Category Archives: Regional construction

PTT Steps to the Plate

The recent North American Petrochemical Construction Conference was held in Pittsburgh a couple weeks ago and there were plenty of pronouncements about the beginnings of the plastics and chemicals industries building out in Pittsburgh. The problem was there were few specifics to support the assertions. Maybe I’m still accustomed to the other shoe dropping but without some logical argument as to why the industries should locate strategic manufacturing assets here, I was unmoved by the PR coming out of the conference.

This morning came news that Thai-based PTT had exercised its option to buy the 168-acre site on the Ohio that has been proposed for construction of a second ethane cracker in the Marcellus/Utica region. The site was the Burger First Energy power plant and has been getting a demo and cleanup that JobsOhio has funded to the tune of $14 million. PTT had auditioned Fluor and Bechtel last year to provide preliminary engineering and budget estimates, with the intention of making a final investment decision in January 2017. Instead of pulling the trigger, PTT deferred the decision until late 2017. That was a cause for concern, although Shell delayed their FID several times and still moved ahead.

This morning’s news is another bit of affirmation that inertia for the petrochemicals industry is building in the Appalachia. Understand that a $13.8 million land buy won’t assure that PTT makes the FID soon or even goes ahead with the project, but it’s comforting news nonetheless. You can read the Pittsburgh Business Times story here.

Contractors seem to be comforted by Pittsburgh’s market conditions since the first quarter. The Master Builder’s Association’s C3 Index – a reading on commercial contractors’ sentiment about the market – showed big improvement in the second quarter. The MBA’s Eric Starkowitz released the C3 Index on July 1 and reported that a significant increase in backlogs had raised expectations about the future.

765ae82b-beeb-4a43-a990-42ea54c67cfd-largeOne significant project that has made news in the plastics industry is Ensinger Plastics’ expansion. After South Strabane Township officials hamstrung Chapman Properties’s development of Southport, where Ensinger was to locate, the manufacturer shifted plans and will add 214,000 square feet at its existing North Strabane location. The construction cost should still be in the $20 million-plus range. Ensinger is taking bids from Franjo, Bear Construction and Fairchance Construction in mid-July.

Healthcare Project Updates

Yesterday’s announcement by Highmark and Allegheny Health Network about the expansion of its cancer treatment added another significant project to the list of major hospital projects. In addition to the expanded partnership with Johns Hopkins, AHN reported that it would be building a new academic cancer institute at the Allegheny General Hospital campus, as well as suburban cancer treatment centers.

The AGH facility is to be a 59,500 square foot expansion with significant related renovations to the hospital. Costs for the project could top $50 million. The development of suburban centers are part of the overall healthcare trend to move treatment into the communities where patients live. AHN explained that these centers will be removed from the AHN system hospitals themselves, which will also receive renovations to upgrade cancer treatment facilities. Estimates of the capital spending for this cancer initiative are $150 million. Work is scheduled to start on the AGH facility by end of year. The target for completion of the overall cancer institute expansion is the 2019 expiration of the AHN/UPMC Hillman Cancer Institute agreement. No architects or contractors have been engaged for the specific projects, although IKM Inc. has been involved with AGH’s institutional master planning.

In other hospital construction news, PJ Dick was chosen as construction manager for St. Clair Hospital’s $80 million expansion. The agreement covers preconstruction services that will be done during the next year.

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Members of CREW Pittsburgh gather at Local on East Carson Street after the chapter’s Escape the Room teambuilding events on June 13.

Tight Bids and Pension Reform

Although there is a little bit of a seasonal lull in bidding as June begins, there is plenty of activity in the Pittsburgh construction market. The brighter prospects, however, haven’t materialized in the public hard-bid market yet. Two projects that bid this week illustrate the market well. First, in the heavy/highway sector, Golden Triangle was low on the Airport Authority’s bid to replace Deicing Pad C at the airport. At $21,934,890, the low bidder was 0.5% under the next bidder. Canon-Mac took bids on its high school that saw Lobar Inc. (from Dillsburg/Mechanicsburg area) get low at $9.3 million, a little more than 1% below the third bidder. Both projects were well under the published budget. Public spending shows no signs of significant increase through 2018, meaning the market should stay tight. How that changes in a tightening labor market remains to be seen.

