Office Prospects Remain Strong

This morning’s Employment Situation Summary showed that the U.S. labor market remained unusually strong in November. While the headline of 155,000 jobs was off from what economists were expecting, the overall data on the employment situation was positive. Wages grew at a 3.1 percent rate, although workers saw a slight decrease in hours. Workforce participation and total unemployed was even with October’s data. Unemployment was steady at 3.7 percent. Taken in concert with the November Job Openings and Labor Turnover Survey, the number of open positions still exceeds those looking for work by one million.

Forecasts of job growth have been off by about 40,000 jobs each of the last four months – both overestimating and underestimating every other month – which highlights the difficulty of predicting monthly changes in the economy, especially late in the business cycle. Other indicators show the economy starting to slow, and the lack of available workers should bring the average monthly growth in jobs down to between 120,000 and 140,000 in 2019. In Pittsburgh, there are fewer signals of a slowing economy. The race to replace retiring Baby Boomers will hold back the total number of employed persons in Pittsburgh but the sources of job growth remain robust.

Construction projects continue to advance in anticipation of continued growth. Developers continue to be optimistic about the office market. Earlier this week Oxford Development brought forward its plans for the first building in 3 Crossings 2.0, the $13.5 million, 110,000 square foot Stacks at 3 Crossings. Rycon Construction is the general contractor. Innovation Center Associates broke ground on a 90,000 square foot Class A spec office at Innovation Ridge, which will be designed and built by Al. Neyer.

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The new spec office at RIDC Innovation Ridge. Rendering by Al. Neyer.

Massaro Corp. was selected for the $11.8 million Greater Pittsburgh Food Bank project. Allegheny Construction Group has started on the $7 million first phase of the grower/processor facility for Penn Health Group in Lemont Furnace. Sunrise Assisted Living has put a $7 million expansion of its McCandless facility out to bid. According to the PBX the bidders are Burchick, PJ Dick, Rycon, Sota and Sun Coast.

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No Holiday Slowdown Yet

Apparently owners didn’t get the memo about the construction industry slowing down between the holidays. For all the publicity about the cracker, UPMC and AHN, and the airport modernization, it is the $10-$50 million projects that are really making this construction market boom. One experienced BD executive told me this week that their calendar had 6 RFPs and 3 interviews on it by the end of the first week in December.

Bids went in Wednesday for Buchanan Ingersoll’s TI at its new 120,000 square foot home in the Union Trust Building. A. Martini, Mascaro, Massaro,Shannon and Wyatt bid. Greater Pittsburgh Food Bank is interviewing Jendoco, Landau, A. Martini, MBM, PJ Dick, and Massaro on Nov. 27 for its $11.8 million project. The $45 million Palumbo Center renovation is out for competitive GMP proposals to Jendoco, Mascaro, Massaro, PJ Dick and Rycon. Conemaugh Hospital has its $35 expansion project out for proposals to Butz, Mascaro, Massaro, PJ Dick and Rycon. Conemaugh also broke ground on its $22 million outpatient center in Ebensburg. Massaro Corp. is the contractor.

Allegheny County Airport Authority has reached a short list for interviews on the three major contracts out for proposals. The second A/E services contract – covering the 3,500-car garage, ground transportation center (GTC) and rental facilities – was narrowed to Michael Baker Jr., TranSystems Corporation Consultants and WSP USA Inc. Two separate contracts for CM Agency services are being considered. The short list for the first – including the 632,000 sq. ft. new landside terminal and renovations of the existing airside terminal – includes PJ Dick/Hunt AECOM and Turner/Baker. The second contract covers the scope of work in the second AE services contract above. The teams short-listed are Hill/WSP/MEC, JMT/SAI Engineering/HNTB and Turner/Parsons. According to the RFP, the Airport Authority is not considering awarding CM contracts for both scopes to the same CM team.

Trade bidding on a number of the major projects is also active. Concrete bids are being taken by Yates Construction on the $150 million new Childrens Hospital at WVU Medicine. Mascaro awarded the MEP contracts on the $350 Vision and Rehabilitation Hospital at UPMC Mercy to Ruthrauff Sauer/SSM and Lighthouse Electric.

Millcraft selected the Yates/Massaro team as CM for the Esplanade, its $300 million mixed-use development on the North Side. Rycon Construction was awarded the $32 million Fifth/Clyde residence hall by CMU.

Pitt is It

With all the activity in Oakland surrounding Pitt (and involving Pitt as an occupant), it’s easy to forget that the university itself has been largely quiet as an owner of construction projects. With the exception of DGS-assigned work, Pitt has been less active than normal for more than a decade. That is about to change with its updated campus master plan, which matches more than $1 billion in capital investment to the university’s new priorities.

