Small businesses, which are the drivers of the business economy, are entering 2017 with a renewed sense of optimism. Whether it’s the belief that a Trump Administration will drop regulations or roll back Affordable Care Act, owners of small businesses are responding to surveys about 2017 in a significantly more upbeat manner than they did in recent years. If that optimism survives the first few months of transition, that is a very good thing for construction. More small companies grow than big ones and that means more expansion and new construction opportunities.
There is growing excitement in Pittsburgh about the impact of the Shell cracker project but its effect on 2017 will be mild compared to the years that follow. According to Bechtel, it’s estimated that “only” around 1,000 workers will be on the site by the end of 2017. That’s a fraction of the 6,000 that Bechtel still says will be needed during the following two years, when most of the plant facilities are brought on site.
One construction buyer that has come back into the market is the General Services Administration. The GSA manages the federal government’s property and has been all but missing for the past decade. The agency currently is seeking qualifications for a 3-step best value process that will occur next spring for $20 million in renovations to the federal courthouse Downtown. GSA is also looking at sites in Butler/Beaver/Lawrence to locate a 400,000 sq. ft. records warehouse. Here again, if the Trump Administration can deliver on promises to stimulate spending on construction, GSA may become a regular buyer in the region.
Some projects that are active in Pittsburgh include the new $25 million Waters Senior Living community underway in Marshall Township, which is being built by Continental Building Co. The PA Builders Exchange reports that the $28.7 million Latrobe Elementary School is due Feb. 16. Pitt took alternates that made TEDCO Construction the successful contractor on the $3.4 million Barco Law Library. Rycon Construction is starting work on converting the 65,000 sq. ft. Latitude 360 into a Main Event entertainment complex. Rycon is also the CM on a 20,000 sq. ft. renovation to Mellon Pavilion’s second floor at West Penn Hospital. That’s mainly an MEP upgrade.
Yesterday, the apartment finder and research firm ApartmentList published its findings on the movement of the Millennial generation over the past decade. Austin, Charlotte, Houston and Seattle were the top four cities for growth in population of people between the ages of 25-35 and Pittsburgh ranked 14th, which seemed to be a surprise to ApartmentList. Between 2005 and 2015, the number of residents of metro Pittsburgh in that age range grew 7.1%. During the same time, median income grew 6.8%. One stat that separated Pittsburgh from the pack was the lower rate of decline in home ownership among 25-35 year olds. The home ownership rate fell nationally by 7.4% but only by 4.5% in Pittsburgh.
The data supports the trend showing Pittsburgh’s median age declining to 33 years old and also underscores the competitive advantage of Pittsburgh’s lower cost of home ownership.
Updating some projects, commuters driving down Smallman Street should see Turner Construction starting work on the $19 million, 133-room AC Hotel near the Convention Center. Turner also appears to have been successful on the $30 million administrative buildings package at Shell’s cracker plant in Monaca, although that contract has not been confirmed.
Allegheny Health Network awarded Mascaro the $3 million Esophageal Lung Institute project at West Penn. UPMC awarded AIM Construction the $6 million Hill Building renovation. A. Martini & Co. was selected to do the $2.2 million build-out of Industrious’ co-working space in PPG Place. Pitt selected Massaro for its $3 million renovation to the Cathedral of Learning’s 14th floor.
I thought I would wait 24 hours after the announcement of the final investment decision by Shell to let the newspapers have at it before a follow up post. Yesterday’s news was certainly good for the regional economy and helpful for the recruiting and training efforts that will go into attracting labor. It also wasn’t that big a surprise.
As we reported last week, Shell has been moving more publicly in recent months, even talking openly about the Monaca project (which Shell refers to as the Pennsylvania chemical project) in its earnings call. Wesex has begun site preparation for a 200,000 square foot warehouse for C. J. Betters Enterprises that will be leased to Shell for storage. Shell has also leased land from Betters in Aliquippa that will be used for parking and overflow from the plant construction.
The players in Monaca once the plant gets started – and construction is continuing to proceed, regardless of the 18-month timeline given to the press – are Bechtel as the main EPC entity, along with Babcock & Wilcox for the plant itself and McCarl’s.
