Category Archives: Regional Economy

Construction Employment Tops 2008

Digging into the weeds of the April employment reports, AGC reported on the metropolitan-level construction employment levels compared to the previous April peak and trough. Pittsburgh had 57,100 workers employed in construction in April 2018, 400 more than the peak in April 2008. Pittsburgh was one of only two PA metros (Altoona was the other) that had exceeded its previous peak employment level.

There was an interesting comparison of data that illustrated just how much better Pittsburgh fared in the last recession than other PA cities. In April, the new Pittsburgh level was 16% above the trough, the low point of 49,700 in April 2011. Compare that to Philadelphia’s suburban metro, which saw construction employment plunge to 38,900 in April 2011. Today, suburban Philadelphia employment still lags its 2008 peak and has but 1,000 more workers employed than Pittsburgh.

In construction news, Burns & Scalo Real Estate is excavating the site for its $35 million, 160,000 square foot Riviera office building (see below). The Riviera is being built 100% spec, although rumors of an anchor tenant swirl. Burns & Scalo is banking on the burgeoning tech industries and the proximity of Pittsburgh Technology Center to attract tenants as construction proceeds.

riviera

The University of Pittsburgh is seeking Predetermination of Responsibility responses on June 20 for its Salk Hall Phase 2 renovation. This is the prequalification for contractors interested in bidding the four prime contracts for the $40 million project. The bidding will go through DGS but will be limited to the contractors Pitt approves through the PDR process. Read more about the PDR here.

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Now, To Build It

With Memorial Day passed, the construction industry is moving into its busiest season. Colleges have graduated and schools are about to let out for summer. Construction in Western PA is ramping up and the pool of labor has already “ramped” up. Hiring in the Pittsburgh MSA was reported last week as up 14,000 jobs April-over-April, an indication that the 1.5% employment growth is sustainable; and construction hiring helped lead the way.

Peters Township School District meets tonight to vote on contracts for the $89 million new high school. Low bidders for the electrical and HVAC withdrew their bids, making for more alternate decisions than expected. The Builders Exchange reported that Franjo Construction was awarded the $6 million expansion at Rose Plastics in California. UPMC is taking proposals from PJ Dick/Rycon, Mascaro/Barton Malow, Turner Construction and Massaro/AECOM Tishman on it $280 million expansion of Hillman Cancer/Shadyside Hospital. The Allegheny County Airport Authority has short-listed teams for A/E services and program management on its $1.1 billion Terminal Modernization Program. Finalists for A/E services are AECOM, Corgan/Michael Baker, Gensler/HDR and luis vidal + architects/CannonDesign. The program management finalists are AECOM, Jacobs and Parsons Transportation. Walnut Capital is bringing its final plans to the city for approval this week for Bakery Square 3.0, the rumored future site of Phillips. PJ Dick and Strada Architecture are the team working on the 328,000 square foot office building and 794-car garage.

Commercial Real Estate Enthusiasm

Burns & Scalo Real Estate hosted a brokers luncheon Tuesday and its president, Jim Scalo, was exceptionally upbeat about the next few years. Scalo characterized 2016-2017 as slow years for transactions and decisions because of uncertainty surrounding the election and the ensuing Trump administration. Citing the Tax Cuts and Jobs Act that was passed in late 2017, Scalo explained that he had seen a dramatic upswing in activity since the start of 2018, both in terms of leasing and interest. His forecast was for a strong year for corporate and technology users in 2018, followed by at least two more great years. With the rapid pace of change in Pittsburgh’s economy, Scalo was reluctant to look beyond 2020, but he made it clear that there was no reason to expect a slowdown in 2021 or beyond.

Burns & Scalo is currently working to develop a 150,000 sq. ft. Class A Riviera office building in the Oakland/Pittsburgh Technology Center riverfront. Construction is scheduled for later this year, although the proposed riverfront zoning changes are a potential drag on the project. Burns & Scalo also plans to start a spec office in Robinson at its Boardwalk site, as well as Beacon II at the Abele Business Park in South Fayette.

Brokers at the luncheon echoed the enthusiasm Scalo had. Industrial brokers were beaming about deals pending in the Wheeling-to-Washington corridor and the airport area. One broker talked about the space at Nova Place, which was once thought to be a white elephant on the North Side, becoming scarce. With rents in the high $20s/sq. ft., Nova Place has succeeded in re-branding itself as a tech hub in high demand.

nova place int lobby

Nova Place’s main concourse. Photo courtesy Perkins Eastman.

In project news, Mistick Construction was selected for the 183-unit, $30 million Solana at Cranberry project. CMU selected Landau Building Co. for the $3.5 million Warner Hall renovation. PJ Dick has started construction on the $6-7 million renovation of the former Cadillac dealership at Craft Place and the Boulevard in Oakland into offices. The developer, Walnut Capital, is said to have a single user for the project. St. Vincent University finalized its list of contractors for its $14 million library project. Jendoco, Landau, Mascaro, Massaro, PJ Dick, and Poole Anderson will be asked to propose on the project.

2017 Wrap-Up

The Pittsburgh Homebuilding Report released its year-end 2017 results for new construction in the six-county metropolitan Pittsburgh market. While the year unfolded mostly as forecast, there were a few noteworthy deviations.

