Category: National Economy

Confidence is High

Posted on | Leave a comment

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.

dscn1101
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.

Catching Up With the Trends

Posted on | Leave a comment

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.

img_20161207_091751658
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.

Jobs Not Politics

Posted on | Leave a comment

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.

job-creation-history

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.

UPMC Stays Active

Posted on | Leave a comment

After reducing capital spending on construction somewhat during the past two years, UPMC is revving back up. This week AIM Construction was selected to do the construction management for the $30 million Presbyterian Hospital HVI project. UPMC also awarded a contract to Massaro Corp. for the $5 million renovation to one patient floor, 5G at Presbyterian Hospital. Turner Construction was awarded a $2.3 million contract for renovations to the HVI unit at UPMC Passavant. Another renovation project, the $6.5 million Hill Building went out to bid to Massaro, Mascaro, Landau, Rycon, Gilbane, AIM, & Turner.

In other hospital construction news, Wheeling Hospital is working through value engineering with Landau and Volpatt on its $20 million-plus continuing care unit.

Today’s jobs report suggests that the US economy continues to expand. Employers added 156,000 jobs in September. The Bureau of Labor Statistics revised the July numbers downward to 252,000 and the August numbers upward to 167,000. More important than the headline numbers is the improvements in the underlying workforce. Wages rose 2.6% year-over-year; hours worked were up again; and 444,000 people were added to the labor pool, which pushed unemployment back up to 5%. Since last September, over three million more people have joined the workforce. That’s nearly triple the 1.2 million who were added through immigration, although still not enough to offset retirements.

dscn0954
MBA President Steve Massaro (4th from left) addresses the crowd gathered to celebrate the 10th anniversary of BreakingGround on Oct. 6.

Better Economic News

Posted on | Leave a comment

This morning’s report from the Bureau of Labor Statistics (BLS) showed employers added 255,000 jobs in June, growth that was almost 50% higher than expected. Adding to the good news was an upward revision of the June growth to 292,000 and May’s to 24,000 from 11,000. BLS also reported that 400,000 more people joined the workforce, which left the unemployment rate at 4.9%. Wages maintained the 2.6% growth rate year-over-year.

BAsed on the July estimate, the U.S. economy added an average of 182,000 jobs per month through the first seven months of 2016 and 202,000 monthly since July 2015.

The growth of jobs doesn’t immediately jibe with the fact that GDP growth seems stuck below 2% over the past six to nine months; however, when you consider that productivity growth has actually fallen during that time, the added payrolls make sense. During recessions people work more hours for the same pay, either out of fear for their jobs or because their employer cuts staff. Productivity drops as the economy recovers, especially as oppoprtunities to leave overworked positions arise.

All this is good news if you are an employee, especially when you consider that wages are probably still on a rising trajectory. The dark cloud in that silver lining is the reality that upward wage pressure – espeially when significant numbers of unemployed are rejoining the workforce – signals the end of slack in the economy. Recessions don’t necessarily follow these kinds of developments but a recovery like this one is getting long in the tooth.

Construction news is slow in August and this year is no exception. Nonresidential starts topped $2.8 billion through July and the forecast of $3.4 billion for the full year looks conservative at this point. Westmoreland Community College selected Turner Construction as CM-Agent for its $42 million campus expansion program. In a surprising move, Carnegie Mellon pulled the plug – at least for now – on its 425,000 square foot Gateway Project.

June Jobs: Not Such a Surprise

Posted on | Leave a comment
Friday’s June jobs report was not the surprise that business media made it to be. Employers added 287,000 new hires in June, according to the Bureau of Labor Statistics, which was well above the 175,000 consensus estimate, but the long-term trend is a strong one and the big jump in June was merely a reversion to the mean. It’s also not a surprise that the trend continues to move lower as economic expansion reaches its eighth year.
Within the report were two noteworthy items. First, the categories of employment that grew the most were higher-paying sectors like IT, education and health services and professional services. Second was the continued growth in wages. Pegged only one-tenth percent higher in June compared to May, wages were nonetheless 2.6 percent higher year-over-year. That represents healthy growth over price inflation and a steady – if unspectacular – trend upward over the past year.
job creation history
In project news, Turner Construction was selected by the RIDC to perform preconstruction services for a 65,000 square foot commercial building planned for Almono in Hazelwood. Dick Building Co. was awarded the 104-room, $12 million Hotel Indigo proposed for Second Avenue.

