Category: Construction news

End of Year News

Posted on December 30, 2011 | Leave a comment

For estimators there were an annoying handful of projects bidding between the holidays this year. None were very exciting but all were for repeat clients who were asking for extraordinary service. For a few firms there were some holiday good tidings in the form of juicy contracts.

Jendoco Construction was chosen as the contractor for CMU’s $60 million plus Nano-Bio-Energy Center, which will start in 2013. Of more immediate concern was the awarding of contracts for Mt. Lebanon’s $88 million High School project. Nello Construction won the general piece at $49.1 million. The other high profile bid before the holidays was the $50 million Squirrel Hill Tunnel rehab. Those came in as follows: Walsh Construction $49.5 million, Lane Construction $$50.99 million, Mosites Construction $51.7 million. The Squirrel Hill project underscores the divergence in competitive conditions between the heavy/highway market and the building side. No market is really fat right now but many building contractors are able to be selective now. The tunnel project will be multi-year and carries some significant risks. There were a total of 6 bids on the job with a better than 20% variance from top to bottom. The 5% gap between first and third tells alot about how tight the infrastructure market is going to be. Read more about that in the Jan/Feb BreakingGround.

The fourth quarter ended with much more bidding and contracting than usual. Given the better macroeconomic climate, it’s a good bet that the region has put recessionary times behind. The first quarter will tell alot about that.

If I Didn’t Know Any Better I’d Think Things Were Getting Better

Posted on November 30, 2011 | Leave a comment

The news of Friday’s (and later Monday’s) extraordinary jump in consumer spending on the first days of the holiday gift season lifted the stock markets on Monday but the joy lasted only as long as writers could begin looking for the cloud behind the silver lining. The juxtaposition to 2010 is interesting. After a summer driven by fear of European default the news that consumers had increased holiday spending by about five percent sparked a six month rally in stocks on the hope of an economic turnaround. Twelve months later – after a summer of fear aboutEuropeagain – news of an increase in spending that is three times as large sparks…uncertainty about how sustainable that is.

For about six months consumers have been surveyed and responded by saying they had less confidence in the economy’s direction, but at the same time consumers were spending more each month. Similarly, a consumer poll was released Monday that showed that only 10 percent of consumers planned to spend more on the holidays this year, while 42 percent planned to spend less. Either the 10 percent spent a ton more – remember that Black Friday sales jumped over 16 percent – or the consumers answering the survey were saying one thing while doing another.

Yes, this spike in sales could be driven by great deals. Or, the American consumer could have been saving all year for this – while somehow spending more too – and the bump is short-lived. And it’s true that buying a bunch of new consumer goods mostly benefits workers inChinaorMalaysiaorVietnam, not American workers. And certainly, growing consumption that is built upon growing consumer debt isn’t sustainable. All these things and many more could be reasons why a 16 percent jump in holiday sales is really not as good as it sounds, but ask yourself how the reaction to a one percent decline in sales would be greeted.

Business owners and developers are consumers too. When they see empty stores and hear of declining sales they are very unlikely to respond by advancing plans for new construction. A holiday season retail boom doesn’t guarantee another construction boom cycle but it doesn’t hurt either.

On a more regional and objective note…contracting for the first eleven months of 2011 has already exceeded the forecast for the year of $3.2 billion. Housing is still stuck in a slump and will be for at least another year but non-residential construction is cycling up fast. In addition to the surprising overall strength in volume, some high profile projects are proceeding.

A decision should come within the week about the construction manager for CMU’s $65 million nanotech center. UPMC is in the process of seeking project/program management services for its $394 million cancer research center. Mascaro Construction got the nod this week to be the construction manager for the $60 million Cardinal Wuerl North Catholic project. Perhaps the most interesting development is the selectivity being shown by contractors bidding the $90 millionMt.LebanonHigh Schoolproject. Only four generals – Massaro, Mascaro, Whiting-Turner and Nello – are bidding (and no guarantee all will ultimately bid). As a single prime project the job attracted almost twice that many bids early in the year. This time around a handful of those bidders are passing on the project, including low bidder Walsh Construction.

