Category Archives: Regional Economy

The Beat Goes On in The East End

Walnut Capital brought plans before the city’s Planning Commission today for what it’s calling Bakery Square Refresh. The Refresh project involves the demolition of the small retail building on the outparcel on Penn Avenue and construction of a two-story, 12,400 square foot retail building that will connect to the original Nabisco bakery. The $5 million Refresh is being designed by Strada Architecture and PJ Dick is the contractor. According to Walnut’s CEO, Gregg Perelman, the new construction – which will be home to several restaurants – is to be ready next October when Phillips occupies its new space in Bakery Square Three. That means construction will start around the first of the year.

The 2-story Bakery Refresh will be adjacent to the Nabisco bakery building. A new green space will be created along Penn Avenue. Rendering by Strada Architecture LLC. Use courtesy Walnut Capital.

Around the corner from Bakery Square, Echo Realty is moving forward with its Shady Hill Center. The project involves 220 units of apartments, to be developed by Greystone Real Estate Partners, a 500-car parking garage, and the replacement of the Giant Eagle with a new 37,000 square foot store. Carl Walker Construction has been selected to build the parking garage.

Data on employment and unemployment was released on the national and regional level within the past week. The job creation data for Pittsburgh showed modest improvement, with 5,500 more jobs in August 2019 than one year before. Unemployment fell by 0.3 points to 3.9%. The good news inside the Pittsburgh metro data, which came from PA’s Department of Labor, was the net growth of employment. The workforce grew by 18,400 from August-to-August, while the number of unemployed fell by 1,000. Retiring Baby Boomers are putting great downward pressure on the workforce supply in Pittsburgh. That the number of people working grew by more than 1.5 percent suggests that the gains in employment are offsetting the demographics for now.

US job growth was better in September than in previous months, according to the Census Bureau’s report on October 4. There were 136,000 new jobs in September. Estimates for July and August were also revised upward by nearly 60,000 jobs. The headwinds on the economy are certainly growing, but US employers are still adding to payrolls.

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Pittsburgh Builds Through the Worries

As the end of summer/back to school season brings a few weeks of slower bidding, construction continues at full pace. Few, if any, skilled workers are available. The Shell cracker is at peak employment of 5,000. There are cranes visible Downtown, Oakland, and most of the suburbs. Some of the recent contract awards/starts include: Mascaro Construction landing the 105,000 sq. ft., $9 million WeWork tenant improvement at 600 Grant Street; Al.  Neyer starting work on Crossgates’ 105,000 sq. ft. distribution center at Westgate Business Park in Big Beaver; and PJ Dick getting the green light for a $35 million project for the University of Pittsburgh, infilling behind Hillman Library off Forbes Avenue. AIMS Construction started construction on the $4 million UPMC CHildren’s Hospital pharmacy. Jendoco Construction started work on the $5.7 million Plaza at Hazelwood Green.

The Plaza at Hazelwood Green

At the Federal Reserve Bank’s Pittsburgh Business Advisory Committee meeting held August 28, the most recent survey of regional business owners found that the Pittsburgh economy was holding steady, despite worries about a recession in the coming year or two. Unlike respondents to business conditions surveys in other Federal Reserve Districts, Pittsburgh business owners reported that they continue to look to add staff over the coming months and see demand for products and services as the same or better than the past quarter.

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.

Good News on the Economy

The first week of the month is an eventful one for economic data. Last week was no exception. First the Commerce Department announced that total construction spending had declined year-over-year, but was still near all-time record high levels at $1.282 trillion dollars annually. The news that followed was rosier.

The Commerce Department released its first estimate of GDP growth for the January-March 2019 quarter. The 3.2% annualized jump was higher than expected. The above average growth was a turnabout from the talk of recession from earlier this year. There were two notes of caution in the report, however. First, GDP was inflated by an unusual buildup in inventories, which generally means that a following quarter will have lower growth from inventory depletion, There was also a temporary decline in imports, likely resulting from tariffs, which boosted consumption of U.S. goods. The second caution was the 1.3% increase in the sales of domestic goods to consumers and businesses. This suggests that underlying demand is lower than the headline GDP growth.

On May 3, the Bureau of Labor Statistics released its monthly Employment Situation Summary, which found 263,000 jobs had been created in April. Unemployment fell to 3.6%, with the number of unemployed persons falling to 5.8 million. That’s more than one million fewer people than there are jobs open, which underscores the seriousness of the problems that businesses are having with finding workers. In reality, this trend of roughly one million more jobs than workers has existed for a year or so, and it should have slowed the economy by now. Obviously, that hasn’t happened.

Light regional construction news. Research of April’s building permits in Pittsburgh revealed that Cavcon was selected to build Vollmer America’s new $4.8 million building in Findlay Township. PJ Dick has started work on the new $26 million multi-modal garage behind Bakery Square on Dahlem Place. A. Martini & Co. started demolition on the $6.5 million Wabtec TI at 30 Isabella Street on the North Shore.

Pittsburgh Jobs Bump

Department of Labor data this week showed Pittsburgh’s seven-county unemployment rate dipped to 3.6%, which is lower than the national rate of 3.8%. That’s the lowest since February 1970. Even more encouraging in the data was the estimate that Pittsburgh’s workforce grew by 8,000 in February, the second straight month of increased workforce. The Pittsburgh economy has been creating more new jobs each month than the net growth numbers, but the rapid retirement rate was consistently dragging the numbers down. Attracting population – and thereby workers – has been a major stumbling block for the region’s business attraction efforts. Let’s hope two months becomes a trend.

pgh y-o-y jobs

One of the job creators in Pittsburgh, Facebook, is taking bids on the buildout of its 105,000 square foot VR space in District 15 in the Strip. Proposals are due from Burchick Construction, RDC Design + Build and Turner on April 5. RDC is also out to bid for subcontractors on its next building, the 260,000 square foot + 387-car garage District 15 Beta.

ConstructConnect is reporting that Carl Walker Construction was the low bidder on the Washington County Courthouse Square Parking Garage and Plaza renovations, at $8.5 million or $13.4 million depending on options selected. DiMarco Construction was the low general on the $6 million Gill Hall Elementary School addition. Volpatt Construction was selected for the $1.2 million West Penn Hospital ERCP project.

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.

5bacd71a5389a.image

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.

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:

salk results

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.