Construction in Central PA is dominated by two institutions: the Commonwealth of PA and Penn State. While the state government has been hampered by a budget deficit for a half-decade, PSU is roaring back with hundreds of millions in new construction.
On the bid schedule are the $29 million new Data Center that Holder Construction has out for trade package bids. Jendoco Construction has the $8 million Michael Baker Building out to bid at the Beaver Campus, due Dec. 2. The $33 million Whitmore Lab Building renovation is being bid by Barton Malow and Kinsley Construction is taking bids on packages for the $13 million HFS Warehouse & Bakery. Details of the project are available at PSU Physical Plant website at http://tinyurl.com/k3enmog.
PSU is interviewing design/build teams Wednesday for one of the biggest projects ever undertaken on campus, the $173 million East Residence Halls renovations and new North Residence Hall. Teams consisting of Clayco/DLA Architecture/Mackey Mitchell Architects, Gilbane/Newman Architects/Bohlin Cywinski Jackson, and Whiting-Turner/Ewing Cole will propose today. The architectural selection process has begun for the $140 million new Chemical Engineering/Biomedical Engineering Building, a 188,000 sq. ft. new building that will essentially replace the Fenske Building.
Last night’s annual meeting of the Allegheny Conference on Community Development was focused on the agenda for the Conference’s three-year strategic plan for 2015-2017. The number one priority is one that is on the minds of a growing number of business owners – attracting enough talent. Growing the region’s population is the general way to describe the Conference’s mission for the coming years.
Assuming there is success in that mission, one of the correlative problems to tackle will be having sufficient housing and amenities. That means increasing opportunities for commercial real estate – offices where people work, stores where people shop and homes where they live. Building permits for October show that the will to develop apartments remains strong. After a slow first nine months, permits for apartments in October reached almost 600 units. A similar number is expected in November/December, bringing the total for the year to roughly 2,500 units. The activity in commercial development that would bring the people here is also building.
Reports of deals in the works for industrial and office users include as many as ten or more projects of at least 100,000 sq. ft., including a few over 250,000 sq. ft. Now, there can be redundancy in these but even with a couple of duplicates in the list, there is clearly an uptick in commercial users. And that activity is, of course, without any direct influence from a green light at the Shell cracker.
The rumors of a pre-election announcement or one coming yesterday from Shell have proven to be simply rumors but the activity below the surface seems too urgent for some imminent word. If I’m still writing this by Thanksgiving, feel free to remind me what urgent actually means.
There’s an analogy used to describe certain kinds of people who appear to be laid back but are intense on the inside. They are said to be like a duck – calm on the surface and paddling like crazy underneath.
That’s a good way to describe the Shell cracker project. Royal Dutch Shell announced earnings yesterday. They were up 31% for the quarter to $5.8 billion (even though their income dropped because of declining oil prices). The increase came from their liquefied natural gas business. There was no mention of the cracker project.
Late last week I was told by an engineer familiar with the Monaca project that Shell had decided to proceed with nine support buildings for the plant. At about the same time I heard from two other sources that big infrastructure/site packages had been awarded – as in contracts. It’s been no secret that both Jacobs Engineering and Bechtel have been bidding packages for months, even as the project is still being studied. That’s been the paddling beneath the surface.
The calm duck has been Shell’s public position. In response to my inquiry about the nine buildings and contracts, Shell’s answer was that they had not yet approved any specific plan and that the project was as yet not approved to proceed. That’s what the late Washington Post editor Ben Bradlee called the “non-denial denial.”
All year long, political observers predicted that the announcement of a green light would come when it would benefit Gov. Corbett the most. Given the polling thus far, that would seem to have been before the final campaign weekend. I don’t pretend to understand political campaigning but I do believe that we are about to get that announcement. The best political bounce would be today or Saturday, when coverage in Sunday papers would be assured. Maybe the plans will remain in the “duck” stage for a while longer but I expect some excitement in the next few days.
