K-12 Making a Comeback

Plunging tax receipts, state budget disasters, PlanCon moratoriums and attempts at PlanCon reform have all been wet blankets on what was once a staple of the construction industry: the K-12 school market. What was once regularly a $300-$00 million/year opportunity fell to $100 million or less after the recession. The market is still very thin by historic standards but the return of big projects has made K-12 one of the growth sectors of 2016 thus far.

Throught the first three months of 2016, K-12 contracting volume is way up over 2015. At $146 million, contracting is more than ten times what it was in the first quarter of 2015.

benchmarks 2016-5Most of the volume in K-12 has come from just a few projects: the $67 million Thomas Jefferson High, $25 million South Fayette High and $34 million Ringgold Middle School jobs. The $25 million Chartiers Vally Middle School project is awaiting award of contracts and nnother $49 million Chartiers Valley High project is out-to-bid. Also bidding now is the $10 million Bentworth High and the new $22 million Rogers Elementary in Shaler is about to be released to bid.That’s $230 million from a half-dozen or so projects.

The problem for K-12 is those projects more or less make up the market in 2016. There will be other work but the total for 2016 will probably not top $300 million. With PlanCon effectively shut down the past year, there will be fewer projects on the street in 2017. That’s why prices have been dirty low, even in a K-12 bubble.

In project news, Mascaro was the low general on the re-bid of the $42.7 million Brush Creek Water Pollution Control Plant in Cranberry Township. Mascaro was also low on the first round and their bid of $35.9 million is expected to be awarded at the May 5 supervisors meeting. Franjo Construction was identified as the successful bidder on the 116-room Homewood Suites at the Village of Cranberry Woods. TBI Contracting is preparing to start work on n 80,000 sq. ft. and 45,000 sq. ft. two-building expansion of Callery Industrial Park.

Late last week there was word that Shell had put the Monaca cracker on hold until February 2017. The project was one of several affected by a corporate capital budget cut that will result in a slowdown of the construction of the project in Monaca. Contracts will go ahead for work that was bid but the schedule will slow to reduce the cash flow impact in 2016.

Job Growth Again

Friday’s report from the Bureau of Labor Statistics wasn’t an April Fool’s joke. Employers added 215,000 jobs in March, boosting the year-over-year gain to just over three million. Estimates for January and February were also increased. The best news of the report was that nearly 400,000 people joined the civilian workforce. While that increased the unemployment rate, it’s a good sign that part-time or discouraged job seekers are re-entering the labor force.

job creation history

At the local level, job creation has been flat through February. One employer that is not holding still is Uber, which is estimated to have around 400 employees in Pittsburgh. While the private car service waits for its office and research center in Lawrenceville to be completed Uber is making plans for its $20 million-plus investment in automated vehicle research at Almono in Hazelwood. Franjo Construction has been selected to do the $11 million test track, as well as renovations to the Roundhouse Building.

Even as the hotel and apartment development markets are becoming less appetizing to lenders and investors, two projects in Pittsburgh had news last week. Developers of the $14 million Hotel Indigo in the Pittsburgh Technology Center are talking with Franjo, Cavcon and Dick Building Co. about construction of the project. In Lawrenceville, Milhaus Development has been working with Rycon during planning and preconstruction of its $120 million mixed-use project at the Arsenal Terminal Warehouse site. The developer is reported to have prequalified contractors to bid the first phase of the project, which is to include approximately 200 apartment units in 4 phases. Among those being considered are BRIDGES & Co., PJ Dick, Mistick, Franjo, Rycon and two companies from outside Pittsburgh.

In Praise of Collaboration

Last night the AIA-MBA Joint Committee held a launch event for its Project Collaboration Best Practices Guide at the MBA’s Training Center. The presentation was the culmination of several years of roundtables with owners from around the region and represents the suggested practices of companies that have been using collaborative delivery models, up to the use of IPD agreements. If you’re interested, there’s a short survey you can take to add your opinion about these collaborative practices.