The $60 million job

Posted on November 10, 2011 | Leave a comment

Business people in this region are pretty conservative by nature (that’s why so many of them last so long), so it it’s taking a little while to have the feeling of recovery sink in. But the action in the market right now is pretty encouraging, especially if you’re a general contractor working in the $60 million sweet spot.

There haven’t been many big jobs out that have been more than $50 million since the recession started but there will be a handful of them decided between Thanksgiving and Christmas.

The long-awaited $90 millionMt.LebanonHigh School project is back out for re-bid, due Dec. 7. The job came in $15 million over budget when it originally bid as a single prime construction contract. The school board ultimately went for the siren song of separate prime packages (there are seven now) and the promise of lower bids because that cuts out the markup from the generals. That is an unfortunate assumption that will be reinforced when the new bids open because of the significant scope changes that were part of the redesign since the first bid. This is a district with a checkered history in terms of their construction programs, architects, CM’s, claims, lawsuits and contractors going out of business while working there. Multiple contract jobs just don’t go smoothly. It’s hard to imagine this one will but there haven’t been many $90 million jobs (although there are a few $60 million jobs) so there should be no shortage of bidders.

CMU will interview the construction management finalists before Thanksgiving for its $65 millionNano-Bio-EnergyTechnologyCenter. Jendoco, Mosites/Gilbane joint venture and Turner were selected for the interviews. The construction manager will work through the deisgn phase of the job next year and construction will start in early 2013.

Awaiting the results of interviews are the finalists – Mascaro, PJ Dick, Massaro and Mosites – for the $60 millionCardinalWuerlNorthCatholicHigh School. This project is still in the design development phase and fundraising success will determine when construction will start.

Also in the early stages of development is the VA Outpatient Clinic that is being offered for developer/design/build proposals. The $60 million project will be built on one of four parcels northwest ofButlerPA.Developers Oxford Development,Cambridge, Burton Katzman, Zenith Systems, Cedarwood Properties and Gilbane Development have put together teams to pursue the project. The VA will take first proposals Dec. 14.

The general piece of the Mt. Lebanon project should be right in the $60 million range and if so, that makes four $60 million opportunities at the same time. Some contractors will get a nice stocking stuffer to start the New Year off on the right foot.

Google Grows Out of CIC Space

Posted on December 30, 2009 | Leave a comment

Since moving to the region in 2006, Google has grown its operations to over 100 people in Pittsburgh, a capacity that required it move to space in the newly constructed Bakery Square in East Liberty. One of the original tenants in the Collaborative Innovation Center on Carnegie Mellon’s campus, Google was looking for more than double its original lease and found 44,000 square feet in the Walnut Capital development, which has redone the old Nabisco bakery on Penn Avenue.

Said Andrew Moore, Google’s site director in Pittsburgh, “The city of Pittsburgh is a world center for computer science and so it makes perfect sense for Google to have the increased commitment represented by this move. We are so excited about the feel, location and history of Bakery Square — just the right kind of place for this growing bunch of creative software engineers to be building some of the next generation of Google products.”

“We are seeing our vision of the Collaborative Innovation Center come to fruition — to serve as a landing zone where businesses can flourish and grow in the region. One of the consequences of our success is that Google Pittsburgh continues to grow and is now moving to Bakery Square, where it can continue its expansion…” said CMU president Jared Cohon. “This is another example of how university-industry partnerships develop innovations that spur economic growth.”

Just before the holidays there was a furious one-week process completed to select a design and construction team for the project’s $4 million tenant improvement in the spring. Google interviewed a small group of contractors and architects, selecting A. Martini & Co. as contractor and Strada Architecture LLC to do the design.

Some Economic News to Sift Through

Posted on November 20, 2009 | Leave a comment

There were a variety of reports within the past week that seem to verify that the national economy has come off the mat and that the root causes of the recession are being remedied. Much potential exists for a second leg down for the stock markets, another fainancial market slide or implosion if the institutions have been hiding big losses and hoping for growth to cover them, but at least there is good national news.

Third quarter GDP was 3.5%, better than the 3.1% predicted. Cash-for-clunkers, ARRA accounted for much of the growth, however, so fourth quarter numbers should be tepid, maybe even negative. The Obama administration claims 3M jobs were created/saved, but unemployment has crested the 10% mark.

