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Some Project Follow-up

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The busy construction season is upon us. The activity is really showing up in the number of $5-20 million projects getting underway around the region. There are also a few projects above $50 million being locked up.

RB VetCo is the general contractor for the $8 million ambulatory care and security improvements at the Louis Johnson VAMC in Clarksburg. Fox Chapel Area Schools awarded contracts for the $17.8 million Kerr Elementary School that bid last week. Hudson Construction is the general trades contractor. Turner Construction was selected as CM for the $72 million Henning Building replacement at Penn State and the $220 million UPMC Immune Transplant and Therapy Center in Shadyside. Turner is also the construction manager for an $8 million tenant improvement for McKesson in Moon Township and the $7 million Allegheny General Hospital ED Expansion. General Services Administration awarded Mascaro Construction a contract for CM services on the $80 million federal courthouse addition and renovation in Toledo, OH. Rycon Construction has started work on the $4.3 million Miller Library renovation at Washington & Jefferson College. A. Martini & Co. held a groundbreaking for the $32 million Bay Village Assisted Living & Memory Care facility for IntegraCare in Annapolis, MD. The University of Pittsburgh interviewed PJ Dick and Turner for CM services on the $80 million Scaife Hall expansion.
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Groundbreaking was held June 6 for the Bay Village community in Annapolis being built by A. Martini & Co.

Cracker Progress Report

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For all the talk about the impact of the ethane cracker Shell is building, there hasn’t been much of an update on the construction in the press. If you have driven by it this summer you may not notice much of a difference, at least to the naked eye, but there is significant progress nonetheless. A massive concrete pour is well underway. Champion Concrete’s batch plant up the Ohio is producing non-stop and there are more than 200 ironworkers on site to handle the rebar tying for what is the pad for the billion dollar process plant to be floated up river from the Gulf of Mexico.  The site will see mostly horizontal construction in 2017 but construction of related buildings will begin in about a year. Right now Great Arrow Builders has a package that includes and administration building and medical/fire station facility totaling about 84,000 square feet out-to-bid, due Aug. 18. A lab building was also just released to bid Sept. 14.

There was an interesting spotting of an autonomous research vehicle on McKnight Road last week that is not an Uber car. The Ford pictured below uses different Lidar/capture technology than Uber’s. Since Ford is a billion-dollar investor in Argo AI, I assume this is one of their vehicles. No announcement of where Argo intends to locate its 120,000 +/- first offices has been made yet.

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In other project news, BRIDGES & Co. was awarded the $12 million Northland Heights senior living facility, which is the conversion Hamister Development is undertaking of a former hotel on McKnight Road. PJ Dick’s special projects group started construction on the $3 million Keystone Shooting Center in Marshall Township. Massaro was awarded the $4 million Mercy Hopsital central sterile facility. Massaro was also selected as the CM for the $26 million AGH Cancer Institute project. IKM was chosen as the architect.

End of Week Roundup

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As chaotic as US politics is right now, the economy continues to hum along. Today’s jobs report outperformed the expectations of analysts, with 227,000 new jobs added to payrolls last month. That continued expansion is in contrast to the story in Pittsburgh, which last year added only 4,400 jobs. At Thursday’s Viewpoint presentation – one of the best forecasting events for commercial real estate – Integra Realty Resources’ President Paul Griffith explained how the healthy job growth early in the business cycle has faded to a flat line since 2013. Pittsburgh’s strong economic sectors have been offset by declining employment in energy and manufacturing.

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In project news, Volpatt Construction was awarded the $2.4 million Nursing Unit 5A renovation at St. Clair Hospital. Developer Alphabet City selected Brubach Construction to build its $7 million, 60,000 sq. ft. East Liberty Centre office building. Campus Advantage interviewed Turner, PJ Dick, Continental and Rycon for its $40 million apartment on Forbes Avenue in Oakland. Rycon Construction is underway on the $27 million, 172-unit Emerald on Centre apartments in Shadyside. Sota Construction is taking bids from subcontractors on the renovation of the Allequippa Place apartments and construction of the 49-unit new Wadsworth Street Apartments, roughly $8 million in total construction. And McCaffrey Interests is taking RFP’s next week on the $66 million Terminal Building redevelopment in the Strip District.