Monday night Jackson Township reviewed Doug Sippel’s plan for what will be a FedEx distribution center on 60 acres north of Zelienople. The 305,000 sq. ft. facility is exactly the kind of industrial project that has been missing from the region until recently. The FedEx project will be the third big user over 250,000 sq. ft. to enter the Pittsburgh market since last year (Gordon Foods and Amazon are the others). Sippel’s development may be another one-off (although by definition that is already impossible) but my guess is that it is part of a trend that was included in our industrial feature in DevelopingPittsburgh last month – a trend that Jeffrey Ackerman of CBRE spoke about two weeks ago.
Amazon’s lease is for a fulfillment center that is a mini-distribution model aimed at handling their overnight and same-day fulfillment goals. Amazon’s vision of selling everything to everyone is creating tremendous logistical needs in markets that are below the super distribution center size. Ackerman talked about the trend at the CBRE Real Estate Symposium and predicted that the Amazon lease would draw the attention of other logistics providers like FedEx and UPS. Let’s hope this is the start of a wave. Even better, let’s hope it inspires some big spec warehouse space construction.
Some noteworthy commercial construction updates: WVU short-listed Mascaro, PJ Dick and Turner on the $30 million Milan Puskar Stadium upgrade. The proposers on the $30-50 million Union Trust Building renovation will interview this week. Beaver Area Heritage awarded $1.1 million in contracts for the Beaver Station restoration. Arcon was the low general. Franjo Construction got started on a new $2 million Goddard School down in Upper St. Clair and a new 16,000 sq. ft. Aldi’s at the Crossings of South Fayette on Washington Pike south of Bridgeville.
Yesterday’s Allegheny Conference Regional Investors’ Council meeting offered a few things beyond the usual regional cheerleading. More important to the construction industry were two programs that may help with workforce issues.
First there was an interesting video and short speech about the Hola Pittsburgh initiative. This is a effort aimed at attracting the professionals and workers leaving Puerto Rico because of the poor economy. The figures the Conference gave were about 50,000 people emigrating every year. Pittsburgh may not seem the most likely place for Puerto Ricans to land but there is a connection because of career of Roberto Clemente of all things. If successful, Hola Pittsburgh would have the unintended benefit of making the region seem more like home to Hispanic workers in all industries. And construction is an industry that has been attractive to Hispanic workers in other major cities.
The second initiative is the Service to Opportunity effort, which connects returning veterans to jobs. The thrust of the initiative is to match valuable skills learned in combat and service to the civilian opportunities, especially in energy and construction.
Construction is facing a serious workforce shortage as Baby Boomers retire with no backfill of labor ready to move in. Trades have been increasing recruiting but this segment of the population – veterans – comes equipped with transferable skills and excellent attitude. Both these regional initiatives have potential to draw people to our industry.
Not much construction news this week. UPMC selected Alexander Building Construction as CM for its $20 million Altoona Hospital job. Another big piece of the Route 219 extension in Somerset has been put out by PennDOT. The $80 million Garrett Bridges project is due October 23.
Robert Morris University selected Landau Building Co. to be the contractor for its new $6.5 million, 28,000 sq. ft. school of nursing building.
Massaro Corp. was chosen by Phipps Conservatory as contractor for its $3.5 million exhibit and staging space in Oakland. The project will be part of its Living Building Challenge.
Duquesne Univ. put out a $2 million-plus bid to renovate the fifth floor of Libermann Hall for a nursing simulation space. The list of invited contractors for general, mechanical and electrical work is at the PBX at http://tinyurl.com/nkfmsuw
Mosites Construction was low on the $14.1 million Fort Pitt Tunnel renovation for PennDOT on Thursday, with Trumbull and Joseph B. Fay second and third.
The list of contractors submitting proposals to Davis Companies for the renovation of the Union Trust Building includes PJ Dick, Jendoco, Mascaro, Massaro and Turner. Proposals go in on Friday for the $20 million medical office building planned for the UPMC Altoona Hospital campus. Alexander, Mascaro, Massaro and Turner are the contractors involved.
The Corps of Engineers announced yesterday that it had awarded a $58.6 million contractor for the construction of a massive lock wall on the lower Monongahela near Charleroi. the project will last four years and involves the demolition of Lock #3.