Housing market news is better. Total state existing-home sales, including single-family and condo, increased 11.4 percent to a seasonally adjusted annual rate of 5.3 million units in the third quarter from 4.76 million units in the second quarter, and are now 5.9 percent above the 5.01 million-unit pace in the third quarter of 2008.

Sales increased from the second quarter in 45 states and the District of Columbia; 28 states and D.C. saw double-digit gains. Year-over-year sales were higher in 32 states and D.C.

Financing for commercial development is showing life for the first time in more than a year. Several large insurance companies have alerted the brokerage community that their money is back in the market and are looking for deals. For developers the down side is the deals are not going to resemble anything like recent years, but most are willing to go 75% loan-to-value, a significant increase over the willingness to extend this spring. The estimates are that money coming back into play approaches $1 trillion

The most significant event of recent weeks was the Developers Diversified CMBS issue of $400 million, which sold out overnight with a reduced risk premium of 140 basis points on AAA bonds, compared to the 200 BP that was offered initially. The AA-rated portion of the bonds carried a yield of 5.75% and the A-rated portion was 6.25%. These aren’t substantially different from what was offered during the heyday of CMBS sales in 2006-2007. The assets backing the securities were retail properties which were government guaranteed under the TALF program. This isn’t a return to normalcy in the CMBS market but it clearly demonstrates demand for the products, and is at least the first issue in 18 months.

Pace of unemployment has slowed nationally, now around 200K jobs instead of 600-700K jobs in spring. Closer to home, October’s unemployment was flat in PA, with the actual number of people working rising slightly. In western PA the unemployment rate still rests more than 2% below the national rate

Finally, the most recent quarter’s numbers from the National Association of Realtors showed the prices rose in the Pittsburgh area, where the median price in the third quarter was $124,600, vs. $122,700 in the same quarter last year. Housing starts remain low in the region, which will support current housing prices by keeping inventory low.

None of this represents robust market conditions, but all of the data is consistent with what happens during the first quarters of economic recovery. Keep your fingers crossed for no more unexpected calamity.

Commercial Construction Slowed by Recession, Housing Decline Ends in 3rd Quarter

Posted on October 21, 2009 | Leave a comment

The effects of the global recession have gripped the non-residential construction market in western PA as the fourth quarter of 2009 begins. Contracting during the first three quarters of the year was down 26.6% from last year. Non-residential construction during January-September was $1.98 billion, down from $2.7 billion during the same period in 2008. “The pace of bidding was about normal for late summer but the average size of the opportunity was much lower,” says Burd. “The pipeline of projects being proposed is improving, but the competitive pressure on contractors to build backlogs is showing in bids. The tight market will continue through at least the first half of 2010”

Reduced global demand has dampened the plans for almost all of the big projects slated to start in 2009, and profit pressures on corporations, combined with poorer results from the institutional sector has limited capital expenditures across the board.

Single family housing starts fell more than 32.3% compared to last year during the nine months of 2009, but that volume represents an improvement over mid-year levels. “While there was probably some goose to the market from the $8,000 tax credit, most of the improvement came in September, which would be too late for most buyers to start and close on a home in time,” said Jeff Burd, President of Tall Timber Group. “I expect that the decline will continue to narrow as the next six months proceeds, both because the October to April period last year was so slow and because demand is recovering.” Burd cited reports from the annual Builders Association of Metropolitan Pittsburgh (BAMP) Festival of Homes, held in late September, of higher than average traffic as reinforcement to anecdotal evidence of an uptick from individual realtors. “There is still a long way to go before we see a return to the normal pace of home construction, however,” cautioned Burd.

During the January through September period 1,090 permits were issued for single-family detached units, down from 1,609 last year. Attached units also declined, with 807 units started compared to 1,056 during 2008. The overall housing construction market was down 28.8%.

