After months of pricing the new $40 million Campus Advantage student apartments at 3407 Forbes Avenue have a contractor. Rycon Construction was selected this week to build the project, which includes 197 apartments and 489 beds.
In other project news, Mosites Construction was awarded a contract for $3 million in renovations to Blackington Hall, Buckhorn Lodge and Sunset Lodge at Pitt-Johnstown. A. Martini & Co. is building out Rocky Patel’s BURN Cigar Bar on the North Shore. Penn State awarded PJ Dick a contract for a $5 million parking garage expansion at its Erie campus.
A. Martini & Company’s Katie Stern (left) and Mike Larson-Edwards flank Katey Andaloro from Jendoco at the MBA YC Kickoff at Olive or Twist.
On Tuesday, PA’s Commonwealth Court reversed an earlier decision by an Allegheny County court that found that the West Jefferson Hills School District (along with others) had willfully violated the PA Separations Act by including the site plumbing for the new $73 million Thomas Jefferson High School in the site package instead of the plumbing. That appeal by the District, Nello Construction and the Laborers union aimed to reverse a decision in favor of the proejct’s mechanical contractor, Wheels Mechanical.
In reversing the Allegheny County decision, Commonwealth Court based its opinion on the doctrine of laches, which essentially meant that Wheels waited an unreasonable time before bringing its complaint. Because Wheels did not raise the issue during bidding or the first six months of construction, the Court decided its claim should not stand. What was left undecided was the issue of whether separating the plumbing beyond the perimeter of the building was a violation of the Separations Act. That battle will have to come another day.
In infrastructure news, the Southern Beltway Section 55c1-1 went out to bid, due in mid-April. These sections have run between $50-70 million each. Uber selected the design team of IKM and CJL Engineering for its next expansion, a $10 million buildout of 120,000 square feet in the Crucible Building in the Strip. Poerio Inc. landed a $33 million expansion of the FedEx Ground facility in Olive Branch, MS. Pitt selected Turner Construction as CM for its $4 million Scaife Hall Phase 1B project. McKnight Realty Advisors selected Allegheny Construction Group as contractor for the renovation of the Terminal Building (aka Riverwalk Corporate Center) in South Side, an 800,000 sq. ft. former warehouse. And the SEA awarded a contract to Massaro CM Services as its agent for the new 9th and Penn Garage. The 700- to 1,000-car garage will be one piece of the multi-phase, mixed-use redevelopment of two blocks in the Cultural District that is currently out for development proposals. The garage piece should run in the $20-25 million neighborhood.
This morning’s NAIOP Pittsburgh chapter meeting featured a distinguished panel of commercial real estate veterans discussing the state of the market. Lou Oliva from Newmark Grubb Knight Frank, Jason Stewart from JLL, Herky Pollock from CBRE and IRR’s Paul Griffith had generally upbeat things to say about the market in 2017. Notably, the apartment market inspired caution and the growing appetite of investors outside the city was raised up as a big influence on the market. None of the four were particularly concerned about interest rates impacting values in 2017 but all expected the increases to continue.
The brightest segment of the market seems to be industrial. Oliva mentioned that some 800,000 sq. ft. of spec industrial space had been delivered into the market in 2016, with more than 500,000 sq. ft. already absorbed. Here again, the largest deals all involved out-of-town developers.
(From left) Lou Oliva, Jason Stewart, Herky Pollock and Paul Griffith update the audience on the real estate market at NAIOP Pittsburgh’s meeting Feb. 16. Photo by James White Media Production
In addition to the industrial deals mentioned this morning several large projects in the pipeline. Buncher has increased its land stake at Findlay Industrial Park, with the ability to build another 100,000 sq. ft. beyond the 80,000 sq. ft. under construction. Al. Neyer will be building a 200,000 sq. ft. warehouse in Jackson Township near the PMF Trailer facility. Castlebrook Development and Wesex Construction are in the planning stages of the Turnpike Distribution Park in Beaver County. Site plans for that call for 3-5 buildings totaling more than 900,000 sq. ft., including two 400,000 + sq. ft. buildings.
In other news, Rycon Construction was selected for McGuire Woods’ $4 million TI at Tower Two-Sixty. East Liberty Presbyterian Church shortlisted Jendoco, Landau and A. Martini & Co. for its $5 million renovation.
As chaotic as US politics is right now, the economy continues to hum along. Today’s jobs report outperformed the expectations of analysts, with 227,000 new jobs added to payrolls last month. That continued expansion is in contrast to the story in Pittsburgh, which last year added only 4,400 jobs. At Thursday’s Viewpoint presentation – one of the best forecasting events for commercial real estate – Integra Realty Resources’ President Paul Griffith explained how the healthy job growth early in the business cycle has faded to a flat line since 2013. Pittsburgh’s strong economic sectors have been offset by declining employment in energy and manufacturing.
In project news, Volpatt Construction was awarded the $2.4 million Nursing Unit 5A renovation at St. Clair Hospital. Developer Alphabet City selected Brubach Construction to build its $7 million, 60,000 sq. ft. East Liberty Centre office building. Campus Advantage interviewed Turner, PJ Dick, Continental and Rycon for its $40 million apartment on Forbes Avenue in Oakland. Rycon Construction is underway on the $27 million, 172-unit Emerald on Centre apartments in Shadyside. Sota Construction is taking bids from subcontractors on the renovation of the Allequippa Place apartments and construction of the 49-unit new Wadsworth Street Apartments, roughly $8 million in total construction. And McCaffrey Interests is taking RFP’s next week on the $66 million Terminal Building redevelopment in the Strip District.
