Category: Construction news

This Week’s News

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On Tuesday, PA’s Commonwealth Court reversed an earlier decision by an Allegheny County court that found that the West Jefferson Hills  School District (along with others) had willfully violated the PA Separations Act by including the site plumbing for the new $73 million Thomas Jefferson High School in the site package instead of the plumbing. That appeal by the District, Nello Construction and the Laborers union aimed to reverse a decision in favor of the proejct’s mechanical contractor, Wheels Mechanical.

In reversing the Allegheny County decision, Commonwealth Court based its opinion on the doctrine of laches, which essentially meant that Wheels waited an unreasonable time before bringing its complaint. Because Wheels did not raise the issue during bidding or the first six months of construction, the Court decided its claim should not stand. What was left undecided was the issue of whether separating the plumbing beyond the perimeter of the building was a violation of the Separations Act. That battle will have to come another day.

In infrastructure news, the Southern Beltway Section 55c1-1 went out to bid, due in mid-April. These sections have run between $50-70 million each. Uber selected the design team of IKM and CJL Engineering for its next expansion, a $10 million buildout of 120,000 square feet in the Crucible Building in the Strip. Poerio Inc. landed a $33 million expansion of the FedEx Ground facility in Olive Branch, MS. Pitt selected Turner Construction as CM for its $4 million Scaife Hall Phase 1B project. McKnight Realty Advisors selected Allegheny Construction Group as contractor for the renovation of the Terminal Building (aka Riverwalk Corporate Center) in South Side, an 800,000 sq. ft. former warehouse. And the SEA awarded a contract to Massaro CM Services as its agent for the new 9th and Penn Garage. The 700- to 1,000-car garage will be one piece of the multi-phase, mixed-use redevelopment of two blocks in the Cultural District that is currently out for development proposals. The garage piece should run in the $20-25 million neighborhood.

Commercial Market Update

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This morning’s NAIOP Pittsburgh chapter meeting featured a distinguished panel of commercial real estate veterans discussing the state of the market. Lou Oliva from Newmark Grubb Knight Frank, Jason Stewart from JLL, Herky Pollock from CBRE and IRR’s Paul Griffith had generally upbeat things to say about the market in 2017. Notably, the apartment market inspired caution and the growing appetite of investors outside the city was raised up as a big influence on the market. None of the four were particularly concerned about interest rates impacting values in 2017 but all expected the increases to continue.

The brightest segment of the market seems to be industrial. Oliva mentioned that some 800,000 sq. ft. of spec industrial space had been delivered into the market in 2016, with more than 500,000 sq. ft. already absorbed. Here again, the largest deals all involved out-of-town developers.

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(From left) Lou Oliva, Jason Stewart, Herky Pollock and Paul Griffith update the audience on the real estate market at NAIOP Pittsburgh’s meeting Feb. 16. Photo by James White Media Production

In addition to the industrial deals mentioned this morning several large projects in the pipeline. Buncher has increased its land stake at Findlay Industrial Park, with the ability to build another 100,000 sq. ft. beyond the 80,000 sq. ft. under construction. Al. Neyer will be building a 200,000 sq. ft. warehouse in Jackson Township near the PMF Trailer facility. Castlebrook Development and Wesex Construction are in the planning stages of the Turnpike Distribution Park in Beaver County. Site plans for that call for 3-5 buildings totaling more than 900,000 sq. ft., including two 400,000 + sq. ft. buildings.

In other news, Rycon Construction was selected for McGuire Woods’ $4 million TI at Tower Two-Sixty. East Liberty Presbyterian Church shortlisted Jendoco, Landau and A. Martini & Co. for its $5 million renovation.

End of Week Roundup

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As chaotic as US politics is right now, the economy continues to hum along. Today’s jobs report outperformed the expectations of analysts, with 227,000 new jobs added to payrolls last month. That continued expansion is in contrast to the story in Pittsburgh, which last year added only 4,400 jobs. At Thursday’s Viewpoint presentation – one of the best forecasting events for commercial real estate – Integra Realty Resources’ President Paul Griffith explained how the healthy job growth early in the business cycle has faded to a flat line since 2013. Pittsburgh’s strong economic sectors have been offset by declining employment in energy and manufacturing.

