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Wrapping Up the Week

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There was news this week about the new UPMC South hospital being proposed. The new 300,000 square foot, $100 million+ hospital will be located off Route 51 on Lindsay-Snyder Drive in Pleasant Hills. UPMC is going through the process of getting zoning approvals and having CannonDesign begin drawings. The process of getting a CM on board will take place after the approval process is finalized.

Burchick Construction was chosen for the $3 million buildout for Oculus at Schenley Place. Winco Development hired Massaro Design Build for its new Route 28 North Business Park, which will have 3 buildings totaling 141,100 sq. ft. in phase 1. The $26 million Chartiers Valley Middle School went out to bid, due February 24. Allegheny Health Network has a number of projects out for CM proposals, including the $9 million NICU at West Penn Hospital. RIDC has asked A. Martini & Co., Franjo and Volpatt to submit proposals for the new 65,000 sq. ft. building at the Lawrenceville Technology Center. The Betner Foundation is taking final proposals and interviewing Jendoco and A. Martini next week for its $3 million buildout at the Benedum Trees Building.

Oxford Makes More News

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Oxford Development closed today on the sales of its 1.1 million square foot flagship office, One Oxford Centre in downtown Pittsburgh. San Francisco-based Shorenstein Properties is the new owner of One Oxford, which should expect to see some significant renovations during the next year or so.

One Oxford Centre - 01The sale brings back the memory of one of the biggest gambles taken on commercial real estate in Pittsburgh. When Eddie Lewis pushed ahead with construction of One Oxford in 1980, the project was 100% speculative. The building opened at the end of a deep national recession and the beginning of the collapse of steel manufacturing in Western PA. It was a tribute to Lewis’ optimism and tenacity that the project succeeded. Many developers in other cities met with disaster on similar projects at that time.

Oxford is in the midst of a flood of development activity in Pittsburgh as 2016 begins. Construction on the Hub at 3 Crossings is about to begin as work is well underway on the 2555 Smallman Street office building.

The developer selected A. Martini & Co. this week as contractor for its 99-unit Craft Place Apartments in Oakland.

What I Saw in Monaca

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One of the disappointments of 2015 for the construction and development business was Shell’s further deferral of a decision to proceed with the investment in an ethane cracker in Monaca. The final decision was long rumored to have been made in December, pending final approval from board or shareholders or someone. It now looks as though no announcement will come before April (and several involved with the job don’t expect anything prior to June); however, if all jobs on hold were as active as this, construction would be a very lucrative business.

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This is what I saw from Route 18 on a gloomy January 13 trip past the site. A photo can’t begin to represent just how much that half-mile stretch of riverfront and hill side has changed over the past year. For those unfamiliar with Frankfort Road, the area to the right of the road pictured above rose steeply until the Mascaro/Trumbull Energy Services team began moving 7 million yards of dirt. You can get some idea of the change by focusing on the small area of existing hillside that remains to the right of the car in the photo. What isn’t shown is the massive site to the north (left) of Route 18 where the plant will be built. The other important piece of information not captured is the beginning of the site work at the I-376 interchange just a few hundred yards ahead. Or the 200-plus cars parked in the workers’ lot.

As I’ve been tipped off about the project, the relocation of Route 18 has been the key milepost for which I was told to watch. That I-376 interchange work is a sign that the highway work is imminent. Corporate realities may be keeping Shell from announcing or deciding to green light the project but the activity suggests very strongly that it will. In Potter Township, officials say that Shell and its EPC’s are still coming in with new work and they speculate that April is when they will hear for sure. I’m getting numb to the speculation by this time but I can say that a trip to Monaca will renew your optimism about the prospects of the project.