The first of these major projects, a $90 million student rec center on O’Hara Street, is out for construction management proposals. Pitt is taking proposals from AECOM, Barton Malow, Gilbane, Mascaro, Massaro, PJ Dick, Turner, Whiting-Turner, and Walsh on Nov. 28. The project includes a new parking garage and is being designed by Moody Nolan & Associates.

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Rendering of the student rec center from Pitt’s updated master plan.

A similar-sized project, the Human Performance Center, should be ready for RFP in the early part of 2019.  That project is part of a $400 million expansion and improvement to the athletic facilities north of campus, in what will be called Victory Heights.

Other major commercial projects continue to advance. Millcraft Investments has narrowed the field to Clark Construction and Massaro/Yates for its $300 million Esplanade mixed-use development on the North Side. Developer Northwood Investments LLC laid out its initial plans for the Sears outlet store property in Lawrenceville. Northwood has hired Perkins Eastman to design the 250,000 square foot tech research space it is calling Dock 51.

The PA Turnpike awarded Trumbull Corp. a $116.2 million contract for Section 55A-2 of the Southern Beltway. The final major section of the Beltway, the $100 million-plus 55C2-1 is bidding now, due December 19. Along with the interchange construction, these are the final pieces of the puzzle that will allow for limited access connection from I-79 at Southpointe to the airport and beyond.

Amazon Looks Elsewhere

Let’s start with a disclaimer: there has been no official announcement from Amazon about the results of its year-long HQ2 search. Yesterday, the New York Times ran an article that sourced several people “familiar with the search” and reported that the online giant was in final negotiations to locate in both Queens, NY and the Crystal City section of Arlington, VA. The assumption is that Amazon will split its second HQ into two equal parts in those cities. Speculation about Crystal City arose over the weekend, prompting even Mayor Bill Peduto to make a statement that Pittsburgh had not been contacted by Amazon.

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Amazon’s Seattle HQ

I think David Ruppersberger, president of the Pittsburgh Regional Alliance, got it right when he said that Pittsburgh won by making the short list. The effort to respond to the proposal taught Pittsburgh’s civic leaders even more about how to position the region and the public relations that have followed the city since has been valuable. Now we don’t have to deal with the mess that would have followed actually winning the project.

Pittsburgh’s tech sector is blossoming in multiple directions. Healthcare research is entering a potentially rapid expansion period. The energy sector holds great promise. And the petrochemical and plastics industries have yet to reveal what will happen when several ethane crackers open by the middle of the next decade. The regional economy is a good bet to create 50,000 new jobs over the next decade without having all of our eggs in one basket. Anyone remember how that worked out the last time Pittsburgh was reliant on one industry above all others?

Lots of interesting little private projects out to bid as the year winds down. In case you missed the BreakingNews email last week, Volpatt Construction was awarded the $6 million UPMC/IRMC Cancer Center at Indiana Hospital and Pitt chose PJ Dick for its Peterson Sports Complex field house expansion. Mistick Construction is taking bids on the $12 million development in New Kensington that will be the 47-unit Pioneer Apartments and offices for Wesley Family Services. Al. Neyer Inc. has started construction on three new industrial buildings: the third and fourth buildings at Clinton Commerce Park (268,000 square feet total) and a 50,000 square foot build-to-suit for Don’s Appliances at 251 Bilmar Drive.

Eds and Meds…Again

Putting the November/December edition of BreakingGround into production this week and I was struck by how much of the commercial real estate sector was being driven by the universities and hospitals. I’ve been hearing so much about “eds and meds” that I was sick of hearing the phrase; but…it’s one of those things that you hear too much of because it’s a real thing.

Here are a couple examples of projects that have barely received any coverage but are happening because of the economic engines of CMU and Pitt. The URA recently approved the sals of land in the Pittsburgh Technology Center on Second Avenue to Elmhurst Group, which plans to build 160,000 square feet of “tech flex” space to attract advanced manufacturing, robotics or other technology spin-offs requiring research and maker space. Walnut Capital has received a lot of ink for its Bakery Square, JAA and PAA projects but the intriguing project is the Fifth and Halket property, which is reported to be an office building of several hundred thousand square feet. That property is in the opposite direction that much of the Oakland-driven development is looking but it will plant a flag on the more neglected Downtown side of Oakland, right by the Parkway East interchanges, right on the BRT route. If it becomes a major university or university-related corporate facility, it will be catalytic for the Uptown and South Oakland neighborhoods.

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Desmone Architects’ rendering of Elmhurst’s tech flex development on Second Ave.

The universities are making construction news on their own. Duquesne announced the modernization of the Palumbo Center yesterday. The $45 million renovation will result in the rebranded UPMC/Cooper Field House. DRS Architects is designing the project, which should bid by early 2019 if the work is to start in the spring. CMU is proposing a new residence hall at Fifth and Clyde. LTL Architects was hired to design the $32 million project. CMU took CM proposals from Jendoco, Mosites and Rycon.

