Commercial Real Estate: Work flowing back as money returns, pandemic eases

-A A +A

Commercial Real Estate: Work flowing back as money returns, pandemic eases

Sun, 04/25/2021 - 2:51pm -- tim

This story was updated to correct information related to UVM developments.

The University of Vermont Firestone Medical Research Building is under construction. PC Construction is the general contractor. Designed by Black River Design, Architects in collaboration with Payette. Courtesy Photo.

by Bruce Edwards, Vermont Business Magazine How tough was last year for some of the state’s commercial contractors? For PC Construction, one of the largest, it was a year when the company took a significant hit – the direct result of the now year-old pandemic.

“Our revenue was off 30 percent, which approximated about $130 million,” said Jay Fayette, PC Construction president and CEO. “So we took it on the chin with work either being delayed, postponed or pushed into 2021.”

The good news, Fayette said, is that “most of that work has come back.”

After a year of COVID, the state’s construction industry is looking to rebound, catching up on projects that were delayed or put on hold.

“The future in the construction industry right now is looking very good,” said Richard Wobby, executive vice president Associated General Contractors of Vermont.

Last year, he said COVID did have an impact but was limited to some big projects that were either canceled or delayed. 

Wobby said this year some of those projects are now back on the table. Add to that new projects and stimulus funding and the result is shaping up as a very busy construction season, he said.  

And it’s not just private sector work either.

Wobby said bridge and highway contractors will benefit from a “flurry of jobs.” 

“The AOT budget probably includes one of the most robust infrastructure building pieces that we have seen in quite some time,” he said.

Wobby said Buildings and General Services are also putting out bids for projects including state police barracks and a new mental health facility.

 

PC

Fayette said PC, which operates up and down the East Coast, is going into this year with what may be the biggest backlog in the company’s history, nearly $1 billion, much of that in the Northeast.

One of the largest projects is the $73 million University of Vermont multipurpose center project.

Construction on the project was halted in March 2020 in accordance with Governor Scott’s “Stay Home, Stay Safe” executive order and the construction pause was extended due to financial uncertainty posed by the pandemic.

In February., UVM’s Board of Trustees voted to resume work on the project, but with re-ordered sequencing. The next phase of construction will focus on enhancement of health and wellness facilities to benefit the entire student body, as well as continued improvements to Gutterson Fieldhouse.  

When work on this new phase nears completion, the board will again evaluate timing for the bond issuance necessary to complete the Tarrant Center, which is the last phase of the multipurpose center project originally approved in October 2018. 

PC is also currently building the $32 million Firestone Laboratory, part of the UVM College of Medicine.

In the resort town of Stowe, the company is building 17 high-end condos at One Spruce Peak valued at $45 million.  

Photo: One Spruce Peak is under construction at Stowe Mountain Resort. PC Construction is the general contractor. Courtesy Photo.

Other PC projects include:

  • Bennington – Southwestern Vermont Medical Center, $22 million expansion to start late summer.
  • Essex – Vermont Physically Secure Recovery Residence, an $11 million project, replacing the state’s Woodside Juvenile Rehabilitation facility.
  • Middlebury – Purpose Energy, $11 million anaerobic digester that will take waste byproduct from Otter Creek Brewing, Vermont Hard Cider and Agri-Mark and turn it into electricity.
  • South Burlington – O’Brien Brothers, $45 million Hillside Lofts apartment development complex near Kennedy Drive and Kimball Avenue. Scheduled to break ground next summer.

In general, Fayette said there are also a number of Burlington projects in the planning stages including further possible development of the Catholic Diocese of Burlington property.

He said Beta Technologies is looking to build a manufacturing facility at the airport. The company develops electric-powered aircraft. 

“So I want to say things are looking up, especially when you combine it with this COVID relief bill that was signed by the Biden administration,” Fayette said. “That’s going to dump a lot of money into infrastructure … into the municipalities.” 

Fayette said pent up demand is already driving up commodity prices for everything from lumber and steel to copper and plastics.

One segment of the economy hit the hardest by the pandemic is hospitality. Fayette said it’s also the sector that will take the longest to rebound.

“We had three hotel projects, about $80 million in hotel work that was supposed to start last summer that was halted and those may not come back because of financing, because of COVID,” he said.

At the same time, Fayette remains optimistic that hospitality will eventually come back spurred by the rapid deployment of vaccines and the infusion of money from Washington.

Throughout the East Coast from Maine to Florida, PC has an abundance of work. “We’re busy across the board,” he said. “Our active work list is in excess of $1.6 billion and our backlog is approaching a billion,” Fayette said. 

PC has 340 employees with 175 in Vermont.    

 

DEW

For Don Wells of DEW Construction, it was much the same story. Cancellations and delays last year mean there’s a back log of business this year, said Wells, DEW president and CEO.

“Our volume will probably increase by 50 percent over last year but last year was down from previous years,” Wells said. “So it’s looking like a good year.” 

Last year, the state ordered all non-essential businesses including construction to shut down in March. When the order was lifted in May contractors got a late start on the season.

