Category Archives: Real estate news

Amazon At Last

July 30th brought the governor and a cast of dignitaries to Findlay Township to announce what had been whispered about for three years (see our July 2016 post), that Amazon was building a million-square-foot fulfillment center at Chapman Westport. Highwoods Construction will be bidding packages for the massive warehouse ASAP. Amazon’s commitment is just one of a number of large-scale industrial deals being done or pursued in Western PA. Komatsu is in the process of selecting a developer for its 250,000 square foot warehouse and office at Alta Vista Business Park in Washington County. Developers Suncap Properties and Al. Neyer have been competing.

The Federal Reserve Bank cut its Fed Funds rate .25% on July 31 at its Open Markets Committee meeting. The stock market plunged a bit after the announcement, likely in reaction to sentiment that the cut would be larger. Expect a rebound shortly. The Fed’s language suggests that another 25 basis point cut is likely later this year. For the U.S. economy, such stimulus is unnecessary at the moment, but economic data globally shows slowing and the bond markets have been trading at interest rates that are lower than the Fed Funds rate for longer maturity bonds. That’s what an inverted yield curve is and investors don’t like inverted yield curves. (You can read about the yield curve in the July/August BreakingGround.)

July’s building permits show that Hunter Buildings started work on a $6.5 million control room building for Eastman Chemical in Jefferson Hills. Rycon Construction pulled a permit for $2.2 million renovation of the AHN Wexford Medical Mall. Uhl Construction is working on a $1.6 million addition/renovation to Baierl Acura in Pine Township and $2.7 million project at Baierl Toyota in Mars, PA.

FMS Construction was awarded the $1.9 million restoration/conversion of the Lohr Building in Wilkinsburg. FMS is also doing general and mechanical/refrigeration construction on Giant Eagle’s $6 million Hempfield Square store renovation. Penn State selected PJ Dick for its $25 million Erie Hall replacement at the Behrend College. PJ Dick started work on the $17.5 million combined power/heating/cooling plant at the Wexford Medical Mall.

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Regional Scorecard Points to Regional Construction

Today’s release of the Pittsburgh Regional Alliance’s annual Business Investment Scorecard shined a light on how the regional economy’s strengths are driving construction in Western PA. The PRA noted that there were more deals – 340 – in 2018 than in any year since the scorecard started in 2007. In those deals was $1.2 billion in capital investment in development. Drilling into the major business sectors, you find that the top job creating areas were IT/robotics, energy and manufacturing. It’s not a coincidence that these sectors are the ones filling up the new buildings in the Strip District, Bakery Square, Robotics Row, etc. The new economy in Pittsburgh is driving commercial construction.

From the news, it appears these sectors are still driving construction in 2019. Al. Neyer Inc. announced it had landed Victory Packaging as a lead tenant and was starting the 220,000 square foot Jackson Distribution Center (rendering above) north of Zelienople. RDC Star took its $50 million District 15 Version Beta through the city’s planning process this week. RDC Design + Build hopes to start construction on the building in August.

PA Turnpike Commission awarded contracts for the $20.3 million Southern Beltway maintenance buildings. Nello Construction is the general construction contractor. Mascaro was selected for the $40-45 million UPMC Mercy 3rd floor renovation. Dick Building Co. started work on the $2.3 million new quest cottages at Laurel Valley Golf Club.

Updates

Last week the Business Times reported that EQT was looking for a new headquarters. EQT joins First National Bank in the search for about 250,000 square feet of consolidated office space. Rumors have been circulating for months in real estate circles that both firms are being courted by Buccini/Pollin for the anchor of the first office building at the former Civic Arena site. A lead tenant would probably have its name on a mid-rise tower that would kick off the $100 million redevelopment. Reports cannot be confirmed that the developer is working with a joint venture involving Mascaro, PJ Dick and Massaro.

While the healthcare headlines are about UPMC delaying hospital construction and the Highmark/UPMC insurance battle at the Supreme Court, AHN has been quietly building hospitals. The Allegheny General Cancer Institute is rolling towards completion at year’s end. Construction is underway on neighborhood hospitals in McCandless, Greensburg, Harmar and Brentwood, and the steel is flying on AHN’s $220 million new Wexford hospital.

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Rycon has topped off steel on the AHN McCandless neighborhood hospital.

PJ Dick is doing preconstruction on the $50 million Scaife Hall replacement at CMU. And Findlay Township supervisors will meet tonight and reaffirm the August 2016 approval of a 1,054,000 square foot distribution center at Chapman Westport, which will be the long-awaited Amazon fulfillment center. Permits have not been issued yet but construction is expected to begin in June.

