After doing some preliminary work on construction volume in metro Pittsburgh thru the first three quarters – with an estimate for September – I am expecting that less than $2 billion will have started during the first nine months. Only in 2010 was the volume so low through three quarters, at least since the 2001-2003 slowdown. Architects and engineers continue to be busy but the amount of work getting through the pipeline is still a trickle.
Last Wednesday, CBRE presented its annual real estate symposium at the Westin. The global real estate firm was upbeat about the economy in general and commercial real estate in particular. Local managing partner Jeffrey Ackerman characterized the Pittsburgh market as “booming.” Given the data on high occupancy and absorption of space, his assessment is correct. What isn’t booming is the new construction that should result from such incredibly tight supply and demand fundamentals.
The last time the construction market felt like this was during the summer of 2004. Following the Plan B boom of stadiums and the school construction boom of the late 1990’s, there was an implosion of construction when the 2001 recession hit. That slowdown lasted over three years, breaking in the fourth quarter of 2004. Like then, the fourth quarter of this year will be an indicator for the coming year.
By November, we’ll have elections won and lost. Any owner waiting for signals will have them by then. Look for the opportunities to build backlog before Christmas to get an inkling about whether the pipeline is going to break loose in 2015 or not.