This morning’s Employment Situation Summary showed that the U.S. labor market remained unusually strong in November. While the headline of 155,000 jobs was off from what economists were expecting, the overall data on the employment situation was positive. Wages grew at a 3.1 percent rate, although workers saw a slight decrease in hours. Workforce participation and total unemployed was even with October’s data. Unemployment was steady at 3.7 percent. Taken in concert with the November Job Openings and Labor Turnover Survey, the number of open positions still exceeds those looking for work by one million.
Forecasts of job growth have been off by about 40,000 jobs each of the last four months – both overestimating and underestimating every other month – which highlights the difficulty of predicting monthly changes in the economy, especially late in the business cycle. Other indicators show the economy starting to slow, and the lack of available workers should bring the average monthly growth in jobs down to between 120,000 and 140,000 in 2019. In Pittsburgh, there are fewer signals of a slowing economy. The race to replace retiring Baby Boomers will hold back the total number of employed persons in Pittsburgh but the sources of job growth remain robust.
Construction projects continue to advance in anticipation of continued growth. Developers continue to be optimistic about the office market. Earlier this week Oxford Development brought forward its plans for the first building in 3 Crossings 2.0, the $13.5 million, 110,000 square foot Stacks at 3 Crossings. Rycon Construction is the general contractor. Innovation Center Associates broke ground on a 90,000 square foot Class A spec office at Innovation Ridge, which will be designed and built by Al. Neyer.
The new spec office at RIDC Innovation Ridge. Rendering by Al. Neyer.
Massaro Corp. was selected for the $11.8 million Greater Pittsburgh Food Bank project. Allegheny Construction Group has started on the $7 million first phase of the grower/processor facility for Penn Health Group in Lemont Furnace. Sunrise Assisted Living has put a $7 million expansion of its McCandless facility out to bid. According to the PBX the bidders are Burchick, PJ Dick, Rycon, Sota and Sun Coast.
Bidding activity is very slow as the kids get back to school. The $100 million Section 55A2 piece of the Southern Beltway is out to bid, due Sept. 26. Pitt’s $40 million Salk Hall has been extended again to Sept. 11. The activity after Labor Day will be a good indicator of how the year finishes out. If the pipeline is any indication, there should be a lot to bid in October/November.
Regardless of what projects owners put out after Labor Day, there will be bidding for some of the big projects that have been tracking for the past year or so.
AHN’s new $260 million Wexford hospital broke ground last week and additional bid packages from Massaro/Gilbane should bid through the fall. Likewise, packages for bid on the $190 million UPMC South Hills and $350 million UPMCY Mercy projects will be out. PJ Dick is bidding the 320,000 square foot, $40 million-plus Bakery Square 3.0 office building. CCAC’s new $60 million classroom at the Allegheny campus is expected to be ready to bid in November. The 90,000 square foot building will be bid in five prime packages.
The Airport Authority’s $1.1 billion Terminal Modernization Program continues to quietly progress. The authority will issue an RFP for construction management services for the project in September, with the expectation of signing a contract in Feb. 2019. An RFP for additional A/E services specific to the $250 million-plus parking garage/lots and ground transportation center will also go out in Sept.
The busy construction season is upon us. The activity is really showing up in the number of $5-20 million projects getting underway around the region. There are also a few projects above $50 million being locked up.
RB VetCo is the general contractor for the $8 million ambulatory care and security improvements at the Louis Johnson VAMC in Clarksburg. Fox Chapel Area Schools awarded contracts for the $17.8 million Kerr Elementary School that bid last week. Hudson Construction is the general trades contractor. Turner Construction was selected as CM for the $72 million Henning Building replacement at Penn State and the $220 million UPMC Immune Transplant and Therapy Center in Shadyside. Turner is also the construction manager for an $8 million tenant improvement for McKesson in Moon Township and the $7 million Allegheny General Hospital ED Expansion. General Services Administration awarded Mascaro Construction a contract for CM services on the $80 million federal courthouse addition and renovation in Toledo, OH. Rycon Construction has started work on the $4.3 million Miller Library renovation at Washington & Jefferson College. A. Martini & Co. held a groundbreaking for the $32 million Bay Village Assisted Living & Memory Care facility for IntegraCare in Annapolis, MD. The University of Pittsburgh interviewed PJ Dick and Turner for CM services on the $80 million Scaife Hall expansion.