Wells said one $8 million project that was “stalled” last year is now moving forward. Two other projects remain on hold including the new Burlington airport hotel.

He said hotel construction has come to a standstill because of the pandemic. 

DEW has offices in Williston and in Keene and Manchester, N.H.

Wells said 50 percent of the company’s business is generated from the New Hampshire offices. Because of the proximity to the Boston area, he said there’s a lot of potential opportunities in the New Hampshire market. 

Wells ticked off a list of some of the company’s major projects in Vermont:

  • Army Mountain Warfare School, Jericho, $24 million.
  • Southern State Correctional facility, Springfield, $2.5 million,
  • Private hockey and athletic facility, Woodstock, $5 million.
  • Burr and Burton Academy, Manchester, $15 million.
  • Essex assisted living facility, Essex Junction, $13 million.
  • Moran Plant (Phase II), Burlington, $2.5 million.
  • Convenience store, Woodstock, $3 million.
  • Bellows Falls Garage housing project, $6.5 million.

“Vermont is holding its own,” Wells said. “It’s always been a strong market for us and will continue to be.”

Photo: DEW Construction is the general contractor on the Moran Frame project in Burlington. Courtesy Photo.

The company also has a number of out-of-state projects.

In Lee, Massachusetts,  the company is scheduled to begin work on a two-phase, $45 million project renovating an old mill into housing. 

“Housing is very, very strong in all the markets that we’re in,” Wells said. “We’ve got three or four sizable housing projects that look like they’re going to start in New Hampshire.”

In New York, the company will build an $8 million, privately financed boutique hotel in Tupper Lake.

 

Bread Loaf

Photo: Bread Loaf Corp. recently completed construction on the Putnam Block in downtown Bennington. Courtesy Photo.

“While some areas of the economy have been slow, other areas are starting to pick up,” said Bread Loaf Corp. President Michael McLaughlin. “The pandemic put new work on hold last year at this time, we are seeing much more activity compared to that time.”

  • The Middlebury company’s list of recent projects include:  
  • Putnam Block, Bennington, completed in February.
  • United Counseling Services, Bennington, spring completion.
  • New Avenue Housing project, St. Johnsbury, fall completion.
  • Wilder School renovation, completed in January.
  • Helen Porter Rehab and Nursing Center, upgrades, Middlebury.
  • Eye Care of Vermont, renovations, Burlington.
  • Town of Hartford pool, spring construction.
  • Town of Wilmington public safety facility, spring construction.

 

Burlington

There is no shortage of construction activity in the state’s largest city.

Near the end of the fiscal third quarter in March, the city had received 157 zoning applications for projects compared to 192 for the entire third quarter the previous year, according to Scott Gustin, Burlington’s principal planner and assistant administrative officer.

Gustin said almost all those applications relate to private construction.

The most significant project includes the long delayed CityPlace development. The Don Sinex project, which was redesigned, received zoning permit approval for 426 residential units and 45,000 square feet of retail space.

Fayette said PC remains the contractor for the delayed and now redesigned and scaled down project.

The project still must secure financing and there is an issue a group of opponents has with parking.

So for now, Fayette said PC is waiting to see what happens next. 

“We’re still very supportive of the project and we want to see that project happen for not only the City of Burlington but for the community and the state,” he said. “It’s a big, big deal.”

There are other projects in various stages of development. 

A 64-unit senior housing development planned for 362 Riverside Avenue. Gustin said that project is in the permit review process.

Gustin also said the city is expecting an application to build 200 additional residential units at Cambrian Rise. The project is already approved for 700 units but Gustin said the developer is expected to seek zoning approval for the additional units bringing the total buildout to 900.

“There are a few other potential residential developments that are being contemplated but not yet applied,” Gustin said.

 

South Burlington

Developers Snyder-Braverman are in the process of building additional housing in the new City Center.

Dover Place, a 43 unit apartment building, received its site plan approval last fall and its zoning permit in March. 

On the drawing board is Prospect Place, a 131-unit development and cafe to be built in two phases. 

City Planner Paul Connor said Prospect Place received site plan approval last summer but the developers have not yet submitted a zoning permit application.

According to Ilona Blanchard, the city’s community development director, there are several projects under construction:

FedEx distribution facility on Community Drive.

Continued construction of several neighborhoods – Golf Course, South Village, Rye neighborhood and O'Brien Brothers Hillside Phase I.

Booska Movers, Meadowland Business Park.

Projects approved: 

  • Hotel at Burlington International Airport.
  • Hotel and renovation of existing hotel at the Holiday Inn site, Williston Road/Dorset Street.
  • Edgewood Neighborhood (Cider Mill II) between Hinesburg Road and Dorset Street.
  • Phase II of Quarry Hill Club, residential housing.  
  • Replacement of Kaigle's Citgo on Shelburne Road with a three-story office/retail/service building

Under review:

  • O’Brien Brothers, Hillside Phase II – six, multi-family/mixed-use buildings along Kennedy Drive.
  • O’Brien Brothers, Eastview Phase I, proposed neighborhood, Old Farm Road.
  • Golf Course neighborhoods.
  • South Village neighborhoods.
  • 600 Spear Street residential neighborhood.

