Category: Construction news

Big Projects Driving Demand

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When the Halloween decorations start showing up at Giant Eagle, the contracting season is usually wrapping up for the year. This year, however, there are a number of big projects on the street (and in the pipeline) that the market is making up for the lower number of projects with a much bigger dollar volume.

Part of this is the result of the lag from announcement to construction for some of the big projects that have been in the news over the past year or so.  Mascaro took bids recently on the 410,000 square foot, $350 million UPMC Mercy Vision & Rehabilitation Hospital and the 96,000 square foot TCS Building at CMU. PJ Dick has been bidding the 300,000 square foot Bakery Square 3 office building.

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Rendering of the new UPMC Mercy Vision & Rehabilitation Hospital by HOK. Image from UPMC.

There’s also been a flurry of activity on large projects at the early stages of development.  Hanna Langholz Wilson Ellis is marketing the 1,200-acre Zediker Station site, which sits along I-70 just east of I-79. It’s the largest development site in PA and may be the only one served by both CSX and Norfolk Southern. The Hazelwood Green project has been advertised for developer proposals. Over the long haul, that’s a project that could lead to more than $1 billion in construction. The developer currently on site, RIDC, has reportedly locked up autonomous vehicle company Aptiv for 70,000 square feet to occupy most of the 2nd building in its Mill 19 project. That would trigger the start of the third 90,000 +/- square foot final phase. In the Strip District, Facebook confirmed that it was leasing most or all of District 15, a 105,000 square foot building being developed by RDC on Smallman Street. According to a recent story by Tim Schooley in the Business Times Facebook’s lease is the tip of the iceberg. Schooley quotes JLL’s Dan Adamski estimating that there are 900,000 square feet of user requirements being shopped in the Strip now. That would make for another explosion of office projects. One of those may be JMC Holdings’s proposed adaptation of the Wholey cold storage building on 15th Street. The developer has engaged Desmone Architects to work on a 350,000 square foot re-use but is reported to be looking at hiring an architect to design a new 17-story, 500,000 square foot building on the site.

As intriguing as this tech demand is, it’s worth noting that most, if not all, of it is new in 2018. It was only last year that occupants like Apple and Argo AI were snatching up big chunks of 3 Crossings. When someone says that the emerging technology sector is growing faster than you can understand, this is what they mean.

Big Win for Indiana County

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Thursday morning, URBN announced they were building an 863,000 square foot fulfillment center for Urban Outfitters at the Windy Ridge Business & Technology Park in Indiana, PA. The project is one of the few mass fulfillment centers located west of the I-81 corridor and is a tremendous return on the investment made by the Indiana County Center for Economic Operations (CEO).

Indiana County CEO executive director, Byron Stauffer, says that $20 million had been invested in the Windy Ridge project over a period of more than ten years. Stauffer was effusive in his praise for the governor, Senator Don White and Rep. Dave Reed for their support of the project, which attracted a variety of grants and loans. URBN said that the fact that Indiana County had a prepared site, available workforce (the facility will employ more than 200), access to Route 422 and the IUP supply chain management program, tipped the decision in favor of the Windy Ridge site.

“The lesson learned here is if you think small, you get small,” Stauffer concluded.

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Blue Rock Construction from Allentown is the construction manager for the $60 million-plus facility, which will have 45-foot precast concrete panels on the exterior. Construction is scheduled to be completed by late summer 2019.

The Impact of Florence

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I got an interesting call yesterday from the local Federal Reserve Bank office asking about the impact of Hurricane Florence on the construction industry. They are trying to figure out the economic effect of the storm. The short answer is that it’s too early, of course, but history gives a little insight into the aftermath. Ike, Katrina and Harvey were similar storms in that they brought massive amounts of water damage. That means much of the damage is uninsured and more difficult to quantify. That also means that the rebuilding will likely stretch out over several years (or longer).

What is different now from 2017 or 2005 is the lack of capacity to rebuild. For building materials, supply is already limited for what will be in highest demand, like lumber, plywood, drywall, and construction equipment. That means there will be price increases, but, with little slack capacity, the availability will be a bigger factor. The same is true for labor. It will take tens of billions to rebuild and repair the flood damage but there will only be so much that can be rebuilt without skilled workers. The winter slowdown in northern cities might provide some labor force, but there is enough construction that there may not be many layoffs this winter. That will certainly be true of Pittsburgh’s construction workforce.

The guess here is that – like with Katrina – the reconstruction in the Carolinas will be stretched out over a number of years.

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Golfers enjoyed a good day Monday at the ACE Mentor outing at Quicksilver. You can contribute to ACE Western PA here.

In project news the Builders Exchange reported on a project that the Turnpike Commission is requesting prequalification to bid. The Southern Beltway maintenance shops are budgeted in the $25 million range and based upon history should go out to bid in the month following the Oct. 24 prequalification due date.

