The Amazon Effect

Monday night Jackson Township reviewed Doug Sippel’s plan for what will be a FedEx distribution center on 60 acres north of Zelienople. The 305,000 sq. ft. facility is exactly the kind of industrial project that has been missing from the region until recently. The FedEx project will be the third big user over 250,000 sq. ft. to enter the Pittsburgh market since last year (Gordon Foods and Amazon are the others). Sippel’s development may be another one-off (although by definition that is already impossible) but my guess is that it is part of a trend that was included in our industrial feature in DevelopingPittsburgh last month – a trend that Jeffrey Ackerman of CBRE spoke about two weeks ago.

Amazon’s lease is for a fulfillment center that is a mini-distribution model aimed at handling their overnight and same-day fulfillment goals. Amazon’s vision of selling everything to everyone is creating tremendous logistical needs in markets that are below the super distribution center size. Ackerman talked about the trend at the CBRE Real Estate Symposium and predicted that the Amazon lease would draw the attention of other logistics providers like FedEx and UPS. Let’s hope this is the start of a wave. Even better, let’s hope it inspires some big spec warehouse space construction.

Some noteworthy commercial construction updates: WVU short-listed Mascaro, PJ Dick and Turner on the $30 million Milan Puskar Stadium upgrade. The proposers on the $30-50 million Union Trust Building renovation will interview this week. Beaver Area Heritage awarded $1.1 million in contracts for the Beaver Station restoration. Arcon was the low general. Franjo Construction got started on a new $2 million Goddard School down in Upper St. Clair and a new 16,000 sq. ft. Aldi’s at the Crossings of South Fayette on Washington Pike south of Bridgeville.

Ray Volpatt, Bill Engel & Dollar Bank's Joe Smith having fun at the MBA golf outing.

Ray Volpatt, Bill Engel & Dollar Bank’s Joe Smith having fun at the MBA golf outing.

Something Has to Give

After doing some preliminary work on construction volume in metro Pittsburgh thru the first three quarters – with an estimate for September – I am expecting that less than $2 billion will have started during the first nine months. Only in 2010 was the volume so low through three quarters, at least since the 2001-2003 slowdown. Architects and engineers continue to be busy but the amount of work getting through the pipeline is still a trickle.

Last Wednesday, CBRE presented its annual real estate symposium at the Westin. The global real estate firm was upbeat about the economy in general and commercial real estate in particular. Local managing partner Jeffrey Ackerman characterized the Pittsburgh market as “booming.” Given the data on high occupancy and absorption of space, his assessment is correct. What isn’t booming is the new construction that should result from such incredibly tight supply and demand fundamentals.

The last time the construction market felt like this was during the summer of 2004. Following the Plan B boom of stadiums and the school construction boom of the late 1990’s, there was an implosion of construction when the 2001 recession hit. That slowdown lasted over three years, breaking in the fourth quarter of 2004. Like then, the fourth quarter of this year will be an indicator for the coming year.

By November, we’ll have elections won and lost. Any owner waiting for signals will have them by then. Look for the opportunities to build backlog before Christmas to get an inkling about whether the pipeline is going to break loose in 2015 or not.

Hola Pittsburgh and a Workforce Solution

Yesterday’s Allegheny Conference Regional Investors’ Council meeting offered a few things beyond the usual regional cheerleading. More important to the construction industry were two programs that may help with workforce issues.

First there was an interesting video and short speech about the Hola Pittsburgh initiative. This is a effort aimed at attracting the professionals and workers leaving Puerto Rico because of the poor economy. The figures the Conference gave were about 50,000 people emigrating every year. Pittsburgh may not seem the most likely place for Puerto Ricans to land but there is a connection because of career of Roberto Clemente of all things. If successful, Hola Pittsburgh would have the unintended benefit of making the region seem more like home to Hispanic workers in all industries. And construction is an industry that has been attractive to Hispanic workers in other major cities.

The second initiative is the Service to Opportunity effort, which connects returning veterans to jobs. The thrust of the initiative is to match valuable skills learned in combat and service to the civilian opportunities, especially in energy and construction.

