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.

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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.

Big Win for Indiana County

Thursday morning, URBN announced they were building an 863,000 square foot fulfillment center for Urban Outfitters at the Windy Ridge Business & Technology Park in Indiana, PA. The project is one of the few mass fulfillment centers located west of the I-81 corridor and is a tremendous return on the investment made by the Indiana County Center for Economic Operations (CEO).

Indiana County CEO executive director, Byron Stauffer, says that $20 million had been invested in the Windy Ridge project over a period of more than ten years. Stauffer was effusive in his praise for the governor, Senator Don White and Rep. Dave Reed for their support of the project, which attracted a variety of grants and loans. URBN said that the fact that Indiana County had a prepared site, available workforce (the facility will employ more than 200), access to Route 422 and the IUP supply chain management program, tipped the decision in favor of the Windy Ridge site.

“The lesson learned here is if you think small, you get small,” Stauffer concluded.

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Blue Rock Construction from Allentown is the construction manager for the $60 million-plus facility, which will have 45-foot precast concrete panels on the exterior. Construction is scheduled to be completed by late summer 2019.

The Impact of Florence

I got an interesting call yesterday from the local Federal Reserve Bank office asking about the impact of Hurricane Florence on the construction industry. They are trying to figure out the economic effect of the storm. The short answer is that it’s too early, of course, but history gives a little insight into the aftermath. Ike, Katrina and Harvey were similar storms in that they brought massive amounts of water damage. That means much of the damage is uninsured and more difficult to quantify. That also means that the rebuilding will likely stretch out over several years (or longer).

What is different now from 2017 or 2005 is the lack of capacity to rebuild. For building materials, supply is already limited for what will be in highest demand, like lumber, plywood, drywall, and construction equipment. That means there will be price increases, but, with little slack capacity, the availability will be a bigger factor. The same is true for labor. It will take tens of billions to rebuild and repair the flood damage but there will only be so much that can be rebuilt without skilled workers. The winter slowdown in northern cities might provide some labor force, but there is enough construction that there may not be many layoffs this winter. That will certainly be true of Pittsburgh’s construction workforce.

The guess here is that – like with Katrina – the reconstruction in the Carolinas will be stretched out over a number of years.

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Golfers enjoyed a good day Monday at the ACE Mentor outing at Quicksilver. You can contribute to ACE Western PA here.

In project news the Builders Exchange reported on a project that the Turnpike Commission is requesting prequalification to bid. The Southern Beltway maintenance shops are budgeted in the $25 million range and based upon history should go out to bid in the month following the Oct. 24 prequalification due date.

Pittsburgh’s construction industry lost a great guy on Monday. Brian McKay passed away after battling ALS for the past year or so. Brian owned AMB Plumbing & Excavating and was incredibly involved in the industry, serving the Mechanical Contractors Association and the Builders Exchange for many years. He was past president of the MCA and the current president of the PBX board. Brian was a man who quietly helped a lot of people out over the years. He will be missed. Visitation will be held today and tomorrow at Schellhaas in Franklin Park. The details are in Brian’s obituary.

 

Inflation Hits Salk Hall Bids

The bids taken Sept. 11 on Pitt’s $41 million Salk Hall Renovation Phase 2 had the hallmarks of growing inflation and a market that is busy. The $50,862,000 total for base bid #1 was about 25% over budget and the project will likely re-bid after scope changes, since there were few alternates to reduce the cost. Burchick was the low general contractor. The general bids are below:

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I don’t have enough information to deduce how much inflation impacted the project but the U.S. index for inputs to construction rose 9.6%, 8.1% and 8.1% year-over-year in May-July. There are also some indications that the current market conditions played a factor. There were only 3 bids on the general and electrical packages. HVAC received 4 bids and plumbing received 5. That’s a dramatic difference from what a Pitt-delegated project would have received even one year ago. Moreover, the gap between bids was big. Burchick’s low bid was 6.8% below the second low bid, and 10.2% below the third. That was the tightest spread by far. The spread between the low and second bids on the other 3 contracts was at least 9.5% and as much as 12.5%.

One of the strong economic signs has been the upswing in owner-occupied industrial/manufacturing projects. Yesterday, Uwharrie Builders from NC broke ground on an 80,000 sq. ft. expansion for Technimark in Latrobe. On August 20, New-Belle Construction pulled a permit for a 68,000 sq. ft. new facility for Zilka & Company in Mason Park, an industrial park near New Stanton. Westmoreland County IDC has been preparing new pads in several locations in anticipation of opportunities like these.  Zilka is in the bakery products business and Technimark does rigid plastic injection molding for healthcare applications. While emerging technologies and gas-related energy should drive growth in manufacturing, the gains in regional manufacturing seem to have a wider base.

PJ Dick Announces Changes at the Top

Pittsburgh-based general contractor PJ Dick-Trumbull-Lindy Paving has announced a leadership succession plan on September 7. The board of directors has approved the transition of Chief Executive Officer Clifford R. Rowe Jr. into the role of Chairman of the Board, effective January 1, 2019. At that time, Jake Ploeger and Tim O’Brien will be promoted to Co-Chief Executive Officers.

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(From left) Tim O’Brien, Cliff Rowe and Jake Ploeger.

In project news, Massaro Corp. is taking sub and supplier bids on its $4 million First Tee project at the Schenley Park Golf Course on Sept. 21. DGS awarded contracts for the $16.4 million new PA State Police headquarters in Greensburg. Leonard S. Fiore Inc. was the successful general construction contractor.

An Interesting Warning Sign

This may be looking for the dark cloud in the silver lining, but there’s an interesting economic indicator that appears to be a warning about the economy. It’s called the “output gap” and it’s an indicator of how close the economy is to the full potential GDP output. In other words, how close are we to having no more capacity to grow, either because there are no more workers or no more capacity to make things. That’s a pretty accurate description of today’s conditions. The thing that makes this measure worth noting is that a recession has followed the peak of the output gap every business cycle for almost 50 years. The question is: how close are we to peak?

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There is no reason that the economy has to go backwards just because it has when conditions were similar in the past. The most practical and urgent conclusion to draw from the current output gap is that the shortage of skilled workers and capacity could limit the ability of businesses to expand, even if their sales are growing. Adding a new plant or new equipment won’t help you grow if there is no one to occupy or operate it.

A few of the projects that have been in the news lately are either bidding or getting ready to bid. Packages are bidding and have been let by Forest City Enterprises for the $20 million conversion of the Freight House Shops to the UPMC training center. The $45 million Produce Terminal/1600 Smallman Street mixed-use development, being built by PJ Dick, is getting close to construction. Al. Neyer Inc. is preparing to start work on two new buildings, totaling 267,000 square feet at the Clinton Commerce Park in Findlay. There is a $6 million UPMC/Indiana Hospital joint venture cancer center out to bid to AIM, Landau, Massaro, MBM, Mosites, Shannon and Volpatt. New-Belle Construction has started work on a 67,000 square foot warehouse/office in the Technology Drive industrial park in New Stanton.