New CEO takes helm at Mortenson amid construction industry challenges

The new CEO of M.A. Mortenson Co. — one of the nation’s largest construction companies — will face a host of challenges in a lukewarm construction market.

Derek Cunz is stepping in to run the 70-year-old family business after current CEO Dan Johnson retires at year’s end.

Golden Valley-based Mortenson is a heavyweight in the industry, building everything from stadiums to hospitals to renewable energy power plants.

Cunz faces many challenges given the changes and market conditions in the industry. Some sectors are slumping, costs for labor and materials have increased, and high interest rates have been challenging.

“The industry is going through a bit of a slowdown. Interest rates have made it more difficult for developers to make projects work,” said Andrew Babula, director of the real estate program at the University of St. Thomas.

Golden Valley-based Mortenson Co. has more than 7,000 employees with offices in 13 U.S. cities. The company expects revenue of $6 billion this year.

“About a third of our business right now is the commercial markets, which are the traditional health care, higher education, hospitality [projects]. That’s typically been a much higher percentage, but obviously, with the high cost of construction, the high interest rates, those commercial markets are depressed right now,” Johnson said.

The renewable energy market — solar and wind farms — is booming, as is the data center business.

Those two sectors account for the other two-thirds of Mortenson, which is constructing a $700 million data center project for Meta in Rosemount. Rebounding health care has been a source of strength. Mortenson is building Allina Health’s expansion of Abbott Northwestern Hospital in south Minneapolis.

”After the financial strain on health care of COVID and three years of difficulty the health care market is stabilized,” said David Mortenson, Mortenson’s chairman.

”We’re seeing a little bit more activity in the health care market and a little bit more activity on university campuses. We do have some corporate customers who are continuing to expand and invest, but very selectively,” Mortenson said.

Sports arenas continue to be a growth opportunity for Mortenson, which has built U.S. Bank Stadium, Allegiant Stadium in Las Vegas and Citypark Stadium in St. Louis.

“There’s definitely pent-up demand in the sports marketplace,” Cunz said.

Looking ahead, Mortenson was selected as the development partner for the first phase of the Minnesota Innovation Exchange on the eastern edge of the University of Minnesota campus. The project, which includes commercial, residential and retail, calls for developing 3 million square feet over the next 15 to 20 years.

Pat Mascia, managing director for the University of Minnesota Foundation Real Estate Advisors, said that Mortenson’s advantage is “their ability to deliver on complex projects, both on the development and construction side.”

M.A. “Mort” Mortenson Jr. spent nearly 50 years leading and building the company. He died in 2019 at the age of 82. David Mortenson is the son of M.A. Mortenson Jr.