Shell’s announcement wasn’t the only big news in Pittsburgh’s energy market yesterday. Westinghouse announced it had secured agreements (although not signed contracts yet) to build six nuclear power plants in India. Westinghouse has received other contracts for plants around the globe, a signal that fears about nuclear plants are abating. After a bid employment build ten years ago, followed by a right-sizing through layoffs and attrition, Westinghouse’s new contracts should spur new hiring. Having subleased one of its buildings to PPG and vacated at least two off campus buildings, Westinghouse will find its space pretty tight if many new hires occur. That could be a nice boost to the Cranberry office market, which is beginning to show signs of life again.
Friday’s report from the Bureau of Labor Statistics wasn’t an April Fool’s joke. Employers added 215,000 jobs in March, boosting the year-over-year gain to just over three million. Estimates for January and February were also increased. The best news of the report was that nearly 400,000 people joined the civilian workforce. While that increased the unemployment rate, it’s a good sign that part-time or discouraged job seekers are re-entering the labor force.
At the local level, job creation has been flat through February. One employer that is not holding still is Uber, which is estimated to have around 400 employees in Pittsburgh. While the private car service waits for its office and research center in Lawrenceville to be completed Uber is making plans for its $20 million-plus investment in automated vehicle research at Almono in Hazelwood. Franjo Construction has been selected to do the $11 million test track, as well as renovations to the Roundhouse Building.
Even as the hotel and apartment development markets are becoming less appetizing to lenders and investors, two projects in Pittsburgh had news last week. Developers of the $14 million Hotel Indigo in the Pittsburgh Technology Center are talking with Franjo, Cavcon and Dick Building Co. about construction of the project. In Lawrenceville, Milhaus Development has been working with Rycon during planning and preconstruction of its $120 million mixed-use project at the Arsenal Terminal Warehouse site. The developer is reported to have prequalified contractors to bid the first phase of the project, which is to include approximately 200 apartment units in 4 phases. Among those being considered are BRIDGES & Co., PJ Dick, Mistick, Franjo, Rycon and two companies from outside Pittsburgh.
March 15 was the Pittsburgh Downtown Partnership’s annual meeting, which featured a speech by Gabe Klein, who was head of transportation for Chicago and Washington DC over the past five years. Klein’s a cyclist and entrepreneur who took a very private-sector approach to getting “sh*t done” (his quote) to change transit in those cities. He had a very exciting vision for what urban transportation would look like, especially after automated vehicles were the norm. His speech dovetailed nicely with the one Mayor Peduto made about Pittsburgh’s selection as a finalist for the $50 million Smart City grant.
For all the firsts in dining and entertaining and livability Pittsburgh has garnered, winning this grant in competition with cities like Austin, Denver, Portland and San Francisco would be a major win. Google the subjects and watch a couple of the YouTube videos with Peduto or Klein talking about smart transportation. It’s exciting stuff.
Along those same lines, Pittsburgh Today posted an article today by Julia Fraser, called Thinking Boldly that advocates for a braod-based coalition of ideas about the future of transit in Pittsburgh. It talks about the work of the new Regional Transportation Alliance that is attemopting to develop a strategy for combining light rail, bus, and non-motorized mobility to make Pittsburgh a model city. To accomplish anything significant in transit will require outside-the-box approaches like have been taken in Denver and Phoenix. There citizens agreed to tax increases dedicated to funding transit. Bold indeed.
In the construction market, competitive pressures continue to make winners out of owners that have projects on the streets. Last week’s winner was Chartiers Valley School District, which received bids on its new middle school. The low general was again from Ohio, Mike Coates Construction. At $24.5 million CV’s middle school was under budget. It will be interesting to see how market conditions vary when the district’s high school project bids later this year.
Faros Properties is bidding a couple million dollars worth of renovations to the former Allegheny Center property it is in the process of re-branding as Nova Place. The concourse and parts of the plaza are being re-purposed to be amenity spaces and tenant space for new restaurants that have been attracted. CMU is in the process of selecting a CM for a $5.6 million investment to convert the former Deardon Center on Fifth Avenue to mixed-use. Turner and Graziano are interviewing for the project.
Don’t give up on the energy sector as an economic driver just yet. Crushing declines in the price of oil and gas have hit the producers hard. There has been a pullback in the amount of space used by companies in the gas sector for two years or more. In early 2016, however, there are signs of life. Experts who follow the energy commodities point out that the historical trend with oil price plunges is for several big drops to occur, followed by reinvestment by the firms that kept their powder dry. Sort of like what Warren Buffet has done his whole career.
