Sobering Up

A year after construction values hit record levels, the industry is coming back down to reality as the slumping residential market contributes to deeper than expected declines.

Decline in Construction Starts to Continue in 2008

These are sobering days for the construction industry. A year ago, many industry observers forecast that construction starts after years of record highs were headed for a slight cool-down in 2007. After peaking at $682.5 billion in 2006, the slumping residential market was expected to drag total construction starts down. Current data suggest that the 2007 market correction was even deeper than predicted with overall declines expected to continue through 2008.

McGraw-Hill Construction, which publishes Mid-Atlantic Construction, estimates that the industry experienced an 8% decline in construction starts in 2007, and another 2% drop is forecast for 2008. Total construction start values are expected to hit $626.7 billion for 2007 and $614.1 billion in 2008.

Last year, MHC predicted that starts in 2007 would drop 1% as the single-family home market weakened and other sectors, such as institutional work, remained strong.

Robert A. Murray, vice president of economic affairs at McGraw-Hill Construction, says turmoil in the sub-prime mortgage market that emerged in August created a major concern for the construction industry and the overall economy. Murray noted that tightening lending conditions will impact development in both residential and commercial real estate.

“As a result, we’re now predicting downturns in the previously resilient multifamily and commercial segments, as well as continued weakness in single-family home construction,” he said.

Single-family home construction remains the main drag on overall construction starts with a 25% plunge estimated in 2007. Declines will continue, but could ease considerably in 2008 with dollar volume expected to decline an additional 3%, according to MHC.

Multifamily housing is also expected to slide 8% in 2008 to $56.4 billion after a nearly 12% drop in 2007.

Faced with tightening lending standards, commercial buildings will take a hit as well, dropping 6% in 2008.

After experiencing a 40% surge of growth in 2007, thanks in part to considerable development of ethanol plants, the manufacturing sector will retreat by 11% in dollar volume to $16.5 billion.

Some trends are more positive for 2007, particular in the public sectors as many state and local governments remain fiscally strong, Murray says. Public works will realize a 3% gain to $120.95 billion in 2008. Highways and bridges are predicted to be a major contributor to growth, as renewed interest has been expressed in Congress for infrastructure improvements following the I-35W bridge collapse in Minneapolis in August. Murray says the sector would see a 5% increase in construction starts to $56.9 billion.

Values of institutional building will also rise 4% to $118.7 billion in 2008, while square footage of those projects will remain essentially flat, experiencing a modest 1% increase. School construction will be a strong contributor to growth in the sector, rising 7% to $56.3 billion next year, while healthcare starts will flatten with a 1% drop predicted.

Maryland Seeks WRDA Gains

Passage of the Water Resources Development Act by Congress in November could kick start several projects in Maryland if appropriations materialize. Nearly $300 million in project-specific funding is earmarked for state projects. The bill includes $192 million for the expansion of Poplar Island, an island restoration project in the Chesapeake Bay.

Poplar Island spanned more than 1,000 acres in 1847, but had nearly eroded away 150 years later. The U.S. Army Corps of Engineers and the Maryland Port Administration have led efforts since 1997 to restore the island using dredged material from the Port of Baltimore. The first two phases, which were built by Kiewit Construction and Skanska, created 570 acres of wetlands and 570 acres of uplands.

WRDA funding would clear the way for a third phase of restoration, creating 575 acres of wetlands and uplands as well as embayment work that would create habitat for larger fish.

Mark Mendelsohn, U.S. Army Corps of Engineers biologist on the Poplar Island project, says the project would go out as a new bid, and nearly two years of study are expected before construction could begin. The project is scheduled for completion by 2015.

Other state projects that would be funded under WRDA include $30 million to reduce nitrogen flowing from Blue Plains Wastewater Treatment Plant; $40 million for other pollution reduction projects in the Chesapeake Bay watershed; $10 million for restoration of Smith Island; $30 million for oyster restoration; and $20 million for the Chesapeake Bay Environmental and Protection Programs.

Turner Teams on $1.2 Billion in BRAC Work

ARLINGTON, VA – Turner Construction of Arlington, Va., is gobbling up large servings of local projects offered under the federal Base Realignment and Closure program.

A joint venture of Turner Construction of Arlington, Va., and Gilbane Building Company of Laurel, Md., broke ground on a new $747 million hospital at Fort Belvoir, Va., Nov. 8.

A joint venture of Turner Construction of Arlington, Va., and Gilbane Building Company of Laurel, Md., broke ground on a new $747 million hospital at Fort Belvoir, Va., Nov. 8.

The project, which is managed by the Norfolk District of the U.S. Army Corps of Engineers, was designed by a joint venture of HDR Architecture of Alexandria, Va., and Dewberry of Fairfax, Va. The new hospital, which is being constructed through an Integrated-Design-Bid-Build procurement method, is expected to be completed in late summer 2010.

The 1.2-million-sq-ft, six-level community hospital will include 120 in-patient beds, a 10-bed intensive care unit, a 10-bed behavioral health inpatient unit, a cancer center, an emergency department, a pharmacy, 10 operating rooms, diagnostic centers such as pathology and radiology, and modular clinic space dedicated to outpatient services. Additional space is planned for future outpatient expansion. The project includes two parking garages and surface parking for 2,600 parking spaces, a helipad, ambulance shelter and dedicated central energy plant.

Turner and its subsidiary Tompkins Builders, in a joint venture with Grunley Construction of Washington and Kinsley Construction of York, Pa., was awarded a $477.5 million design-build project at Aberdeen Proving Ground in Maryland in October. 

