Winding Down the Bids for 2014

There are a few large projects out to bid that will carry contractors over into 2015 but the market is shutting down for the holidays. Last week there were a few projects bidding that stood out as the backlog-builders for next year.

Mechanicsburg-based Lobar Inc. struck twice, getting low on a $7.8 million wastewater project in Masontown WV and the general trades piece of the $40 million Montour K-4. The 3 low bidders on Montour were:

1) Lobar – $28,973,000; 2) Burchick – $29,596,000; 3) Nello – $29,867,000

Bethel Park’s $6.6 million Fire Station came in under budget, with TOMLYN edging Yarborough Construction. Those results were:

1) TOMLYN – $6,613,000; 2) Yarborough – $6,644,000; 3) DiMarco – $6,709,000

The jury is still out on how the year will kick off in 2015. Right now the total contracting volume for 2014 looks like it will be better than I expected just 60 days ago. Fourth quarter volume will be above $700 million – a good omen for 2015. The total for 2014 should end up around $2.65 billion. There are a lot of $15-30 million opportunities hanging around ready to get to the streets. If these pop in the first quarter, contractors should be happier sooner rather than later.

The forecast for 2015 looks very positive. There are a few potential problems lurking but contracting volume should exceed $3 billion, possibly even $4 billion if the cracker gets going earlier in the year.

Thoughts on the Astorino/Cannon Merger

This morning’s Post-Gazette story on CannonDesign’s acquisition of Astorino followed a few days of rumors of the deal and has of course spawned its share of speculation about the deal. Given Cannon’s reach and the fact that the firm has regularly – if not frequently – worked in the Pittsburgh market, it seems like Cannon could gain market share without buying Astorino. If you look at Cannon’s announcement of the deal, however, you get some insight about the motive.

I haven’t spoken to Lou Astorino yet and Cannon’s CEO Gary Miller is out of the office, so what follows is speculation. Cannon positions the acquisition as the merger of two like-minded firms serving similar clients. They point out that the two firms have worked together before and share similar philosophies. Once you get into the meat of the news you see that Cannon makes a point of touting the additional capabilities that Astorino Development’s design/build team brings. This construction management arm, that Lou P. Astorino leads, is the value that the Astorino side brings to the table. Astorino’s resume is impressive (how many companies can boast PNC, the Pirates and the Pope as clients?) but no more so than Cannon’s; and Cannon’s billings are roughly 14 times that of Astorino’s. But Cannon didn’t have that construction resume.

Delivery methods are evolving. It was Lou Astorino’s recognition of this fact that led to the launching of the construction management group. I believe it’s more than a gesture that Lou P. is going to lead the design/build operation from Pittsburgh. Whether it’s design-led design/build or just the opportunity to act as as CM-at-risk, Cannon now has capabilities to serve clients that are looking at streamlining the process with an alternative delivery method. In particular, healthcare clients – one of Cannon’s major client groups – are looking at ways to deliver expensive construction with less cost and more predictable outcomes. Highmark/AHN has used Astorino that way. Other large CM/design firms are pitching a modular approach to hospital construction. This puts Cannon in the mix with competitors that it couldn’t joust with before.

Jobs Report Surprises the Market

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.

Clayco's Scott Caplan and Carl Belli from Continental at the NAIOP Pittsburgh bash.

Clayco’s Scott Caplan and Carl Belli from Continental at the NAIOP Pittsburgh bash.

More on USS Headquarters, Etc.

The decision to locate its headquarters in the new Uptown development put USSteel on the front pages again Monday. What stayed below the surface of what was an upbeat announcement was that its 18-year lease at the 268,000 sq. ft. building represents a relatively downbeat outlook for the steel maker, which currently leases 420,000 sq. ft. at 600 Grant Street. It’s probably safe to assume there are plans for growth to occur but the length of the smaller lease implies a smaller commitment to Pittsburgh.

Other than that minor negative note, the win is big for the Pens and Uptown. The redevelopment of the former arena site gets a significant anchor and the heart of the site gains a catalyst that might spark development of the adjacent mixed-use block while the residential portion gets underway in 2015. That’s a lot of activity in a short period of time, especially after the length of the planning cycle.

