Week Ending Project News

Design-build bid packages for the 300-bed plus student residence facility at CCAC Boyce’s campuses should be put out to bid shortly. PennDOT has issued a $45 million package for the Airport Busway.

PJ Dick was selected by Concord Hospitality to build the new $40 million Hyatt at the Pittsburgh Athletic Association site in Oakland. UPMC awarded Mascaro the contract for renovations to five floors of the Shadyside Hospital patient tower, a $25 million-ish project. Mosites Construction was selected as construction manager for the new $12 million Ansys building at Carnegie Mellon University. BCJ is the architect on the team.

The Return of the Healthcare Market?

Affordable Care Act and the UPMC/HIghmark battle have had a negative effect on the healthcare construction market in Pittsburgh. Hospitals have been struggling with figuring out lower reimbursements and the casualties from the insurer/hospital wars. Healthcare construction was a major contributor to the overall construction market in Pittsburgh so the jump in activity over the past few weeks is encouraging.
Rycon Construction was awarded the $6 million first phase of the UPMC Jameson Hospital modernization in New Castle, where UPMC ultimately expects to spend $70 million over a period of years. PJ Dick was awarded the West Penn NICU project, which is in the $15-$20 million range. Bids are being taken from Massaro, Mascaro, PJ Dick, Turner, Rycon and Walsh on the $30 million Presbyterian Hospital cardiovascular renovation and the Shadyside Hospital patient room upgrade is also out. Waters Senior Living awarded Continental Building Systems its $27 million Warrendale facility. Wheeling Hospital is taking bids on a $20 million continuing care facility from Landau, Colainni, Mascaro and Volpatt.

Better Economic News

This morning’s report from the Bureau of Labor Statistics (BLS) showed employers added 255,000 jobs in June, growth that was almost 50% higher than expected. Adding to the good news was an upward revision of the June growth to 292,000 and May’s to 24,000 from 11,000. BLS also reported that 400,000 more people joined the workforce, which left the unemployment rate at 4.9%. Wages maintained the 2.6% growth rate year-over-year.

BAsed on the July estimate, the U.S. economy added an average of 182,000 jobs per month through the first seven months of 2016 and 202,000 monthly since July 2015.

The growth of jobs doesn’t immediately jive with the fact that GDP growth seems stuck below 2% over the past six to nine months; however, when you consider that productivity growth has actually fallen during that time, the added payrolls make sense. During recessions people work more hours for the same pay, either out of fear for their jobs or because their employer cuts staff. Productivity drops as the economy recovers, especially as oppoprtunities to leave overworked positions arise.

All this is good news if you are an employee, especially when you consider that wages are probably still on a rising trajectory. The dark cloud in that silver lining is the reality that upward wage pressure – espeially when significant numbers of unemployed are rejoining the workforce – signals the end of slack in the economy. Recessions don’t necessarily follow these kinds of developments but a recovery like this one is getting long in the tooth.

Construction news is slow in August and this year is no exception. Nonresidential starts topped $2.8 billion through July and the forecast of $3.4 billion for the full year looks conservative at this point. Westmoreland Community College selected Turner Construction as CM-Agent for its $42 million campus expansion program. In a surprising move, Carnegie Mellon pulled the plug – at least for now – on its 425,000 square foot Gateway Project.

Could It Be Amazon?

A trip by the airport yesterday revealed a major dust cloud pluming up from the Chapman Westport development. After stopping by the project site, I found a massive excavation job being undertaken. A little digging around at Findlay Township’s offices uncovered applications by Chapman Properties for four items to be acted upon at the July 26 planning commission meeting. Those actions included the subdivision of 427.4 acres, including the creation of an 84.6 acre parcel, labeled Parcel A. There is also the application for approval of a land development on that parcel that involves construction of a 1,015,740 square foot warehouse/office, along with a 48,000 square foot building on another parcel.

That’s not a typo. There are two commas in that warehouse square footage.

Last week’s Pittsburgh 2Q2016 Industrial Market Report by Newmark Grubb Knight Frank alluded to a million square foot user in the market without naming the company. It would seem that user has landed. Tony Rosenberger, Chapman’s president, politely acknowledged that Chapman was planning a 48,000 square foot spec building – known as 110 Building – and that Foley Excavating was doing a major dirt job to prepare for the expansion of the Westport park. Beyond that, he had no comment on the construction or the applications to Findlay Township. Of course, I would have been shocked if he had.

