Today’s announcement by Concord Sierra of another hotel in the Strip District points out just how strong the hospitality market is in Pittsburgh. The 131-room hotel will be built at 1100 Smallman, where Schreiber Real Estate had planned apartments. Although no construction team was announced, Concord has worked with Continental Building Systems to build its last few hotels in Pittsburgh. Ridgetop Hospitality also got headlines for moving forward with hotels in Wheeling and Waynesburg. Concord’s project would mark the 90th hotel started in metro Pittsburgh since 2005, with 52 started since the beginning of 2012.

JLL interviewed development teams last week for the CMU Gateway project, a 425,000 sq. ft. office/hotel/convention space to be built in Junction Hollow along Forbes Avenue. Interviewed were teams that included Elmhurst/Alter Group, Longfellow Real Estate Partners, Walnut Capital, Oxford Development, Gateway Development and Wexford/BioMed.

Bids came in Sept. 4 for the new $25.7 million Muse Elementary in Canon McMillan School District. The low bidders for the general construction package were within 2% of each other:

1-Waller Corp.  $18,117,800; 2-Nello Construction  $18,387,000; 3-Vendrick Construction  $18,596,000

Leonard S. Fiore Inc. started work on the new WalMart at 7500 University Blvd in Moon Township. The 153,950 sq. ft. store is the first new WalMart to be built since the store built behind the Northern Lights Shopping Center in 2012. The lack of big box construction is a testament to the new retail landscape. The Rivers Casino awarded the contract for its $1 million connector project to Skanska USA. Rycon Construction was selected to do the buildout of Apple’s 26,000 square foot space at Three Crossings.

Alcoa is taking proposals from PJ Dick, Graycor, Massaro, Turner, Landau and Triple C Construction on Sept. 25 for another early phase of its $60 million Technical Center expansion in Upper Burrell in Westmoreland County.

It’s been almost 10 years since the South Side Works burst on the scene with the Cheesecake Factory and a bunch of one-off retailers (at least one-off to Pittsburgh) to join the office and apartments that had been developed earlier. In the intervening years, retail habits have changed and the Soffer Organization had endured some financial pressures. There was also a deep recession. The net result was stagnation in what was a hot spot.

Apartments and a fresh business cycle are bringing the South Side back into the limelight. On Friday there will be a groundbreaking ceremony for the South Side Works City Apartments, being developed by Village Green and built by Rycon Construction. The $50 million development includes 264 luxury apartments and penthouses with 12,000 square feet of ground floor retail/commercial space and a 562-car parking garage.

The City Apartments join the 117-unit Hot Metal Flats (being developed by Oxford Development and PJ Dick) and the 56-unit 3030 South Water lofts (from Ralph Falbo and P. W. Campbell), all under construction. Highwoods Properties has announced plans for a 158,000 sq. ft. office building within a blocks of all this residential development along the river.

Friday morning’s report on November job creation surprised analysts across all the metrics – although most economists seemed to be forecasting a surprise even as they predicted much lower numbers. The Census Bureau survey showed 321,000 new jobs in November and raised the previous estimate of job growth in October from 214,000 to 243,000 new jobs. That blew away all estimates and marked 10 straight months of 200,000 jobs created.

The bigger surprise was in the details. The unemployment rate remained at 5.8%. That may seem a surprise but it was because the labor participation rate remained the same and the U-6 unemployment – that’s the number for those who are part-time or temporary for economic reason – fell to 11.4%. That’s significant because the decline is caused by a shift to more permanent hiring by employers. Economists have speculated for several months that the tightening labor market and better economic prospects would force employers to grow permanent payrolls more rapidly. November marks a stronger response to that trend. If it becomes a new level of magnitude, the job market will be a real tail wind for the economy in 2015.

Some of that additional hiring is definitely showing up in Pittsburgh in the industrial sector. The recent announcements of new facilities by GE, Ensinger, FedEx and Amazon seem to be the start of a wave. Earlier this week, Universal Electric announced that it was expanding because of growth in its transportation market and was adding 81,000 sq. ft. and 58 employees. Mascaro Construction has begun moving dirt on the addition.

As the fourth quarter of a disappointing 2014 gets underway there are rumblings from the marketplace that suggest that the steady improvement in the economy may be loosening the purse strings that owners have kept tight. Given that this year has seen more fits and starts than any in memory, you might want to take the uptick in activity with a grain of salt but there are some users out there looking for bigger spaces.

Sippel Development brought plans for a 305,000 sq. ft. FedEx distribution center in Jackson Twp. north of Zelienople. Jackson Taylor Contractors from Mentor, OH is the project’s contractor.

Fourth River Development is finalizing approvals for a 104,000 sq. ft. industrial building at Starpointe that will be anchored by Mach 1 Global Services taking half the building. Dynamic Building Co. will build that project. Continental/Chaska has started Building 300 at the Pittsburgh International Business Park. That’s a 55,000 sq. ft. spec flex office. Interest is high in that property and the next building there is likely to be larger, perhaps 100,000 sq. ft.

