US Construction Prospects Brighten

Yesterday’s news from the AIA underscores how strong the demand for new construction is throughout the US. AIA’s Architectural Billings Index (ABI) for June rose to 55.7, the highest level since 2007. The survey of firms indicates that 55.7% saw billings rise in June, an unusually high number.

The four-month trend for billings and inquiries is sharply higher.

The four-month trend for billings and inquiries is sharply higher.

A dive into the numbers shows that it’s institutional and government projects that are leading the way, with commercial real estate development also above 50. One noteworthy change was a decline to 47 for firms engaged in multi-family projects, an indication that planning for apartments may finally be cooling. As an indicator, the ABI is a reliable forecasting tool for the 9-12 months forward.

In project news regionally, the design/build team of Mascaro/Tetra Tech was selected by Penn State for its $6.6 million Ag Digester & Dairy Barn. PSU also short-listed Barton Malow, Gilbane, Turner and Whiting-Turner for its $30 million Ag-Engineering Building. Horizon Properties was selected to redevelop the former Star Theater into a town center in South Fayette Township. The state of WV selected alternates that made Paramount Builders the successful contractor on the $33.2 million State Office Building #3 in Charleston. Oxford is working with Massaro Corp. to build its $20 million, 146-unit Emerald on Centre apartments in East Liberty.

Construction Ramps Up in Second Quarter

Owing to continued demand for apartments and the start of a number of long-awaited projects, construction activity in the first six months was up significantly in metropolitan Pittsburgh. Commercial and institutional construction jumped 24.3% to $1.38 billion from January to June. Residential construction was up 31% year-over-year, with 2,380 units started in the first half of 2015.

Within the residential segment, the increase in units started was all in the multi-family market, which had 1,488 units started compared to 843 for the same period in 2014. Because of lot shortages and continued regulatory pressures on development lending, construction of single-family detached homes remains depressed below the level of potential demand.

Along with apartments, hotels remain a hot property type. Fairchance Construction started work on an $11 million Hilton Garden Inn in Moon Township. Dynamic Building was selected as contractor on a $10 million Towne Place Suites by the Grove City Outlets.

Bear Construction has started work on the new 25,000 facility for Tri-State Supply outside Washington PA. Rycon has begun site work for the new Dick’s in Greenwood Plaza in Butler. PJ Dick has started the preliminary work on Google’s 66,000 sq. ft. space in Bakery Square 2.0. In State College, Clayco Corp. is taking proposals on the design-assist mechanical and electrical packages for the first phase of the $170 million East Residence Halls project.

Dog Days of Summer

One of the more deceptive characteristics of the market in summer of 2015 is the bidding activity. For general contractors, the activity is slow, maybe slower than normal; but there is action taking place in the next tiers down the food chain. Within the past 60 days there has been a marked shift in the subcontractor bidding environment, a shift that bears watching if you’re an owner.

Subs and suppliers are busier. In part this is due to the releasing of projects that had been delayed over the past year or so, or had a general on board while designs were being completed. There is also the reality that the skilled labor force is nearing full capacity. Within the majority of the trades, the halls are empty. One other consideration is that the Pittsburgh market may finally be shifting like the rest of the country to delivery methods other than design-bid-build. And subs have been bearing more of the burden of this extended slowdown, carrying an unfair share of project costs because of longer (meaning slower) pay cycles and increased administrative expense. There will be some hay-making while the sun shines.

Any or all of these factors will move the focus of the bid market from generals to subs and specialty contractors. The evidence of this is in higher prices and less participation. More than a few generals have expressed the sentiment that the latter is a reality now, especially when it comes to budgeting. Owners that haven’t brought a project to the market in six months or more may find it a very different environment. It may be too early to declare it a seller’s market but construction is no longer the buyer’s market that has existed since 2009.

For those looking ahead to big bidding opportunities, the PA Builders Exchange reported this morning on an $81 million new treatment plant for West View Water (with a general package over $40 million) that should bid in the fourth quarter. Check out the details at http://tinyurl.com/oq6qnz6. On the commercial side, Milhaus Development selected Strada Architecture and Rycon Construction as the team for its $100 million redevelopment of the 12-acre site west of the 40th Street Bridge in Lawrenceville.

Another Step Forward for the Cracker

As was reported in BreakingNews and BuildingPittsburgh on June 19, the Dept. of Environmental Protection announced today that it had issued the air pollution control permit for the operation of the ethane cracker and polyethylene production facility in Monaca. The permit was a major hurdle to overcome in the planning process for the plant.

The site plan for the proposed polyethylene complex. Image courtesy Shell Chemicals.

The site plan for the proposed polyethylene complex. Image courtesy Shell Chemicals.

Shell spokesman Michael Marr reiterated that the permit is just one piece of the decision-making process but his comments revealed little in the way of further obstacles to the project’s progress.