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In project news, Volpatt Construction was awarded the $2.4 million Nursing Unit 5A renovation at St. Clair Hospital. Developer Alphabet City selected Brubach Construction to build its $7 million, 60,000 sq. ft. East Liberty Centre office building. Campus Advantage interviewed Turner, PJ Dick, Continental and Rycon for its $40 million apartment on Forbes Avenue in Oakland. Rycon Construction is underway on the $27 million, 172-unit Emerald on Centre apartments in Shadyside. Sota Construction is taking bids from subcontractors on the renovation of the Allequippa Place apartments and construction of the 49-unit new Wadsworth Street Apartments, roughly $8 million in total construction. And McCaffrey Interests is taking RFP’s next week on the $66 million Terminal Building redevelopment in the Strip District.

Confidence is High

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The prospect of lower corporate taxes and less regulation has business swooning at the start of 2017. One of the measures of small business confidence – the National Federation of Independent Businesses index – soared more than 7 points in December to 105.8. That’s the highest since the end of 2004, when the economy took off after an uneven recovery from the 2001 recession.

PNC Senior Vice President and Chief Economist Stu Hoffman gave an equally confident forecast for 2017 (and 2018 for that matter) when he addressed a crowd of NAIOP Pittsburgh/BOMA members this morning at the William Penn. Hoffman liked the chances of tax cuts, stimulus spending and less regulation during this year and forecast that GDP would respond by growing closer to three percent. Hoffman saw that happening in late 2017 and into 2018 – maybe even a quarter or so of 4% growth – assuming the stimulating measures are enacted during the first months of the Trump Administration. He also warned that overplaying trade sanctions could blunt the growth from the stimulus.

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BOMA President Tony Young from the Carnegie Museums (left) with PNC’s Stu Hoffman and NAIOP President Dave Weisberg from BNY Mellon.

Confidence in the construction industry has been boosted by the strong year-end activity. In addition, there are a half-dozen or so major projects that are in the process of moving forward in 2017, although few will start construction until afterwards.

UPMC announced its big investment in Hamot in Erie but the healthcare system is also on the verge of an announcement about its direction in the South Hills, where a new hospital or multiple mini-hospitals may be built to serve its patients. Another major South Hills hospital project, the St. Clair Hospital expansion, is getting a redesign but should be put before selected CM’s for proposals before spring. Reports are that the Dick’s HQ expansion is back on the front burner. And Pitt is moving forward with early programming for a new building at the Syria Mosque site that is in the 350,000 sq. ft. range.

A couple of $30 million-plus projects that have been kicking around for a while appear to be heading for a competitive hard bid. Oxford Development is rumored to be close to a major tenant announcement for its Riverfront West project at 3 Crossings. In Oakland, Campus Advantage will be bidding its 300,000 sq. ft. apartment project on Forbes Avenue.

Murland Associates selected Mascaro Construction as contractor for its proposed 97,000 sq. ft., $15-18 million office at 3422 Forbes Avenue. Landau Building Co. was selected as contractor for the $4.5 million Mars Library. Pitt awarded the $3.4 million Barco Law Library project to TEDCO Construction. Chapman Corp. is the apparent successful bidder on the mechanical piece of three major compressor stations for Energy Transfer Partners, in Clarington OH, Majorsville PA and Burgettstown PA.

New Year, New Opportunities?

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Small businesses, which are the drivers of the business economy, are entering 2017 with a renewed sense of optimism. Whether it’s the belief that a Trump Administration will drop regulations or roll back Affordable Care Act, owners of small businesses are responding to surveys about 2017 in a significantly more upbeat manner than they did in recent years. If that optimism survives the first few months of transition, that is a very good thing for construction. More small companies grow than big ones and that means more expansion and new construction opportunities.

There is growing excitement in Pittsburgh about the impact of the Shell cracker project but its effect on 2017 will be mild compared to the years that follow. According to Bechtel, it’s estimated that “only” around 1,000 workers will be on the site by the end of 2017. That’s a fraction of the 6,000 that Bechtel still says will be needed during the following two years, when most of the plant facilities are brought on site.

