A Week of Mixed News for the Pittsburgh Construction Market

The title of this post is a bit misleading. The past week was something of a tidal wave of good news that was doused by one bit of very bad news. Rather than burying the lede, let’s start with the bad news: U.S. Steel cancelled its billion-dollar upgrade to the Mon Valley Works. The project involved a $250 million cogeneration plant at the Clairton Coke Works and a billion-dollar new rolling mill at the Edgar Thomson Works in Braddock. You can read the labor/industry reaction here and some of the environmentalists reactions here, or read some of both here. For the construction industry, the project’s end means the loss of about 1,000 construction jobs over the next two years. There are lots of other mega projects in the pipeline, so those jobs lost might not be felt; however, the decision to cancel the project sends a chill through the Mon Valley. There is a precedent for that.

U.S. Steel’s CEO, Dave Burritt, said the right things when announcing the decision. He took a couple shots at the state and county for dragging out permitting but mainly blamed the changing global markets and need to de-carbonize as the drivers of the decision. He also committed to steel-making in the Mon Valley. For residents who lived in the Mon Valley in the 1980s, that probably sounds eerily similar to what David Roderick said then about the mills that were closed a few years later. Perhaps the outcome will be different. It is quite feasible that Burritt will be standing in Braddock in a year or two announcing that conditions allow for reinvestment after all, or at least announcing a smaller-scale reinvestment. Regardless of what the future holds, the decision isn’t great for construction or the economy in the Mon Valley.

Now on to the good news. The big news last week was the first estimate of gross domestic product (GDP) growth, which was an annualized 6.4%. Revived demand, driven by vaccinations and government checks, pushed consumer spending and business investment much higher than expected. Consumers increased spending by 10.7% and business investment jumped 9.9%. The latter is especially encouraging because business investment had been steadily falling since mid-2019 in anticipation of an end to the cyclical boom in 2020 or 2021. COVID-19 was not what businesses were anticipating. The U.S. government’s responses, especially since the end of 2020, have allowed businesses to keep dry powder and consumers to boost personal savings rates to 27.6%. Stocks are at record levels, so publicly-traded corporations also have lots of working capital in reserve. After the sharp rise in the first quarter, total GDP stands just 1% below the record-high levels of the end of 2019.

Economists seem to think that good economic news was going to shoot construction much higher in March than what occurred. The Census Bureau report on total U.S. construction spending came out May 3. It showed spending was basically flat from February to March, rising only $4 billion to $1.513 trillion. Economists had forecasted an increase of 1.2%. The rationale for the increase must have been tied to the robust economic growth in the first quarter but such an increase was unlikely given the lead time needed for construction and the dampening impact of the supply chain disruption. That disruption is causing significant delays and inflation that has slowed construction activity. Demand for construction is probably closer to the growth expectations, but it’s unlikely that construction will reach the levels that demand is driving until the third quarter.

Construction activity in Pittsburgh is noticeably higher. Following an unexpected $1.39 billion in first quarter construction contracting, the pace of bidding and construction starts has not slowed through April. New project announcements keep coming. Architects are busy and struggling to hire staff. Bidding is still very competitive, as contractors are anxious to line up work now after nine months or more of difficult backlog building. Mosites Construction was the low general on the $12.7 million Port Authority LRT station platform renovations. Liokareas Construction was the low general on Gateway School District’s $30.4 million middle school addition and alteration project. Mele & Mele & Sons were the low bidder on the $30 million Center Township wastewater treatment plant modernization in Beaver County.

Monroeville VA Outpatient Clinic. Rendering by Plunkett Rayisch Architects

Summit Smith Development announced this morning that it had been selected by the Veterans Administration to build a new $91 million outpatient facility at the Monroeville Mall. C.D. Smith Construction from Milwaukee is the construction manager. Developer Craig Rippole is teaming with Michael Keaton to help Nexii Building Solutions build a 200,000 square foot plant in the Pittsburgh area. No site has been chosen. Rycon Construction was selected as CM for Duquesne University’s $54 million College of Osteopathic Medicine. Tree of Life announced it had hired architect Daniel Libeskind (working with Rothschild Doyno Collaborative) on its $20 million renovation. The Tree of Life is taking CM proposals from A. Martini & Co., PJ Dick, Jendoco, Mascaro, Massaro, and Mosites on May 7. Hudson Group from Sharon brought the $30 million Julian Apartments on Melwood Avenue before the Planning Commission. Mistick Construction started work on the $10 million Granada Square Apartments in the Hill District.

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