Groundbreaking was held June 6 for the Bay Village community in Annapolis being built by A. Martini & Co.
For all the talk about the impact of the ethane cracker Shell is building, there hasn’t been much of an update on the construction in the press. If you have driven by it this summer you may not notice much of a difference, at least to the naked eye, but there is significant progress nonetheless. A massive concrete pour is well underway. Champion Concrete’s batch plant up the Ohio is producing non-stop and there are more than 200 ironworkers on site to handle the rebar tying for what is the pad for the billion dollar process plant to be floated up river from the Gulf of Mexico. The site will see mostly horizontal construction in 2017 but construction of related buildings will begin in about a year. Right now Great Arrow Builders has a package that includes and administration building and medical/fire station facility totaling about 84,000 square feet out-to-bid, due Aug. 18. A lab building was also just released to bid Sept. 14.
There was an interesting spotting of an autonomous research vehicle on McKnight Road last week that is not an Uber car. The Ford pictured below uses different Lidar/capture technology than Uber’s. Since Ford is a billion-dollar investor in Argo AI, I assume this is one of their vehicles. No announcement of where Argo intends to locate its 120,000 +/- first offices has been made yet.
In other project news, BRIDGES & Co. was awarded the $12 million Northland Heights senior living facility, which is the conversion Hamister Development is undertaking of a former hotel on McKnight Road. PJ Dick’s special projects group started construction on the $3 million Keystone Shooting Center in Marshall Township. Massaro was awarded the $4 million Mercy Hopsital central sterile facility. Massaro was also selected as the CM for the $26 million AGH Cancer Institute project. IKM was chosen as the architect.
As chaotic as US politics is right now, the economy continues to hum along. Today’s jobs report outperformed the expectations of analysts, with 227,000 new jobs added to payrolls last month. That continued expansion is in contrast to the story in Pittsburgh, which last year added only 4,400 jobs. At Thursday’s Viewpoint presentation – one of the best forecasting events for commercial real estate – Integra Realty Resources’ President Paul Griffith explained how the healthy job growth early in the business cycle has faded to a flat line since 2013. Pittsburgh’s strong economic sectors have been offset by declining employment in energy and manufacturing.
In project news, Volpatt Construction was awarded the $2.4 million Nursing Unit 5A renovation at St. Clair Hospital. Developer Alphabet City selected Brubach Construction to build its $7 million, 60,000 sq. ft. East Liberty Centre office building. Campus Advantage interviewed Turner, PJ Dick, Continental and Rycon for its $40 million apartment on Forbes Avenue in Oakland. Rycon Construction is underway on the $27 million, 172-unit Emerald on Centre apartments in Shadyside. Sota Construction is taking bids from subcontractors on the renovation of the Allequippa Place apartments and construction of the 49-unit new Wadsworth Street Apartments, roughly $8 million in total construction. And McCaffrey Interests is taking RFP’s next week on the $66 million Terminal Building redevelopment in the Strip District.
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.
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.
As the year winds down we’ve done the first estimates for the total construction and the big factor in 2016 was heavy industrial/energy work. The total non-residential construction volume for 2016 is $4.07 billion, the highest level of activity since 2000. Hidden in that number is about $1.3 billion from just three jobs: $580 million Tenaska Westmoreland combined-cycle power plants; the $500 million Revolution cryogenic gas processing plant in Burgettstown; and about $300 million in construction at the Shell petrochemical site in Monaca. Because of the Shell project, volume in this sector will be extraordinarily high for the next three years as well.
Brian Chlop, Eric Starkowicz and Jason Sigal enojy the YC Holiday Party, which raised $4,000 for the Lemieux Foundation and 200 toys for Toys for Tots.
In commercial construction, Massaro Corp. is finalizing the GMP for the $50 million Campus Advantage apartments in Oakland. UPMC announced its $111 million Hamot Hospital expansion. The first phase of that project is $10 million of relocations for users in Hamot’s professional building. Building Systems Inc. is doing relocations in the hospital and Massaro Corp. is handling relocations in non-hospital sites. Burchick, F. J. Busse and Landau are putting in proposals today for a new $4.5 million Mars Library. Zamagias Properties has asked Continental Building Co., PJ Dick, Massaro and Rycon for proposals Jan. 10 on its 26-unit Sewickley Lofts, a high-end condo project being built in Sewickley’s village.
Hope the year has been prosperous and 2017 will be better. Happy Holidays!