In other project news, the Pittsburgh Builders Exchange reported that the Fox Chapel Golf Club selected Franjo Construction for its $7 million addition. The Ligonier Valley YMCA decided not to pursue other bids and has chosen A. Martini & Co. for its $7.5 million expansion/renovation. Massaro Design/Build has started work on a new 25,000 sq. ft. warehouse and plant for Synergy Inc. in the Victory Road Business Park in Saxonburg. MBM Contracting was awarded the tenant buildout work for 4Moms at Elmhurst’s 912 Ft. Duquesne Boulevard building.
The Butler Health System is interviewing MBM, TEDCO and Turner on August 28 for a $15 million medical office building at its Butler Hospital campus.
Proving Leo Durocher wrong, the MBA announced yesterday that Angelo Martini Sr. had been selected by the AIA/MBA Joint Committee as this year’s recipient of the James Kling Fellowship Award. The Kling Fellowship recognizes professionals from the contracting and design communities who have demonstrated the utmost in cooperation between the two professions. Angelo Martini is one of those people who you meet in this industry that everyone likes. That’s a group to which there are few members. Congratulations to Angelo.
Construction remains pregnant instead of prolific at this point. Turner has started work on Cenveo’s 300,000 sq. ft. tenant work at the RIDC Westmoreland, which is the former Sony plant. The few jobs that are out to bid are attracting fierce competition and owners seem to be interested in taking the fullest advantage. The Ligonier Valley YMCA took proposals on an $7-8 million addition that came in over $8 million. While getting VE suggestions from Jendoco, Volpatt & A. Martini & Co., the YMCA put the job out to bid to General Industries & DiMarco Construction. As you can imagine, the subs working on the value engineering were less than thrilled to get invitations to bid from other contractors. Earlier this week, WVU took bids on a small renovation to its Clinical Trials Unit at the BRNI. The project attracted 14 bids from all shapes & sizes of contractors from Pittsburgh and Morgantown. The results are below:
Manheim Corp. – $1,324,000; Mascaro Construction – $1,429,000; TEDCO Construction – $1,430,000.
Construction of all kinds lagged significantly behind the activity in the first half of last year. Housing starts in Pittsburgh plunged 37.3 percent in the first half of 2014 compared to the same period in 2013. The drop in activity was driven by a significant drop in apartment starts coupled with a downturn in single-family permits that is attributable to weather and market conditions.
New home construction is still lagging the pent up demand for housing of all kinds. Some of the decline in starts can be explained by the severe winter, but much of the decline is due to the profile of the custom builder and the lot shortage in Metro Pittsburgh. The average builder is smaller here than most markets and it’s difficult for smaller builders to catch up when weather holds down buying for an extended period. More importantly, the dominant share of NVR’s Ryan/Heartland brands has made it very appealing to develop new lots for that juggernaut and unappealing to develop traditional neighborhoods that feature multiple custom builders.
Total residential starts fell to 1,813 during the first six months of 2014. Because several large multi-family projects got underway in the second quarter of 2013, the year-over-year comparison reflects a steeper decline than the Pittsburgh market might normally support. With another 2,000 units in the multi-family pipeline, permits for attached and multi-family units will still top 2,000 units for the full year, a total that is roughly 25 percent above the historical norm.
Demographics are really behind this part of the market. For as many apartments as have started since late 2012, leasing remains brisk, even accelerated compared to 2013.
Nonresidential contracts reached only $1.02 billion from January to June 2014, down 29.7percent from $1.45 billion during the same period in 2013. The pace of activity seems to be finally increasing, although the market is nothing like the boom of construction that took place after the last recession. Because of the cold winter and slow spring bidding, there is little expectation of a significant turnaround in 2014 but the pipeline is filling up with projects that bode well for 2015. Jobs like CMU’s Tepper School and the Cohon Center, the next phases of Bakery Square 2.0 or the Three Crossings are some examples of projects that will get underway in the next six months.
The big trigger will be the Shell cracker in Monaca, I believe. There are bigger industrial users looking for space now but the demand for manufacturing and industrial space will explode once plans for the site are announced. Jacobs Engineering took bids on some early packages over a week ago and confidence is still very high that work will go ahead by the end of this year on the preparation for the chemical processing facility, even if only to prepare it for Shell to sell to another producer. That prep work should be in the billion dollar neighborhood.