K-12 Bid Results

Monday night the Moon Area School District awarded contracts for the Brooks and Allard Elementary School projects, which bid April 8.  The successful general contractor was Nello Construction at a combined total of about $9.6 million. Bids were also taken last Thursday and Friday for the $7.5 million Marshall Middle School in North Allegheny and the $12 million McKee Elementary School in West Allegheny.

The results for those schools are below:

k-12 low bids

Google interviewed A. Martini & Co., Mascaro, PJ Dick, Rycon and Turner yesterday for the tenant improvements for its new 66,000 sq. ft. space at Bakery Square 2.0.

Wrapping Up a Slow Week

It’s that time of spring when there are a lot of little things out to bid but not much new on the big and exciting front.

Google is taking proposals Monday for the construction manager portion of its 66,000 sq. ft. tenant buildout at Bakery Square 2.0. Oxford Development takes design/build proposals on May 15 for their 3 Crossings parking garage, a 575-car garage that should run $10-$12 million. PJ Dick, Massaro, Al Neyer, Rycon and Carl Walker were the contractors short-listed for the garage.

Eat ‘n Park is taking bids from BRIDGES, CBF, TEDCO and MBM for construction of two new restaurants in Bethel Park and Peters Township. (Apparently having all upper case letters was a qualification). Riverview Children’s Center is taking proposals from Jendoco, A. Martini and Massaro for a $1.7 million renovation to its Verona facility.

Labor Market News: Not So Good Friday

This morning’s announcement from the Labor Department echoed the private payrolls report by ADP earlier this week: hiring has slowed. Government data for March showed 126,000 new jobs, roughly half the number that was the consensus estimate of economists surveyed by the Wall Street Journal. Hiring for January and February were revised downward as well, leaving an average gain of 197,000 jobs/month during the first quarter.

The causes of the slowed pace of hiring aren’t clear. Poor weather slashed demand for construction, hospitality, retail and other consumer businesses. Earnings growth has slowed, leaving less cash for growing payrolls. There is also the tightening labor pool, which was reflected in the unexpected wage hikes for McDonald’s and WalMart recently. If businesses can’t attract workers, they won’t be adding new jobs. As with all monthly economic news, more time is needed to understand if we’re in a slowing trend or a seasonal variation.

In a slow construction news week the biggest news was the selection of Massaro as the construction manager at-risk for the new $21 million, 250,000 sq. ft. Ensinger Plastics plant in South Strabane Twp. Penn State had made selections on the final pieces of its big push for professional services from the winter. The team of EYP Architects and DPR Construction was selected for the $30 million AgEngineering Building, the first true integrated project delivery project to be done at PSU. HOK’s New York office was chosen to design the $100 million chemical engineering/biomedical engineering building and Populous was awarded the design contract for the Lasch Football Building renovation.

Tall Timber’s preliminary research of building permit offices showed close to $700 million in construction contracting during the first quarter, a robust start to the year. Following a $900 million fourth quarter of 2014, construction is heading for an upward trend in work.

Another K-12 Moratorium Looms

Within Gov. Wolf’s 2015-2016 fiscal year budget legislation is a provision that places another moratorium on PlanCon beginning July 1. The assumption is that a moratorium would only be for one year but that was the assumption in 2012 too (and it was a wrong assumption). The language of the bill specifies that projects in the process prior to July 1 will continue to progress. Gov. Wolf’s proposed budget does include funding at the same level as the current budget, or just under $300 million.

Rep Seth Grove from York had earlier proposed a reform of PlanCon that would streamline the process and add another $30 million or so to increase deferred capital spending.

Dept. of Education Secretary Rivera did not directly address the question of a moratorium but said that “Governor Wolf is committed to ensuring his education investment reaches the classroom first,” saying that, “once the funding gap has been restored local officials will ultimately be able to make decisions on where they want to invest, including construction projects.”