Low Bids on Thomas Jefferson

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Continuing the trend seen at South Fayette and several other public projects over the past few months, bids on the new Thomas Jefferson High School came in substantially under the published budget last week. Nello Construction was the low bidder on the largest contract, the $42 million general construction. According to the PA Builders Exchange, the other low bids were:

HVAC:  Ruthrauff/Sauer – $8,600,000

Plumbing:  A. J. Demor & Sons – $3,259,000

Electrical:  Kirby Electric – $8,380,000

Fire protection:  Preferred Fire Protection – $915,000

Food Service Equipment:  Commercial Appliance – $769,862

The $63.9 million total was more than $12 million under the budget that was approved at West Jefferson Hills School District’s Act 34 hearing. That gives the district room to put alternates in place that might add more value to the project. The competitive price also allays the fears of those concerned that the school district’s Project Labor Agreement would limit competition. While the PLA clearly kept some non-union K-12 bidders from competing, the market conditions more than made up for any limited bidding. School districts and government agencies that can get projects to the street over the next 60 days are likely to find similar bidding conditions. With labor trending tighter as 2016 proceeds, market conditions are likely to shift significantly as the spring unfolds.

In private sector news, Carnegie Mellon made a quick decision, choosing Rycon Construction on Friday as construction mgr. for its $13 million Hamerschlag Hall Maker project. The finished space will allow innovative ideas to be fabricated within a few hundred yards from where the innovators are doing their research and development, using 3-D printing to fabricate new products. CMU will be putting the new 40,000 square foot Tata Consulting Services Building out for CM proposals later this week. Excavation for the $107 million Tepper Quad has been ongoing for about a month. PJ Dick should be ready to take bids on the main packages for Tepper later this spring.

Turner started work before the year ended on the new 54,000 sq. ft. space for JLL in the Tower Two-Sixty office tower that Millcraft Investments is completing. Massaro has started construction on the $20 million, 144-room Residence Inn in Oakland. PJ Dick is taking bids on the first phase of the Mill at Second Avenue apartments that Walnut Capital is developing.

A Moment for Joe Massaro

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Joe Massaro’s funeral was Monday morning. The mass at St. Paul’s Cathedral gave anyone attending a good idea of what was important to Joe during his life. His highest priority was family.

A beautiful funeral mass isn’t exactly the setting for story telling, however, and that’s a bit of a shame when it comes to Joe Massaro. His life and career are a treasure trove of stories. I had the privilege of spending a lot of time with Joe just before the onset of his Alzheimer’s disease. His sons had asked me to help document his life story for Joe’s many grandchildren. Over the course of a year, I heard hundreds of stories, many of which have been told repeatedly through the years by Joe or his sons. The one story that hasn’t been told nearly enough was how Joe’s business nearly failed and recovered. Those four or five years scarred Joe and he was understandably happy to have put the period in the past, but the experience also galvanized his already close family.

Joe was remarkably candid in talking about the bad decisions and bad luck that led to his company’s troubles. The battle to save the business brought two of his sons into the business. Joe talked with great respect about how hard those two, Joe III and Steve, fought to help right the ship. His other son, David, later joined the business as well.

When Joe told me the story of that period, it was also pretty clear that he leaned even more heavily on his wife Carol to endure the battle. He spoke of not wanting to get out of bed in the morning – comparing it to going to war every day – and said it was Carol and their daughter Linda who pushed him each day. He said Carol reminded him that no one was going to fix the problems for him.

Joe gets credit for his determination in turning his company around. He didn’t take such credit in retelling the story of that time in his life. He sincerely believed that it was his family that made the difference and it’s probably true that without that combined effort Massaro Corp. would not have survived.

It made Joe unhappy that his mistakes changed the plans his children had made but the crisis galvanized the family in a way that none of his successes had. Creating a business that would be a family legacy was a driving motivation for Joe Massaro. He may have been uncomfortable with how that legacy was created but there is little doubt that it’s a legacy that has endured.

First Look at 2015 Results

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With permit data collected for 11 months and most of the bidding follow up done, we’re estimating that the nonresidential contracting for 2015 will be up significantly, from $2.69 billion in 2014 to $3.31 billion for 2015. The biggest chunk in that gain was in heavy industrial projects. Even with a depressed gas price and downsizing in that sector, there were still hundreds of millions spent in processing and infrastructure.

Housing construction came in surprisingly close to the activity in 2014, closer than any year going back to 1995. The total number of dwelling units (new construction only) should come in right around 5,000, with more than half of those being apartments and less than 40% being single-family detached homes.

Architectural backlogs remain high, an indication that 2016 should be on a par with 2015. No announcement about the Shell project appears to be happening soon – with rumors that the decision is being delayed another six months. That may slow some of the commercial market west of town, as may the rising vacancy numbers in the south and west suburbs. Recent federal budget action will be good for the heavy and highway sector, which should see more than $2.5 billion bid and see more even distribution of projects bidding during the year.

