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.
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.
March 15 was the Pittsburgh Downtown Partnership’s annual meeting, which featured a speech by Gabe Klein, who was head of transportation for Chicago and Washington DC over the past five years. Klein’s a cyclist and entrepreneur who took a very private-sector approach to getting “sh*t done” (his quote) to change transit in those cities. He had a very exciting vision for what urban transportation would look like, especially after automated vehicles were the norm. His speech dovetailed nicely with the one Mayor Peduto made about Pittsburgh’s selection as a finalist for the $50 million Smart City grant.
For all the firsts in dining and entertaining and livability Pittsburgh has garnered, winning this grant in competition with cities like Austin, Denver, Portland and San Francisco would be a major win. Google the subjects and watch a couple of the YouTube videos with Peduto or Klein talking about smart transportation. It’s exciting stuff.
Along those same lines, Pittsburgh Today posted an article today by Julia Fraser, called Thinking Boldly that advocates for a braod-based coalition of ideas about the future of transit in Pittsburgh. It talks about the work of the new Regional Transportation Alliance that is attemopting to develop a strategy for combining light rail, bus, and non-motorized mobility to make Pittsburgh a model city. To accomplish anything significant in transit will require outside-the-box approaches like have been taken in Denver and Phoenix. There citizens agreed to tax increases dedicated to funding transit. Bold indeed.
In the construction market, competitive pressures continue to make winners out of owners that have projects on the streets. Last week’s winner was Chartiers Valley School District, which received bids on its new middle school. The low general was again from Ohio, Mike Coates Construction. At $24.5 million CV’s middle school was under budget. It will be interesting to see how market conditions vary when the district’s high school project bids later this year.
Faros Properties is bidding a couple million dollars worth of renovations to the former Allegheny Center property it is in the process of re-branding as Nova Place. The concourse and parts of the plaza are being re-purposed to be amenity spaces and tenant space for new restaurants that have been attracted. CMU is in the process of selecting a CM for a $5.6 million investment to convert the former Deardon Center on Fifth Avenue to mixed-use. Turner and Graziano are interviewing for the project.
Don’t give up on the energy sector as an economic driver just yet. Crushing declines in the price of oil and gas have hit the producers hard. There has been a pullback in the amount of space used by companies in the gas sector for two years or more. In early 2016, however, there are signs of life. Experts who follow the energy commodities point out that the historical trend with oil price plunges is for several big drops to occur, followed by reinvestment by the firms that kept their powder dry. Sort of like what Warren Buffet has done his whole career.
Bidding has picked up for some of the compressing/processing facilities in the midstream. In at least a couple cases, projects that were shelved in late fall have come back on the front burner. Similarly, the big energy project in the region is also reported to have been accelerated. The Shell cracker plant is definitely in the “believe it when I see it” category but the procurement suggests the final investment decision has been made, if not announced. Regardless of the timetable for announcement. This is what the site looked like from I-376 this morning:
That’s a lot of work done. For those that can zoom in, the small square structures just to the left of the plumes from Shippingport are the Nova Chemicals plant about 2 miles away.
Elsewhere in the energy sector, Black & Veatch awarded a contract to PJ Dick for site prep, earthwork, concrete, roads, etc. for the $500 million Tenaska power plant to be built near I-70 in South Huntington Twp. of Westmoreland County. Packages are being bid on another gas-fired plant, a $900 million project by Combined Power Ventures in Cambria County near the town of Vinco. The low gas prices that are hurting the Marcellus Shale play are making combined-cycle plants more viable.
In commercial project news, Rycon Construction was chosen for the renovation of 1 PNC Plaza and PJ Dick was chosen for 2 PNC. The projects were valued by the PA Builders Exchange at $13 million and $15 million respectively. The PABX also reported that MBM Contracting was chosen to do Duolingo’s buildout of 15,000 sq. ft. at 5900 Penn. Construction is just starting on Ashley Capital’s 316,000 sq. ft. warehouse in Findlay Industrial Park. Oliver Hatcher Construction is the contractor. PW Campbell is preparing to start work on a 26,535 sq. ft. new dealership for Day Apollo Subaru in Moon Township.
With permit data collected for 11 months and most of the bidding follow up done, we’re estimating that the nonresidential contracting for 2015 will be up significantly, from $2.69 billion in 2014 to $3.31 billion for 2015. The biggest chunk in that gain was in heavy industrial projects. Even with a depressed gas price and downsizing in that sector, there were still hundreds of millions spent in processing and infrastructure.
