Category: Regional construction

Recovery Gaining Steam for the Pittsburgh Construction Market

I had the need to meet up with a customer during the lunch hour last Friday in the Strip District for a brief exchange of materials. The new Terminal Building was a convenient place to meet since it is about halfway between our two offices. The inconvenient part was the usual Strip District stuff: people all over the place, no place to park, impatient drivers on Smallman Street creating their own lanes where none exist. Except that those were the typical inconveniences of the Strip in June 2019, not of the past 15 months. The “business as usual” irritations of a busy streetscape were but another reminder that the economy is bouncing back better and faster than expected. The difference in the marketplace from December 2020 to March 2021 was night and day, and the same can be said of the difference between March and June. Bid boards are full. Backlogs have swelled. Firms are unable to find project managers, project architects, engineers, estimators, etc. Here are a few signposts:

  • Contracting volume for the first six months should be around $2.4 billion, compared to $1.8 billion during the first half of 2020.
  • The final report of U.S. GDP growth remained at 6.4% for the first quarter. Economists expect the full year expansion to be even higher.
  • There were 3 new cases of COVID-19 recorded in Allegheny County June 28. The 7-day average is 13.
  • Hotel occupancy reached 66% in the U.S. for the week ending June 12, the highest since Nov. 2019.
  • Apartment rents in Pittsburgh rose 2% last month and were 4.8% higher than in March 2020 before the pandemic hit.

Obviously, any number of factors can still slow the progress being made. Inflation looks to be easing, especially as home construction slows because of higher prices, but construction costs are still high. That could keep projects from starting. Construction labor is running short, which would cool expansion. Infections could rise again, especially if the Delta variant spreads quickly through unvaccinated people with relaxed virus mitigation. Economic activity outside the U.S. is sluggish, which could limit growth opportunities for global U.S. companies (and we have a few of those in Pittsburgh). The odds are, however, most of the potential hurdles for economic growth will not present themselves. The next 60 days should provide a good vision into where the market is heading. If bidding remains active, bid lists will become shorter as the summer ends, as contractors line up work that stretches capacity. It’s possible that anxiety left over from 2020 will fuel contractors to keep building backlog beyond their capacity, but few firms are struggling financially and that should mean prudence not risk-taking.

Friday afternoon, 20th & Smallman Street.

Braddock Library selected Jendoco Construction as contractor for its $13 million renovation. Mascaro Construction was awarded the $124 million steel structure and concrete decks package for the Pittsburgh International Airport’s Terminal Modernization. The big building envelope package for the TMP was recently advertised. Peak Construction started work on Scannell Properties’ $25 million West Hills Commerce Park in Findlay Township. NextGen Construction held a pre-bid for the $1.3 million Big Tom’s Barber Shop in the Hill District. Walter Mucci Construction was awarded the $44.2 million Paynter Elementary School in Baldwin. ICON is bringing its proposed Smithfield Redevelopment, an $8-10 million re-use of 635-641 Smithfield Street into 40 apartments and retail, to the Pittsburgh Downtown Partnership for review. Hampton Township School District advertised its $36 million high school project for bids July 22.

Note: The blog post written earlier this week identified the PIT Terminal Modernization Program package awarded to Mascaro Construction as stee/foundations in error. the foundations package bid on June 30. The three lowest bids were: Mascaro Construction $39,105,000; Burchick Construction $39,585,000; Mosites Construction $43,048,472.

Employers Are Hiring – Job Seekers Aren’t as Ready to Return

Economists breathed a sigh of relief when the Census Bureau reported that U.S. employers added 559,000 jobs in May. That’s more than double the job creation in April and more in line with what expectations would be for a fully recovering economy. The unemployment rate renewed its downward trend, falling to 5.8%.

Forecasts for May job growth were slightly higher – most topped 600,000 – but after April’s surprising shortfall, no economist was making a confident estimate for May. The number reported Friday morning more closely mirrored Thursday’s data on private payrolls from ADP. The payroll processing giant reported 978,000 additions to payrolls in May.

New hiring in May was reported to be lower than the potential for job growth. The JOLTS survey in May showed a record number of new openings. Employers are increasingly citing an inability to attract applicants. Employment recruiters unanimously report that listings are outnumbering job seekers by a wide margin. This input, along with the fact that wages have jumped 1.2% in the past two months, adds weight to Republicans seeking to end the supplemental and extended unemployment benefits, which they say is an incentive to stay unemployed.