Tall Timber Group, based in Ross Township, is a research and consulting firm for businesses marketing in the construction industry. Founded in 2000 Tall Timber is also the publisher of BreakingGround magazine. The totals listed below represent the number of new housing units for which building permits were issued, excluding mobile homes and elderly care complexes. The top areas were:

City of Pittsburgh Leads Housing Permits But New Housing and Commercial Slowing

Posted on July 17, 2009 | Leave a comment

Single family housing starts fell more than 39% compared to last year during the first half of 2009. “The buyers’ response to tough market conditions has been strong and builders have responded by keeping new inventory off the street,” said Jeff Burd, President of Tall Timber Group. “It was pretty obvious from the activity levels month to month that much of the slowdown was early in the year, when the fear from last fall’s financial panic was still palpable; however, the spring permits don’t indicate much easing of the uncertainty.”

During the January through June period 697 permits were issued for single-family detached units, down 39.4% from the same period last year. Attached units also declined, with 614 units started compared to 641 during the first half of 2008. The overall housing construction market was down 26.8%.

“There really isn’t anything upbeat in this market, but the hopeful signs are that the decline has slowed significantly from the first to second quarter,” says Burd. “And, the one positive trend continues to be the solid demand for living in the city, as Pittsburgh proper lead the region in single-family permits, a first since we began covering the area in 1994.”

Non-residential construction was down almost 18% from last year, but contracting volume was up over 75% from the first quarter of 2009. Contracting during January-June was $1.3 billion, down from $1.58 billion in 2008. “The pace of bidding is better than you might expect for a recession,” says Burd. “The pipeline of projects being proposed is improving, with architects and engineers seeing some uptick in the number of proposal requests, however, the pressure on contractors to build backlogs is starting to show in bids.”

Reduced global demand has dampened the plans for almost all of the big projects slated to start in 2009, and Tall Timber has modified it forecast for non-residential construction for 2009 to $2.4 billion. “Unless the bigger economy begins to grow sooner than it appears it will, I’m not hearing anything to suggest that AK Steel or Allegheny Ludlum will begin until next year” noted Burd. The other large industrial project, USS Clairton Works, has already been shelved.

The totals listed below represent the number of new housing units for which building permits were issued, excluding mobile homes and elderly care complexes. The top areas were:

Opportunities Are Coming Back in Pittsburgh

Posted on March 12, 2009 | Leave a comment

As the weather is routinely hanging around 50 degrees there appears to be a chill in the non-residential construction market as well. While a number of high profile, big-dollar construction projects continue towards completion, there are some interesting projects being bid.

The most interesting project to come out of late is the $30 million tenant buildout of the K & L Gates space in the former Arriva building (formerly Freemarkets, formerly One Oliver Plaza, now cleverly named K & L Gates Center). Perhaps the timing for K & L isn’t so great, coming on the heels of a 5% staff reduction announcement, but for the construction industry it’s a good job.

Lehman Smith McLeish out of Washington DC is the architect on the project, which is a 240,000 sq. ft. tenant improvement with facade and plaza renovations. They have asked bids March 27 from P. J. Dick, Massaro, Rycon, Mascaro, Continental and Turner.

UPMC just let a interesting project to Allegheny Construction Group at the new Children’s Hospital campus. The work is a $10 million plus renovation to the 12-story Plaza Building which was formerly, in part, the nuns’ residence. The upper five floors will house the new Ronald McDonald House and the lower floors will be converted into offices.

Oxford Development is in the process of bidding and contracting the partial demolition of the Expo Mart to make way for new offices for Caremark, and the renovation of the former Wickes Furniture Store for use as a replacement Monroeville Convention Center. Rycon Construction is doing the Caremark work and the Wickes building, and another piece is out to bid now.

In Cranberry the Victory Family Church is using Tallahassee-based COSCO & Associates as architect/construction manager to find a team for a 128,150 sq. ft. expansion of their facility. No one has released a budget but the project will be north of $10 million.

And at the end of the month the $98 million Bethel Park High project will hit the streets.

It’s pretty clear that the recessionary forces squeezing the national economy are being felt here, but it’s also clear that there are going to be projects built in Pittsburgh anyway.

Big Prisons, Big Infrastructure in the Pipeline

Posted on February 13, 2009 | Leave a comment

On February 11 Joe Biden was in the state of PA visiting some beat up bridges and drumming up support for the stimulus bill. During the visits he promised/alluded to $16 billion for PA during the next two years. The fear here is that is was Joe Biden being Joe Biden, telling the audience what it wanted to hear. On the other hand, the speech offered some insight into the plan that has allayed some worries about what the real impact on construction the stimulus bill would have.