Housing construction came in surprisingly close to the activity in 2014, closer than any year going back to 1995. The total number of dwelling units (new construction only) should come in right around 5,000, with more than half of those being apartments and less than 40% being single-family detached homes.
Architectural backlogs remain high, an indication that 2016 should be on a par with 2015. No announcement about the Shell project appears to be happening soon – with rumors that the decision is being delayed another six months. That may slow some of the commercial market west of town, as may the rising vacancy numbers in the south and west suburbs. Recent federal budget action will be good for the heavy and highway sector, which should see more than $2.5 billion bid and see more even distribution of projects bidding during the year.
This morning’s headlines from the Pittsburgh Business Times included a predictably negative story quoting an official from the Ohio Oil & Gas Association who believes that only one cracker will be built in the Appalachian Basin. I’m not familiar with the level of influence of the Ohio Oil & Gas Association but this gentleman’s opinion flies in direct opposition to what everyone in the petrochemical business had told me about the logistics and dynamics of building ethane cracking capacity. The input I’ve had is that nobody wants to build the only cracker and it makes little economic sense to do so. Not sure what this guy’s motive is but I bet if you dig deep enough there’s an Ohio-centered reason for his nay-saying the crackers.
What does appear to be true (and negative enough for our business press) is that the long-awaited decision from Shell will be awaited at least another 90 days. After laying off 6,500 people globally and being in the middle of some potentially big strategic moves, Shell may not be ready to publicly announce a $5 billion or $6 billion project.
The cracker isn’t the only economic story in Pittsburgh. The inertia behind the development pushing east out of Downtown is growing and it is time to push for a more ambitious vision for what 2030 will look like.
There is a regional public transportation initiative underway and that seems like a good place to raise the bar. Yes, there are political realities about mass transit that can’t be ignored but caving in to an assumption that one city can’t receive or raise billions of dollars before asking is defeatist. Every once in a while a great idea defeats the political nonsense that exists (remember the highway bill in 2013?) and Pittsburgh’s mass transit strategy should aim for that.
If it takes $2 billion to link Downtown to Oakland and/or Hazelwood (or both), then ask for $2 billion and push to get it built in five years. Throw the region’s political and corporate weight behind a project that links The Strip and Oakland using an existing AVRR line and right-of-way. Imagine the impact on development in The Strip if the 3 Crossings transit hub could link residents to Almono.
Check out this photo/rendering that Desmone Architects is using to show how the condos planned by Francois Bitz will sit in The Strip neighborhood. Imagine the infill potential between the 31st Street Bridge and 16th Street Bridge. In the image, Oxford has already filled in much of the two blocks east of the Cork Factory Lofts with 3 Crossings. Beyond that, Buncher’s massive riverfront site will begin (slowly) filling in with apartments and a riverside boulevard that could connect thousands of units of additional residential.
It took about 30 years to reverse the damage done to greater Pittsburgh by the steel industry’s collapse but much of the progress has occurred since 2008, when civic leaders challenged Pittsburghers to “Imagine Pittsburgh” differently. Imagine the difference it might make to aim even higher, expecting a vision of a Strip District skyline or bustling Hazelwood or Hill District to come to fruition before 2030.
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).
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.
Last Friday, Carnegie Mellon selected PJ Dick as construction manager for what is called the Forbes Morewood project. Depending on the final scope and schedule the project will be somewhere between $20 million and $30 million but its impact will be much bigger. A lot of the work will be focused on changing and updating the university’s “headquarters” – Warner Hall – but the latter phases of the project will form the physical linkage between CMU’s iconic “Cut” to the new north campus under development.
The importance of the north campus development is that it is going to be the home of what CMU’s visionaries, especially Pres. Subra Suresh, see as the future home of its corporate partners. Under Jared Cohon’s leadership, CMU upped its game in technology transfer, which is the commercialization of its research in new technologies across many industries. More recently, Google’s explosive growth has shown a spotlight on the talent at CMU and highlighted the value that a company can derive from working closely with the university. Dr. Suresh’s vision for what is being dubbed the “Tepper campus” – because the new home of the Tepper School of Business will anchor the development – involves corporate partners locating on the university grounds. This same concept has become bricks and mortar at MIT, Stanford and other schools, and clearly CMU intends to be among that group.
Imagine turning left onto Forbes from Craig at the end of this decade, driving past a hotel filled with corporate visitors and a new incubator-style office between the Hollow and Scaife Gallery, and on up a Forbes Avenue that has a town center spanning the street and connecting to a new campus that has the Amazon Building or the GE Building or the Uber Building or all three. By that time, the Gates/Hillman and Scott Halls will have filled in the east side of Panther Hollow and connected all of the science buildings together. The flow of research and information from the minds learning chemistry, nanotechnology, information technology, physics, etc. will cross Forbes to reach those entities that can apply that enormous knowledge to the real world.