The reality is more complicated than politicians care to embrace. No conclusive surveying has been done that can keep up with the dynamic situation of this recovery but there are a number of factors keeping people out of the workforce that have been identified. First among them is lingering concern about health. The pandemic has not ended. Vaccinations have knocked down the candidates for community spread but with at least 40% of the adult population unvaccinated, those with concerns about COVID-19 have reason to worry. Related to that, childcare capacity still lags what is needed. The nation’s largest childcare provider – the public school system – has not returned to normal operations yet. Reports of difficulty finding workers cut across most industries but the most common complaints are for low wage positions. These positions will be the ones that benefit most from the enhanced unemployment benefits. ZipRecruiter reports that more than half of its job seekers want work from home options while only 10% of employers are offering that option. Perhaps the most overlooked factor is that the economic recovery driving new hiring is a few months old. In most states, workers in the prime age cohorts of 25-55 have only been eligible for vaccination since mid-April. For those unemployed by the pandemic, the renewed activity has not been here long enough to overcome the many conflicting factors that are keeping workers – particularly young mothers – from re-entering the job market.

One indicator that this is the case is the online job search market. reported that postings were 27% higher at the end of May than in February 2020. ZipRecruiter notes that its listings have increased much faster than online searches.

None of this should be particularly surprising. The world’s biggest economy ground to a halt in about three days last March. Our economy tanked because about 300 million people didn’t leave home for six weeks. All things considered, this recovery has unfolded much more smoothly than expected. I can’t forecast how quickly job creation will ramp up or at what point in 2022 or 2023 the U.S. economy reaches full employment, but I can confidently predict that we will see disappointing job creation numbers again at some point before September. Looking at all the factors influencing economic recovery, it will be a bumpy ride back to normal in 2021.

The one data point that concerns me is the variance between where job seekers want to work and what employers expect for work-from-home. As vaccination rates climb, the decline in infections and hospitalizations has accelerated even though restrictions on gathering have been removed. That has pushed more employers to accelerate plans for full-time return to the office or workplace. There has been a variance between what employees and their bosses predicted about work-from-home throughout the pandemic. Now that time has shown that employers can make the workplace safe from virus spread and the virus is on the decline, the gap has widened. If you think through how that gap may manifest itself, there could be some problems coming.

Employers that embrace work-from-home may attract more and better workers. That could be a competitive advantage. At the same time, if working from home is less productive than its proponents claim (and there is growing evidence that is the case), companies that attract good talent that works from home may fall behind its competition anyway. What will happen to workers with skills that translate well across industries when some industries can work from home better than others? It seems unlikely that a skilled construction worker would leave the trade to work in an industry that allows work-from-home, but will the office and administrative staff for a construction company change industries to work from home instead of the office? At minimum, I believe we will have to see these scenarios play out over the next couple of years before some sort of consensus on work-from-home is reached. And I’m not one who believes that we will end up with a hybrid solution, at least not one that looks different from the model that existed on Valentine’s Day 2020.

Construction is less likely to deal with as many of these uncertainties, including uncertainties about the economy. The nature of the industry is such that the ups and downs of 2021 will have an impact on 2022’s work. The outcome of 2021 is mostly baked in by June and the solutions to the problems of re-starting the economy in 2021 will be mostly worked out by 2022. Assuming that the U.S. can side step any lasting issues from the disrupted supply chain or inflation, construction will be booming in 2022.

Opportunities to land work are accelerating in Western PA. Bids on the $90 structural steel and concrete foundations package for the Airport Terminal Modernization Program was rejected and will be re-bid. The first bid packages for the $230 million FNB Financial Center in the Lower Hill District will go out to bid next week. Packages will include steel, foundations, concrete, and M/E/P. Braddock Library is taking CM proposals from Burchick, Jendoco, A. Martini & Co., PJ Dick, Massaro, and Sota for its 2-phase $13 million renovation. Diocese of Greensburg selected Volpatt Construction for the $2.5 million renovations to St Mary of Czestochowa Church. A. Martini & Co. was selected for the $1.8 million UPMC Passavant Cranberry Cancer Center renovation. C.H. Schwertner & Son started construction on the new Target store at the Kaufmann’s Grand on Fifth. BRIDGES & Co. is building the new $3 million Dialysis Clinic Inc. facility on Perry Highway in McCandless. Extra Storage Space selected Brackenridge Construction for its $6.5 million, 65,000 square foot expansion in Homewood. Continental Real Estate has shifted its Lot 10 building on the North Shore from office/retail/condo to 110-125 apartments. Thompson Thrift will be building the 336-unit, $60 million Prism at Diamond Ridge apartments at the end of 2021.

