Positive signs emerging for construction industry

By Louise Brass
Contributing Writer

Future success for the construction industry will require keeping an eye on new regulations, tapping green initiatives and targeting small projects, while labor groups compete in the tough bidding environment for a limited number of new building jobs.

Even though speculative projects remain rare, many positive signs can be found, said Phil Van Duyne, a partner at Itasca Construction Association Inc. The Midwest posted a 2 percent increase in building permit activity in November.

“There are some opportunities out there. Being ready to respond when your clients call you is important,” Van Duyne said.

The Front Street Lofts of Lemont—which features 82 residential loft units and 24,000 square-feet of retail space, as well as a 262-space parking deck—has had difficulties filling available space since its completion earlier this year. (Photo by Dietrich Wolfframm)

“We are seeing some small projects in retail improvements, and some medical office improvements, and the food industry is still doing some things. We are seeing some industrial type improvement projects also,” he said.

The key to success is hunting for the right client and finding available capital, Van Duyne added. Municipalities can be good clients as they seek to increase their tax base by attracting businesses that require new buildings, some of them green. However, Leadership in Energy and Environmental Design (LEED) projects are still the exception, he said.

Finding efficiencies to cut costs are important trends for builders today, because clients are expected to put more up-front equity into their projects. Forty percent of a project’s cost is required up front by some lenders, said Van Duyne.

A major construction project with 82 residential loft units and 24,000 square-feet of retail space was completed this year in Lemont, after being stalled midway through when the original contractor dropped out, said Jeff Prosapio, project manager of Front Street Lofts of Lemont.

The structure, developed by Marquette Companies Inc., includes a 262-space parking deck in a Tax Increment Financing District near a commuter rail station. Still, filling the vacant lofts has been “a little sluggish,” Prosapio said.

“We finished very strong with Bovis Lend Lease Inc., as the general contractor. The whole thing is encouraging. We would have sold out but for the economic situation right now,” he said.

Some homebuilders have switched to remodeling exclusively to ride out the current economic tide, said Mike Carroll, a partner at Distinctive Homes Inc. The firm typically constructs about 100 homes annually, but built only 15 in 2009.

“We’re doing remodeling now, which is something we didn’t do before. I believe things have to turn around,” Carroll said. His firm is using more carpenters and electricians than ever before. However, supplies can be hard to get these days, taking weeks to get such items as door locks, he said.

According to a spokesman for Horcher Brothers Construction, however, material supplies are plentiful, awaiting more jobs.

“I think lending is the key for us right now. I think the intent of the TARP money was to get down to the end users, home buyers and small businesses—that is not where it’s gone,” Carroll said. However, his firm saw the downturn coming and prepared for it by diversifying activities and working with banks early. “We were ahead of the curve,” he said.

Tighter regulations will play a bigger role in the construction industry in coming years. The U.S. Environmental Protection Agency has finalized its Construction and Development Effluent Limitations Guidelines, which seeks to impose nationwide monitoring requirements on sediment runoff from construction sites.

The move is expected to impact projects affecting 10 or more acres, according to a report by the Association of General Contractors in America, and will take four years to implement, beginning next February.

Commercial construction will rule in 2010, although increased housing starts are expected. Nationwide housing production fell 10.6 percent in October, with single-family home starts dropping by 6.8 percent.

“Now that Congress has wisely moved to extend the tax credits into next year and expand its eligibility to more buyers, we hope and expect that this will have a substantial effect on home sales and help keep the housing market solidly on the road to recovery,” said Joe Robson, chairman of the National Association of Home Builders, in a news release.

Currently, aggressive bidding is underway for projects by area labor groups, including roofers, landscape workers and carpenters. Competition for projects is stiff, which is a good sign jobs are available and construction is on the rise.

Now is the time to move on pending projects, while supply costs are low, said architect John Olivieri, of Olivieri Brothers in Frankfort.

“The labor market is really good right now. If you are going to do it you are going to get some really good pricing. Financing is the biggest challenge that we have,” he said, although accessing Small Business Administration loans has worked for many of his clients.

“Commercial construction is going to pick up. Businesses needing additions are redoing their offices to accommodate different people and floor plan layouts. There’s a lot of work that is going to be coming in next spring and summer,” said Olivieri, who has a couple of LEED projects underway.

Ensuring that appropriate supplies are in hand is vital, Olivieri said, and he has found no time lag for acquiring materials. He believes the recent recall of China-made drywall has not been an issue in the region.

The U.S. Consumer Product Safety Commission (USCPSC) announced Nov. 23 that a major indoor air study on corrosion of metals in homes containing the drywall revealed levels of hydrogen sulfide gas. The Interagency Drywall Task Force is developing protocols to deal with the problem, said Inez Tenenbaum, USCPSC chair.

Regionally, the availability of the construction industry workforce is plentiful and trained people are ready to employ their skills. The United Brotherhood of Carpenters (UBC) spokesman Douglas McCarron recently said that the UBC, which spends $175 million annually to train its members, is dedicated to working without a heavy bureaucracy, keeping the well-being of its workforce in mind.

“In the field, construction projects are manned and completed in a timely fashion with all of the trades working together,” McCarron said.

Posted on Thursday, December 17, 2009 (Archive on Thursday, December 24, 2009)
Posted by jstoltz Contributed by jstoltz

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