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A tough year for Aspen construction industry

Scott Condon
Aspen Times
Aspen file photoWork was under way last spring on a new commercial building in downtown Aspen, but overall, construction in the city slowed to a crawl in 2009.
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ASPEN – Last year was the worst for Aspen-area construction businesses since 2001, the last time an economic slump crippled the industry, according to data tracked by the city of Aspen.

The city building department issued 575 building permits for residential and commercial projects last year. Those projects had a valuation of $68.92 million – down 60 percent from the year before, and the first time since 2002 the value of the work fell below $100 million.

“We’re all hurting, every one of us,” said Marty Schlumberger, owner of Schlumberger Construction. He has been in business in Aspen for 35 years and said he has experienced previous down cycles, but none this severe.

The recession started slowing construction activity in 2008 after banner years between 2005 and 2007. The city issued 631 building permits in 2008 for a total valuation of $170.07 million. The biggest year for the industry was 2006, when projects valued at $300.26 million were undertaken.

The slowest year this decade was 2002, when the city issued 295 permits for $56.14 million in work. That year was plagued by an ailing national economy and the fallout from 9/11.

Activity also sagged last year in unincorporated Pitkin County, but the data isn’t as complete. The county building department issued 169 permits for about $142 million in 2008. Through September last year, it had issued 96 permits for $51.26 million. Few projects were started in the fourth quarter of the year.

Steve Hansen, who started Hansen Construction more than 30 years ago, said the profit margins are thin and the competition tougher than ever for construction firms these days. He has noticed a bit more interest in the last four months, but nothing dramatic. There are a handful of new residential projects to be pursued around the Aspen area and some “significant” remodel jobs.

Hansen Construction has 35 carpenters and other workers on its payroll. A year ago at this time he employed 50 to 55 workers, he said.

Schlumberger’s firm finished three major jobs late last year. The projects were started before the recession hit and sustained him through the first year of the downturn. Now he’s scrambling for new jobs.

“We’re talking to everybody we can,” Schlumberger said Thursday afternoon as he was preparing to meet with a prospective client.

He laid off workers for the first time, letting a couple go. “We’re still afloat,” he said.

Both veterans of the construction business said they will ride out the tough times and position their firms for when the market turns. Hansen said the high demand and limited supply of housing in Aspen make it a relatively stable market.

Realistically, Hansen and Schlumberger concluded in separate interviews, the industry probably won’t bounce back strong in 2010.

Hansen said the architects he teams with don’t have much work right now. There is a “delayed reaction” that trickles down to the construction firms, he said. Since architects aren’t busy now, that means contractors won’t be busy down the road.

Schlumberger also noted a “lack of urgency” in the market. Clients wanted work to start immediately and set a tight schedule through most of this decade, he said. Not so anymore.

Schlumberger said hardest hit are the small firms that were started during the boom times this decade by guys who had worked for bigger contractors. They peeled off on their own. When the recession hit, they didn’t have reserves to fall back on.

He believes business might be even tougher in 2010, based on his talks with others in the construction industry.

“They’re not sure there’s a true direction,” Schlumberger said.

Mike Taets, president of Timberline Bank in Aspen, agreed that 2010 could be tough.

“One of the problems in construction right now is the regulatory environment,” Taets said. “The regulators really don’t want us making loans.”

Banks and the banking industry regulators want more of the old loans taken off the books before new loans are made for construction projects. That will take time.

“I wouldn’t go so far as to say it’s going to get worse. It’s just going to take a long time to get better,” Taets said.

Meanwhile, there are a few cash jobs that are sustaining the industry, or at least part of it. A fair number of workers are finding work in other fields, or they are moving. “There’s a lot of workers for very little work,” Taets said.

scondon@aspentimes.com


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