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Javaneh Jabbari and Jeremy Tong from CMU (center) are among the guests at the AIA_MBA Joint Committee presentation March 30.

One of the participants in the roundtable discussions, the University of Pittsburgh, approved its capital spending yesterday. The $34.7 million in projects was indicative of Pitt’s reduced construction spending, although the Gallagher Administration seems to be building momentum for some very significant projects within the next few years. The headline project for 2016 is actually the $5.7 million renovation of a building in downtown Bradford PA to make the Marilyn Horne Museum. Carl E. Swanson & Sons is the low bidder on that project. Among the other major projects planned is a $7.2 million upgrade to the Starzl BST and a $6.5 million renovation to a dorm at Pitt-Johnstown.

In other project news, Rycon Construction was awarded the Classrooms 232 & 332 renovation at the Cathedral of Learning. Uhl Construction was selected for the $8 million expansion of Sisson Motors in Washington, PA. PJ Dick was awarded the $4.5 million Ft. Ligonier renovations. PJ will also be building the 55,000 square-foot new office building at McCandless Crossing that Kevin Dougherty from AdVenture Development announced earlier this week. Sports & Exhibition Authority selected Massaro CM Services as construction manager for its 798-car, $14 million North Shore Parking Garage.

The Buzz About Transit

March 15 was the Pittsburgh Downtown Partnership’s annual meeting, which featured a speech by Gabe Klein, who was head of transportation for Chicago and Washington DC over the past five years. Klein’s a cyclist and entrepreneur who took a very private-sector approach to getting “sh*t done” (his quote) to change transit in those cities. He had a very exciting vision for what urban transportation would look like, especially after automated vehicles were the norm. His speech dovetailed nicely with the one Mayor Peduto made about Pittsburgh’s selection as a finalist for the $50 million Smart City grant.

For all the firsts in dining and entertaining and livability Pittsburgh has garnered, winning this grant in competition with cities like Austin, Denver, Portland and San Francisco would be a major win. Google the subjects and watch a couple of the YouTube videos with Peduto or Klein talking about smart transportation. It’s exciting stuff.

Gabe Klein 2 chicago proposed BRT

Rendering of Chicago’s Bus Rapid Transit System and the transformation of a six-lane street into multi-modal transit. Image courtesy Pittsburgh Downtown Partnership.

Along those same lines, Pittsburgh Today posted an article today by Julia Fraser, called Thinking Boldly that advocates for a braod-based coalition of ideas about the future of transit in Pittsburgh. It talks about the work of the new Regional Transportation Alliance that is attemopting to develop a strategy for combining light rail, bus, and non-motorized mobility to make Pittsburgh a model city. To accomplish anything significant in transit will require outside-the-box approaches like have been taken in Denver and Phoenix. There citizens agreed to tax increases dedicated to funding transit. Bold indeed.

In the construction market, competitive pressures continue to make winners out of owners that have projects on the streets. Last week’s winner was Chartiers Valley School District, which received bids on its new middle school. The low general was again from Ohio, Mike Coates Construction. At $24.5 million CV’s middle school was under budget. It will be interesting to see how market conditions  vary when the district’s high school project bids later this year.

Faros Properties is bidding a couple million dollars worth of renovations to the former Allegheny Center property it is in the process of re-branding as Nova Place. The concourse and parts of the plaza are being re-purposed to be amenity spaces and tenant space for new restaurants that have been attracted. CMU is in the process of selecting a CM for a $5.6 million investment to convert the former Deardon Center on Fifth Avenue to mixed-use. Turner and Graziano are interviewing for the project.

A Couple Decisions on High Tech

Over the past week, two projects with ties to Pittsburgh’s new tech economy moved a step closer to construction. Carnegie Mellon selected Mascaro Construction as construction manager for the new Tata Consulting Services building on Forbes Ave. The $15 million, 40,000 sq. ft. new building will be at the site of CMU’s electric vehicle charging station, across from Panther Hollow.

In Lawrenceville, Franjo Construction was selected to build the $12 million, 65,000 sq. ft. new robotics research building at the RIDC’s Lawrenceville Technology Center.

