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Construction behemoth Skanska sees potential in Indy: U.S. division of Swedish-based company sets sights on health care, education, pharmaceutical building sectors

May 26, 2008

New Jersey-based Skanska USA Building Inc., a division of the $23 billion Swedish construction powerhouse Skanska AB, arrived in Indianapolis in April.

Named last year as the top green contractor in the nation by Engineering News-Record magazine, Skanska USA is recognized in particular for its projects in the health care, higher education and pharmaceutical sectors. Its largest project, however, is the $998 million Meadowlands football stadium under construction in New Jersey.

Locally, Terry Parrott, 50, is in charge of operations. The Evansville native and Purdue University graduate is a former executive vice president of Indianapolisbased Smoot Construction LLC. From a temporary office in the Precedent office park, he recently sat down with IBJ to shed some light on Skanska and its work.

IBJ: What led Skanska to open an office in Indianapolis?

PARROTT: Indianapolis has always been a very progressive city, if you look at what they've done in light of other cities, especially Midwestern cities. They've gone out and built the first new airport since 9/11. In a way they are leading, I think, the Midwest in their innovation in trying to draw companies in the life sciences. It's got a lot of growth potential.

With [Eli] Lilly [and Co.] here and the IU Med School here-some of our core markets are health care, life sciences, pharma and higher ed. And everything that is progressive and peaking in Indiana really matches our core competency and what we're after.

And it's a great location, in the fact that it's centrally located in the Midwest. It's got great road access in every direction, so it allows us to reach out to the Fort Waynes, to the Cincinnatis, to other areas also. So it's more than just Indianapolis; it's also Indiana.

IBJ: What is the outlook for the local office, in terms of growth potential and number of employees?

PARROTT: Obviously, it would depend on what kind of work we pick up in the near future. But we're looking at somewhere around 20 professional-type people here within the first year and growing to 100, and I'm only talking about professional people, not tradesmen.

We would like to consider ourselves a city builder. We have a civil group. We can do the roads, the bridges, the highways, the sewers and the pipelines. The hospital, or the infrastructure of any building, we have those capabilities to do that. So it's really a full-service city provider. And Indianapolis is a very progressive-thinking area. Indianapolis is growing leaps and bounds and has over the past 10 years.

IBJ: With a focus on the health care and pharmaceutical sectors, what types of projects are you looking to land?

PARROTT: One of the large markets that we're likely to get into is health care: hospital expansions, additions, renovations. That's always been a mainstay.

There's a misconception that we find with clients that we're such a large company they say, 'Look, if it's not a $100 million job, are you guys even interested?' Our average job is still $10 million. We are more client-based than we are project-based, so we will deal constantly with a health care system, or a provider, or a hospital. And we'd like to be the person they call every day. That's how our company was built. That's our mentality.

IBJ: Has Skanska landed any local clients and projects yet and, if so, who and what are they?

PARROTT: Have we done work for, let's use Lilly for example? We've done work for Lilly throughout the world. Are we doing one locally right here for them? No, not right now. Not quite yet.

We do have some jobs up at [the University of ] Notre Dame that we're doing right now. We are progressively pursuing additional work from a health care standpoint. But, you know, a lot of people would open an office by going and getting a job and opening an office from that. We're saying we're coming to the community. We don't have a job. This is our home. We're going to create this just like it's our home. Then we're going to go pursue the work. We're definitely doing that.

When we talk about retail, we have done work in Indiana. This is not new. We've done many retail jobs here. We've done health care here. We've worked for Clarian [Health] before. So a lot of the clients already exist.

Surprisingly, the Skanska name in the Midwest and Indiana is not well-known. A lot of people are saying, 'We just don't know.' Then you tell them who we are and what [our] capabilities are and they say, 'Wow, we didn't know that.' So we need to do a better job of branding and name recognition, and getting it out.

IBJ: What sets Skanska apart from local developer Duke Realty Corp. and its Bremner health care real estate division, and other competitors?