Bidding has picked up for some of the compressing/processing facilities in the midstream. In at least a couple cases, projects that were shelved in late fall have come back on the front burner. Similarly, the big energy project in the region is also reported to have been accelerated. The Shell cracker plant is definitely in the “believe it when I see it” category but the procurement suggests the final investment decision has been made, if not announced. Regardless of the timetable for announcement. This is what the site looked like from I-376 this morning:
That’s a lot of work done. For those that can zoom in, the small square structures just to the left of the plumes from Shippingport are the Nova Chemicals plant about 2 miles away.
Elsewhere in the energy sector, Black & Veatch awarded a contract to PJ Dick for site prep, earthwork, concrete, roads, etc. for the $500 million Tenaska power plant to be built near I-70 in South Huntington Twp. of Westmoreland County. Packages are being bid on another gas-fired plant, a $900 million project by Combined Power Ventures in Cambria County near the town of Vinco. The low gas prices that are hurting the Marcellus Shale play are making combined-cycle plants more viable.
In commercial project news, Rycon Construction was chosen for the renovation of 1 PNC Plaza and PJ Dick was chosen for 2 PNC. The projects were valued by the PA Builders Exchange at $13 million and $15 million respectively. The PABX also reported that MBM Contracting was chosen to do Duolingo’s buildout of 15,000 sq. ft. at 5900 Penn. Construction is just starting on Ashley Capital’s 316,000 sq. ft. warehouse in Findlay Industrial Park. Oliver Hatcher Construction is the contractor. PW Campbell is preparing to start work on a 26,535 sq. ft. new dealership for Day Apollo Subaru in Moon Township.
With permit data collected for 11 months and most of the bidding follow up done, we’re estimating that the nonresidential contracting for 2015 will be up significantly, from $2.69 billion in 2014 to $3.31 billion for 2015. The biggest chunk in that gain was in heavy industrial projects. Even with a depressed gas price and downsizing in that sector, there were still hundreds of millions spent in processing and infrastructure.
Housing construction came in surprisingly close to the activity in 2014, closer than any year going back to 1995. The total number of dwelling units (new construction only) should come in right around 5,000, with more than half of those being apartments and less than 40% being single-family detached homes.
Architectural backlogs remain high, an indication that 2016 should be on a par with 2015. No announcement about the Shell project appears to be happening soon – with rumors that the decision is being delayed another six months. That may slow some of the commercial market west of town, as may the rising vacancy numbers in the south and west suburbs. Recent federal budget action will be good for the heavy and highway sector, which should see more than $2.5 billion bid and see more even distribution of projects bidding during the year.
This morning’s headlines from the Pittsburgh Business Times included a predictably negative story quoting an official from the Ohio Oil & Gas Association who believes that only one cracker will be built in the Appalachian Basin. I’m not familiar with the level of influence of the Ohio Oil & Gas Association but this gentleman’s opinion flies in direct opposition to what everyone in the petrochemical business had told me about the logistics and dynamics of building ethane cracking capacity. The input I’ve had is that nobody wants to build the only cracker and it makes little economic sense to do so. Not sure what this guy’s motive is but I bet if you dig deep enough there’s an Ohio-centered reason for his nay-saying the crackers.
What does appear to be true (and negative enough for our business press) is that the long-awaited decision from Shell will be awaited at least another 90 days. After laying off 6,500 people globally and being in the middle of some potentially big strategic moves, Shell may not be ready to publicly announce a $5 billion or $6 billion project.
The cracker isn’t the only economic story in Pittsburgh. The inertia behind the development pushing east out of Downtown is growing and it is time to push for a more ambitious vision for what 2030 will look like.
There is a regional public transportation initiative underway and that seems like a good place to raise the bar. Yes, there are political realities about mass transit that can’t be ignored but caving in to an assumption that one city can’t receive or raise billions of dollars before asking is defeatist. Every once in a while a great idea defeats the political nonsense that exists (remember the highway bill in 2013?) and Pittsburgh’s mass transit strategy should aim for that.
If it takes $2 billion to link Downtown to Oakland and/or Hazelwood (or both), then ask for $2 billion and push to get it built in five years. Throw the region’s political and corporate weight behind a project that links The Strip and Oakland using an existing AVRR line and right-of-way. Imagine the impact on development in The Strip if the 3 Crossings transit hub could link residents to Almono.