Last week’s results from the bidding of the new middle school at Ringgold School District show that the public market is still very competitive. Like earlier projects at Thomas Jefferson and South Fayette, the Ringgold Middle School came in under budget at $33.8 million, with Hudson Construction from Sharon as the low general contractor. Two of the three low generals were from outside Pittsburgh. That’s a sign that the competitiveness won’t end soon. Those that remember the bidding market after the crash in 2009 may want to re-think the public market. Bid lists were measured in the dozens and a number of the projects went to Ohio or eastern PA contractors. Few ended well. Until Harrisburg comes to its senses and the K-12 market gets back on its feet – at least a year away – it might be best to tread lightly in the public market. Thank goodness the private development sector is still strong in Pittsburgh.

Energy on the Rebound

Don’t give up on the energy sector as an economic driver just yet. Crushing declines in the price of oil and gas have hit the producers hard. There has been a pullback in the amount of space used by companies in the gas sector for two years or more. In early 2016, however, there are signs of life. Experts who follow the energy commodities point out that the historical trend with oil price plunges is for several big drops to occur, followed by reinvestment by the firms that kept their powder dry. Sort of like what Warren Buffet has done his whole career.

Bidding has picked up for some of the compressing/processing facilities in the midstream. In at least a couple cases, projects that were shelved in late fall have come back on the front burner. Similarly, the big energy project in the region is also reported to have been accelerated. The Shell cracker plant is definitely in the “believe it when I see it” category but the procurement suggests the final investment decision has been made, if not announced. Regardless of the timetable for announcement. This is what the site looked like from I-376 this morning:IMG_20160303_095117596

That’s a lot of work done. For those that can zoom in, the small square structures just to the left of the plumes from Shippingport are the Nova Chemicals plant about 2 miles away.

Elsewhere in the energy sector, Black & Veatch awarded a contract to PJ Dick for site prep, earthwork, concrete, roads, etc. for the $500 million Tenaska power plant to be built near I-70 in South Huntington Twp. of Westmoreland County. Packages are being bid on another gas-fired plant, a $900 million project by Combined Power Ventures in Cambria County near the town of Vinco. The low gas prices that are hurting the Marcellus Shale play are making combined-cycle plants more viable.

In commercial project news, Rycon Construction was chosen for the renovation of 1 PNC Plaza and PJ Dick was chosen for 2 PNC. The projects were valued by the PA Builders Exchange at $13 million and $15 million respectively. The PABX also reported that MBM Contracting was chosen to do Duolingo’s buildout of 15,000 sq. ft. at 5900 Penn. Construction is just starting on Ashley Capital’s 316,000 sq. ft. warehouse in Findlay Industrial Park. Oliver Hatcher Construction is the contractor. PW Campbell is preparing to start work on a 26,535 sq. ft. new dealership for Day Apollo Subaru in Moon Township.

 

Commercial Real Estate News

After a recent story about softening at Southpointe, there have been two notes this week that suggest that the region’s largest office park is bouncing back quickly. Southpointe added millions of square feet since the start of Southpointe II back in 2006. The rise of the natural gas business filled the park up with names like Range Resources, MarkWest and Noble Energy. The downturn in commodity prices has meant that some of these businesses have pard back and Southpointe has seen vacancy rise to 10%. That’s going to be a fact of life in Washington County as long as the gas business is driving the economy.

Earlier this week, Mylan announced that it was going to build a 1,407-car, $14 million garage adjacent to its Southpointe HQ (Carl Walker Construction is the project’s general contractor). Today, it was reported that MedExpress was interested in leasing one of the two empty buildings that make up the bulk of Southpointe’s vacancy.

Further up the road, Burns & Scalo Real Estate Services announced plans for two new 80,000 square foot buildings at Abele Business Park in South Fayette Township. Jim Scalo said that the buildings would be spec and that there was already a significant lease in the works. Burns & Scalo also has a couple of new 120,000 squar foot buildings on the boards at the RIDC Park West, although land acquisition hasn’t been completed.