The first quarter of 2016 was rocky for the permanent real estate financing markets, said a couple of Pittsburgh-based veterans of the industry at this morning’s NAIOP Pittsburgh breakfast. HFF’s Mark Popovich and Jim Scalo of Burns & Scalo Real Estate Services expressed surprise that the spreads and rates for CMBS and life company lending jumped up during the first three months of the year. Popovich attributed the rise in cost to a rise in fear of global disruption by a Chinese crash – a crash which never happened. Both expected conditions to remain stable the balance of the year.

Liquidity and capital supply are also running ahead of demand. Banker John Fetsko from Wesbanco noted that his bank (and others) had seen their fill of apartment, hotel and office deals and would be more selective about projects, even though capacity exists. Popovich said that capital supply was running well ahead of deals because of uncertainty but that there was more than ample liquidity to deploy. Scalo echoed the sentiment about uncertainty, going further to predict that presidential elections, oil/gas declines, and fears about China, interest rates and terrorism would slow down development and sales until 2017.

In project news, Excela Health held a groundbreaking for its new $40 million Excela Square ambulatory care center in Latrobe that A. Martini & Co. is building. BRIDGES & Co. started work on the new 110,000 square foot self-storage center for Guardian in Hampton Township and the new $5 million Eden Christian Academy school in Ohio Township. The Cranberry Supervisors approved contracts for the $42.7 million Brush Creek treatment plant upgrade. Mascaro is the general contractor.

Another large treatment project bid earlier this week and again highlighted the hypercompetitive nature of the public market. Port Vue Plumbing was the low general/mechanical contractor for Canonsburg Houston’s plant expansion at $18.7 million, some 15% lower than Kokosing’s $21.5 million bid. In a bit of a surprise the project only attracted two bidders. The week before, Mike Coates Construction was the low general on the $44 milllion Chartiers Valley High job at $28.9 million. That was $3.6 million – or 11% – lower than Rycon Construction second low bid. The low HVAC number was also 10% under the next bid, although the remaining contracts bid tightly.

The tight market worked to Char Valley’s advantage. The school board was able to accept over $3 million in add alternates on the $29.7 million middle school (awarded to Mucci Construction) and $650,000 in alternates to the $48.5 million high school (awarded to Rycon). At the same time Mike Coates Construction pulled low bids on both jobs, a situation that always creates confusion in the market.