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Construction update: where's the work?

The softened economy sent metropolitan area construction companies searching for work over the last year. While large private-sector commercial and residential development has virtually dried up, government agencies throughout have become major sources of assignments that include construction and renovation of schools and airports. Additionally, construction companies are accepting smaller renovations contracts and are scrambling for the few built-to-suit opportunities available.

Even so, the Building Congress does not believe there is enough work to go around and is fearful that work is going to underqualified firms.

When asked, |Where's the work?,' Louis J. Coletti, president and CEO of the Building Congress, replied "nowhere."

Coletti said the primary markets are in other areas of the country so only those firms that have established a presence in markets around the world are doing fairly well.

While there is some bridge and tunnel work, Coletti, said, "new construction in New York doesn't exist." And, while the city has been responsive, Coletti said, "the jury is still out."

Last week, Mayor David Dinkins said publicly that he made a mistake by reducing the capital projects budget in the city. He said he will try to find a wa to increase infrastructure projects that does not deepen the city's debt.

Although the various governmental entities are attempting to put out aw much work as possible, Coletti said, the competition is cut-throat, with prices coming in at 30 percent under estimates. "I have serious problems about some of the firms winning contracts," he added, "which depend on their knowledge of the city market and their reputation."

Contractors are coming in from out of the area, Coletti said, and while price is one of the factors that should be considered, he said, "the public interest is not served by awarding to the low bidder who has no track record. "It's difficult," he noted, "because you want companies to grow but you don't want them to take on more than they can handle because no one is served. The public will not get what they expect and the contractor will fail."

Coletti said it is up to the public agencies to decide what kind of program they are going to have. When he moderated a conference about the Federal General Services Administration (GSA), Coletti said one thing that struck him was their concern for quality. "The GSA representative said |We're willing to pay a little extra because it's still a better price than we got two years ago, but we want strong firms that have enough capital to come up with a quality product'."

While the law says |the lowest responsible bidder,' Coletti acknowledged that in this environment it is difficult for a public official to say, |I am rejecting this because it is the low bid.' He believes, therefore, that what is needed today is strong and courageous decision making in government.

Keeping Busy In New Ways

REW spoke to metro area construction and construction management firms about some of their current projects, many of which represent new directions for these companied.

Douglas M. Bennett, director of Corporate Planning and Communications for the Turner Corporation, said the focus of the Turner Construction Company is on the non-residential sector which includes hotels. He said that market is down almost 30 percent from the peak of 1987 to 1989, but Turner has maintained a $3 billion level of contracts, which is down less than 20 percent from their peak at $3.5 billion.

The lack of building projects is most severe in the Northeast, Bennett said, particularly in New York, New Jersey and New England, where he said he has not seen any noticeable pickup.

Throughout the rest of the country, commercial construction is virtually soft, Bennett said. There have been no new building awards in the commercial or the hotel sector within the last year to 18 months, he explained, due to the inability of developers to get any loans or commercial money.

"There are almost no new prospects that we've seen across the board in the U.S. in the last 18 months due to the inability to obtain commercial credit," he said.

This has forced Turner, as well as other construction companies, to look at other sectors. Bennett said he is seeing considerable strength in new construction for pharmaceutical companies while the airport market has been active across the country. Turner is working on the Albany County airport as well as airport work in Columbus, Ohio and Newark, New Jersey. The pharmaceuticals are located primarily in the Philadelphia and New Jersey area, he said.

Lehrer McGovern Bovis, Inc. construction managers, was just awarded the United Airlines Maintenance Facility Terminal project in Indianapolis.

Health care has been strong, Bennett said, and remains so throughout the country. As the largest hospital builder in the United States, Bennett said, Turner is building the Mt. Sinai addition in New York, and working on the Kings County Hospital in Brooklyn.

Bennett is seeing strength in the Pacific Northwest, where Boeing is located, while he has observed that the industrial market throughout the Midwest has remained steady.

Back To School

Turner has secured some institutional educational projects from both public schools and universities in different areas.

Tishman Construction is currently working on a number of projects for The School Construction Authority, according to Kevin Taylor, the business project development manager of Tiger Construction Corporation, a unit of Tishman Realty & Construction.

"The Board of Education was responsible for its own work and it wasn't working well, so they founded the SCA to try to pick up the best parts of how the private sector handles it," he said.

Kreisler Borg Florman is also working with the School Construction Authority for a number of jobs, including two in the $30 million range. The company is acting as construction managers and is also providing management personnel for other SCA job. "We have a minority co-venturer with us on each job," said President Robert F. Borg PE.

Lehrer McGovern Bovis is working on 41 schools for the City of Houston and they have also been working at Rutgers University and with UCLA. Its assignments include both renovation and some new construction.

Federal Funding

Taylor said Tishman is seeing work from big projects that are federally funded. "We are doing a lot of work for the Postal Service; we're doing an office building for the GSA in Foley Square."

In Foley Square, the Company is working as construction manager with developer Linpro New York Realty.

Roland L. Ferrera, corporate vice president of business development and marketing for Lehrer McGovern Bovis said they have found there is an extensive amount of work in the Federal Government sector.

"It shouldn't be a surprise," he said listing the GSA, the United State Postal Service, the Federal Bureau of Prisons, and a variety of other agencies within the government who are pursuing plans. "Things are coming out of all the agencies," he added.

