Commercial Real Estate and Credit Crisis and Contractors and Indiana Convention Center and Construction and Hotels and Real Estate & Retail

Experts see 'great concern' over local construction outlook

December 21, 2009

A symbolic topping-off ceremony early this month to celebrate a milestone on the massive JW Marriott hotel project downtown can’t hide the anxiety felt within the construction industry.
 
Commercial contractors throughout the country have been hit particularly hard by the recession, and construction activity in Indianapolis is down substantially despite progress on a few high-profile projects.

Combined costs of the 34-story Marriott hotel, the Indiana Convention Center expansion and new Wishard Hospital total an impressive $1.4 billion. Yet industry leaders such as John Griffin, executive director of the Central Indiana Building Trades Council, paint a bleak picture.

“You have these sexy projects,” Griffin said. “But if you look at the bread and butter, the day-in-and-day-out work, the smaller projects, that’s the stuff that sustains the construction industry.”

The sector still is reeling from last fall’s economic meltdown and ensuing credit crunch that continues to crimp construction activity. In October, non-residential construction spending slumped to $652 billion nationally, an 11-percent decline compared with the same month last year, figures from the U.S. Census Bureau show.

Mass layoffs have pushed the industry’s national unemployment rate to 19.4 percent in November, according to the Bureau of Labor Statistics. That’s nearly double the country’s overall jobless rate.

The Indianapolis metropolitan area isn’t faring much better. The region shed 6,000 construction jobs, or 13 percent of its work force, in the 12-month period ended in November, BLS numbers indicate.

In Indiana, where nearly 9 percent of construction jobs have been lost, the industry has been hurt further by a state law that now requires big school building projects to be approved first by voters, Griffin said.

J.R. Gaylor, president and CEO of the Associated Builders & Contractors of Indiana, an organization that represents non-union contractors, sees little relief in sight.

“There’s no recovery in our industry; we think it’s going to be a long haul,” he said. “When it does come back, we don’t see it coming back quickly.”

Few in the construction trades could have envisioned the severity of the fallout. Just last summer, before the financial crisis peaked, industry leaders remained confident about the coming year’s pipeline of projects.

Gary Price, president of the Indiana Construction Roundtable, predicted then that central Indiana would not see a “significant downturn” in construction activity this year. The ICR, which consists of some of the biggest users and providers of construction services, commissions an annual labor report forecasting demand for labor.

But Price since has retracted his forecast, saying the dreadful conditions are worse than what he witnessed during the recession of the early 1980s.

“I have never seen a slower time,” he said. “So there is great concern about 2010.”

The expansion of the convention center and construction of the 1,650-room Marriott hotel both are expected to be finished in early 2011.

The $450 million hotel project also features a Courtyard by Marriott, SpringHill Suites and Fairfield Inn & Suites. The new hotels and the existing Marriott Indianapolis Downtown hotel a block away from the new complex will be marketed together as Marriott Place. They will have a total of 2,200 rooms.

Meanwhile, construction of a parking garage that will be part of the new Wishard should start in May, with completion of the entire project slated for December 2013. Wishard’s parent organization, Wishard Health Services, plans to sell bonds to finance the $754 million hospital just west of downtown.

To be sure, scores of construction firms have their sights set on the project.

Health and Hospital Corp. of Marion County, which owns the hospital, received 30 applications from companies vying to help oversee the project as construction manager. Health and Hospital CEO Matt Gutwein said the pool has been whittled to 15, with a selection possible in March.

Bids for much of the actual work will be let in September, but interest in the project already is mounting. A Dec. 15 presentation provided by the Indiana Subcontractors Association drew about 400 laborers.

“We plan to be very aggressive in ensuring that local Marion County companies, employers, laborers are aware of the opportunities of this project,” Gutwein said. “We want these local dollars spent locally.”

A project labor agreement, which shuts out non-union workers from participating, will be in effect during construction of the new hospital. Supporters of PLAs say the agreements ensure large projects are completed on time and on budget.

PLAs have been involved in many of the city’s large projects, including Indianapolis International Airport’s midfield terminal, Lucas Oil Stadium and Conseco Fieldhouse.

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