A Week of Mixed News for the Pittsburgh Construction Market

The title of this post is a bit misleading. The past week was something of a tidal wave of good news that was doused by one bit of very bad news. Rather than burying the lede, let’s start with the bad news: U.S. Steel cancelled its billion-dollar upgrade to the Mon Valley Works. The project involved a $250 million cogeneration plant at the Clairton Coke Works and a billion-dollar new rolling mill at the Edgar Thomson Works in Braddock. You can read the labor/industry reaction here and some of the environmentalists reactions here, or read some of both here. For the construction industry, the project’s end means the loss of about 1,000 construction jobs over the next two years. There are lots of other mega projects in the pipeline, so those jobs lost might not be felt; however, the decision to cancel the project sends a chill through the Mon Valley. There is a precedent for that.

U.S. Steel’s CEO, Dave Burritt, said the right things when announcing the decision. He took a couple shots at the state and county for dragging out permitting but mainly blamed the changing global markets and need to de-carbonize as the drivers of the decision. He also committed to steel-making in the Mon Valley. For residents who lived in the Mon Valley in the 1980s, that probably sounds eerily similar to what David Roderick said then about the mills that were closed a few years later. Perhaps the outcome will be different. It is quite feasible that Burritt will be standing in Braddock in a year or two announcing that conditions allow for reinvestment after all, or at least announcing a smaller-scale reinvestment. Regardless of what the future holds, the decision isn’t great for construction or the economy in the Mon Valley.

Now on to the good news. The big news last week was the first estimate of gross domestic product (GDP) growth, which was an annualized 6.4%. Revived demand, driven by vaccinations and government checks, pushed consumer spending and business investment much higher than expected. Consumers increased spending by 10.7% and business investment jumped 9.9%. The latter is especially encouraging because business investment had been steadily falling since mid-2019 in anticipation of an end to the cyclical boom in 2020 or 2021. COVID-19 was not what businesses were anticipating. The U.S. government’s responses, especially since the end of 2020, have allowed businesses to keep dry powder and consumers to boost personal savings rates to 27.6%. Stocks are at record levels, so publicly-traded corporations also have lots of working capital in reserve. After the sharp rise in the first quarter, total GDP stands just 1% below the record-high levels of the end of 2019.

Economists seem to think that good economic news was going to shoot construction much higher in March than what occurred. The Census Bureau report on total U.S. construction spending came out May 3. It showed spending was basically flat from February to March, rising only $4 billion to $1.513 trillion. Economists had forecasted an increase of 1.2%. The rationale for the increase must have been tied to the robust economic growth in the first quarter but such an increase was unlikely given the lead time needed for construction and the dampening impact of the supply chain disruption. That disruption is causing significant delays and inflation that has slowed construction activity. Demand for construction is probably closer to the growth expectations, but it’s unlikely that construction will reach the levels that demand is driving until the third quarter.

Construction activity in Pittsburgh is noticeably higher. Following an unexpected $1.39 billion in first quarter construction contracting, the pace of bidding and construction starts has not slowed through April. New project announcements keep coming. Architects are busy and struggling to hire staff. Bidding is still very competitive, as contractors are anxious to line up work now after nine months or more of difficult backlog building. Mosites Construction was the low general on the $12.7 million Port Authority LRT station platform renovations. Liokareas Construction was the low general on Gateway School District’s $30.4 million middle school addition and alteration project. Mele & Mele & Sons were the low bidder on the $30 million Center Township wastewater treatment plant modernization in Beaver County.

Monroeville VA Outpatient Clinic. Rendering by Plunkett Rayisch Architects

Summit Smith Development announced this morning that it had been selected by the Veterans Administration to build a new $91 million outpatient facility at the Monroeville Mall. C.D. Smith Construction from Milwaukee is the construction manager. Developer Craig Rippole is teaming with Michael Keaton to help Nexii Building Solutions build a 200,000 square foot plant in the Pittsburgh area. No site has been chosen. Rycon Construction was selected as CM for Duquesne University’s $54 million College of Osteopathic Medicine. Tree of Life announced it had hired architect Daniel Libeskind (working with Rothschild Doyno Collaborative) on its $20 million renovation. The Tree of Life is taking CM proposals from A. Martini & Co., PJ Dick, Jendoco, Mascaro, Massaro, and Mosites on May 7. Hudson Group from Sharon brought the $30 million Julian Apartments on Melwood Avenue before the Planning Commission. Mistick Construction started work on the $10 million Granada Square Apartments in the Hill District.

Some Spring Pittsburgh Construction News

Perhaps construction has not thawed in your corner of Pittsburgh, but the market has noticeably come to life. The $1.4 billion first quarter construction volume was an unexpected upside surprise. Recent project announcements mirror the strengths of the Pittsburgh economy: more industrial space being developed, healthcare construction on the upswing, college work rebounding after better-than-expected enrollment results, big public bids receiving lots of competitive attention.