PARROTT: Obviously, I think the expertise, not only local that we can bring, but what we have learned through other architectural firms, through the other design firms, through the other owners. We bring all that expertise together.

The other is just our sheer size financially. We're a very strong financial company. We have some buying power through the fact that we buy nationally and worldwide. We have bulk-buying and commodity-buying [capabilities] that we can bring that can improve prices that some of the maybe smaller or other contractors here may not be able to take as much of an advantage of.

We are going to implement a designbuild-finance [system], because of our financial strength. We would like to come back and promote that with the [lack of] availability of money through the bond market and everything else. That is just a constant problem throughout the United States right now, anyway. So, we can design it, we will build it, we will finance it. And we can even lease it back to you over time, or we can sell it back to you at the end of the job. But we would take care of the whole process, so it's almost a one-stop-shopping type. And that's a different concept in the United States and what's typically done in the Midwest.

IBJ: The announcement of Skanska's arrival in Indianapolis mentions the state's growing construction markets. What makes Indiana so attractive?

PARROTT: We have a very knowledgeable work force here. If you look at the tradesmen, they're well-educated, very good-quality tradesmen. You don't see that in all parts of the country. But Indianapolis has a good supply of young engineers from the universities here. The tradesmen are educated and very welltrained. So it's not like we're going somewhere where we can't find the work force to do the quality of construction that we expect. Plus, for me, it's home.

If you look at the long-range planning that Indianapolis and Indiana have done, I think they're way ahead of the curve than many of our Midwestern states. And I think that we're going to be a leader in the industry with some of our clients that are here. And it's going to start in health care. We in Indiana are going to lead the green industry in the Midwest.

IBJ: How strong is commercial construction activity, amid a weak economy and slowdown in residential building?

PARROTT: They're really two different markets. I'm not sure you can tie the two very closely together.

As the community and baby boomers get older, health care is a growing market. The need for higher education and the specialization they have-nano-technologies at Purdue University, and the pharmaceuticals at Butler and Purdue, and the medical school at Indiana-you've got it all right here. Indiana and Indianapolis are set up for the growing markets that are coming. It's just an ideal situation.

We do retail work, but that's not one of our core groups. If you look at Indianapolis, we have some companies here, the Dukes and the Lauths, and some of those. That's their market. It's not ours so much, even though we have retail groups that do those. We've done retail jobs in Indiana, but our specialty right now is health care, higher ed, pharmaceutical, industrial.

IBJ: Do you see signs of a rebound?

PARROTT: You go through cycles. You see more projects coming out during certain times of the year. We still see the forecast and the growth in health care being there. It's been a steady growth market, and we don't see it changing. There may be slowdowns. But we don't see that it's going to slow down here.

Is the economy going to rebound, United States-wide and worldwide? It's going to have to. It can't keep going down; it's gotta come back. We can see it on the coasts, too. They're picking up some. Sometimes the Midwest is a little slower to react.

IBJ: How did Skanska earn the distinction from Engineering-News Record magazine as the top green contractor in the nation?

PARROTT: [Providence Newberg Medical Center in Oregon] is the only [LEED-certified] gold hospital in the nation. I drive a hybrid car, and I drive that every day, so it is the culture. I think a lot of that is driven by the fact that we are in other areas where it's been more prevalent all this time, being overseas and on the coasts. It is coming. We as a society have to make some changes.

We are committed to it. We are committed to green. We know what it is; we know what it costs; we know how to implement it; we know the most efficient ways to implement it. And that's what we're gonna bring. If you keep that mentality-so many times, being here in the Midwest, you talk about it a lot, but I don't think anybody ever understood what it was. I'd meet with clients and they would say, 'That's all good, but how much is it gonna cost me? I can't afford to do that today.'

It can be done without a tremendous amount of extra cost. There are a lot of things that can be done green-wise that don't have to run the price up on a project. You're only going to know that from experience. We do that.
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