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Let’s Raise the Vision

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This morning’s headlines from the Pittsburgh Business Times included a predictably negative story quoting an official from the Ohio Oil & Gas Association who believes that only one cracker will be built in the Appalachian Basin. I’m not familiar with the level of influence of the Ohio Oil & Gas Association but this gentleman’s opinion flies in direct opposition to what everyone in the petrochemical business had told me about the logistics and dynamics of building ethane cracking capacity. The input I’ve had is that nobody wants to build the only cracker and it makes little economic sense to do so. Not sure what this guy’s motive is but I bet if you dig deep enough there’s an Ohio-centered reason for his nay-saying the crackers.

What does appear to be true (and negative enough for our business press) is that the long-awaited decision from Shell will be awaited at least another 90 days. After laying off 6,500 people globally and being in the middle of some potentially big strategic moves, Shell may not be ready to publicly announce a $5 billion or $6 billion project.

The cracker isn’t the only economic story in Pittsburgh. The inertia behind the development pushing east out of Downtown is growing and it is time to push for a more ambitious vision for what 2030 will look like.

There is a regional public transportation initiative underway and that seems like a good place to raise the bar. Yes, there are political realities about mass transit that can’t be ignored but caving in to an assumption that one city can’t receive or raise billions of dollars before asking is defeatist. Every once in a while a great idea defeats the political nonsense that exists (remember the highway bill in 2013?) and Pittsburgh’s mass transit strategy should aim for that.

If it takes $2 billion to link Downtown to Oakland and/or Hazelwood (or both), then ask for $2 billion and push to get it built in five years. Throw the region’s political and corporate weight behind a project that links The Strip and Oakland using an existing AVRR line and right-of-way. Imagine the impact on development in The Strip if the 3 Crossings transit hub could link residents to Almono.

Image by Desmone Architects
Image by Desmone Architects

Check out this photo/rendering that Desmone Architects is using to show how the condos planned by Francois Bitz will sit in The Strip neighborhood. Imagine the infill potential between the 31st Street Bridge and 16th Street Bridge. In the image, Oxford has already filled in much of the two blocks east of the Cork Factory Lofts with 3 Crossings. Beyond that, Buncher’s massive riverfront site will begin (slowly) filling in with apartments and a riverside boulevard that could connect thousands of units of additional residential.

It took about 30 years to reverse the damage done to greater Pittsburgh by the steel industry’s collapse but much of the progress has occurred since 2008, when civic leaders challenged Pittsburghers to “Imagine Pittsburgh” differently. Imagine the difference it might make to aim even higher, expecting a vision of a Strip District skyline or bustling Hazelwood or Hill District to come to fruition before 2030.

More Jobs and Who Might Be Renting All Those Apartments

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Friday’s jobs report excited the markets again, as November’s expansion of 211,000 new jobs surprised analysts for a second straight month. In addition to the higher-than-expected November number, the Bureau of Labor Statistics revised both October and September – which was weaker – upwards by 35,000 jobs. Within the report, big gains in construction and retail offset declines in mining/logging (which is the category covering oil/gas drilling).

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A report from the Census Bureau on December 2 gave updated estimates of the number of people aged 25-35 who live in Allegheny County. Census used five years of estimates to show the change in population for that age range. The results are surprising and upbeat for the region’s apartment owners, since about 70% of that demographic group are renters.

While the Census report shows the percentage of those under the age of 35 as roughly unchanged in the U.S. since 2010 (6.8 percent are 25-29; 6.6 percent are 30-34), the data shows that the share of Pittsburgh’s population in those age ranges has jumped over the past five years. Those living in Pittsburgh who are 25-29 now make up 10.9 percent of the population, while 7.9 percent of the people living in Pittsburgh are 30-34. The same research showed an increase of .06 percent for that age group living in Allegheny County. In real numbers, that means roughly 9,000 more people of prime renting age live in metro Pittsburgh today than in 2010.

In project news, G. M. McCrossin was the low general/mechanical bidder on West View Water’s $61 million Baden treatment plant. Temple University released its $190 million library for bid. UPMC is looking at options for a new data center, including existing secure facilities and design/build proposals for new centers from teams that include Holder Construction, Whiting-Turner and PJ Dick as construction managers.