3 Crossings Phase 2 (And other office news)

Oxford Development recently announced that it was going to move its office later this year to 25,000 square feet in the Riverfront West Building at 3 Crossings, almost coincidental to the news that Honeywell was taking 25,000 square feet of the former Bosch leasehold at 2555 Smallman Street. Today, Oxford made the first of what may be several big announcements on the second phase of 3 Crossings, confirming that Smith & Nephew was taking 45,000 square feet of the Stacks at 3 Crossings building. The $16.5 million Stacks core and shell is under construction by Rycon.

UPDATED INDUSTRY STREET VIEW-Revised (1)

Rendering by Perkins Eastman.

Oxford also released more information about the full next phase of 3 Crossings, which will be located along Smallman Street and AVRR, between 28th and 29th Street. A design/build team of Mascaro Construction and Indovina Associates will be delivering a $16 million multi-modal center with more than 600 parking spaces. Including the two-building Stacks project (which is a rebuilding of the Packaging Corporation of America’s former buildings), 3 Crossings Phase 2 will have six office buildings totaling 600,000 square feet. Rycon Construction will also be building the 178,000 square foot 2 Hopper Place office building, which is being designed by WTW Architects for construction later this year.

Steve Guy, Oxford’s CEO, said that the heightened demand from users had surprised them, even though Oxford expected the project to move quickly. Guy suggested that another two or three office buildings, plus the multi-modal center, could be under construction by early 2020.

3 Crossings was developed in anticipation of the growth of the AI/robotics/autonomous vehicle industries in Pittsburgh and the landing of Petuum, Argo AI and Bosch proved that concept correct. The Smith & Nephew lease shows that trend still has legs.

Oxford’s announcement came 24 hours after Carlow University and Elmhurst Group broke the news that they had come to an agreement on the development of a 225,000 square foot office building in Oakland on Fifth Avenue at Craft Place. Elmhurst’s Bill Hunt explained that the rapid expansion of technology and medical innovation in Oakland drove the decision to proceed with the building, which will be directly across Fifth Avenue from the 10-story Innovation Research Tower being developed by Walnut Capital.

In construction news, F. J. Busse was awarded the $3.5 million renovation of the 20th floor of the Federated Investors Tower. A. Martini & Co. has started work on the $12 million Buchanan Ingersoll TI at the Union Trust Building. Wildwood Country Club chose the team of R. A. Glancy and HHSDR Architects & Engineers to design/build its $4 million expansion/renovation. Franjo Construction broke ground on the $2.5 million new Jaguar dealership for A & L Motors in Monroeville. MBM Contracting started work on the $3 million-plus renovation of the Asbury Heights patient wing in Mt. Lebanon.

Some Surprising Results

The final tally of housing starts in Pittsburgh found several surprising changes from 2017, and the trends of the previous five years or so. Most notable among these was the steep decline in construction of new multi-family product. After five years of at least 2,100 new apartment or condo units, construction of new multi-family in the metropolitan Pittsburgh market fell 52.3 percent to 1,234 units. As has been true during the past decade, the preponderance of these new units were started within the city of Pittsburgh. There were 584 multi-family units permitted in the city proper, nearly half the total for the region.

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Another trend that broke in 2018 was the output of townhouse or other attached homes. Driven by empty-nesters and first-time buyers, townhome construction has been supported by the demographics of Pittsburgh and the scarcity of single-family detached homes priced under $250,000 to $300,000. Both of those drivers were stronger in 2018, but construction of new single-family attached homes dropped 23.6 percent, or 244 units. There is little or no evidence that demand for townhouses declined, other than anecdotal evidence that younger buyers aren’t entering the market or aren’t interested in entering by the townhouse route. It’s likely that the decline, like with detached homes, stems from the lack of lots and new development.

The bright spot for residential construction in 2018 was the traditional single-family detached home, which saw a 11.3 percent increase to 2,193 units. The 222-unit jump from 2017 nearly offset the decline in attached homes.

There were a couple of other interesting notes in the housing data. In the more active communities, there were more new homes than during the past few years. The municipality with the most new single-family homes, Pine Township, saw 162 new detached homes get underway. That’s the most new homes started in any municipality since before the Great Recession. And there were four communities with at least 100 new homes. There were zero apartments built in any of the top ten communities for single-family homes. And while apartment construction slowed, the City of Pittsburgh still had the most new residential units by far, with 673 units overall and 89 single-family dwellings.

There was a surprise in the public bid market last week as well. Bids were opened for the Franklin Elementary School additions and alterations in North Allegheny. The project was expected to come in around $30 million but the apparent low bidders totals were less than $24 million. That’s a pleasant surprise for the owner, especially if there were alternates that can add to the scope of work for the project. There is a second project out to bid at NA that should be in the $20+ million range and two projects of very similar size out at Franklin Regional School District. The results give an early reading as to how the K-12 market is responding to what is otherwise a busy construction industry. You can view the apparent low bidders at the Builders Exchange.