To the former point, ALCOSAN’s board will award contracts totaling $87 million for its East Head Works project, which came in under the estimate by around 20%. PJ Dick will be awarded the general construction piece at $78 million. Last week, Fayette County Commissioners received bids and awarded contracts for its new $39 million county prison. Nello Construction is the general trades contractor.

Pittsburgh’s mega projects are coming into the market as well. Packages worth $182 million are out to bid for the airport’s $1.39 billion Terminal Modernization Program. The PJ Dick/Mascaro/Massaro partnership is taking curtain wall design assist proposals on the $230 million FNB Financial Center (see rendering below). Turner/Mosites is taking bids on University of Pittsburgh’s new $100 million chilled water plant.

Massaro Corp. will be starting construction on the $60 million Landing at Rivers Casino Hotel in mid-May. Turner Construction was awarded the $23 million renovation of Google’s Bakery Square One offices. Penn State selected Rycon Construction as CM at Risk for the $5.8 million renovation of its General Classroom Building at Penn State-Beaver. Rycon was also awarded the $25 million warehouse that Trammell Crow is developing at the Eastland Mall site in North Versailles, reported (but unconfirmed) to be for Amazon. PJ Dick will be renovating 4951 Centre Avenue for Winchester Thurston to create the $6.5 million Joan Clark Davis Center for Interdisciplinary Education.

Be Careful with the Data: February Was Not That Slow

On Friday, the Pittsburgh Business Times ran an article on construction activity in February that quoted Dodge Data & Analytics’ report that a mere $36 million in construction started in that month, The lede was that construction declined 88% year-over-year. (In the interest of full disclosure, I worked for what was formerly the F. W. Dodge Division of McGraw-Hill for 14 years at the beginning of my career.) Given the increased level of activity in the construction market since February 1, this headline and data seemed out of step with reality. I did a few minutes research and found that February was indeed down significantly compared to the same month in 2020, but the conclusion of the article was misleading. That’s not the Business Times’ fault. They are relying on data that is very inaccurate.

The construction market in Pittsburgh is rapidly picking up steam as spring begins. That’s a great indicator for 9-12 months out. The optimism and activity are better than what would have been unexpected just 90 days ago; however, the improved prospects for recovery will do little to improve the prospects for 2021. This year is going to be tougher financially than 2020 because the extreme slowdown in the second and third quarters of last year will be echoed in the first half of 2021. Construction businesses need data to manage 2021 so that they can be best positioned to take advantage of what should be a booming 2022. And bad data is worse than no data.

So here’s the data Tall Timber has from its research of building permits, construction reports, architects, owners, and contractors in the region:

Starts ($M) Variance
February 2020 $370.1
February 2021 $185.5 -49.9%
March 2020 $237.9
March 2021 $354.3 ** 48.9%

** Actual through March 26

The data in February 2020 was a good indication of the health of the market. Projects that were permitted or awarded that month included the $80 million Arsenal 201 apartments, a $5 million Behavioral Health Unit at Ohio Valley General Hospital, $25 million shell building for Krystal Biotech in Findlay Township, The $20 million airport micro-grid, $10 million Kraft Heinz research kitchen renovation, $12 million Heinz Field expansion for the Steelers Pro Shop, and a $16 million slag processing facility at Allegheny Ludlum’s Brackenridge facility. It was cross section of the economy. Of course, that was all about to change. The impact of the pandemic showed up almost immediately, as starts in March (typically a much busier month than February) fell off by 35.7%.

That March decline makes sense now, but at the time, such an immediate slowdown would have seemed unlikely. Bear in mind that our methodology for construction starts seeks to identify when work starts or is about to start. We are not tracking construction put in place, so the mandated shutdowns that followed the outbreak should not have influenced March’s start data. The preconstruction process is lengthy and I would have expected that starts would remain higher for a few months when a downturn began. Such was the jarring nature of COVID-19’s impact on the economy that projects were stopped in their tracks, even if they had already bid. Seeing that data by mid-April 2020 informed me that work was going to decline precipitously in 2020. At that point in time, my forecast for 2020 was for 30% lower start volume; but, as it worked out, the market held up better, falling “only” 17% year-over-year.

On the other side of the coin, the optimism that began to build when vaccines were announced in December 2020 has taken a few months to translate into construction starts. Like in February 2020, the work started over the past 30 days represents what the post-COVID economy may present: $60 million in new industrial properties, including Suncap’s and Northpointe’s developments of over 200,000 square feet; a handful of emerging tech fitouts, including multi-million expansions by Intervala at RIDC Westmoreland and Google at Bakery Square.