The project will create a 1-million-sq-ft, nine-building campus for a Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance Installation.

Skidmore Owings & Merrill of Washington is the designer. Work is scheduled to begin in early 2008 with completion in September 2010.

Developers Continue to Find Room for Hotel Projects

The hot hotel market continues to see a steady stream of new projects getting underway with much of the recent work coming from Marriott.

The Donohoe Companies of Washington broke ground this fall on two hotel projects, totaling $119 million in costs. The Hilton Garden Inn Bethesda, a 216-room 13-story hotel, is being constructed as part of the Air Rights Center in downtown Bethesda, Md. The $57 million hotel is scheduled to open in 2009.

The Residence Inn by Marriott Arlington Courthouse, a 176-suite extended-stay hotel, is being erected above the Courthouse Metro Station in Arlington County, Va. The $62 million hotel with street level retail is scheduled to open in 2009.

The two hotels are being developed, built and managed by Donohoe.

Marriott broke ground on a 154-room Fairfield Inn & Suites at Historic Brewers’ Park in Baltimore, Nov. 12. The $23 million project aims to be the first LEED-certified hotel in the city. The design incorporates many existing materials on the site, including the use of beer storage tanks for stormwater collection. The project is scheduled for completion in spring 2009.

Marriott is also undertaking major renovation work in Baltimore, including an $18 million project at Baltimore Marriott Waterfront, a $12 million renovation at the Baltimore Marriott Inner Harbor and $15 million in renovations at the Renaissance Harborplace Hotel.

The new work comes even as other major projects are underway in Baltimore, including the 750-room Hilton Baltimore Convention Center Hotel. Despite the optimism, other projects remain stalled. Work still hasn’t started on the proposed Four Seasons at Harbor East project, which was originally set to break ground in 2005.

Clark Starts Major Montgomery County Office Project

Clark Construction of Bethesda, Md., broke ground on the 350,000-sq-ft Redland Corporate Center in Rockville, Md., Nov. 14. It is the largest speculative office development in the history of Montgomery County.

ROCKVILLE, MD – Clark Construction of Bethesda, Md., broke ground on the largest speculative office development in the history of Montgomery County, Nov 14. The 350,000-sq-ft Redland Corporate Center in Rockville, Md., will include two Class A office buildings, designed to meet LEED certification standards. The project, which is being developed by a joint venture of Perseus Realty and Prudential Real Estate Investors, will be completed in mid-2009.

The first building will have 210,240 sq ft of space on nine floors. The second will have 136,430 sq ft on six floors. Concurrent with the two buildings, Perseus Realty is developing a six-story structured parking garage. Both buildings will meet the new General Services Administration setback and security requirements for federal tenants. An existing 139,000 sq ft building is located on the site and is fully occupied by the U.S. Department of Health and Human Services.

The complex is part of a 28-acre campus near the intersection of Interstate 270 and Shady Grove Road. The site will eventually be built out with a mix of office, residential, and retail uses, while preserving 13 acres of forested land.

Hensel Phelps Lands $60 Million Navy Project

SUITLAND, MD – Hensel Phelps Construction of Chantilly was recently awarded a $60.6 million design-build contract for the 182,649-sq-ft expansion of the National Maritime Intelligence Center in Suitland, Md.

The new building expansion will accommodate additional personnel in an efficient, state-of-the-art, secured environment providing command support to support missions related to the Office of Naval Intelligence and its sub-tenants. Unique areas of the facility will include SCIF space, RFI/EMI shielded spaces, a conference center, and an automated data processing center.

The Washington office of Fentress Architects is the architect of record. Completion is scheduled for July 2010.

Forrester Upgrades Anne Arundel College Facilities

ARNOLD, MD – Forrester Construction of Rockville, Md., has been awarded the $13 million Anne Arundel Community College, Careers Building Renovation in Arnold, Md. The project will involve a gut, renovation, and small addition to the largest classroom building on Anne Arundel’s campus. The three-story 135,000-sq-ft facility, built in 1973, will gain upgrades to its heating, air conditioning, plumbing, electrical, safety, and security systems.

Grimm + Parker of Calverton, Md., is the designer. The fast-track project is scheduled to begin in January 2008 and take approximately 12 months.

CSD Designs Home for Future Designers

BALTIMORE, MD – CSD of Baltimore has been selected to design the new $54 million school of architecture at Morgan State University in Baltimore. The 120,000-sq-ft building is being designed to achieve LEED silver certification.

The new facility will house several of the school’s design-related departments, including the Institute of Architecture and Planning and the Department of Civil Engineering.

Oak Contracting Moves Ahead on $57 million Bel Air High School Job

The steel frame is currently being installed for the new 258,134-sq-ft Bel Air High School in Bel Air, Md. Oak Contracting of Towson, Md., is building the new $57 million facility.

BEL AIR, MD — Oak Contracting of Towson, Md., and Harford County, Md., representatives officially broke ground on the new $57 million Bel Air High School in Bel Air, Md., Oct 8. Crews started relocation of utilities during the previous spring and continued throughout the summer with building pad preparation. Footers, slabs, and the steel frame are currently being installed for the new 258,134-sq-ft facility.

The new school is being constructed directly behind the existing school and is scheduled to open in August 2009. At that time, the existing school will be demolished. The new school will feature two 3-story academic towers, state-of-the-art science labs, gymnasium, auditorium, and media center.