The head of the U.S. arm of international construction giant Skanska remains bullish despite tremors in the global economy.
Rich Cavallaro, CEO of Skanska USA, said the U.S. construction industry should be buoyed in part by public works projects in ground transportation, aviation, the medical sector and higher education.
In Atlanta, Skanska recently won the job to build 3400 Overton, a seven-story office building near SunTrust Park in Cobb County, and is part of joint venture involved in a domestic terminal update at Hartsfield-Jackson International Airport.
In a brief interview at the recent National Association of Real Estate Editors conference in New Orleans, Cavallaro talked about his company’s plans in Atlanta, the national construction outlook and his view on the value of U.S. infrastructure. The conversation is edited for clarity and length.
Q: Where are you seeing the opportunities?
A: If you look across the country, aviation is a big one and we have some aviation work going on at Hartsfield. We also have eight or nine airports going on now. In general, airports are hot, airlines are flush with cash. Fuel is cheap — and it’s a huge part of their costs — and I haven’t seen any reductions in my ticket costs, I’m sure you haven’t either. It’s good to see they’re re-investing in airports. They desperately need it.
Q: And the Atlanta airport is teeing up billions of dollars more in construction (as part of a long-range master plan)…
A: We really are focused on aviation as an opportunity for us because we have the skill sets, we’re organized right to take advantage of it and not everybody can do aviation work. We have a new office building (in Cobb) that you know about for sure and hospitals are a great market sector for us. We are doing a lot of hospital work. We’re working for the Marriott Marquis (in downtown Atlanta). They’ve been another great customer of ours.
Q: In Atlanta, we’re talking about a mass transit referendum (to expand MARTA), are you seeing a rise in transit-oriented development or new transit infrastructure projects?
A: In general, I don’t know that I can specifically talk about Atlanta, but it’s interesting what’s happening, they’re turning these deals into almost real estate deals. A developer might end up with a real estate deal serviced by a station but he has to end up building the station. They get somewhat complicated, but they’re very interesting deals. We have a big one in New York right now, it’s going to be the new (station serving the Empire State Building)… We see a lot of this joint development… I think for a long time out our transportation wasn’t quite organized. If you go to Europe, if there’s a train station, there’s a city around it. For a long time, nobody wanted to live near the train station in the U.S., but that’s changing. It goes to the trend that people want to live in the cities again, they’re coming in from the suburbs. Transit across the country has been very active.
Q: The U.S. economy is hanging on and metro Atlanta is doing well, but we’re seeing slowing in Europe and China …
A: We feel good. We’re bullish on the U.S. business. First of all it is gigantic. There has been a move to bigger and more complicated projects, which plays to our abilities. We really are bullish on it. We always talk about how energy (prices) have negatively affected the economy, but in a lot of ways, it’s actually impacted it positively. Like the airlines being flush with cash and trucking firms and anybody who uses energy in their process has money.
Q: You’re giving a speech today (at a NAREE luncheon), what’s the message you plan to deliver?
We need to improve our infrastructure. You say, ‘Infrastructure is a mess and we need to upgrade it for sure,’ but what it does is it unlocks everything else. If you want to build a residential tower and there are no schools or hospitals or utilities or power, you’re not going to put up a residential tower. It unlocks so much. It’s sort of like the early investment you make that everything will follow.
Q: Georgia is in general is getting more into the (public-private partnership) world, it’s getting started in transportation and higher education projects. It’s a big part of your business. Are you watching that?
A: The Triple-P business is a flourishing business and there are more opportunities than we can chase. First of all, they’re very expensive to bid and you have to have a high win rate… On the infrastructure side there’s tons of it, more than we can possibly bid in a year. That’s exciting for us and I think that’s important for the country. We have these infrastructure needs that we just can’t pay for, and there’s all this private money on the sidelines looking for a place to invest. You can’t get a return from the banks … you have all these pension funds that have all the responsibility to deliver 3, 5 or 7 percent interest on their funds and they’re all looking for a place to invest. What better place to invest than in the infrastructure of the U.S.? And that will open the doors for investment in all the private stuff that will bolt on to great infrastructure.
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