Construction companies feel good when their bid boards are full but analysis isn’t about feelings; it’s about data. Bidding is a predictor of activity to come. This coming year will see economic growth that comes in fits and starts. It is easier for executives to make decisions about opportunities if they are able to see February’s activity accurately measured, and the expected gains in March follow suit. Put in the context of the conclusions drawn by the author of the Business Times article, contractors that believe the market is slow because their activity is slow can make incorrect decisions about what and how to bid. The value of accurate data is that you can judge how you are doing against the market, rather than your own observations. To wit, if your company worked primarily in the office market, you might think there were few construction opportunities available in March, but there were plenty, just not in the office market.

I’m not familiar with Dodge’s methodology anymore, other than the fact that they don’t employ local reporters as they once did. Perhaps there will be a revision issued in April that shows the February data was higher or a much higher March that shows that the February data was just a timing issue. Regardless of whether the grossly understated February report changes, be careful about the data you use to measure the market in 2021. It will be a volatile and potentially active year. We already know that pricing is out of kilter, which could create a halting recovery from 2020’s malaise. Perhaps you are going to put your head down and hustle your way through 2021, but if you are the type of businessperson who wants to understand what the market is doing, be careful of the data you use. If it seems like the information isn’t matching your reality, look closer. This is not a year you want to miss the market.

Digesting Economic News for the Pittsburgh Construction Economy

Friday will bring the first jobs report on 2021. The January Employment Situation Summary is expected to show modest job gains. If today’s report on January private payrolls from ADP is an indication, the number of jobs created is likely to be above the consensus estimates. After December’s dip in employment, economists were expecting 49,000 additions to private payrolls in January but ADP reported a bump of 174,000 jobs. First and foremost, that’s good news. The late 2020 surge in infections and hospitalizations that followed the Thanksgiving holiday brought fresh rounds of restrictions and, more important, resulted in people voluntarily avoiding places where people gathered. That was bad news for bars, restaurants, airlines, hotels, etc. A rebound from that suppressed demand was expected and, to the degree the bounce back overshoots expectations, it’s good to have job creation recovering ahead of the vaccination rollout.

Last week, the first reading on GDP for the year was released by the Commerce Department. It showed that output declined by 3.5% in 2020. That estimate will be updated two more times but most economists don’t expect much to change. The decline was the steepest since 1946, when the U.S. was retooling industry from wartime to peacetime production. The disruption to the economy in 1946 was different than the pandemic of 2020, but there are similarities in that the dropoff was caused by non-economic factors. That provides additional optimism about the recovery in 2021, as there was less destruction of wealth and capital after the pandemic hit, which will give fuel to the rebound later this year.

The improving economic conditions match up to the increased levels of activity from tenants in commercial real estate, including a number of large space requirements in the market; and it helps explain the increase in design activity at regional architectural and engineering offices.

The Airport Authority announced some very good news in its Blue Sky email Tuesday. Last year’s delay of the $1.1 billion Terminal Modernization Program allowed architects and engineers time to produce 90% design documents by the end of January. Construction documents will be completed as bid packages are prepared but the construction management team of PJ Dick/Hunt and Turner will be releasing bid packages in March for the next phase, which is the multi-modal transportation center. The terminal project’s progress is good news for the Pittsburgh construction market, which should see another mega project, UPMC’s Heart and Transplant Hospital, get into the market in late 2021. With the proposed billion-dollar modernization of the US Steel Mon Valley Works on hold, these two mega projects will be major job creators in 2022 and beyond.

PIT’s Terminal Modernization Program Ready to Move Ahead

In other construction news, Suncap Property Group is moving ahead rapidly with its two proposed industrial developments. Graycor Construction has started construction on a 278,000 square foot distribution center in Findlay Township. Meridian Design Build will begin work on a 220,000 square foot distribution center – rumored to be for Bayer Healthcare – at the Victory Business Park in Clinton Township, Butler County. Bids will be taken February 5 for Duquesne University’s new osteopathic medical school. Contractors bidding the project are Jendoco, Massaro, PJ Dick, Rycon, and Turner. Construction is not expected to start until end of 2021.

Pittsburgh’s Construction Year in Review: 2020

Construction and development were on a roll coming into 2020. While the economy was certainly showing signs of age, the pipeline of projects to be built had swollen to the point that it appeared that the Pittsburgh construction market would skate through any downturn that might come in 2021 or 2022. Of course, the downturn that materialized 75 days into the new year dashed that idea and laid waste to the economy. By summer, the hopes for a booming 2020 were gone. The human costs and loss of businesses and jobs have been devastating. From the perspective of construction underway and starting in 2020, however, Pittsburgh’s market performed better than feared.