Pittsburgh’s construction industry lost a great guy on Monday. Brian McKay passed away after battling ALS for the past year or so. Brian owned AMB Plumbing & Excavating and was incredibly involved in the industry, serving the Mechanical Contractors Association and the Builders Exchange for many years. He was past president of the MCA and the current president of the PBX board. Brian was a man who quietly helped a lot of people out over the years. He will be missed. Visitation will be held today and tomorrow at Schellhaas in Franklin Park. The details are in Brian’s obituary.

 

Inflation Hits Salk Hall Bids

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The bids taken Sept. 11 on Pitt’s $41 million Salk Hall Renovation Phase 2 had the hallmarks of growing inflation and a market that is busy. The $50,862,000 total for base bid #1 was about 25% over budget and the project will likely re-bid after scope changes, since there were few alternates to reduce the cost. Burchick was the low general contractor. The general bids are below:

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I don’t have enough information to deduce how much inflation impacted the project but the U.S. index for inputs to construction rose 9.6%, 8.1% and 8.1% year-over-year in May-July. There are also some indications that the current market conditions played a factor. There were only 3 bids on the general and electrical packages. HVAC received 4 bids and plumbing received 5. That’s a dramatic difference from what a Pitt-delegated project would have received even one year ago. Moreover, the gap between bids was big. Burchick’s low bid was 6.8% below the second low bid, and 10.2% below the third. That was the tightest spread by far. The spread between the low and second bids on the other 3 contracts was at least 9.5% and as much as 12.5%.

One of the strong economic signs has been the upswing in owner-occupied industrial/manufacturing projects. Yesterday, Uwharrie Builders from NC broke ground on an 80,000 sq. ft. expansion for Technimark in Latrobe. On August 20, New-Belle Construction pulled a permit for a 68,000 sq. ft. new facility for Zilka & Company in Mason Park, an industrial park near New Stanton. Westmoreland County IDC has been preparing new pads in several locations in anticipation of opportunities like these.  Zilka is in the bakery products business and Technimark does rigid plastic injection molding for healthcare applications. While emerging technologies and gas-related energy should drive growth in manufacturing, the gains in regional manufacturing seem to have a wider base.

PJ Dick Announces Changes at the Top

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Pittsburgh-based general contractor PJ Dick-Trumbull-Lindy Paving has announced a leadership succession plan on September 7. The board of directors has approved the transition of Chief Executive Officer Clifford R. Rowe Jr. into the role of Chairman of the Board, effective January 1, 2019. At that time, Jake Ploeger and Tim O’Brien will be promoted to Co-Chief Executive Officers.

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(From left) Tim O’Brien, Cliff Rowe and Jake Ploeger.

In project news, Massaro Corp. is taking sub and supplier bids on its $4 million First Tee project at the Schenley Park Golf Course on Sept. 21. DGS awarded contracts for the $16.4 million new PA State Police headquarters in Greensburg. Leonard S. Fiore Inc. was the successful general construction contractor.

An Interesting Warning Sign

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This may be looking for the dark cloud in the silver lining, but there’s an interesting economic indicator that appears to be a warning about the economy. It’s called the “output gap” and it’s an indicator of how close the economy is to the full potential GDP output. In other words, how close are we to having no more capacity to grow, either because there are no more workers or no more capacity to make things. That’s a pretty accurate description of today’s conditions. The thing that makes this measure worth noting is that a recession has followed the peak of the output gap every business cycle for almost 50 years. The question is: how close are we to peak?

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There is no reason that the economy has to go backwards just because it has when conditions were similar in the past. The most practical and urgent conclusion to draw from the current output gap is that the shortage of skilled workers and capacity could limit the ability of businesses to expand, even if their sales are growing. Adding a new plant or new equipment won’t help you grow if there is no one to occupy or operate it.

A few of the projects that have been in the news lately are either bidding or getting ready to bid. Packages are bidding and have been let by Forest City Enterprises for the $20 million conversion of the Freight House Shops to the UPMC training center. The $45 million Produce Terminal/1600 Smallman Street mixed-use development, being built by PJ Dick, is getting close to construction. Al. Neyer Inc. is preparing to start work on two new buildings, totaling 267,000 square feet at the Clinton Commerce Park in Findlay. There is a $6 million UPMC/Indiana Hospital joint venture cancer center out to bid to AIM, Landau, Massaro, MBM, Mosites, Shannon and Volpatt. New-Belle Construction has started work on a 67,000 square foot warehouse/office in the Technology Drive industrial park in New Stanton.