Photo: City Center foundation construction in South Burlington, VT. VBM Photo.

 

Act 250

The state’s land use law can provide an indication of future construction activity. The Natural Resources Board has nine environmental commissions around the state that handle Act 250 applications, many are minor applications while some are considered major.

A sampling of projects that have either been issued an Act 250 permit or are awaiting approval include:

Manchester, a 46-bed, four season Eco-Retreat with a price tag of $5.1 million.

The town of Brattleboro is replacing its water treatment facility at a cost of $9.2 million. 

Okemo LLC in Ludlow is undertaking a $12 million project to renovate buildings, walkways and parking lots in the Clocktower base area. The Vermont Department of Forests, Parks and Recreation is a co-applicant.

Grumpy Knuckles submitted an application for a $3.4 million, 49,500-square-foot building in Milton that can accommodate up to 80 employees.

382 Bridge Street LLC has plans to build 54 single-family homes in nine buildings in Morristown at a cost of $6.2 million.

The Housing Trust of Rutland County and Immaculate Heart of Mary Parish Charitable Trust is undertaking $4.1 million in renovations and upgrades to the vacant school on Lincoln Avenue.

The former John Deere dealership on Route 4 in Rutland Town is being converted into nine affordable housing units at a cost of $2 million.

The town of St Johnsbury is building a 4,540-square-foot building in Waterford with access on Route 18 at a cost of $5.5 million. 

Agency of Transportation will undertake a $30 million project in Colchester to improve the interchange at Exit 17 on I-89.

 

Help wanted

John Russell, president of Russell Corporation, said the biggest challenge his company faces isn’t a lack of work but workers.

“I don’t see that getting any better,” he said of the workforce issues facing the industry and the state. “It’s actually very concerning to me.”

Russell said all the subcontractors are busy as well. 

Adjusting to the shortage of workers, especially trades people, means the Rutland company has to exercise a degree of caution.

“We’re very careful in the work we take on,” he said. “We’re constantly keeping tabs on our subcontractors to make sure their workload is well balanced.”

Russell said he has a “nice backlog of work,” including projects at Bennington College and in Vergennes for the Vermont National Guard.

Like Russell, Wobby of AGC said the biggest challenge the industry is facing over the next two years is the ongoing shortage of workers and the trades in particular – carpenters, electricians, plumbers.  

As many in the trades retire, younger workers have not filled the void.  

“I don’t think we’ve done a fabulous job of promoting construction as a career and we are suffering for it today,” Wobby said

He said AGC is attempting to address the problem with rapid modified training. AGC Vermont is also partnering with groups like Vermont Works for Women. 

 

Forecast

In its annual forecast, a survey by Associated General Contractors of America found that most contractors expect construction to shrink this year even as the pandemic has already resulted in delays or cancellations of projects. 

“This is clearly going to be a difficult year for the construction industry,” Stephen Sandherr, AGC America chief executive officer, said in a statement. “Demand looks likely to continue shrinking, projects are getting delayed or canceled, productivity is declining, and few firms plan to expand their headcount.”

The survey results are detailed in “The Pandemic’s Growing Impacts on the Construction Industry: The 2021 Construction Hiring and Business Outlook Report.”

The survey found that contractors were particularly pessimistic about retail construction. There are also concerns about lodging and private office construction.

Other construction categories of concern are higher education construction, and K-12 school construction. Three market segments where there is optimism are warehouse construction, construction of clinics, testing facilities and medical labs.

When it comes to hiring, only 35 percent of companies said they would add staff this year, 24 percent intend to decrease their headcount while 41 percent expect no changes in employment. 

Although hiring is expected to decline, most contractors said it remains difficult to find workers. 

While AGC of America is forecasting a nationwide drop of construction projects, Wobby said the national profile “really doesn’t fit what Vermont is doing.” 

He said Vermont never went through the steep economic downturn that other parts of the country experienced. On the flip side, Wobby also said the state never has the big economic boons either.

“We kind of stay in that stable area,” he said.

 

Work Zone Safety Is In Your Hands

The Department of Motor Vehicles is also urging drivers to use caution in work zones, now that the highway construction season is opening back up.

Work zones require everyone to stay alert and be prepared for sudden changes that distracted drivers may not notice in time to prevent a crash. It is up to each of us to be vigilant when driving through or near highway work zones.

But workers are not the only ones in danger. In fact, four out of every five work zone fatalities are drivers or their passengers. To stay safe, remain focused on the road and make sure you obey the speed limit.

On average, three fatalities each workday happen in highway construction areas nationwide. This is something we can prevent, so please join us in raising awareness and driving safely.

Work zone safety doesn't just occur during daylight hours – rules apply 24/7. To help keep work zones safe, please slow down, maintain a safe following distance, stay alert, and expect the unexpected. 

This story was updated to correct information related to UVM developments.

Bruce Edwards is a freelance writer from Southern Vermont.