The first quarter of 2016 was rocky for the permanent real estate financing markets, said a couple of Pittsburgh-based veterans of the industry at this morning’s NAIOP Pittsburgh breakfast. HFF’s Mark Popovich and Jim Scalo of Burns & Scalo Real Estate Services expressed surprise that the spreads and rates for CMBS and life company lending jumped up during the first three months of the year. Popovich attributed the rise in cost to a rise in fear of global disruption by a Chinese crash – a crash which never happened. Both expected conditions to remain stable the balance of the year.

Liquidity and capital supply are also running ahead of demand. Banker John Fetsko from Wesbanco noted that his bank (and others) had seen their fill of apartment, hotel and office deals and would be more selective about projects, even though capacity exists. Popovich said that capital supply was running well ahead of deals because of uncertainty but that there was more than ample liquidity to deploy. Scalo echoed the sentiment about uncertainty, going further to predict that presidential elections, oil/gas declines, and fears about China, interest rates and terrorism would slow down development and sales until 2017.

In project news, Excela Health held a groundbreaking for its new $40 million Excela Square ambulatory care center in Latrobe that A. Martini & Co. is building. BRIDGES & Co. started work on the new 110,000 square foot self-storage center for Guardian in Hampton Township and the new $5 million Eden Christian Academy school in Ohio Township. The Cranberry Supervisors approved contracts for the $42.7 million Brush Creek treatment plant upgrade. Mascaro is the general contractor.

Another large treatment project bid earlier this week and again highlighted the hypercompetitive nature of the public market. Port Vue Plumbing was the low general/mechanical contractor for Canonsburg Houston’s plant expansion at $18.7 million, some 15% lower than Kokosing’s $21.5 million bid. In a bit of a surprise the project only attracted two bidders. The week before, Mike Coates Construction was the low general on the $44 milllion Chartiers Valley High job at $28.9 million. That was $3.6 million – or 11% – lower than Rycon Construction second low bid. The low HVAC number was also 10% under the next bid, although the remaining contracts bid tightly.

The tight market worked to Char Valley’s advantage. The school board was able to accept over $3 million in add alternates on the $29.7 million middle school (awarded to Mucci Construction) and $650,000 in alternates to the $48.5 million high school (awarded to Rycon). At the same time Mike Coates Construction pulled low bids on both jobs, a situation that always creates confusion in the market.

Thursday morning’s joint NAIOP Pittsburgh/Master Builders’ Association program on the hot multi-family market was surprisingly informative. Surprising because there has already been so much talk about the apartment market that I didn’t expect anything new. The panelists – Oxford’s Steve Guy, IRR’s Paul Griffith, First Niagara’s Kris Volpatti and PJ Dick’s Eric Pascucci – lived up to expectations, however, and gave some different insight.

Pascucci provided a better look at what drives costs on multi-family projects and offered suggestions for planning so that developers could meet the critical June 1 shopping date. Volpatti and Griffith gave an inside look at what makes lenders and appraisers happy – and nervous. These two were especially helpful in looking out at the 3,900 units coming online in 2016-2017 to forecast some rent softening until absorption caught up.

Steve Guy talked about Oxford’s appetite for developing apartments based upon some very stark changes in demographics and renter preferences that they had observed after the housing crisis. Guy especially stressed the strong demand in the urban core and fringe. He also noted that while lenders may be growing more cautious, there was no shortage of investors anxious to add equity to an apartment deal.

Lots of comments followed the program. Perhaps the most interesting was from Chapman’s Steve Thomas, who said he came into the program thinking his company should build some more apartments and left feeling he should sell the ones he owns.

Some project news: Trumbull Corp. was awarded the $164 million CSVT Bridge in Union County. Black & Veatch was selected as EPC contractor for the new $500 million Tenaska Westmoreland plant in South Huntingdon Twp. Fort Willow Development selected PJ Dick Inc. to build its $25 million Fort Willow Apartments, a 191-unit complex in Lawrenceville. The Western Westmoreland Municipal Authority is set to award contracts for its $23.9 million Brush Creek WWTP on November 16. Chivers Construction from Erie is the low bidder.

Two significant leases were signed within the past 24 hours that turned prospective speculative buildings into build-to-suits projects.

ServiceLink will be taking another building at the Pittsburgh International Business Park in Moon Township. Continental Building Systems will start work on the 68,000 sq. ft. building in October. In the Strip, Oxford Development announced that its second office building at Three Crossings will be a new headquarters for attorneys Burns White. Rycon Construction is the contractor for the 105,000 sq. ft. building.

There was project news from West Virginia and Washington. WVU selected the development team that included Yates Construction for its new $50 million+ hotel/conference center. The university also took qualifications for CM-at risk for the $22 million renovation of the Coliseum.  Monongalia General Hospital released its $11 million radiation therapy project to Gilbane, Landau, March Westin, Mascaro and Whiting Turner, due Sept. 18. Washington & Jefferson College selected Mosites Construction as CM for the remaining phase of its $14 million recreation center.