Check out this photo/rendering that Desmone Architects is using to show how the condos planned by Francois Bitz will sit in The Strip neighborhood. Imagine the infill potential between the 31st Street Bridge and 16th Street Bridge. In the image, Oxford has already filled in much of the two blocks east of the Cork Factory Lofts with 3 Crossings. Beyond that, Buncher’s massive riverfront site will begin (slowly) filling in with apartments and a riverside boulevard that could connect thousands of units of additional residential.
It took about 30 years to reverse the damage done to greater Pittsburgh by the steel industry’s collapse but much of the progress has occurred since 2008, when civic leaders challenged Pittsburghers to “Imagine Pittsburgh” differently. Imagine the difference it might make to aim even higher, expecting a vision of a Strip District skyline or bustling Hazelwood or Hill District to come to fruition before 2030.
Friday’s jobs report excited the markets again, as November’s expansion of 211,000 new jobs surprised analysts for a second straight month. In addition to the higher-than-expected November number, the Bureau of Labor Statistics revised both October and September – which was weaker – upwards by 35,000 jobs. Within the report, big gains in construction and retail offset declines in mining/logging (which is the category covering oil/gas drilling).
A report from the Census Bureau on December 2 gave updated estimates of the number of people aged 25-35 who live in Allegheny County. Census used five years of estimates to show the change in population for that age range. The results are surprising and upbeat for the region’s apartment owners, since about 70% of that demographic group are renters.
While the Census report shows the percentage of those under the age of 35 as roughly unchanged in the U.S. since 2010 (6.8 percent are 25-29; 6.6 percent are 30-34), the data shows that the share of Pittsburgh’s population in those age ranges has jumped over the past five years. Those living in Pittsburgh who are 25-29 now make up 10.9 percent of the population, while 7.9 percent of the people living in Pittsburgh are 30-34. The same research showed an increase of .06 percent for that age group living in Allegheny County. In real numbers, that means roughly 9,000 more people of prime renting age live in metro Pittsburgh today than in 2010.
In project news, G. M. McCrossin was the low general/mechanical bidder on West View Water’s $61 million Baden treatment plant. Temple University released its $190 million library for bid. UPMC is looking at options for a new data center, including existing secure facilities and design/build proposals for new centers from teams that include Holder Construction, Whiting-Turner and PJ Dick as construction managers.
Last Friday, Carnegie Mellon selected PJ Dick as construction manager for what is called the Forbes Morewood project. Depending on the final scope and schedule the project will be somewhere between $20 million and $30 million but its impact will be much bigger. A lot of the work will be focused on changing and updating the university’s “headquarters” – Warner Hall – but the latter phases of the project will form the physical linkage between CMU’s iconic “Cut” to the new north campus under development.
The importance of the north campus development is that it is going to be the home of what CMU’s visionaries, especially Pres. Subra Suresh, see as the future home of its corporate partners. Under Jared Cohon’s leadership, CMU upped its game in technology transfer, which is the commercialization of its research in new technologies across many industries. More recently, Google’s explosive growth has shown a spotlight on the talent at CMU and highlighted the value that a company can derive from working closely with the university. Dr. Suresh’s vision for what is being dubbed the “Tepper campus” – because the new home of the Tepper School of Business will anchor the development – involves corporate partners locating on the university grounds. This same concept has become bricks and mortar at MIT, Stanford and other schools, and clearly CMU intends to be among that group.
Imagine turning left onto Forbes from Craig at the end of this decade, driving past a hotel filled with corporate visitors and a new incubator-style office between the Hollow and Scaife Gallery, and on up a Forbes Avenue that has a town center spanning the street and connecting to a new campus that has the Amazon Building or the GE Building or the Uber Building or all three. By that time, the Gates/Hillman and Scott Halls will have filled in the east side of Panther Hollow and connected all of the science buildings together. The flow of research and information from the minds learning chemistry, nanotechnology, information technology, physics, etc. will cross Forbes to reach those entities that can apply that enormous knowledge to the real world.
If the vision is fulfilled, there will be a lot of money made by that flow of information. Southeastern Oakland is not going to become the new Silicon Valley but it doesn’t have to to have a transformative effect on Pittsburgh’s overall economy. So if you have to go from Oakland to Squirrel Hill over the next few years, maybe don’t detour around all the mess on Forbes Avenue. Take the time to witness something that will make your life a bit easier in the long run.