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Thursday, Oct 6, 2022
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S.D. Companies Building Overseas Portfolios

Overseas construction projects have been crucial to some locally based firms as they weather San Diego County’s lingering slowdown in most building sectors.

And there could be more work to come inside and outside the United States in the next decade. A report commissioned by the consulting firm PricewaterhouseCoopers LLP predicts global construction will grow 67 percent — from $7.2 trillion today to $12 trillion by 2020.

Growth in China, India and the U.S. is expected to spur more than half the increase, with China and India driving much of the growth in emerging markets thanks to rising populations and rapid urbanization.

“Construction will become one of the exciting global growth industries of the next decade, driven by emerging markets and the U.S. rebound,” said Neil Blake, director of economic analysis at research firm Oxford Economics Ltd., in a statement accompanying the March 3 release of the PwC report.

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The report is based on research by Oxford Economics and consulting firm Global Construction Perspectives Ltd. It notes that China, boosted by its government’s stimulus spending, overtook the U.S. in 2010 to become the world’s largest construction market.

Researchers predict that China’s construction market will more than double in size during the next decade to $2.5 trillion, or 21 percent of world construction.

As the recession squelched Southern California projects the last three years, companies such as San Diego-based McCullough Landscape Architecture Inc. were able to capitalize on China’s construction boom.

The company in October completed landscape design work for a 200-acre amusement park being developed in the Chinese province of Fushun. Working with The Goddard Group, a noted Los Angeles-based designer of theme parks around the globe, McCullough oversaw landscaping elements for Fushun Dream World’s high-rise hotel, shopping district, water park and five theme-specific neighborhoods.

Good Timing

The firm’s principal, David McCullough, said the amusement park work brought in around $300,000 and proved important at a time when local construction jobs are far from rebounding to pre-recession levels. His company is cautiously weighing future opportunities in burgeoning China.

“You have to be really careful about the projects you take on, and making sure that it will be worth the time you will be investing,” McCullough said. For instance, government approvals in China move forward at lightning speed compared with the U.S., but that also could mean making unplanned revisions later to designs and contracts if problems arise during construction.

“If you go in knowing how the processes work in China, you should be OK, but the scheduling and the construction processes are very different from what they are in the United States,” McCullough said.

Australia native Pauly De Bartolo came to San Diego in 2005 when his employer, an Australian architectural firm, decided to establish its first U.S. presence. When the California building boom went bust and the firm exited the local market, De Bartolo and a colleague, Ivan Rimanic, decided to stay in San Diego and establish their own firm.

De Bartolo Rimanic Design Studio was able to get work on three large local condo developments, but those types of projects dried up during the Great Recession.

During the past two years, the firm has been able to supplement local work with a small but steady flow of projects in Australia and China, including housing as well as government and commercial office buildings. It also worked with McCullough’s firm on the Chinese amusement park.

Opportunities and Challenges

Experts caution that overseas work brings serious challenges along with the opportunities, especially for small and medium-sized firms that are not affiliated with multinational companies as subcontractors.

Yehudi Gaffen, chief executive officer of San Diego-based Gafcon, said his construction consulting firm in past years has done work in places including Japan, Abu Dhabi and South Africa, but had limited results in establishing steady project flows.

The firm is now focused on Southern California projects in the public sector, including education and health care, although the local competitive climate is expected to remain tough for at least two more years.

“When you go up against players in foreign markets, they know the local scene and know how to work those local systems,” Gaffen said. “It’s very tough to sustain a presence if you’re not already a part of that community.”

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