Mall Closings Shouldn’t Surprise

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Today’s announcements from Sears, K-Mart and Macy’s were headline news around the country but the closings are really “dog bites man” news. The ever-growing share of online shopping is a five-year story that has left retailers struggling to find the right mix of bricks-and-mortar vs. online retailing. Research has shown that retailers that do both well get more money from shoppers than those that just do one or the other well. I don’t envy any company trying to figure that out, especially since the landscape is constantly shifting.

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Macy’s Ross Park Mall store was one that escaped closing.

Pittsburgh was left relatively unscathed by the closings, with only a few malls in outlying areas affected (although you have to wonder about the wisdom of closing Beaver Valley Mall stores at this point). On the upside for the region, it seems that Pittsburgh is on the radar for fulfillment centers, which is the upside of retailing these days. Several of the big warehouse leases signed in the past 6 months have been for online fulfillment and the prospect of Amazon as the user for the million-square-foot warehouse at Chapman Westport remains strong. One of the many companies scrambling to get into this business is Macy’s, which is converting some of its big closed stores into fulfillment centers. Perhaps that fate awaits one of the two stores announced for closure in metro Pittsburgh.

Look for this industrial market niche to be a hot – if not huge – property type over the next few years. FedEx Ground has invested significantly in facilities over the past decade but expect to see it, and its competitors, try out new ways to get products to consumers quicker. Amazon’s arrival will signal to others, like Zappos and Wayfair, that Pittsburgh is a viable next-step market. With the industrial demands that will come from Shell’s cracker and related industries, warehousing will be a steady source of millions of square feet of new construction between now and 2025.

Big Year for Industrial Construction

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As the year winds down we’ve done the first estimates for the total construction and the big factor in 2016 was heavy industrial/energy work. The total non-residential construction volume for 2016 is $4.07 billion, the highest level of activity since 2000. Hidden in that number is about $1.3 billion from just three jobs: $580 million Tenaska Westmoreland combined-cycle power plants; the $500 million Revolution cryogenic gas processing plant in Burgettstown; and about $300 million in construction at the Shell petrochemical site in Monaca. Because of the Shell project, volume in this sector will be extraordinarily high for the next three years as well.

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Brian Chlop, Eric Starkowicz and Jason Sigal enojy the YC Holiday Party, which raised $4,000 for the Lemieux Foundation and 200 toys for Toys for Tots.

In commercial construction, Massaro Corp. is finalizing the GMP for the $50 million Campus Advantage apartments in Oakland. UPMC announced its $111 million Hamot Hospital expansion. The first phase of that project is $10 million of relocations for users in Hamot’s professional building. Building Systems Inc. is doing relocations in the hospital and Massaro Corp. is handling relocations in non-hospital sites. Burchick, F. J. Busse and Landau are putting in proposals today for a new $4.5 million Mars Library. Zamagias Properties has asked Continental Building Co., PJ Dick, Massaro and Rycon for proposals Jan. 10 on its 26-unit Sewickley Lofts, a high-end condo project being built in Sewickley’s village.

Hope the year has been prosperous and 2017 will be better. Happy Holidays!

Week Ending Project News

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Design-build bid packages for the 300-bed plus student residence facility at CCAC Boyce’s campuses should be put out to bid shortly. PennDOT has issued a $45 million package for the Airport Busway.

PJ Dick was selected by Concord Hospitality to build the new $40 million Hyatt at the Pittsburgh Athletic Association site in Oakland. UPMC awarded Mascaro the contract for renovations to five floors of the Shadyside Hospital patient tower, a $25 million-ish project. Mosites Construction was selected as construction manager for the new $12 million Ansys building at Carnegie Mellon University. BCJ is the architect on the team.

The Return of the Healthcare Market?

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Affordable Care Act and the UPMC/HIghmark battle have had a negative effect on the healthcare construction market in Pittsburgh. Hospitals have been struggling with figuring out lower reimbursements and the casualties from the insurer/hospital wars. Healthcare construction was a major contributor to the overall construction market in Pittsburgh so the jump in activity over the past few weeks is encouraging.
Rycon Construction was awarded the $6 million first phase of the UPMC Jameson Hospital modernization in New Castle, where UPMC ultimately expects to spend $70 million over a period of years. PJ Dick was awarded the West Penn NICU project, which is in the $15-$20 million range. Bids are being taken from Massaro, Mascaro, PJ Dick, Turner, Rycon and Walsh on the $30 million Presbyterian Hospital cardiovascular renovation and the Shadyside Hospital patient room upgrade is also out. Waters Senior Living awarded Continental Building Systems its $27 million Warrendale facility. Wheeling Hospital is taking bids on a $20 million continuing care facility from Landau, Colainni, Mascaro and Volpatt.