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This is what $500 million-plus in “ready” work looks like at the Shell site.

One construction buyer that has come back into the market is the General Services Administration. The GSA manages the federal government’s property and has been all but missing for the past decade. The agency currently is seeking qualifications for a 3-step best value process that will occur next spring for $20 million in renovations to the federal courthouse Downtown. GSA is also looking at sites in Butler/Beaver/Lawrence to locate a 400,000 sq. ft. records warehouse. Here again, if the Trump Administration can deliver on promises to stimulate spending on construction, GSA may become a regular buyer in the region.

Some projects that are active in Pittsburgh include the new $25 million Waters Senior Living community underway in Marshall Township, which is being built by Continental Building Co. The PA Builders Exchange reports that the $28.7 million Latrobe Elementary School is due Feb. 16. Pitt took alternates that made TEDCO Construction the successful contractor on the $3.4 million Barco Law Library. Rycon Construction is starting work on converting the 65,000 sq. ft. Latitude 360 into a Main Event entertainment complex. Rycon is also the CM on a 20,000 sq. ft. renovation to Mellon Pavilion’s second floor at West Penn Hospital. That’s mainly an MEP upgrade.

Catching Up With the Trends

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One of the best programs of the year is the Urban Land Institute’s “Emerging Trends in Real Estate.” The 2017 version of this was held this morning at the Rivers Club. There was a great panel, with Maureen McAvey from McAvey consulting in Washington DC as the keynote speaker. Her presentation centered on the theme that commercial real estate was in a good place but probably not getting much better for this cycle. In fact, she predicted that the good run probably had another 12-18 months to go before a cyclical slowdown. She called it the “kinder, gentler real estate cycle,” which is more good news. ULI makes the “Emerging Trends” document available at their site.

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Flemming Bjoernslev – former CEO of Lanxess – address the crowd at ULI’s Emerging Trends in Real Estate conference at the Rivers Club.

The rest of the program focused on the Pittsburgh market and the changes occurring. I found the best points were made by Claire Hosteny, one of the partners in East End Development Partners (which brought us the Ace Hotel). Claire spoke about the residential conditions and emphasized that Pittsburgh was beginning to push up against the boundaries of our affordability limits, emphasizing that affordability was one of the region’s biggest selling points. She really hit the mark when pointing out that the biggest threat to continued growth of city living was the inadequate public education system. She urged the crowd to consider investment in the Pittsburgh Public Schools or charter schools as a top priority.

One of the drivers of Pittsburgh’s resurgence has been the 25-35 year-olds returning to the city because of great jobs. Reluctant (or unable) to buy, this group of Pittsburghers have been paying the rents that we middle-agers think are outrageous and driving the apartment market. As this age group does marry and reproduce, the same factor will drive where they live as drives all American home buyers: where are the schools we want? If the city schools don’t pass muster for the Millennials, they will head to the suburbs just like their parents. There is a home buying/building boom in the near future. How good Pittsburgh Public Schools are perceived to be will determine if that boom includes Pittsburgh proper.

A couple of project follow-ups: CCAC put a design RFP out for its 150-bed student housing project at the Boyce campus. The RFP included (sort of) the option to add development and finance to the package. Pitt opened bids last week on its Barco Law Library project. Rycon was low at $3,049,000. TEDCO was second at $3.1 million but could become the low bidder if Pitt were to take 3 or  more of the alternates. Massaro CM Services will be releasing the $5 million North Allegheny Intermediate School renovations on Dec. 12 with bids due on Jan. 11.

Sewickley is Hopping

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During a visit to Sewickley on Nov. 17, I saw the recently-opened new Howard Hanna office on the corner of Thorn and Broad Street and got to experience what can only be calleda building boom in the village of Sewickley. Hanna’s office (picture below) was the fourth new commercial building started in the tiny commercial district in the village. Nearly 60,000 square feet of new office and theater have been started and nearly completed. Around the corner from the commercial activity, demolition was going on to clear the way for the Sewickley Condominiums, a 24-unit luxury development of two buildings on Locust Street by Zamagias Properties. And at the eastern end of the village, Charter Homes built 22 new homes in the last two years.

