With $1 billion in local projects over the past 20 years, McCarthy Building Companies Inc. isn’t exactly a stranger to Silicon Valley. But the general contractor has never had an office in the South Bay — until now.
The St. Louis, Mo.-based general contractor signed a lease last week for a 7,000-square-foot regional office at 2665 North First St. in San Jose. The deal comes as McCarthy‘s book of business here blossoms, with major projects under way for Irvine Company, Stanford University andApple Inc.
“We’ve been down there for the last 20 years, but we project our growth to increase pretty significantly in next five, and we want to be closer to our clients and architects,” said Paul Erb, a veteran ofMcCarthy‘s San Francisco office who will lead the San Jose outpost.
McCarthy, which also has an office in Sacramento, is not alone in planting its flag in Silicon Valley’s increasingly crowded general contractor landscape.
In December, Phoenix-based Sundt Construction opened a North San Jose office (read more here). Los Angeles-based C.W. Driver arrived in early 2012with an office in San Mateo County. Sunnyvale-based Level 10 Construction, a home-grown offshoot of Jay Paul Co., is also morphing into a significant player in private work, having won the Facebook campus last year. And L.A.-based Matt Construction also made waves by securing the Nvidia campus in Santa Clara.
Martin R. Shapan, managing director for recruiting firm Kaye/Bassman International Corp., said it’s not surprising that general contractors with strong ambitions in the region would feel compelled to lock down their own brick and mortar.
“There’s a perception that if you don’t have a shingle out, a storefront, that you aren’t really committed to that market,” Shapan said. “So to really seriously pursue work down there, a lot of contractors think it helps to have a storefront to build relationships with the subs that work in that market, the architects and owners.”
The activity is being driven by very strong construction activity here, as tech companies build out huge projects and developers gamble on speculative deals, Shapan noted. As of the end of February, contracts have been awarded for $173.7 million worth of future commercial projects in Santa Clara and San Benito counties, according to McGraw Hill Construction. That is a 72 percent increase over the same period last year.
“A lot of folks are chasing after the work down there,” he said. “I wonder, are these guys coming to the market late? In other words, all this work in the South Bay, are we on the tail end of the wave? I don’t know the answer to that.”
Erb, however, said there’s plenty of work to go around. He noted that the tech expansions are bringing in many more new residents, who over time will require new schools, hospitals and other facilities. That will create a construction virtuous cycle that should keep contractors busy for a while.
“The area is projected to see from $3 billion to $5 billion worth of work per year for the next five years,” he said.
Erb said his office will focus on McCarthy‘s traditional strengths of healthcare, K-12 and higher education, and office. In addition, McCarthty is targeting niches in solar, wastewater treatement plans and parking structures.
As for the latter, McCarthy has a major calling card in the works, having won the contract for a massive parking structure as part of Apple Campus 2 in Cupertino. The Business Journalpreviously reported the award, though McCarthy officials are unable to discuss the project.
“San Jose, as it grows as a city, and Santa Clara as it grows its office complexes, they’re losing that surface parking,” Erb said.
Other projects currently under way include a new parking structure for Irvine Company at its speculative Santa Clara Square office campus, lab renovations and new housing facilities at Stanford University, and (in a joint venture with Clark Construction) the new Stanford Hospital in Palo Alto.
Completed projects include Santa Clara Valley Medical Specialty Center in San Jose, Veterans Affairs Palo Alto Health Care System Mental Health Center, College of San Mateo Integrated Science Center and Planetarium, Maxim Headquarters in Sunnyvale, and the Nadev Printing Facility in Fremont.
According to the Business Journal’s General Contractors List, McCarthy posted $94.5 million in revenue in Silicon Valley in 2013. Erb said this year looks to be in line with that figure.
The office, which will open in May, will have room for up to 30 employees but will start with just shy of 10. The office will offer pre-construction and construction-phase services.
“Then we want to maintain a pretty aggressive on-boarding strategy — drawing from people within McCarthy as well as external folks we hire from outside McCarthy over the next year so we can ramp up,” he said.
McCarthy was represented by Josh Gispan of San Jose-based Meacham/Oppenheimer CORFAC International and Barry Bram with San Francisco-based TRI Commercial/CORFAC International. The building owner was represented by Don Lonsinger and Mark Christierson of CBRE. The property is managed by Borelli Investment Co.