The Shell Game

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I thought I would wait 24 hours after the announcement of the final investment decision by Shell to let the newspapers have at it before a follow up post. Yesterday’s news was certainly good for the regional economy and helpful for the recruiting and training efforts that will go into attracting labor. It also wasn’t that big a surprise.

As we reported last week, Shell has been moving more publicly in recent months, even talking openly about the Monaca project (which Shell refers to as the Pennsylvania chemical project) in its earnings call. Wesex has begun site preparation for a 200,000 square foot warehouse for C. J. Betters Enterprises that will be leased to Shell for storage. Shell has also leased land from Betters in Aliquippa that will be used for parking and overflow from the plant construction.

The players in Monaca once the plant gets started – and construction is continuing to proceed, regardless of the 18-month timeline given to the press – are Bechtel as the main EPC entity, along with Babcock & Wilcox for the plant itself and McCarl’s.

Shell’s announcement wasn’t the only big news in Pittsburgh’s energy market yesterday. Westinghouse announced it had secured agreements (although not signed contracts yet) to build six nuclear power plants in India. Westinghouse has received other contracts for plants around the globe, a signal that fears about nuclear plants are abating. After a bid employment build ten years ago, followed by a right-sizing through layoffs and attrition, Westinghouse’s new contracts should spur new hiring. Having subleased one of its buildings to PPG and vacated at least two off campus buildings, Westinghouse will find its space pretty tight if many new hires occur. That could be a nice boost to the Cranberry office market, which is beginning to show signs of life again.

Milhaus, ANSYS, Shell Making News

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Milhaus Development has given notice-to-proceed to Franjo Construction for the first phase of its Arsenal Terminal mixed use development. Franjo still needs to finalize a GMP for the $40 million, 250-unit apartment complex, which will be the first part of what shuold be a $120 million investment. Even with the growing supply of apartments entering the market, Arsenal’s proximity to the Strip and Oakland make the project’s prospects for success better than average.

In Oakland, another tech-related development is moving ahead at Carnegie Mellon. CMU and simulation software designer, ANSYS, announced a partnership that will include a 30,000 sq. ft. new building on campus.

While of course no one will confirm or deny it, Aliquippa-based C. J. Betters Enterprises is rumored to have inked a deal to do a 200,000 square foot build-to-suit warehouse for Shell.

 

So Much for the Dead Apartment Market

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The first quarter of 2016 marked the first that there were no apartment complexes started in three years. At the national level, the apartment market has begun to slow. Lenders are growing very leery of the property type. Absorption in Pittsburgh is slowing. Multi-family has become overbuilt. Those are the headlines. It seems that developers aren’t reading the headlines.

One of the experts concerned about the pace of development is Paul Griffith, president of Integra Realty Resources. His firm forecasts that multi-family construction needs to slow below 500 units for the next 18-24 months for absorption of new units to catch up. The average for the past three years has been above 2,000 units of new apartments. In a recent conversation, however, Griffith noted that requests for appraisals on new deals have not slowed. The activity in the bidding market reflects that.

The most ambitious project in the city is Milhaus’ plan to redevelop the Arsenal Terminal complex just west of 40th Street in Lawrenceville into at least 625 units. The first phase of that project is about 300 units (to be built in 70-75 unit increments) and the $38 million project is being priced by Continental, Franjo, Mistick, PJ Dick and Rycon. Also bidding is the 300-unit South Hills Village Apartments in Upper St. Clair. Mascaro, Mistick, Dynamic and Rycon are bidding the $43 million project. Massaro has been taking bids on its $85 million, 326-unit Empire project in Oakland. In the on deck circle are the first phases of the Riverfront apartments, being developed by NRP Group at the Buncher site in the Strip, and the Station Square West apartments that Forest City/Trammel Crow are proposing. Each is about 300 units. Given the scope of these projects, the apartments won’t hit the market until late 2017 or early 2018.

These 1,500 units are less than one-third of the 4,800 units in the design/development pipeline at the moment.