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The new Howard Hanna Real Estate Sewickley office, Thorn & Broad Street.

Another bit of space in the village will soon become a parking garage, infrastructure that is desperately needed. WTW Architects is designing the 250-car garage, which should cost between $5-6 million.

In other project news, the contractor for Hanna’s office, Dick Building Co., was selected to build the new 4,800 sq. ft. First National Bank branch on McKnight Road. MBM Contracting started construction last month on the $1 million Butler Hospital 6th Floor Administration project. Continental Building Co. was hired by Shorenstein Properties to act as construction manager/owner’s rep for the modernization of the One Oxford Centre building, a project that should run $50 million or more.

The Millennials Are Coming!

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Yesterday, the apartment finder and research firm ApartmentList published its findings on the movement of the Millennial generation over the past decade. Austin, Charlotte, Houston and Seattle were the top four cities for growth in population of people between the ages of 25-35 and Pittsburgh ranked 14th, which seemed to be a surprise to ApartmentList. Between 2005 and 2015, the number of residents of metro Pittsburgh in that age range grew 7.1%. During the same time, median income grew 6.8%. One stat that separated Pittsburgh from the pack was the lower rate of decline in home ownership among 25-35 year olds. The home ownership rate fell nationally by 7.4% but only by 4.5% in Pittsburgh.

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The data supports the trend showing Pittsburgh’s median age declining to 33 years old and also underscores the competitive advantage of Pittsburgh’s lower cost of home ownership.

Updating some projects, commuters driving down Smallman Street should see Turner Construction starting work on the $19 million, 133-room AC Hotel near the Convention Center. Turner also appears to have been successful on the $30 million administrative buildings package at Shell’s cracker plant in Monaca, although that contract has not been confirmed.

Allegheny Health Network awarded Mascaro the $3 million Esophageal Lung Institute project at West Penn. UPMC awarded AIM Construction the $6 million Hill Building renovation. A. Martini & Co. was selected to do the $2.2 million build-out of Industrious’ co-working space in PPG Place. Pitt selected Massaro for its $3 million renovation to the Cathedral of Learning’s 14th floor.

Jobs Not Politics

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Setting aside the crazy campaign and surprising results of Tuesday’s elections to get back to business, the Bureau of Labor Statistics announced October’s employment gains on Nov. 4 (and the results were surprising there too). Employers created 161,000 new jobs in October. BLS also revised its estimates for September and August upward, to 191,000 and 176,000 respectively. The gains were in financial services and the losses in manufacturing.

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In local project news, Lane Construction was the winner of the $117.8 million I-70 section that bid to PennDOT last week. Independence Excavation was low at $90.5 million on the Southern Beltway sec. 55A1 that bid Nov. 9. Reynolds Construction Mgt. was chosen for the Indiana Regional Medical Center’s $6 million behavioral care project. Allegheny Health Network selected Turner Construction for the $3.5 million acute rehabilitation job at Allegheny Valley Hospital in Natrona Heights and Landau for its $8 million outpatient services clinic at Waterworks Mall. Mascaro is reported to be the winner of the $60 million Uptown District Energy Facility for NRG, although that has not been confirmed.

Some Developments in the News

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Earlier this week developers Walnut Capital brought plans to the city for the conversion of 162-164 Fort Duquesne Blvd. into office and roughly 70 apartments. The $30 million project will be built by PJ Dick Inc. Strada is designing now and construction is expected in the spring.

Spring bidding is expected on the next phase of the Providence Point senior community in Scott Township, near Heidelberg. TEDCO Construction is the construction manager/agent for the owner and will bid the $40 million-plus project in packages, including a general package.

Late this month, it’s expected that the RFP will go out for CM services for the $100 million expansion of St. Clair Hospital.

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Want to have as much fun as these lawyers? Don’t miss the PA Builders Exchange’s Annual Cocktail Party on November 11 at the Rivers Casino. Get tickets at the PABX website