Beyond the horizon of those projects, Chapman Properties is looking more seriously at starting the first large spec building at its Chapman Westport property, probably something in the 90,000 sq. ft. range. And the most interesting prospect out there is an RFP for architectural/engineering services for a 250,000 sq. ft. building from a confidential client. Those looking at the RFP have been given no specific indication of the site or the user. There have been a couple 250,000 sq. ft. users in the market during the last few years (USSteel, Chevron, etc.) but this appears to be a different company than those being shopped previously.

The construction boom that occurred between recessions kicked off with a big jump in activity in the last quarter of 2004. Let’s hope for deja vu all over again.

While everyone is waiting to hear what contracting team was selected for the new Chevron offices (FYI, their previous decisions seemed to be made on Thursdays), a handful of other projects have moved forward.

Highmark will be interviewing Martini, Mascaro, PJ Dick and Rycon next week for the CMR contract at the $14 million Jefferson Regional Medical Center Ambulatory Surgery Center in Bethel Park. Indiana Hospital takes proposals next week from contractors for its $30 million vertical addition. On the list are Alexander, PJ Dick, Martini, Mascaro, Massaro, Quandel and Fiore. Gordon Food Services selected Whiting-Turner as construction mgr. for its 500,000 sq. ft. distribution center in Findlay Business Park. Burchick is confirming prices for the $15 million, 110,000 sq. ft.  Schenley Place office building in Oakland.

Mosites Construction was the successful bidder on the $18 million Luna Parking Deck job in Shadyside. The Lane Co. was the low bidder on the $39 million West Carson Street Viaduct job for PennDOT.

This morning’s Bureau of Economic Analysis report on GDP showed that US economic growth was still sluggish but better than expected. After Jan/Feb data showed that the US economy was not taking much notice to the sequestration cuts, economists had upgraded their expectations for the first quarter GDP. The BEA estimated the quarter at 2.5% GDP growth and revised the 4th quarter GDP from negative to 0.4% growth. Most economists were expecting growth on that order (some even as high as 3%) but most of those same economists predicted sub-2% growth just 2 months ago.

The other release this AM was the consumer sentiment index, which fell to 76.4. That’s down from March but not as far down as economists expected (are you sensing a theme here). The takeaway from the report was that consumers were now starting to feel the effect of that Social Security withholding increase and were feeling less spunky. If that is a correct assessment then it’s not good for the economy, since consumer spending in the 1st quarter was 3.2% higher than the previous quarter. On the other hand, using an index of emotions that looks backward to predict the future is not a precise method either.

On the local front, PJ Dick was selected to be the CM on the $30 million Embassy Suites being built out within the Henry W. Oliver Building downtown. CMU selected Mosites Construction as CM on their University Center project, which won’t get underway until early 2014. Repal Construction is the low bidder on the Paramount Exchange Building renovation in the Lower Hill. Dynamic Building Co. & TBI Construction are negotiating the contract for the 35,000 sq. ft. new building in Alta Vista Business Park for Scientific Drilling.

I suppose it’s a sign of the competitive times but the list of bidders on privately-funded projects have become longer & less logical than the crazy public market. At the bottom of the downturn in 2009 it was common to see 15-20 contractors chasing even small public jobs but that returned to the ‘normal’ 10-12 after a year or so. Now the demand for opportunities from contractors seems to have given owners (maybe their architects too?) the idea that having 10 bidders on a so-called ‘select list’ of bidders is good for them. Two projects out this wee illustrate just how questionable that strategy is.

The $7 million East Suburban YMCA job in Penn Hills has 10 contactors on it, ranging in size from PJ Dick & Mascaro to Kacin Construction, with a handful of $10-30 million/year contractors sprinkled in. The bidders are mostly union contractors but there are a few non-union generals so the range of subcontractors who will bid is going to be broad.

An even more illogical list is the group invited to re-bid the $3.5 million Aquinas Academy job in Hampton Township. This project bid a year or so ago & was awarded to Graziano but never started. Now it bids again to 10 contractors, including Graziano. The list also includes BRIDGES, Busse, Franjo, Landau, TEDCO, Just-Mark, W. K. Thomas, Nello & Turner Construction. If you worked all day to come up with a group of contractors that is more dissimilar I doubt you could do so. Turner is a $6 billion global contractor. Just-Mark & Thomas are almost never in a hard bid situation. According to the Builders Exchange this is the 2nd job in two years that Just-Mark has appeared on.

What owners don’t seem to realize is that extending the lists like this only creates an environment that hurts them once construction starts. It’s not just that the generals can’t reliably judge how their competition is going to approach the job, it’s that putting together such different kinds of contractors with radically different rosters of subcontractors means that numbers will be out on the street that are not actually competitive. In a reasonable market, the smart generals (and subs) who have some work will just walk away from this job (and still may), meaning the owner is left with a much better chance of getting a low bidder that has bad sub numbers, is counting on buying out the job hard & taking advantage of any weakness in the documents to extract money as the job progresses.

The problem with bidding in general is that it tends to reward the least understanding of the project at hand. If a bad number is on the street, the price (and performance) for that category slips to that level. It only takes a few of those to make a competitive job become a bad job. History had shown that putting together a list with 3-4 contractors of similar size & approach provides enough competitive incentives to get to the best price for the project. That price may not be the one the owner wants to hear but it’s almost always the right price. Asking more contractors to bid until you can hear the number you want isn’t going to change the right number.