Job Growth Again

Posted on | Leave a comment

Friday’s report from the Bureau of Labor Statistics wasn’t an April Fool’s joke. Employers added 215,000 jobs in March, boosting the year-over-year gain to just over three million. Estimates for January and February were also increased. The best news of the report was that nearly 400,000 people joined the civilian workforce. While that increased the unemployment rate, it’s a good sign that part-time or discouraged job seekers are re-entering the labor force.

job creation history

At the local level, job creation has been flat through February. One employer that is not holding still is Uber, which is estimated to have around 400 employees in Pittsburgh. While the private car service waits for its office and research center in Lawrenceville to be completed Uber is making plans for its $20 million-plus investment in automated vehicle research at Almono in Hazelwood. Franjo Construction has been selected to do the $11 million test track, as well as renovations to the Roundhouse Building.

Even as the hotel and apartment development markets are becoming less appetizing to lenders and investors, two projects in Pittsburgh had news last week. Developers of the $14 million Hotel Indigo in the Pittsburgh Technology Center are talking with Franjo, Cavcon and Dick Building Co. about construction of the project. In Lawrenceville, Milhaus Development has been working with Rycon during planning and preconstruction of its $120 million mixed-use project at the Arsenal Terminal Warehouse site. The developer is reported to have prequalified contractors to bid the first phase of the project, which is to include approximately 200 apartment units in 4 phases. Among those being considered are BRIDGES & Co., PJ Dick, Mistick, Franjo, Rycon and two companies from outside Pittsburgh.

More Jobs and Who Might Be Renting All Those Apartments

Posted on | Leave a comment

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).

job creation history

 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

More Apartments and Jobs

Posted on | Leave a comment

Two groundbreakings in the last two weeks bring another 331 multi-family units into the Pittsburgh housing market.

Cranberry developer Larry Dorsch and Morgan Management started work on the 149-unit Cosmopolitan at Ross Park, the first new apartment project in Ross Township in decades. The high-end units will be located on the southern access road of the Ross Park Mall at the Cheryl Drive intersection of the McKnight Park East office complex.

Willow Street Associates and Walnut Capital celebrated the start of their Foundry on 41st, a $35 million, 182-unit project being built by PJ Dick. The complex will be between Willow Street and the Allegheny River at 41st Street in Lawrenceville.

The Foundry is an example of the strength of the housing market in the city of Pittsburgh. New Urbanism is often cited as the driver behind the boom (relatively speaking) of the Pittsburgh apartment market. There’s some truth to that, especially in the Downtown market, but the biggest drivers in the city’s multi-family growth have been East End jobs (CMU, Google, UPMC) and the arrival of new product that hasn’t been offered. Where the real impact of urban attraction has shown up is in single-family homes. Pittsburgh has had the third-highest total of new single-family homes. Counting townhomes for sale in with single-family detached units, the number of new homes in Pittsburgh soars above all other communities.

Topmuni2015-3

For housing growth to be sustained there will have to be job growth, of course. Friday’s jobs reports looked spectacular, with 271,000 new jobs created in the U.S. in October. There are reasons to be calm about the results. First is the fact that October’s jump only levels out the declines in September and August, bringing the three-month average to 188,000. That’s not terrible, especially for late summer, but the moving averages show a flattening of the growth curve. Reinforcing that trend is the pattern of revisions.  Because of its methodology, the Bureau of Economic Analysis adjusts the previous two months data as results come in after the reporting month, so this report showed small downward revisions to September and August. More important than the size of the revision is the downward trend. In growing markets, the lagging data tends to add to the previous estimates. The opposite is true in slowing markets. Data from the summer on is suggesting that the arc of the job growth into 2016 will be flat rather than higher, probably averaging closer to 175,000 jobs than 200,000.

Of Interest Rates and the Casino Hotel

Posted on | Leave a comment

Thursday’s announcement that the Federal Reserve voted 9-1 to leave interest rates untouched at their September meeting means that a) confidence in the global economy isn’t strong, and b) financing for construction and development will continue to be done in an environment of historically low cost of capital. Whether or not the extended rates have anything to do with the activity, developer-driven construction continues to lead the projects in metro Pittsburgh.

One of those projects is the new 140,000 sq. ft. spec lab/research building being developed by Ferchill Group at the Pittsburgh Technology Center on Second Ave. Turner Construction is on the $70 million project and working through design development with an eye towards Spring 2016 bidding.

Proposals are due next Friday, Sept. 25, for the new 214-room, $30 million hotel at the Rivers Casino. Asked to submit proposals for construction mgt. were: Massaro, Turner, Mascaro, Skanska and Norwood.

Bids are being taken today for the 12,344 sq. ft. buildout of the Jackson Lewis space on the 10th floor of Liberty Center. Facility Support Services, A. Martini & Co. and Rycon Construction are bidding. Faros Properties is taking bids on Tuesday, Sept 22, on the Innovation Works space at its Nova Place buildings. Innovation Works is one of the first of the high tech tenants Faros is hoping to attract to the former Allegheny Center Mall property.