(From left) Bill Taxay, Brian Walker and Angelo Martini Jr. having fun at NAIOP Pittsburgh's holiday party Dec. 3.
(From left) Bill Taxay, Brian Walker and Angelo Martini Jr. having fun at NAIOP Pittsburgh’s holiday party Dec. 3.

 

 

 

 

 

 

 

 

 

 

 

State College High Under Budget

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The long-awaited State College High School project bid Wednesday afternoon and came in under Massaro CM Services’ budget at $116,996,100. Lobar Construction from Mechanicsburg was the low general at $70,755,000. Most of the low bidders were from the Lancaster/Harrisburg area with only Bob Biter Electric as a local contractor that was a low bidder. Few Pittsburgh area firms bid the job and those bids were 10% or more above the low bid. See the full results.

The project is likely to be the biggest K-12 project in the state for a while and the bidding showed that. Bidding on Thomas Jefferson High School will present an interesting counterpoint to see how aggressively the school builders bid that $76.3 million job in mid-January.

Also in State College, Clayco has the first phase of the $173 million East Residence Halls renovation and new North Residence Hall out to bid, due Dec. 22. View details at the PBX.

In contracting news, Continental Building Systems was awarded the $8.5 million Fairfield Inn & Suites at McCandless Crossing. DGA Construction started work on the $20 million, 149-unit Cosmopolitan Apartments by Ross Park Mall. There is no confirmation from any parties involved but it’s reported that the Mascaro/Trumbull Energy Services/PJ Dick team will build the 900+-car parking garage at the Monaca cracker, should the project proceed.

Rumors about the cracker continue to circulate. Within the past three days I’ve been told that announcement will be made Dec. 10, Dec. 14 and at least 90 days from now. Shell’s word on progress is that evaluation continues with no schedule for an announcement. The mystery continues.

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(Left) Lou Gilberti from the Carpenters, Seubert’s Jay Black and Burchick’s Dave Meuschke mingle at the MBA’s Excellence Awards nominee event.

The Master Builders’ announced the nominees for its 2015 Building Excellence Awards at an event on Nov. 18. You can read about the projects here. Winners will be announced at the Feb. 25 Evening of Excellence.

Bidding a Project the Right Way

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On Nov. 18, the West Jefferson Hills School District board will authorize the bidding of their $76.3 million new high school. The school district, architect and construction mgr. have created a schedule and bidding method that really makes sense. For that reason it stands out in our industry.

First, the documents are set to be available the day after the board approves the bid date. Second, the bid date will be Jan. 12, meaning the owner isn’t expecting that the industry will ignore the holidays to bid its job. But beyond the reasonable lead time, the architect and CM have set a pre-bid meeting for Dec. 8 and asked for all RFI’s by Dec. 16. That gives bidders two weeks (plus the Thanksgiving holiday) to review the documents before the pre-bid, then allows another week for RFI’s. The architect has committed to reply to all RFI’s by Dec. 29, meaning that the major addenda will be issued two weeks before bid date. That also means that answers will be waiting for contractors once they return from the holiday downtime.

This project was going to get everyone’s full attention regardless of how smoothly the bidding process went but showing respect for the industry’s time during this time of year is extraordinary and should yield dividends down the road. Let’s hope other owners follow the example.

A sidebar discussion at the Allegheny Conference’s commercial real estate luncheon Friday yielded news that Oliver Hatcher Construction had started work on the 316,000 sq. ft. spec warehouse for Ashley Capital Group at the FIP.20151113_105213_resized Buncher should be starting work on an 82,000 sq. ft. warehouse at Findlay Industrial Park sometime later this winter

The park’s developer, Imperial Land Co. said that there were other users interested in lots at the park, as well as at smaller sites in Imperial Land’s new Westport Woods. The entry road for that is shown on the photo at left.

Continental Building Systems has started construction on the next flex office at Pittsburgh International Business Park, a 62,000 sq. ft. fifth building branded as Building 400. Continental was also selected to build the retail shops at the Siena at St. Clair. The 87,000 sq. ft. building will house the complementary retailers at the center anchored by Whole Foods.