 2017.

In addition to a large number of smaller rivals, Cumming Corp. competes nationally and globally with large players such as Jacobs Engineering Group of Pasadena, AECOM Technology Corp. of Los Angeles, and URS Corp. of San Francisco.

Outsourcing Trend to Continue

Eben Jose, an industry research analyst with IBISWorld, said firms with cost-management and related pre-construction expertise have generally seen demand for their services rising since the downturn, as contractors cut back on staffing and outsourced certain consulting services.

The trend is likely to continue for the foreseeable future, as firms hold back on permanent hiring and address their planning needs on a project-by-project basis. “The larger construction firms might take more of these services in-house over time, but the smaller companies will probably continue to outsource,” Jose said.

Jose said that as the economy improves, pre-construction service providers will likely see a rise in private construction project work, which would help offset reductions in public projects over time, as government funding declines amid budget cutting.

Currently, the U.S. pre-construction services sector relies on institutional developers, including those involved in the building of education facilities and hospitals, for 42.6 percent of its annual revenue, according to IBISWorld. About 25 percent comes from commercial and industrial projects, with 19 percent from single- and multifamily residential construction.

Heald said the recent passage of several bond issues in California and elsewhere has helped clear the way for educational and government construction projects to move forward, and will keep his firm busy for the next several months.

He said continuing budget-mindedness in both the public and private sectors should keep cost-related issues in the forefront of construction planning.

“As a customer advocate, we are very aware that the client wants to make every penny count on every project,” Heald said.