One commonly circulated theory about the stimulus was that it would not increase infrastructure spending so much as it would replace the spending cuts that have resulted from the deficit in revenues during the past 12-18 months. Biden specified that almost an additional $2 billion would be coming to PA from the federal coffers to repair bridges and roads. Given that PA has identified over 400 structurally deficient bridges, that should help. More to the point, that amount of investment is roughly the total amount spent by PennDOT annually since the late stages of the Ridge administration. Regardless of how much slippage in construction there has been from escalating costs and declining revenues, effectively doubling the amount spent by PennDOT each year will certainly result in a net gain in infrastructure construction.

One private sector infrastructure project that is rumored to be going ahead is the construction of a second natural gas processing/distribution facility in Majorsville PA, along the West Virginia border in Washington County. Developer Mark West, who also developed a similar plant in Houston PA last year, will be soliciting turnkey proposals later this spring for design and construction of the $200 million-plus project.

In another sector, prisons, roughly $600 million is going to be contracted in our region, and more than $800 million statewide for construction of new facilities. Just south of the PA border in Hazelton WV, the Fedral Bureau of Prisons has begun the selection process for a 584,000 square foot medium security facility at FCI-Hazelton. The project is in the federal budget at $230 million. Right now the first phase proposals are being solicited for technical qualifications, and are due back March 12.

In PA the Department of General Services will be seeking design/build proposals for new facilities in three locations. According to DGS press releases the state will put out the first of these in the first half of the year. The $200 million expansion of SCI-Rockview, just east of State College, is expected to go first, with another $200 million at SCI-Fayette in German Township. In the east, a $400 million new facility is scheduled to be bid at SCI-Graterford.

National Economic Woes Begin to Dampen Local Construction

Posted on January 26, 2009 | Leave a comment

Metropolitan Pittsburgh’s good economy could not overcome the fear that gripped the consumer in October and November, sending housing starts here to the lowest levels in two decades. Permits for new construction virtually stopped from mid-October through the end of November. You could literally follow the panic that was gripping Wall Street and see people here put the brakes on. Even with significantly higher activity in December the number of single-family detached homes started was 397, the lowest for any quarter since we began tracking activity in 1994.

During the full year of 2008, permits were issued for 2006 single-family detached units, down 20.5% from 2007. The market for single-family attached and multi-family units was off similarly, with 1,342 units started compared to 1,640 started in 2007. The overall housing market was down 19.6% compared to 2007, and by more than 35% compared the cyclical high in 2004. I attribute the depth of the slowdown to the fact that most builders in the region are small and very well-connected to the market demand. Time and again, we see Pittsburgh’s builders react quickly when a market softens, which prevents the build-up of any significant oversupply of houses.

The other noteworthy development is the continued growth of new construction in the City of Pittsburgh, which experienced the second highest total of detached new units in the region, saw its overall new construction total increase by 24.6%, and issued permits for twice as many units of new housing as Cranberry and Adams Townships combined.

Non-residential construction remained at a high level in 2008, with $3.48 billion contracted for the year, less than a one percent decline from 2007. Contracting in the fourth quarter slowed dramatically, with volume being driven by three large projects. Setting aside UPMC East, Dick’s Headquarters and the Oakland VA jobs, there were less than $400 million contracted in the last three months. With more than $3 billion expected to be invested in the dozen biggest projects in 2009, this trend appears to be extending out for another few quarters, with less work for most of the market to pursue.

We are forecasting a modest increase in housing in 2009, with single-family growth of a couple hundred units, and an overall volume of 3,700 units for the metropolitan area. Because of the large investment in industrial projects like Allegheny Technologies Brackenridge plant, AK Steel and the USS Clairton Works, non-residential contracting should exceed $4 billion in 2009, but I expect the underlying commercial market to decline by more than 30%.

The totals listed below represent the number of new housing units for which building permits were issued, excluding mobile homes and elderly care complexes. The top areas were: