Portland-metro subcontractors hunt for work

General contractors say they’re seeing strong interest from subcontractors in bids for construction projects as the pipeline for work begins to slow.

Deacon Construction recently put out a request for sub-bids to build a flexible commercial structure for the Port of Kalama in southern Washington. The job attracted more than 400 sub-bidders, said Chip Laizure, Deacon’s vice president of business development. A sub-bid of that type would typically attract fewer than 100 sub-bidders, he said.

“They need work,” Laizure said. “The backlog is dropping off for these guys.”

Interest rates are playing an outsized role, construction executives said. The Federal Reserve began raising interest rates in March 2022 to cool inflation. Since then, the federal funds rate has climbed from near zero to more than 5 percent. That has made project financing much more expensive, discouraging parties from breaking ground on new projects.

As projects that were begun in a lower-interest-rate environment wrap up, subcontractors face a tougher fight for the next wave of work.

“There is a little bit of backlog that was kind of secured a couple of years ago or a year ago,” said Damon Jeffrey, design phase director for Mortenson ’s Portland office. “Subcontractors are starting to work through that backlog. They’re looking at the wave cresting and they’re looking at their next opportunities.”

The construction outlook varies greatly by sector. While office and multifamily projects are few, industrial, data center and infrastructure jobs are more plentiful. Hospitality is also hot in certain markets as tourism booms.

New office projects have largely disappeared since the COVID-19 pandemic took hold, flooding the market with excess inventory.

At the same time, residential construction has slowed to a trickle. Local governments permitted 3,666 housing units through May in the Portland-Vancouver-Hillsboro metropolitan statistical area, according to census data. That was down 34 percent from the same period a year ago.

Single-family construction grew, but multifamily construction dropped sharply. The number of buildings permitted with five units or more fell 56 percent to 38.

Urban commercial construction also appears to be in a slowdown. Commercial permits issued in the city of Portland fell 13 percent in 2024 through Tuesday. Permit intakes were off by 1 percent.

To be sure, the overall outlook for the construction industry is hardly doom and gloom. Engineering and construction spending nationwide is expected to rise 6 percent this year, according to industry analyst FMI.

But general contractors said they’re seeing more proactive communication from subcontractors.

“We’re getting a lot more unsolicited requests,” Jeffrey said. “It’s more of a normal market rather than when the subcontractors were so busy that we were having trouble getting their attention, and not necessarily where it’s so dire that they don’t have any work and they’re on the cusp of being financially unviable. It’s more of a healthy back-and-forth dialogue, where we’re seeing a good amount of participation, a good amount of attention.”

Locally, Mortenson is engaged on projects such as the Hillsboro Hops ballpark and the Portland Art Museum ’s Rothko Pavilion renovation.

While office and multifamily work has slowed dramatically, certain sectors, including chipmaking and advanced manufacturing, are seeing robust growth.

“What we’re seeing right now is a lot of activity in the advanced manufacturing and data center space,” Jeffrey said. “There’s a lot of desire for that type of work.”

Subcontractors are adjusting.

“There’s still stuff to bid,” said Bill Ellis, president of Whitaker/Ellis , a concrete contractor based in Portland. But, he added, project budgets are being scrutinized. “From the owner’s standpoint, they’re a little hesitant to pull the trigger,” he said.

Established subcontractors are accustomed to the cyclical nature of the construction industry, Ellis said.

“It’s off from previous years, but I think the subcontractors that have a good workforce can kind of weather the storm,” he said.

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