Rycon will do the construction of the AHN Brentwood micro hospital that had its groundbreaking recently. Work has not started yet. UPMC selected PJ Dick for its $15 million ED expansion at the UPMC East campus in Monroeville.

In other construction news, Franjo Construction was reported as the awarded general contractor for the $4.7 million Youghiogheny Administration Building for North Huntingdon Municipal Authority. Cast & Baker was the low bidder on the $4.5 million site prep package for the World Trade Center at the airport. That’s a project that could open up hundreds of millions in new commercial construction over the next decade, a project worth following.

More Mixed Use Forging Ahead

The Urban Redevelopment Authority selected Lexington Partners – a joint venture of ICON Development and KBK Enterprises – to develop the Lexington Commons site in Point Breeze/South Homewood. The project will be a mix of 125 apartments (of which 50 will be affordable rentals) and 25 townhouses for sale. That’s similar to some of the developments KBK has done to replace Housing Authority of City of Pittsburgh projects in the Hill District. ICON is the development arm of Integrity Construction, owned by Jason Lardo. ICON’s vision for the commercial space includes renovation of more than 400,000 square feet of existing buildings into innovation space. The plan also involves extensive work to the infrastructure, including re-doing Thomas Boulevard and adding structured parking. The total development cost will exceed $110 million. The developer is working with Indovina & Associates. The site plan is below.

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The $300 million-plus Esplanade development – a mix of residential, hotel, retail and waterfront construction on the North Side – being proposed by Millcraft Investments has gone to construction managers. Clark Construction, PJ Dick, Mascaro, Massaro and Rycon submitted proposals.

Pitt took CM-at risk proposals from PJ Dick, Mascaro, Massaro and Rycon on it $8-9 million Peterson Events Center vertical addition.

(Massaro was inadvertently omitted from the Esplanade and Peterson lists in the Oct. 11 email blast. If you don’t get the bi-weekly email blasts let me know.)

In other commercial real estate project news, Milhaus is taking proposals from Elford Construction, Franjo, PJ Dick and Rycon for the 2nd phase of its Arsenal multi-family development, which should be in the $40 million range.  Developer T & R Properties from Columbus kicked of the construction of its $100 million Summit Station transit-oriented development in South Park with the start of the $30 million, 180-unit Summit Lofts.

Big Projects Driving Demand

When the Halloween decorations start showing up at Giant Eagle, the contracting season is usually wrapping up for the year. This year, however, there are a number of big projects on the street (and in the pipeline) that the market is making up for the lower number of projects with a much bigger dollar volume.

Part of this is the result of the lag from announcement to construction for some of the big projects that have been in the news over the past year or so.  Mascaro took bids recently on the 410,000 square foot, $350 million UPMC Mercy Vision & Rehabilitation Hospital and the 96,000 square foot TCS Building at CMU. PJ Dick has been bidding the 300,000 square foot Bakery Square 3 office building.

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Rendering of the new UPMC Mercy Vision & Rehabilitation Hospital by HOK. Image from UPMC.

There’s also been a flurry of activity on large projects at the early stages of development.  Hanna Langholz Wilson Ellis is marketing the 1,200-acre Zediker Station site, which sits along I-70 just east of I-79. It’s the largest development site in PA and may be the only one served by both CSX and Norfolk Southern. The Hazelwood Green project has been advertised for developer proposals. Over the long haul, that’s a project that could lead to more than $1 billion in construction. The developer currently on site, RIDC, has reportedly locked up autonomous vehicle company Aptiv for 70,000 square feet to occupy most of the 2nd building in its Mill 19 project. That would trigger the start of the third 90,000 +/- square foot final phase. In the Strip District, Facebook confirmed that it was leasing most or all of District 15, a 105,000 square foot building being developed by RDC on Smallman Street. According to a recent story by Tim Schooley in the Business Times Facebook’s lease is the tip of the iceberg. Schooley quotes JLL’s Dan Adamski estimating that there are 900,000 square feet of user requirements being shopped in the Strip now. That would make for another explosion of office projects. One of those may be JMC Holdings’s proposed adaptation of the Wholey cold storage building on 15th Street. The developer has engaged Desmone Architects to work on a 350,000 square foot re-use but is reported to be looking at hiring an architect to design a new 17-story, 500,000 square foot building on the site.

As intriguing as this tech demand is, it’s worth noting that most, if not all, of it is new in 2018. It was only last year that occupants like Apple and Argo AI were snatching up big chunks of 3 Crossings. When someone says that the emerging technology sector is growing faster than you can understand, this is what they mean.