In unofficial construction news, Massaro Corp. was selected as CM for the $60 million Conemaugh Hospital Building B expansion in Johnstown. Turner Construction was tabbed for the $125 million 1501 Penn Avenue tower and Franjo Construction was successful on the $40 million Arsenal apartments second phase. Construction on the latter two still has a ways to go.

Amazon Looks Elsewhere

Let’s start with a disclaimer: there has been no official announcement from Amazon about the results of its year-long HQ2 search. Yesterday, the New York Times ran an article that sourced several people “familiar with the search” and reported that the online giant was in final negotiations to locate in both Queens, NY and the Crystal City section of Arlington, VA. The assumption is that Amazon will split its second HQ into two equal parts in those cities. Speculation about Crystal City arose over the weekend, prompting even Mayor Bill Peduto to make a statement that Pittsburgh had not been contacted by Amazon.

Amazon's Seattle Campus 2017

Amazon’s Seattle HQ

I think David Ruppersberger, president of the Pittsburgh Regional Alliance, got it right when he said that Pittsburgh won by making the short list. The effort to respond to the proposal taught Pittsburgh’s civic leaders even more about how to position the region and the public relations that have followed the city since has been valuable. Now we don’t have to deal with the mess that would have followed actually winning the project.

Pittsburgh’s tech sector is blossoming in multiple directions. Healthcare research is entering a potentially rapid expansion period. The energy sector holds great promise. And the petrochemical and plastics industries have yet to reveal what will happen when several ethane crackers open by the middle of the next decade. The regional economy is a good bet to create 50,000 new jobs over the next decade without having all of our eggs in one basket. Anyone remember how that worked out the last time Pittsburgh was reliant on one industry above all others?

Lots of interesting little private projects out to bid as the year winds down. In case you missed the BreakingNews email last week, Volpatt Construction was awarded the $6 million UPMC/IRMC Cancer Center at Indiana Hospital and Pitt chose PJ Dick for its Peterson Sports Complex field house expansion. Mistick Construction is taking bids on the $12 million development in New Kensington that will be the 47-unit Pioneer Apartments and offices for Wesley Family Services. Al. Neyer Inc. has started construction on three new industrial buildings: the third and fourth buildings at Clinton Commerce Park (268,000 square feet total) and a 50,000 square foot build-to-suit for Don’s Appliances at 251 Bilmar Drive.

Eds and Meds…Again

Putting the November/December edition of BreakingGround into production this week and I was struck by how much of the commercial real estate sector was being driven by the universities and hospitals. I’ve been hearing so much about “eds and meds” that I was sick of hearing the phrase; but…it’s one of those things that you hear too much of because it’s a real thing.

Here are a couple examples of projects that have barely received any coverage but are happening because of the economic engines of CMU and Pitt. The URA recently approved the sals of land in the Pittsburgh Technology Center on Second Avenue to Elmhurst Group, which plans to build 160,000 square feet of “tech flex” space to attract advanced manufacturing, robotics or other technology spin-offs requiring research and maker space. Walnut Capital has received a lot of ink for its Bakery Square, JAA and PAA projects but the intriguing project is the Fifth and Halket property, which is reported to be an office building of several hundred thousand square feet. That property is in the opposite direction that much of the Oakland-driven development is looking but it will plant a flag on the more neglected Downtown side of Oakland, right by the Parkway East interchanges, right on the BRT route. If it becomes a major university or university-related corporate facility, it will be catalytic for the Uptown and South Oakland neighborhoods.

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Desmone Architects’ rendering of Elmhurst’s tech flex development on Second Ave.

The universities are making construction news on their own. Duquesne announced the modernization of the Palumbo Center yesterday. The $45 million renovation will result in the rebranded UPMC/Cooper Field House. DRS Architects is designing the project, which should bid by early 2019 if the work is to start in the spring. CMU is proposing a new residence hall at Fifth and Clyde. LTL Architects was hired to design the $32 million project. CMU took CM proposals from Jendoco, Mosites and Rycon.

Rycon will do the construction of the AHN Brentwood micro hospital that had its groundbreaking recently. Work has not started yet. UPMC selected PJ Dick for its $15 million ED expansion at the UPMC East campus in Monroeville.

In other construction news, Franjo Construction was reported as the awarded general contractor for the $4.7 million Youghiogheny Administration Building for North Huntingdon Municipal Authority. Cast & Baker was the low bidder on the $4.5 million site prep package for the World Trade Center at the airport. That’s a project that could open up hundreds of millions in new commercial construction over the next decade, a project worth following.