A public pension reform law went to the governor for signing today. It’s gratifying to see both sides of the aisle collaborating on this critical issue, but the finished product trims only $1.4 billion from the pension outlay over the next 20 years. It does shift more of the risk of pension shortfall to pensioners instead of taxpayers but leaves unanswered the question of how to manage the $60 to $70 billion unfunded pension balance that exists. That means that school districts and the Commonwealth will continue to have pension costs drag against capital investment.

In project news from Harrisburg, the General Services Administration is taking RFP’s on the $150 million federal courthouse now. Closer to home, the Pittsburgh Parking Authority has apparently short-listed three development teams – Oxford/PJ Dick, Millcraft/Mosites and Davis/Mascaro – for its 1,000-car 9th & Penn garage replacement/mixed-use development. Shannon Construction is working as general contractor for the announced $7 million renovation of the Arts Institute building on Boulevard of Allies. 

Hospitals and Jobs

Both the major Pittsburgh hospital systems have signaled an increase in spending in 2017 and the push has really begun throughout the market. Proposals are due Friday for CM services on the $111 million UPMC Hamot patient tower. RFP’s went to PJ Dick/E. E. Austin, Mascaro, Massaro/Gilbane, Turner and Whiting/Turner. RFP’s for the $75 million St. Clair Hospital project are due out by next week and RFP’s for the new 280,000 square foot, $180 million UPMC South Hills hospital at South Fayette’s Newbury Market should follow right behind. You can read more about the hospital construction market in the March/April BreakingGround digital edition.

In other project news, BRIDGES & Co. was awarded the $4.5 million expansion of Prominent Fluid Controls Building 2. Massaro Corp. was selected for a $5 million renovation project by UPMC at the Kaufman Medical Building in Oakland. Pittsburgh Theological Seminary is taking proposals from Facility Support Services, PJ Dick, Jendoco and Mosites for renovations to its library, a project in the $10-12 million range. Corcoran Jennison is taking bids April 15 for the 2nd phase of the Oak Hill neighborhood, the 140-unit Brackenridge Apartments. The contractors bidding the $24 million phase are Arcon Construction, Fairchance, Graziano, Jendoco, Mistick and PJ Dick/Waller.

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Employment growth since 2013 has been well below February’s 10,000-job pace.

The Department of Labor released its estimates of metropolitan job growth in February and Pittsburgh came in below the benchmark average of two percent, with 10,000 more jobs than in February 2016. That’s a 0.9 percent bump; not great but four times the average annual gain for 2014-2016. The forecast is that the rejuvenation of the gas business will be a booster – rather than a drag – for the tech and finance job growth in Pittsburgh this year.

Campus Advantage Moves Ahead

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.

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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.

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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.

 

 

A Final Look at 2016

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:

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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.

Mall Closings Shouldn’t Surprise

Today’s announcements from Sears, K-Mart and Macy’s were headline news around the country but the closings are really “dog bites man” news. The ever-growing share of online shopping is a five-year story that has left retailers struggling to find the right mix of bricks-and-mortar vs. online retailing. Research has shown that retailers that do both well get more money from shoppers than those that just do one or the other well. I don’t envy any company trying to figure that out, especially since the landscape is constantly shifting.

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Macy’s Ross Park Mall store was one that escaped closing.

Pittsburgh was left relatively unscathed by the closings, with only a few malls in outlying areas affected (although you have to wonder about the wisdom of closing Beaver Valley Mall stores at this point). On the upside for the region, it seems that Pittsburgh is on the radar for fulfillment centers, which is the upside of retailing these days. Several of the big warehouse leases signed in the past 6 months have been for online fulfillment and the prospect of Amazon as the user for the million-square-foot warehouse at Chapman Westport remains strong. One of the many companies scrambling to get into this business is Macy’s, which is converting some of its big closed stores into fulfillment centers. Perhaps that fate awaits one of the two stores announced for closure in metro Pittsburgh.

Look for this industrial market niche to be a hot – if not huge – property type over the next few years. FedEx Ground has invested significantly in facilities over the past decade but expect to see it, and its competitors, try out new ways to get products to consumers quicker. Amazon’s arrival will signal to others, like Zappos and Wayfair, that Pittsburgh is a viable next-step market. With the industrial demands that will come from Shell’s cracker and related industries, warehousing will be a steady source of millions of square feet of new construction between now and 2025.