Additional steps still remain, including implementing the permitted preliminary work at the site, finalizing the engineering and design work for the facility, and continuing to strengthen our long-term feedstock portfolio,” Marr was quoted saying in the Pittsburgh Business Times.

Activity at the site is already heavy. The Mascaro/Trumbull Energy Services team has people working at the site, along with other early works subcontractors. A key project that should be starting soon is the construction of the marina and docks by Joseph B. Fay Co. Much of the cracker plant itself will be fabricated off site and shipped to the project by barge. Look to that project as a key indicator.

Mid-June Buzz

There has been a surprising amount of buzz surrounding the news that Shell closed on the land that on which it proposes to build an ethane cracker. I think that’s a sign of how thirsty we are for news about the decision. From the standpoint of the decision to proceed, the closing is kind of a non-event. Shell can still decide against the project for the time being or walk away and sell the property to someone else.

The bigger news about the cracker is that the needed permits are reported to be in hand. I assume that means that there has been informal word given, since it seems unlikely that DEP would have granted approval without someone announcing it. This, if true, is a big deal because it removes virtually all obstacles to the decision. Shell still wants to prove the long-term sustainability of the gas supply (something of a no-brainer) and then agree to invest in Monaca instead of other capital projects. So far, any guesses I’ve heard about when the final call will be are just that: guesses.

The last few weeks have seen the start of a bunch of small projects that have been around for a while. Village Theater Co. chose A. Martini & Co. to build it $2 million new theater in Sewickley. That’s the third new building to get underway in Sewickley this month. Oberg Industries awarded W. K. Thomas & Associates the contract to build its 67,000 sq. ft. expansion. Chapman Properties is getting ready to start construction on a new 23,575 sq. ft. Skyzone trampoline center in Monroeville.

In news of more companies entering the Pittsburgh market, Reynolds Construction opened an office in the RIDC O’Hara. The new office is located at 634 Alpha Drive, Suite 1100, Pittsburgh, PA 15238. The Pittsburgh office will be led for now by company President Jeff Merritt.

Some Long-Awaited Starts

Waukesha Pearce Industries awarded the construction of its new $8 million, 45,000 sq. ft. facility to New-Belle Construction. The high-bay building will be used to service and distribute WPI’s heavy gas engines, being used by the natural gas industry. The building was designed by Desmone Architects.

Uber selected Continental Building Systems as construction manager for the build-out of its new 53,000 sq. ft. space in Lawrenceville.

TBI Contracting is starting construction on two new buildings in Sewickley village. The first is a 10,000 sq. ft. commercial building that will house a new Crazy Mocha on the ground floor. The second is the Vanguard Village office, a 30,000 sq. ft. spec building being developed by Forbes Trail Development and PWA Real Estate.

Those commuters creeping up or down Greentree Hill will soon see the the new Greentree Primary Care Center II coming out of the ground. Burns & Scalo Real Estate is developing the 44,000 sq. ft. GPCCII as a spec building for healthcare users.

Rendering of GPCC-II by DLA+ Architecture

Rendering of GPCC-II by DLA+ Architecture

Great Jobs Reports

This morning’s report on May job creation was well above the expectations of various economists. The Dept. of Labor Statistics reported 280,000 new jobs created in May. That followed on the heels of ADP’s report on Wednesday of 210,000 private sector jobs added and a PA Dept. of Labor report that Metro Pittsburgh saw 24,000 jobs added in May.

The raw numbers were good but ther were some more subtle improvements within today’s report. The majority of which were in service, healthcare and education – all higher paying jobs – and the average wage showed a 2.3% increase year-over-year. That’s an expansion of the trend of growing wage rates. Another good number was the increase in the unemployment rate to 5.5%. That indicates that the stronger labor market is attracting more permanent workers who weren’t in the market to look for jobs.

May's job creation continues a pattern of strong recovery from the weak winter economy.

May’s job creation continues a pattern of strong recovery from the weak winter.

Although the regional bid market is still seasonally slow, there is movement on some of the higher-profile jobs. Some preliminary pricing is being done on the complicated re-purposing of the upper floors at the Macy’s Building. CMU has let contracts for the extension of its utilities infrastructure to prepare for construction new utility service north of Forbes for the Tepper Quad. While there is no confirmation from anyone involved in the Google TI at Bakery Square 2.0, it appears that PJ Dick has been selected to do the build-out. PJ Dick has also been selected as construction mgr. for the $12 million, 50,000 sq. ft. new school for the Watson Institute in South Fayette Township. Work has started on the $12.4 million McKee Elementary School in West Allegheny School District. Hudson Construction is the general contractor.

Rendering by McLean Architects of the new Watson Institute school in South Fayette.

Rendering by McLean Architects of the new Watson Institute school in South Fayette.