Construction starts recovered stronger than was expected at mid-year. Residential construction was up sharply for single-family homes. New permits for single-family construction rose 12.7 percent year-over-year, to 3,337 new homes. Both single-family detached (2,337 units) and attached homes (1,000 units) saw increases. A steep decline in multi-family starts brought the overall total units started down to 4,138 units, more than 1,000 units off the 2019 pace. Apartment properties faced significant uncertainty throughout 2020 because of the COVID-19 virus and the economic downturn that resulted. Job losses, eviction freezes, and the maddening politics surrounding economic aid created an uncertain environment for landlords and developers. That uncertainty, along with significant municipal and state-level delays in the entitlement process, pushed at least 900 planned units from 2020 construction into 2021.

Nonresidential/commercial construction saw sufficient improvement in the last months of 2020 to bring construction volume within shouting distance of $4 billion. The $3.923 billion in construction of commercial and nonresidential building structures was nearly $1 billion less than was forecast at the beginning of 2020; however, the final tally was more than 10 percent higher than mid-year predictions for activity.

The prospect of widespread vaccination by mid-year is giving owners a view to recovery and boosting activity. Architects and engineers are reporting increased billing and bidding. The Biden administration’s priorities and slim Congressional majorities increase the likelihood that a major infrastructure package will boost construction spending and hiring by spring. That, in turn, seems to have been an impetus for progress on several of the region’s major projects, including the Pittsburgh International Airport modernization, First National Bank’s new headquarters in the Lower Hill District, and UPMC Heart and Transplant Hospital. The region’s two major hospital systems, UPMC and Allegheny Health Network, have upped construction budgets for 2021 and the following years, which is a good leading indicator for the construction industry.

Highwoods Properties is presenting plans for its new 65,000 square foot East Liberty Centre office building to the Zoniong Hearing Board on Feb. 18. PJ Dick is the construction manager. The presentation can be viewed at the Zoning Hearing Board site. AHN selected Sentinel Construction as the CM for its new $10 million parking garage at the new Wexford hospital site in Pine Township.

Green Shoots of Recovery for Higher Education

Throughout the U.S. colleges and universities have become hot spots for new COVID-19 infections, often with numbers that are astronomical for the small towns in which the schools are located. After one month, however, returning to school has been less of a problem for the economy than was feared. This doesn’t mean we’re out of the woods, of course, but the outbreaks have so far been mostly confined to the campuses, rather than setting off big spikes in the college towns. Obviously, stay in touch with this issue as flu season begins.

This morning brought a report from the National Student Clearinghouse that was more good news for the higher ed market. The National Student Clearinghouse Research Center released a preliminary report on fall enrollment across the U.S. today and its results were better than expected. Colleges and universities have seen undergraduate enrollment decline 2.5% in fall compared to last year. Public 4-year schools were nearly even with 2019, and private non-profit schools were off 3.8%. One downside surprise was that community colleges saw a 7.5% decline. Community colleges were expected to get a bump because of the economic impact of the pandemic. Another troubling trend was the decline in foreign students. The pandemic, and its related travel restrictions, accelerated the declining foreign student enrollment to 11% in fall 2020. Only 22% of the colleges and universities reported in time for this update, so it is possible that these trends will see revisions by the time of the final report in late fall.

Source: National Student Clearinghouse

Pennsylvania institutions fared much worse than the nation as a whole, probably because of the predominance of private 4-year schools, with enrollments shrinking 9.2%. One national trend that is likely to hit Pittsburgh universities harder than most is the 11% drop in foreign students enrolled in U.S. colleges. Locally, Duquesne University was off very slightly, as an increase in graduate students virtually offset the drop in undergrad enrollment. The same trend boosted enrollment slightly higher at Slippery Rock and California University of PA. Local private colleges Point Park University and Grove City College both report that enrollment was lower but in line with 2019. Robert Morris University saw a decline of just under 10% but attributed that to an unusually large graduating class in 2019 and a significant drop in international students. Data on Pitt and CMU enrollments wasn’t available but, assuming enrollment declines were milder than expected there also, news is good for the many planned construction projects in Oakland.

In project news, JMC Holdings selected the PJ Dick/Dick Building Co. team as construction manager for the 1501 Penn Avenue office building, which is expected to advance in spite of rejection by the Pittsburgh Planning Commission. Another large redevelopment will be before the Zoning Board of Adjustment in October. Echo Realty’s Shady Hill mixed-use project, a demolition and redevelopment of the Shakespeare Street Giant Eagle in Shadyside, involves a new 36,000 square foot Giant Eagle and 38,000 square feet of retail, to be built by Continental Building Co., and a $10 million, 432-car garage that has been awarded to Carl Walker Construction. Shady Hill also includes a $37 million, 252-unit apartment being developed by Echo’s partner Greystar. Massaro Corp. is the contractor for the apartments.