Tuesday’s NAIOP Pittsburgh chapter meeting was a luncheon that hosted executives from Uber, who explained the company’s Pittsburgh growth strategy. Started in 2009, Uber has grown to more than $20 billion in revenue, with 11,000 employees worldwide. The company’s VP of Strategic Initiatives, David Richter, presented a dizzying set of facts about Uber’s astonishing growth. And while the ride sharing business represents its major revenue stream, it’s clear its future is elsewhere, like autonomous vehicles.
Richter spoke glowingly of Pittsburgh, claiming that Uber was beginning to see cases of San Francisco employees choosing to relocate to the Steel City because of quality of life and the opportunity to work on the next big thing. He also made it clear that it was CMU’s engineering research and grads that were the reason Uber was here.
“There are only four or five cities in the world with that kind of talent in robotics and Pittsburgh is one of them,” he said.
Uber’s David Richter addresses the crowd at NAIOP Pittsburgh.
Uber also did a slideshow of its incredible new offices in Lawrenceville, which were designed by Strada and built by Continental Building Co. The $32 million project is modern and clean, with many spaces designed for collaboration. During the course of the presentation Richter also mentioned the payoff for the region: after starting at zero employees in January 2105, Uber now has 550 in Pittsburgh, with roughly 100 new positions open now.
He also noted that the company anticipated needing more space in the near future. After building its new Advanced Technology Center and fitting out about 100,000 sq. ft. in Schreiber Real Estate’s building on 30th Street, Uber has invested nearly $50 million in new testing facilities and track at Almono.
The bidding activity to kick off 2017 has not been spectacular but there are more projects going out than at this time last year. More importantly, there are more projects getting underway or being awarded than at the same time in 2016. Without any building permit research for 2017 yet there are already nearly $200 million in starts or contracts awarded, an indication that January’s volume will far exceed that of the past few years. The key to a strong 2017 will be that owners maintain this newfound level of economic confidence and keep the flow of projects coming. The stop-and-start nature of 2016 – particularly the lull in late spring and post-Labor Day – played havoc with contracting businesses last year.
The industrial sector of the market continues to shine. Construction has started on an 80,000 sq. ft. warehouse that Buncher is building in Findlay Industrial Park. Chapman Properties is starting work in its 74,000 sq. ft. flex building at 110 South Campus Drive at Chapman Westport. Al Neyer Inc. is close to a deal for a 200,000 sq. ft. warehouse in Jackson Township, north of Cranberry. Castlebrook Development is edging forward with plans for 900,000 sq. ft. of distribution near the I-376 and PA Turnpike interchange in Beaver County. Much of this spec activity is being driven by the expansion of retail fulfillment services (e.g. Amazon, Zappos, etc.) into the Pittsburgh market.
There is real momentum for healthcare construction also. UPMC has asked for architectural proposals for its proposed 200,000 sq. ft. ophthalmology building at the UPMC Mercy campus. The hospital has not announced its decision about its South Hills expansion but is reported to be looking at two separate developments, one near the site announced earlier in the Pleasant Hills/Route 51 corridor and one near its Children’s Hospital south satellite in South Fayette. Most of the hospital projects being contemplated will have little construction impact in 2017, although contracting in the fourth quarter should be robust.
Rendering of the $51.5 million, 221-room hotel proposed by the Rivers Casino. Image by Stantec Architecture Inc.
And the news in the Downtown office market continues to be good. Citizens Bank announced that it will be staying put in 525 William Penn Place and sees the location as a growth driver. The company’s 150,000 sq. ft. lease was seen as a source of anxiety by the commercial real estate community as recently as last year. Cleveland-based Stark Enterprises announced that it had agreed to buy the former Frank & Seder store building (AKA 441 Smithfield Street) from Oxford Development, thus ending the plans for a 28-story new office at 350 Fifth Ave. The transaction continues the trend of purchases in the Central Business District by companies from outside Pittsburgh.
Our research at the granular level is about completed for 2016 data and it appears we underestimated the housing market a bit and had the non-residential market pretty close. For the latter, the final number for non-residential/commercial contracting in 2016 was $4.13 billion. That’s the highest number since Tall Timber (or the Pittsburgh Construction News before it) has tracked going back to 1995. In that number is about $1.9 billion for natural gas processing plants, the Tenaska combined cycle power plant and the Shell cracker progress. That leaves a lot less for the mainstream commercial construction industry.
Residential ended a bit higher than expected. Single-family detached home construction finished up more than expected, as did the apartment market (although the latter was off more than 10%). The final numbers are below:
2017 is shaping up to be a surprising year for higher ed construction. Overall the category is depressed compared to the volume of most of the past decades. PASSHE schools will again have about $65 million to share, leaving few significant projects. Private colleges are facing some real challenges too but those in the region have some nice projects in the hopper. Yesterday’s announcement from Robert Morris about its $50 million new convocation center/practice gym is one of a dozen or so throughout the footprint. PJ Dick will be building that project (although they are not one of the funders, as the PBT reported). There are plans for a new building at W & J; a $25 million STEM facility at Westminster; a new $15 million field house at Grove City; several new buildings at CMU (Tata Consulting, ANSYS and the planning for a new science building); and Pitt should be looking for its team for the $100 million new building at the Syria Mosque. That’s not bad for a segment in tough straits.