Single-family housing construction was up compared to 2016 but the gains were in attached products, like townhomes and quads. Permits for attached homes jumped more than 25 percent to 1,035 units. Starts for single-family detached homes actually declined by 6.3 percent, to 1,971 homes under construction. In contrast to the national trend, permits for new apartments also increased last year. New apartment construction activity was expected to slow in 2017 but permits for new units increased by 11 percent, to 2,368 units.

Another trend that continued more strongly in 2017 was the migration to the city. Permits for new construction in Pittsburgh proper reached 1,714, or roughly one-third of the total construction for the entire metropolitan statistical area.

Topmuni2017-4

In another measure of the economy, job growth returned to Pittsburgh during 2017. Hiring grew by an average of 11,625 jobs monthly in 2017; however, that average is well below the current trend. Job creation increased steadily throughout the year, with the monthly average reaching 16,000 jobs in the fourth quarter. In fact, December’s job growth of 19,300 was the highest year-over-year in 2017. Although there have been later revisions that deflated the preliminary jobs numbers in several of the most recent years, the consistent strength of employment gains in 2017 suggests that the trend of flat employment changed significantly last year.

Project news is light at this time of year but the hospital market continues to expand. Rycon Construction was selected as CM for the first of the AHN neighborhood hospitals in Greensburg. Turner Construction is bidding early packages and expects to release the main specialty contractors bids in mid-February for the $90 million UMPC Hamot tower in Erie. UPMC will be interviewing a handful of architects for its $700 million Transplant and Heart Hospital in Oakland (along with the Hillman/Shadyside expansion) next week, with RFP’s for construction management to follow within the month.

Reindustrialization & Amazon

This morning Amazon announced the 20 cities that had made the first cut down from the 238 submissions. Read one local newspaper story about the news. There was a lot of excitement, as you might expect, about the announcement but it’s worth remembering that there are 19 other cities still in the running, including every city handicapped to have had an advantage over Pittsburgh from the start.

The news reminded me of a comment a gas industry executive made during the research for a recent BreakingGround article. He was grousing about all the press for the Amazon HQ2 bid and scoffed at the idea of 50,000 added jobs over the next 10-15 years. By the time the natural gas and chemical industry built out, he said, there would be 100,000 new jobs added in that sector.

That executive might have been exaggerating a little but it’s becoming clearer that the industrial sector is the big reason we’re seeing tight labor conditions ahead of what will be a bigger boom in the next two or three years. With most of the research for 2017 complete, we’ve tracked $4.37 billion in commercial/non-residential contracting. Some $2.37 billion of that total was in the industrial market. While there were a few big commercial warehouses in that number, the lion’s share of the industrial starts came from manufacturing, processing and power generation. This isn’t a one-year phenomenon. The industrial total for 2016 was $1.85 billion; and in 2015, it was $770 million. Even the relatively small total in 2014 – $492 million – dwarfs the total of any other sector during those four years.

There are a number of the mega projects – like Shell or the combined-cycle power plants – that have garnered headlines and make up big chunks of the dollars spent, but there has also been a steady stream of smaller, regionally-focused projects started. Within the past couple of months, for example, Al. Neyer started a 75,000 square foot addition to Knepper Press in Clinton Commerce Park. Hallstrom Construction is working on a 180,000 square foot addition to the New Stanton warehouse for DeLallo Foods.  These are local companies making stuff and doing stuff here. These are project that add to the employment base too.

Think back to the P.R. of the gas industry when the Marcellus Shale play started ten years ago. The payoff, they said, would be in the boom in manufacturing that would follow the exploration. This reindustrialization is starting to become bricks and mortar (or concrete and steel). Along with the construction and jobs, comes a fundamental change in the way business decisions are made. Manufacturers think in terms of the return on their assets. An asset-based economy tends to be focused on long-term trends instead of the next quarter’s results. That usually leads to better decisions for the health of the regional economy. You can read an article on the subject in the Jan/Feb BreakingGround (it’s on p. 52).

What’s going on in the technology transfer for robotics, information technology, AI and big data is an incredible opportunity for transformation of Pittsburgh’s economy. There’s an equally transformative reindustrialization trend. In the race to see which sector takes the economy higher, the winner is Pittsburgh.

Slow Start, Big Promise

The unusually cold weather made for a slow start to the 2018 construction season. Bidding activity has been slow out of the gate too, but the momentum is building. There is news on a couple of large projects people have been keeping an eye on. Siemens Corp. is taking bids on early packages at the $600 million combined cycle plant at Hatfield Ferry in Green Co. Wesex Corp. has started work on the first building at Castlebrook’s million-square-foot industrial park in Big Beaver/Koppel area in Beaver County. The building is a 400,000 square foot warehouse called the Fairlane Distribution Center. Allegheny Health selected the Gilbane/Massaro team to build its new $200 million new hospital in Wexford. At Slippery Rock University, DGS selected the team of Mike Coates Construction, Renick Bros. and Blackhawk Neff to negotiate a final agreement for the new $22 million performing arts center at Miller Auditorium. In other commercial real estate starts, Jendoco Real Estate started work on Building 200 at Settlers Cabin Business Park.

job creation history

News on the economy has been very good to start the year. The government reported that 148,000 new jobs had been created in December, marking the 75th straight month of job gains. Pittsburgh’s job market remained in growth mode in November. The Department of Labor reported that 16,500 new jobs were added from November 2016 to 2017, a gain of 1.4%. Unemployment dropped to 4.8%.

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.