There aren’t that many million-square-foot users out there. Civic leaders have speculated about those kinds of companies following the Shell cracker as downstream manufacturers; but with the plant’s opening date set for “early next decade,” it seems unlikely that a related plant would be getting underway now. The proximity of the site to GE Plastic’s new facility gets the imagination spinning but, again, it seems unlikely that GE could have created enough economic activity in six months to have spawned a million-square-foot neighbor. The most likely user at Westport is Amazon, especially since Dick’s Sporting Goods announced today that it was building its big distribution center in Conklin, NY.

When Amazon signed the lease for 250,000 square feet in Crafton back in Summer 2014, logistics experts talked about the “Amazon effect” that would attract other big distribution and fulfillment companies. But at the time, the brokerage community talked about the deal as being a search for 250,000 to 300,000 sqaure feet with future need for a million or more. That’s the size that is typically associated with Amazon Robotics’ fulfillment centers, which employ as many as 1,000 people.

Perhaps the end user will be revealed at the Findlay Township planning commission meeting, although that wouldn’t be necessary for the review or approval. In some ways, it could be even better if it’s another big company, since it would make Pittsburgh that much more attractive to kindred businesses. Chances are it won’t be a secret long.

June Jobs: Not Such a Surprise

Friday’s June jobs report was not the surprise that business media made it to be. Employers added 287,000 new hires in June, according to the Bureau of Labor Statistics, which was well above the 175,000 consensus estimate, but the long-term trend is a strong one and the big jump in June was merely a reversion to the mean. It’s also not a surprise that the trend continues to move lower as economic expansion reaches its eighth year.
Within the report were two noteworthy items. First, the categories of employment that grew the most were higher-paying sectors like IT, education and health services and professional services. Second was the continued growth in wages. Pegged only one-tenth percent higher in June compared to May, wages were nonetheless 2.6 percent higher year-over-year. That represents healthy growth over price inflation and a steady – if unspectacular – trend upward over the past year.
job creation history
In project news, Turner Construction was selected by the RIDC to perform preconstruction services for a 65,000 square foot commercial building planned for Almono in Hazelwood. Dick Building Co. was awarded the 104-room, $12 million Hotel Indigo proposed for Second Avenue.

Some Small Project Updates

Tuesday’s bid results for the new playing fields at Pitt’s Trees Hall were very tight. The bids were for the largest piece of the $12.5 million upgrade. The 3 lowest bids were:

Mosites:    $8,377,222

PJ Dick:    $8,400,000

Mascaro:    $8,495,000

City Works Restaurant was awarded to A. Martini & Co. The $2.5 million buildout will take 10,750 square feet in 2 PPG Place. Martini was also successful in landing the $2.2 million tenant improvement for Eckert Seamans, which is renewing its lease for 89,500 square feet in USSteel Tower.

IMG_1148 hi res-crop

Massaro Corp. broke ground last week on the $13.7 million UPMC Hampton ambulatory center. Photo courtesy IKM Inc.

RIDC is in the process of selecting a pre-construction manager to help with the planning of its 65,000 square foot first building at Almono in Hazelwood. Vertical construction won’t occur until late 2016 or 2017.



Optimism Returns

Yesterday I was on a panel speaking about the impact of the Shell cracker project on the regional construction industry at the Northeast Petrochem Conference in Pittsburgh. It was very interesting to see how another industry is reacting to the project. Construction and real estate players have been awaiting the final investment decision for at least a year but it turns out so have all the players in the petrochem industry. Shell Chemical’s exec in charge of the Appalchian region, Ate Visser, spoke about an hour before our panel. Let’s just say the room cleared out quite a bit after he finished.

What we learned from Visser was actually nothing really new. He mainly used the time to speak about the lag between the FID three weeks ago and the start of construction. From what I could tell, the delay won’t actually stop construction at the site but will slow down the execution of contracts already in place and extend the preliminary work being done.

The most interesting presentation was from a process engineer who explained a lot of chemical details about the cracker to a glazed-over crowd. The upshot was that he predicts there will be another intermediate chemical processing plant or two built in the region, the kind that takes the byproduct chemicals that aren’t converted to polyethylene or other plastics. His estimate of these kinds of plants was in the $4-5 billion range.

Even without factoring in another petrochemical plant, here’s how the Shell project is showing up in my intermediate forecast:

nonres forecast chart

All of the talk of the petrochem opportunities left the attendees in a real upbeat mood. They aren’t the only ones apparently. The MBA pre-released its Commercial Contractors Condition Index for the second quarter, which was above 2.5 (out of 4) for the first time in its four-year history. The big driver was a huge jump in optimism about business projections for the coming year. Don’t think that is a coincidence, following just a week or two after Shell’s announcement. The better news out of the C3 Index was that the backlog reading was up significantly too.