If the vision is fulfilled, there will be a lot of money made by that flow of information. Southeastern Oakland is not going to become the new Silicon Valley but it doesn’t have to to have a transformative effect on Pittsburgh’s overall economy. So if you have to go from Oakland to Squirrel Hill over the next few years, maybe don’t detour around all the mess on Forbes Avenue. Take the time to witness something that will make your life a bit easier in the long run.
Owing to continued demand for apartments and the start of a number of long-awaited projects, construction activity in the first six months was up significantly in metropolitan Pittsburgh. Commercial and institutional construction jumped 24.3% to $1.38 billion from January to June. Residential construction was up 31% year-over-year, with 2,380 units started in the first half of 2015.
Within the residential segment, the increase in units started was all in the multi-family market, which had 1,488 units started compared to 843 for the same period in 2014. Because of lot shortages and continued regulatory pressures on development lending, construction of single-family detached homes remains depressed below the level of potential demand.
Along with apartments, hotels remain a hot property type. Fairchance Construction started work on an $11 million Hilton Garden Inn in Moon Township. Dynamic Building was selected as contractor on a $10 million Towne Place Suites by the Grove City Outlets.
Bear Construction has started work on the new 25,000 facility for Tri-State Supply outside Washington PA. Rycon has begun site work for the new Dick’s in Greenwood Plaza in Butler. PJ Dick has started the preliminary work on Google’s 66,000 sq. ft. space in Bakery Square 2.0. In State College, Clayco Corp. is taking proposals on the design-assist mechanical and electrical packages for the first phase of the $170 million East Residence Halls project.
PPG Industries has committed to renewing its lease in the signature One PPG Place when it expires in 2018. Highwoods Properties made reference to the renewal in its conference call April 29, letting the cat out of the bag on what had been whispered around town for a month or so. Avison Young handled the transaction for PPG.
The decision to take 350,000 square feet is a significant vote of confidence for the Pittsburgh region – and Downtown – from an employer that is growing its top and bottom line. It keeps the revitalization of Market Square on an upward arc as well. Coupled with Rice Energy’s decision to expand and take 150,000 square feet at Burns & Scalo’s third building at Zenith Ridge in Southpointe, the PPG announcement adds some upbeat news to the Pittsburgh office market, which had been buffeted a bit lately by the prospect of vacancy from USSteel’s downsizing and the Citizen’s Bank decision to sell the 525 William Penn Place building.
Chuck Bunch, PPG’s CEO, commented that the decision reflects the coatings manufacturer’s continued expansion in Pittsburgh. With the past year PPG has filled one of the vacated Westinghouse campus buildings in Cranberry and invested roughly $15 million to update research facilities in Harmar.
This morning I attended the NAIOP Pittsburgh monthly chapter meeting at the William Penn. The meeting feature a panel that included developers Todd Reidbord (Walnut Capital) and Mark Minnerly (The Mosites Co.), along with Kyra Straussman from the URA. Councilman Dan Gilman moderated. It was surprisingly informative.
I say surprisingly because the story of East Liberty’s transformation has been told a lot. I mean, A LOT. But when these active participants retold what it took to redevelop East Liberty, especially when you heard the timeline of all the projects at once, it was impressive. Most observers have accurately characterized the turnaround of East Liberty as a long, painful process. While that’s true, it was also apparent from this morning’s presentation that much of what we consider to be the turnaround story has happened in just the last five years or so. The thing that struck me was that Whole Foods signed on in 2002 and it was another six or seven years until Target arrived on the scene. After that, Bakery Square wasn’t open for business for another two years or so. That’s a lot of investment since the start of the Great Recession.
The presentation concluded with a brief discussion of the Larimer redevelopment, for which a $30 million Choice Communities Grant was received. I can’t see Larimer turning around like East Liberty, but then I can’t say I shared the vision of what would happen in East Liberty ten years ago. It’s an amazing change.
A bit of construction news: Continental Building Systems has started work on the $2 million, 17,000 sq. ft. Toby Keith’s I Love This Bar at North Shore Place II. JLL is receiving bids on March 24 for USAA on 56,000 sq. ft. of fit-out for Cabot Oil & Gas at 2000 Park Lane. Precision Builders, Rycon and Shannon are the bidders.