Mele & Mele was low on the $25.7 million Canonsburg-Houston WWTP. Yarborough was low bidder on the $1.9 million Port Authority Manchester Garage engine test facility. Masco Construction was low on the $3.6 million Robinson Township Police Station. Sentinel Construction is about to start on an $8.7 million renovation of Seven Oaks Country Club in Beaver. Johnson Development has awarded a contract to Franjo Construction for the new $6 million, 105,000 square foot Cube Smart Self-Storage on the North Side. Franjo is also the contractor for a $3.2 million upgrade to Zamagias’ Shaler Plaza.The $67 million Canon McMillan Middle School is out to bid due Oct. 15. 

Some Random and Personal Observations

Jack Mascaro died on Sunday. There were few figures who played a bigger role in the construction industry in the era following the collapse of the steel industry than Jack did. His personality will be missed. I’ve done business with Mascaro Construction for 25 years now but didn’t get to know Jack until the time between selling Pittsburgh Construction News and starting the magazine BreakingGround. Over the past decade we became friends, working together every year or so on a project that he was pursuing (and for which he wanted some free information). I will miss getting those calls.

In his obituary there was mention of his starting his business in 1988 on the Ping Pong table in the basement of his Upper St. Clair home. This story is part of the Mascaro lore but it always makes me chuckle. Jack was proud of the humble beginnings story but he was anything but the kind of businessman who worked from his basement. Jack invested heavily in his people, his technology, his equipment, and his facilities. He didn’t do things on the cheap and he built a company that is one of the leaders of the construction industry. He was proud of that and of the fact that his three sons were trying to take the business to a higher level than he left it for them.

Jack was impatient. He was a ball buster. He didn’t like to lose, even in an industry where you lose way more opportunities than you win. And he had a high level of curiosity. Jack gave me a new book to read every time we met in his office. There was a lot more to Jack than I ever got to see but two stories stick in my mind when I think of how to describe Jack.

The first took place in 2006 or 2007, when we were first getting to know each other. One of his competitors had just landed a big job that he was competing to build. It was not the first big job the competitor had landed recently. My phone rang. Instead of hello, I heard Jack’s unmistakable high raspy voice asking me if [fill in the blank] “needs to win every [expletive deleted] job in Pittsburgh?!?” When I reminded him that the same competitor could have asked that question about Mascaro Construction just a few years before that, he laughed and said, “Well that was then. This is now.”

In 2018, Jack asked me for a bunch of data to try and understand an aspect of the market better for an idea he had to create a more competitive environment for the Laborers union. We had lunch at Legends of the North Shore. There was a server who would speak Italian with Jack so he could practice learning the language. Jack was really interested in digging into the data I pulled together for him, trying to see if it supported his idea and thinking about where his argument might be weak. All of this was after beating a bout with cancer into remission. I asked him why he was so concerned about the industry when he was technically retired from the operations. “I’m 73 years old. I’m just starting to get good at all of this,” he said.

I just turned 63. I try to think about that lunch when I feel tired of the day-to-day nonsense of running a business much smaller than Mascaro Construction. Jack left behind a great legacy. His sons, John, Jeffrey and Michael, care about Mascaro Construction and its people the way he did. His humor, passion, and curiosity left an imprint on an industry and a city. Alla prossima Jack.

Changing gears, Monday brought more great news about the progress towards a vaccine for COVID-19. The vaccine being developed by Oxford University and Asta Zeneca completed an early trial on 1,007 people and was found to be safe and to trigger the antibodies needed to fight the virus. This news follows last week’s announcement that the Moderna vaccine had been effective in triggering the defense antibodies in 100% of its trials and would go into large-scale human testing. The news is a reminder that the solution to the economic problems caused by the pandemic will be a medical solution. Until then, data is showing that people are going to avoid economic activities that expose them to the public, meaning that the recovery will be slow until the fear of transmission fades. Wash your hands. Stay six feet apart. Wear a mask.

In local construction news, Fay-Penn Economic Council announced the start of construction of a 100,500 square foot spec industrial building in Fayette Business Park in Georges Township south of Uniontown. Fairchance Construction is building it. Construction also started on the $20 million micro-grid project being developed by People Gas to power the Pittsburgh International Airport site. PJ Dick is the construction manager.

Where We Stand as We Move to Green

Southwestern PA went to green today and I’m getting a haircut. Seems like a good time to look at where the market is.