Clayco's rendering of the new USSteel headquarters.

Clayco’s rendering of the new USSteel headquarters.

Clayco expects to start in third quarter 2015. Its in-house architectural office, Forum Studio, will handle the design of the building. Discussion of the cost of the project has been nonexistent for some reason but the building should run $50 million or more. Given that it’s essentially a single-tenant building, the construction with fit-out could run a bit higher than $200/sq. ft.

In other news:

While there has been no formal announcement made, the design/build team for another anticipated project has been selected. The team of Trumbull Corp./Polivka has been chosen to do the $50 million inter-modal transit facility near McKees Rocks.

Today’s economic news was a surprising GDP report from the Dept. of Commerce. The government’s final estimate of GDP growth for the third quarter was revised upward to 3.9%. After a 4.6% gain in the second quarter, the U. S. economy is much stronger than even optimists predicted. The best news from the report for construction was the big jump in business investment of 7.1%.

More Commercial Development News

This morning NAIOP Pittsburgh’s meeting featured the Penguins development team for the 28-acre former arena site. Pens COO Travis Williams, JLL’s KC Pelusi and Craig Dunham, owner’s rep for the project, presented the details of the multi-year project, which expects to include 2.5 million sq. ft. of residential, office and retail development. The first infrastructure piece is bidding now. While it’s too early for this project to be signing any deals (at least so far), other commercial developers are reporting increased deal interest since the election.

Travis Williams, JC Pelusi and Craig Dunham.

Travis Williams, JC Pelusi and Craig Dunham.

At WesBanco’s Southpointe branch ribbon-cutting on Tuesday evening, Jim Scalo reported that construction would start on December 1 on the third building at Burns & Scalo’s Zenith Ridge development in Southpointe. Clayco is the construction manager for the 150,000 sq. ft. spec office. Clayco is about to get underway with an operations/distribution center for Walgreen’s in the RIDC Park West.

Interest in RIDC properties is higher. In addition to the deals in the Parkway West, users Paragon Foods and Burns Equipment should be building new facilities in Thorn Hill in spring.

Penn State Makes a Quick Decision

PSU’s Board of Trustees turned around the selection of a design/build team for the East Residence Halls and new North Residence Hall in a couple days, awarding a contract to Clayco Construction on Nov. 14th. The winning team for the multi-year $171.3 million project includes DLA+ Architecture & Interior Design and Mackey Mitchell Architects.

PSU's $171.3 million residence hall program will add 330 beds & renovate more than 1,200 beds by 2019.

PSU’s $171.3 million residence hall program will add 330 beds & renovate more than 1,200 beds by 2019.

The residence hall project is one of the largest construction projects undertaken at Penn State. You can see more details on it at http://tinyurl.com/m67yyj2.

More Manufacturing Coming

The civic leaders have been telling the public for more than 2 years that the real payoff from having multiple ethylene production facilities – ethane crackers – was in the downstream manufacturing that would arise. Today, GE announced what had been alluded to in an earlier blog post last week – a new plant in Pittsburgh.

The company acquired a site in Chapman Westport, along Rte. 576 in Findlay Twp. with the intention of building a 180,000 sq. ft. advanced manufacturing facility. GE will get proposals from three development teams, including Chapman Properties, Al Neyer & Clayco, to build the plant. The project will be a crunch, with work starting in March if GE gets its way. GE’s announcement was a little vague about the building’s purpose but I was told last week that the plant would manufacture resins, one of the key ingredients to the plastics recipe. (As a reminder, ethylene is the mother feedstock of plastics).

Although there has been no confirmation, Ensinger Plastics has reportedly chosen a site for a new facility, a plant of more than 250,000 sq. ft.

Perhaps Shell wasn’t the only company waiting for the dust to settle before sharing its plans with the region.

The Ellwood City Ledger earlier this week reported some specifics about the early work at the Shell site that buildingpittsburgh alluded to last week. The paper listed Trumbull Energy Services as having won a contract for earthwork. The successful contractor is actually a joint venture between Trumbull and Mascaro Construction is expected to land significant pieces of the site preparation.