Construction is facing a serious workforce shortage as Baby Boomers retire with no backfill of labor ready to move in. Trades have been increasing recruiting but this segment of the population – veterans – comes equipped with transferable skills and excellent attitude. Both these regional initiatives have potential to draw people to our industry.

Not much construction news this week. UPMC selected Alexander Building Construction as CM for its $20 million Altoona Hospital job. Another big piece of the Route 219 extension in Somerset has been put out by PennDOT. The $80 million Garrett Bridges project is due October 23.

RMU Awards School of Nursing

Robert Morris University selected Landau Building Co. to be the contractor for its new $6.5 million, 28,000 sq. ft. school of nursing building.

Massaro Corp. was chosen by Phipps Conservatory as contractor for its $3.5 million exhibit and staging space in Oakland. The project will be part of its Living Building Challenge.

Duquesne Univ. put out a $2 million-plus bid to renovate the fifth floor of Libermann Hall for a nursing simulation space. The list of invited contractors for general, mechanical and electrical work is at the PBX at http://tinyurl.com/nkfmsuw

Updating the News

Mosites Construction was low on the $14.1 million Fort Pitt Tunnel renovation for PennDOT on Thursday, with Trumbull and Joseph B. Fay second and third.

The list of contractors submitting proposals to Davis Companies for the renovation of the Union Trust Building includes PJ Dick, Jendoco, Mascaro, Massaro and Turner. Proposals go in on Friday for the $20 million medical office building planned for the UPMC Altoona Hospital campus. Alexander, Mascaro, Massaro and Turner are the contractors involved.

Fay Lands $58.6M Locks Project

The Corps of Engineers announced yesterday that it had awarded a $58.6 million contractor for the construction of a massive lock wall on the lower Monongahela near Charleroi. the project will last four years and involves the demolition of Lock #3.

In other project news, the Pittsburgh Builders Exchange reported that the Fox Chapel Golf Club selected Franjo Construction for its $7 million addition. The Ligonier Valley YMCA decided not to pursue other bids and has chosen A. Martini & Co. for its $7.5 million expansion/renovation. Massaro Design/Build has started work on a new 25,000 sq. ft. warehouse and plant for Synergy Inc. in the Victory Road Business Park in Saxonburg. MBM Contracting was awarded the tenant buildout work for 4Moms at Elmhurst’s 912 Ft. Duquesne Boulevard building.

The Butler Health System is interviewing MBM, TEDCO and Turner on August 28 for a $15 million medical office building at its Butler Hospital campus.

A Good Guy Gets His Due

Proving Leo Durocher wrong, the MBA announced yesterday that Angelo Martini Sr. had been selected by the AIA/MBA Joint Committee as this year’s recipient of the James Kling Fellowship Award. The Kling Fellowship recognizes professionals from the contracting and design communities who have demonstrated the utmost in cooperation between the two professions. Angelo Martini is one of those people who you meet in this industry that everyone likes. That’s a group to which there are few members. Congratulations to Angelo.

Construction remains pregnant instead of prolific at this point. Turner has started work on Cenveo’s 300,000 sq. ft. tenant work at the RIDC Westmoreland, which is the former Sony plant. The few jobs that are out to bid are attracting fierce competition and owners seem to be interested in taking the fullest advantage. The Ligonier Valley YMCA took proposals on an $7-8 million addition that came in over $8 million. While getting VE suggestions from Jendoco, Volpatt & A. Martini & Co., the YMCA put the job out to bid to General Industries & DiMarco Construction. As you can imagine, the subs working on the value engineering were less than thrilled to get invitations to bid from other contractors. Earlier this week, WVU took bids on a small renovation to its Clinical Trials Unit at the BRNI. The project attracted 14 bids from all shapes & sizes of contractors from Pittsburgh and Morgantown. The results are below:

Manheim Corp. – $1,324,000; Mascaro Construction – $1,429,000; TEDCO Construction – $1,430,000.