With a Republican-controlled legislature in opposition to many of Gov. Wolf’s proposals, his 2015-2016 budget is not expected to pass without extensive negotiation. According to PA School Board Association staff, the proposed PlanCon moratorium is opposed on both sides of the aisle. It’s likely that the budget is meant to get both parties to compromise on their sacred cows and a moratorium will be quashed in negotiations. Until that comes to pass, however, the construction industry will be anxiously watching to see if this vital sector is set back again.

According to the Pittsburgh Builders Exchange, Allegheny Construction Group was the low bidder on the $9.7 million CCAC West Hall and the $2.77 million Pittsburgh International Airport South Matrix baggage handling improvements. Podojil Builders was awarded the new $1.5 million Primanti Brothers restaurant to be located off Racetrack Road at the Streets at the Meadows mixed-use development being done by Horizon Properties.

Rycon, Max Construction, Restaurant Specialties and Fred Olivieri are bidding a new Applebee’s on Route 22 in Murrysville on April 6 and for Waynesburg on April 9.

What the Heinz/Kraft Merger Means

This week’s announcement of the merger between Kraft Foods and Heinz has made Pittsburgh civic leaders a bit nervous, and for good reason. After watching what 3G Capital did to slash overhead with its acquisition of Heinz 19 months ago, leaders should expect significant executive layoffs and reorganization to consolidate operations. While that should be better news for Pittsburgh than Chicago – where Kraft has an impressive corporate campus – there is one significant factor that could make a higher-cost headquarters in Chicago more desirable: air travel.

As the Wall Street Journal reported Wednesday, Chicago has dozens of direct flights to destinations around the world daily, including 3G’s home country of Brazil. Pittsburgh’s only current year-round international flight is to Toronto. The disparity of serving 216 cities daily versus 35 from PIT, gives Chicago the kind of edge that the Allegheny County Airport Authority has been fighting to regain after USAirways reneged on its promise to maintain its flights.

Let’s hope that lower costs for commercial space and much lower costs of living win the day because it seems unlikely that 3G will maintain “co-headquarters” for very long.

Following up on some recent projects of interest, Burchick Construction was awarded the contract for the Victoria Street parking garage by UPMC, a $9 million structural renovation. Google selected Perkins Eastman for the design of its interior fit-out in the Bakery 2.0 office building. Gurtner Construction was awarded the general trades portion of the new $7 million Ross Township public works garage complex. Rycon Construction was the low bidder on the Cathedral of Learning Suite 910 renovation at $419,000, beating out TEDCO at $448,000 and A. Martini & Co. at $461,800.

Massaro CM Services is in the process of putting three North Allegheny schools out to bid as part of the $22 million program to upgrade the Marshall Middle and Elementary School, and the Bradford Woods School. The projects are due April 9, 14 and 17. In Ohio, the new $30 million Canton South High School is out to bid.

The East Liberty Story

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.

(From left) Dan Gilman, Kyra Straussman, Mark Minnerly and Todd Reidbord tell the East Liberty turnaround story at NAIOP Pittsburgh.

(From left) Dan Gilman, Kyra Straussman, Mark Minnerly and Todd Reidbord tell the East Liberty turnaround story at NAIOP Pittsburgh.

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.

The Fed and Interest Rates

Wednesday’s release from the two-day Open Market Committee of the Federal Reserve confirmed what had been expected since the beginning of the tapering of the easing began in winter 2014. Citing strong job gains and continued economic improvement, Fed Chair Janet Yellen reported that the FOMC concluded that the U. S. could tolerate slightly higher borrowing costs. In signaling that it would raise rates – probably in June – the Fed also estimated that its funds rate would only climb to 0.625% by December. That’s roughly half what it estimated the rate would be just three months ago.

So what we got was rates going up sooner but slower. The investment markets seemed to like that kind of certainty, reversing early day losses and finishing up more than 200 points higher.

For a little perspective check out the graph below that shows interest rates for the past couple generations. At four times the current rate level, interest rates would still be lower than 42 of the last 50 years. Still a good time to borrow.