This morning the Bureau of Labor Statistics released its monthly Employment Situation Summary, which had some of the first good economic news since January. Employers re-hired enough laid-off workers to add a net 2.5 million jobs in May, bringing the unemployment rate down to 13.3%. That’s pretty consistent with the decrease of four million receiing unemployment insurance during the week ending May 23. The report followed on the heels of Thursday’s news that first-time unemployment claims “fell” to 1.88 million last week. Earlier this week payroll firm ADP reported that private employment declined 2.76 million in May, a significant improvement over April. The most significant information in this morning’s BLS report was the analysis of the unemployed from the past few months. The relevant paragraph from the summary is quoted below:

In May, the number of unemployed persons who were jobless less than 5 weeks decreased
by 10.4 million to 3.9 million. These individuals made up 18.5 percent of the
unemployed. The number of unemployed persons who were jobless 5 to 14 weeks rose by
7.8 million to 14.8 million, accounting for about 70.8 percent of the unemployed. The
number of long-term unemployed (those jobless for 27 weeks or more), at 1.2 million,
increased by 225,000 over the month and represented 5.6 percent of the unemployed.

The data shows the potential for strong recovery, providing that the news on the medical front remains positive. If economic activity were to return to 95% of GDP levels pre-COVID (a mark that would equal the output at the bottom of the financial crisis recession), unemployment should decline to 7-8%. That’s not a great economy but it is a vast improvement. Absent a medical solution to the virus, this outcome seems unlikely but the May data shows a possible path to a quick recovery. (That’s a scenario that seemed highly unlikely a month ago.) The risk in viewing this report as the start of a “V” shaped recovery is real, however. In the breakdown of industry-level hiring, the biggest gain was in hospitality (1,239,000), which remains mired in a deep slump from lack of demand. It’s likely that the bulk of the hiring in hospitality was the result of Payroll Protection, since we also know that demand for restaurants, hotels, and travel is off by 50-75%. The gains in construction and manufacturing (464,000 and 225,000 respectively) are more durable. Much of the economic activity that was lost since mid-March will be lost for 2020; however, the opportunity for a quicker-than-expected recovery exists if consumers and businesses did build reserves that can carry them into the late summer.

Yesterday’s extension of Payroll Protection Program benefits will help businesses stay afloat through the summer months and retain employees, which in turn provides income for rent, mortgage payments, and consumption. The INVEST Act, which was passed by the House of Representative Wednesday, also provides hope for the construction industry. INVEST authorizes infrastructure spending for the fiscal years 2021-2025. The $500 billion represents a 64% increase over the $305 billion authorized in the 2015 FAST Act. The authorization still has to pass the Senate.

Because of the lag in reporting, the data we have on the regional economy is not as sunny. The Department of Labor reported that unemployment jumped to 16.3% in metropolitan Pittsburgh during April. That tracks very closely with the expectations based upon U.S. data for April. It will take until mid-late July to see whether regional hiring picked back up in May to the same extent as the rest of the U.S. Construction data for the first five months in Pittsburgh suggests that nonresidential/commercial construction will fall below $2 billion for the first six months of 2020, a trend that indicates total construction in 2020 of less than $3.5 billion. That would be a decline of more than $1 billion from forecasts at the beginning of the year.

On June 1, Census Bureau reported on total U.S. construction spending. Because of its methodology, the spending looks much more optimistic than what is likely to be reality. AGC’s Ken Simonson points out that Census imputes a lot of modeling into its calculations in the absence of first-hand reporting from contractors, many of which did not report in April. He believes the actual totals will be much lower when revised in coming months.

Source: U.S. Census Bureau

Last week Pittsburgh’s Urban redevelopment Authority approved the Buccini Pollin plan for developing the 28-acre former Civic Arena site last week. The move cleared the path for the $200 million FNB Tower, which will be built by the PJ Dick/Mascaro/Massaro team. It was but one of several significant projects to move forward in the Hill. McAllister Equities is presenting its plans to the city for a $10 million, 51-unit apartment at 1717 Fifth Avenue. Franjo Construction is scheduled to start construction around August 1. The URA is publicizing the June 12 pre-bid meeting for the $10 million Granada Square redevelopment, a conversion of the Granada Theater in the Hill District into a 40-unit apartment built by Mistick Construction. Subcontractor/supplier bids are scheduled to be taken July 6. With the $450 million UPMC Mercy Vision & Rehabilitation Hospital underway, the Hill District is set to lead construction out of the recession caused by the coronavirus mitigation.

In other construction news, Mistick is also taking bids on the $16.5 millioin, 44-unit Jeremiah Village in Zelienople. PS Construction started work on $7.5 million build-out for medical marijuana facilities for CannTech in RIDC Thorn Hill. Sentinel Construction is working on a $1.4 million tenant improvement for Seneca Resources at 2000 Westinghouse Drive in Cranberry Township. Shannon Construction started work on an $800,000 TI for Matthews Marking Systems at Cranberry Business Park. A. Martini & Co. was successful on the new Chase Bank branch announced for Fox Chapel Road next to Fox Chapel Plaza. Charter Homes & Neighborhoods started work on the 26,000 square foot retail building at the Meeder Farm development in Cranberry Township that will include the Recon Brewery.