Ferrera said Lehrer McGovern Bovis is presently construction manager for the $200 million Foley Square Courthouse -- with developer BPT Properties, and the $35 million White Plains Federal Courthouse, and was just selected to do a $100 million renovation of the Federal Courthouse in San Franscisco that was damaged in the earthquake.

"It's a very delicate project and important to the GSA," he said.

Lehrer has also completed a renovation and restoration of the 1792 New Jersey State House in Trenton.

Ferrera said they are also pursuing work in the prisons and postal service field on a national basis. "In today's marketplace, finding qualified firms from the local area is not a problem," Ferrera said. Acting a construction manager, he said the company is providing in-depth technical experience to these agencies, that, he explains, cannot perform the assignment themselves right now because of budget constraints. "They cannot oversee such an undertaking," he said.

New York City

In New York City, Tishman has finished a project for Merrill Lynch at 101 Hudson Street; and is finishing the Jewish Museum expansion at Fifth Avenue and 90th Street by blending it into the former mansion.

One Tishman project is the Riverbank Park, which sits atop the waste treatment plant along the West Side Highway, that is being created for the New York City Urban Development Corporation.

The park, which will be completed by the end of the end of the year is "monstrous," he said, with indoor and outdoor pools, tennis courts, and fields.

A tri-state regional general contracting, construction management and development company, Kreisler Borg Florman General Construction Company of Scarsdale, has seen its market evolve over the past year from private enterprise to government contracts. Borg said the company completed both a 115,000-square-fllt IBM building in Fishkill, New York -- built in under 10 months to rigid specifications -- and the construction management and co-development of Battery Park City's 163-unit townhouse apartments at Cove Club and its retail stores in the last year.

At the same time, Kreisler Borg Florman completed three apartment houses for the elderly in Mamaroneck, White Plains and Peekskill, New York, and have under construction three more in Manhattan in Clinton, Chinatown, and Lower East Side neighborhoods. These, he said, are financed by the HUD 202 program.

In the past years, Borg said, the emphasis was on the jobs that were built by private enterprise, such as the Cove Club and the IBM project. "With the slackening off of the work by private enterprise in the recession, we have been able to more than make up the deficiency with government funded or sponsored construction."

Another category of residential work that is just getting underway for Kreisler Borg Florman is that of co-developer of a project in the University Heights section of the Bronx called Popham Gardens. The 83, two-family attached homes will be built over large vacant portions of four or five blocks around Popham Avenue and is being developed in conjunction with the New York City Housing Partnership. The homes will be offered for resale to qualified moderate income people and Borg said the State and City governments are giving subsidies that will reduce the purchase price.

The company is currently processing paperwork and financing for four other HUD apartment houses in the Bronx, in Brooklyn and Manhattan. "We're very conscious of any job we do in the community and reach out to them and hire someone from the community to act as a trainee," Borg noted. While it keeps the community informed, it also provides jobs for minorities who often continue to work for the company.

Lehrer McGovern Govis is active in New York City, as well. Among their current projects is converting an existing building for Barney's at 660 Madison Avenue. This new flagship store will contain a 280,000-square-foot retail store and executive offices on the first nine floors of the building. Met Life is retrofitting floors 10 through 22 which will be rented out as offices. They are also construction managers for the MetroTech project in Downtown Brooklyn.

Now the fourth largest building construction manager in the United States, Lehrer McGovern works with the Museum of Natural History and is known for their renovations of the Statue of Liberty and Ellis Island.

Move To Renovations

Taylor said its Tiger division is involved in smaller scale new construction and renovation work as well as interior fit-out work.

"More and more the work for us these days is in Tiger-Type projects," Taylor said. "The big, mega-scale project is on the wane. Because people are holding onto their properties, the smaller scale renovation is probably the hottest thing today."

Tiger is finding a great deal of work where people are taking advantage of moves from one building to another. Taylor observed, "They are getting rid of their old high-end rent and going to better buildings where prices are coming down."

Turner is also putting a renewed emphasis on its special projects and interiors division but focusing on small building interiors. This is not a strong market, but it has remained fairly steady, Bennett said, because of the large numbers of relocations.

World Wide Move

Other parts of the world are also getting attention and Turner has expanded its marketing effort in Asia to provide construction consulting services in Singapore, Taiwan and Thailand, primarily for high-rise office buildings and mixed-used construction, and it has started a joint venture company in Europe with, Karl Steiner Ltd, a swiss partner.

Tishman has other large offices based in Chicago, Los Angeles, Orlando, Washington, Boston and Atlantic City and all are finding that the very large scale projects are few and far between. They are currently holding grand openning festivities for the new $180 million Sheraton Chicago Hotel & Towers, for which they are construction and asset managers.

"They all do any size project," Taylor noted. "We recently opened an office in Vienna to capitalize on the European expansion." Tishman is currently completing work on Euro Disney in Paris.

Special Areas

Ferrera said the company was recently awarded the Summer Olympics in Atlanta in 1996. Lehrer McGovern will be working "hand-in-hand" with McDevitt & Street, a sister company, to develop the entire program, including the scheduling, stadiums, housing facilities and other structures used for the games.

"The total dollars have not been defined yet but it's a multifaceted, multi-million dollar project," he said.
COPYRIGHT 1992 Hagedorn Publication
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Construction & Renovation Supplement
Author:Weiss, Lois
Publication:Real Estate Weekly
Article Type:Industry Overview
Date:Apr 22, 1992
Previous Article:Mendik leases to State Dept.
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