Miscellaneous…

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Pittsburgh Homebuilding Report issued its research on the housing market in the six-county metro area this week. The report was unsurprising in that year-over-year growth in single-family detached homes was muted by lot inventory to 4.4%. There was a steep decline in multi-family starts but that is more a matter of timing than a change in direction of the market. With what is in the pipeline, it is expected that permits for apartments/condos will reach the 2,000 units mark again in 2018. The surprise was the 36.1% drop in attached single-family permits. This segment of the market has grown steadily over the past decade, as demographics and topography made townhouses and quads more desirable. This category has produced roughly 900-1,000 units during recent years. It’s unlikely that there will be a two-fold jump in townhouse construction during the last six months. Overall, the market was off by almost 800 units, or more than 30%.

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One of the major projects in the apartment pipeline, the second phase of the Riverfront development being built by NRP, is out to bid for subcontractors, due July 27. According to the description at the NRP Construction website this phase will include 442 apartments in two buildings, plus a 544-space garage. In today’s market, that should be in the $55 million range.

Turner Construction was selected as construction manager for the $240 million UPMC Hillman/Shadyside Hospital expansion. That wraps up the CM selections for the major UPMC capitol program. To recap: PJ Dick/Whiting Turner will build the Transplant and Heart Hospital at Presbyterian. Mascaro/Barton Malow is CM for the Vision and Rehabilitation Hospital at Mercy. Rycon/Skanska will build the UPMC South Hills Hospital.

The Cracker is Booming

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If you haven’t driven by the Shell Franklin site in Monaca lately, you should. The beehive of activity is impressive. Maybe more impressive is the fact that 1,700 workers are on site at the moment but that will more than triple by this time next year.

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Count the cranes from the Ohio River.

In project news, Allegheny County Airport Authority selected Jacobs as program manager for the $1.5 billion Terminal Modernization Program. The A/E team is expected to be selected at the July board meeting. University of Pittsburgh selected PJ Dick for its $80 million addition and renovation to Scaife Hall. UPMC short-listed Turner Construction and the Mascaro/Barton Malow team for the $280 million Hillman/Shadyside expansion. PJ Dick’s Special Projects Group was awarded the $9 million CM-at-risk contract for the Botanical Gardens in North Fayette. St. Clair Hospital awarded Mascaro the contract for the new $16 million central utility building. Phipps Conservatory is taking proposals from Jendoco, Massaro, PJ Dick, Rycon and Sota on its $10 million garden center project.

PA Budget Passes: Not So Great for Construction

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As expected, the Commonwealth’s legislature passed a 2018-2019 budget yesterday, sending to the governor a spending bill that creates a surplus for the Rainy Day Fund without raising taxes. The budget also increases funding for education and, specifically, props up the ailing PASSHE system schools. In a gubernatorial election year such cooperation was expected, but the healthy bump in revenues through five months (that is expected to continue into 2019) made the budgeting process smoother.

For the construction industry, however, the budget is a continuation of the under-investment that has marked the Corbett and Wolf administrations, which saw Republican majorities in the state houses. The new budget does nothing to fix PlanCon, contrary to promises made by members of the advisory committee for the reform of the K-12 reimbursement mechanism. There is also less funding for capital projects statewide. And nothing was done to address the looting of the funds generated by the gas tax increase in Act 89 of 2013. That highway bill was designed to add $3.5 billion to annual bridge and highway funding by 2019 but more than $700 million has been “appropriated” to make up a gap in state police funding. The gap is due to PA State Police patrols of communities that cannot afford local police forces.

The PlanCon situation is particularly troublesome for the industry, because the system has been under a moratorium since mid-2015. Projects not already well along with the design process at that point have been stuck in PlanCon purgatory since. Some districts have found ways to deliver projects without the additional funding that PA would provide by reimbursement, but some unknown number of capital programs will remain stuck through at least mid-2019.

New Castle School 005Funding for projects already in the process has been allocated, which is some good news. Firms involved in public construction hoping for improvement in the coming year got little other good news yesterday.

The Work Keeps Coming

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Breaking news of project awards in the past 24 hours highlights the breadth and depth of the Pittsburgh market in 2018.

Imperial Land Corp. closed on a land sale June 14 that was a big win for Western PA. Niagara Bottling LLC purchased 42.6 acres in Findlay Inustrial Park to build a 454,000 square foot bottling plant. Choate Construction from Charlotte, NC will build the plant.

In higher education, Carlow University selected Franjo Construction to build its $8 million St. Joseph Hall project. Thomas Construction from Grove City was awarded the $2 million second phase of the Hoyt Science Resource Center at Westminster College.

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The Arrott Building will become an Autograph hotel.

Continental Building Co. will start work soon on the conversion of the Arrott Building at 401 Woods Street into a 120-room Autograph boutique hotel. The $19 million project invloves a complete gut and rebuild of the 78,000 square foot historic Frederic Osterling building.