August 10, 2009

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From the Ground Up

Construction Industry Re-builds Utah’s Economy

By Peri Kinder

August 10, 2009

Construction cranes integrated into the Salt Lake City skyline belie the fact that commercial construction in Utah took a hit during the last year. Like many other industries affected by the economic slump, commercial construction showed a definite downturn during the last 12 months. But Rich Thorn, president and CEO of Associated General Contractors, believes commercial construction projects will actually help lead Utah’s economy out of the recession. Thorn works with more than 500 local members including general and specialty contractors. He has witnessed the efforts made by the construction industry to keep people employed and keep the industry vibrant. “I’m a glass half-full kind of person,” Thorn says. “I think right now Utah construction is not as good as it has been, but it’s not in too bad a shape.” With Utah’s big construction companies’ revenue averaging $650 million, down from $900 million, the trickle-down impact to the economy has been felt across the board—especially for small business owners wanting to expand the family business, remodel or build out another location. Loans are harder to come by and many owners are making do with their current situation until the economy improves. Volume for small business construction has been cut nearly in half. More financial woes hit the Salt Lake market when General Growth Properties, one of the country’s largest shopping mall developers and owners, filed for bankruptcy this last spring, less than one year after breaking ground on the Cottonwood Mall redevelopment project. The design for the historic Cottonwood Mall included adding restaurants, a specialty grocery store and a large selection of retail shops catering to the upscale community. The bankruptcy effectively halted construction on the project, leaving the City of Holladay in a holding pattern until funds can be obtained to complete the project. Residents hoping for a transformation are left looking at an empty lot. “The status of the project right now is they’re just waiting for the economy to pick up,” says Miranda Strong, General Growth Properties’ administrative assistant. Paving The Way But even if some projects are struggling, or stalled, Thorn has hope for the future. Stimulus money from the federal government and actions taken by the Utah State Legislature are paving the way for almost $2 billion in road improvement projects, including the reconstruction of Interstate-15 in Utah County. Incorporating an innovative design-build program, the Utah Department of Transportation will hire a team to design and build the project simultaneously. Construction along part of the I-15 corridor will be happening while another part is still being designed. Jim McMinnimee, UDOT chief engineer and director of project development, explains doing a design-build will get the project started sooner, bringing jobs to thousands of workers. “This is the biggest road construction project Utah has ever done,” McMinnimee says. “We’re starting at American Fork and going as far south as we can get with the money we have.” The $1.725 billion will pay for an estimated 14 miles of reconstruction that will include widening the corridor and improving 54 bridges. The number of jobs created is based on 30,000 employees per $1 billion spent, which means the project will employ an estimated 50,000 workers. Another $213 million, approved by the state legislature, will go to other UDOT projects around Utah. “Right now we have the most work under contract in the history of UDOT,” McMinnimee says. “We have about 193 jobs for maintenance, pavement reconstruction and other small projects. Ninety percent of the money is already spent.” While highway construction has been stable through the economic crisis, an increase in cash-flow has the industry gearing up for a busy summer. “We have the best contractors in the nation,” McMinnimee says. “That is by and large the main reason why we can get so much done in the state. We’re looking forward to getting that big project underway.” Home Grown Higher mortgage rates, a slow economy and the difficulty to obtain loans have helped the multi-family construction industry stay afloat during the recession. With fewer people purchasing homes, and more people looking for apartments or townhomes, Dan Lofgren, president of Cowboy Partners, has been able to keep his employees busy. Cowboy Partners is a leader in multi-family housing development projects in the West. With communities along the Wasatch Front, Colorado, Nevada and Idaho, Cowboy Partners continues to develop rental properties for thousands of residents. “The multi-family business has been essentially healthy and vibrant, in a relative sense,” Lofgren says. “Construction has been pretty steady.” Some projects in the works at Cowboy Partners include a high-end, top-of-the-line rental property near The Gateway on 500 West. And a more affordable project offering small studio or one bedroom apartments will begin on the corner of Second South and Third East. Currently under construction within Sandy City is the Quarry Hill development, a 93-unit townhouse-apartment hybrid project. With so much multi-family construction happening in Utah, Lofgren is anxious about the amount of product in development. “Is there more supply than there is demand?” he asks. “The single-family [housing] market will stage a comeback, but I’m more cautious than concerned.” Lofgren is also involved in the redevelopment of the downtown Salt Lake City area. The City Creek Center, scheduled to be completed in 2012, is currently the biggest project in the downtown area, providing employment for thousands of construction workers. The development combines residential, office and retail space with a walkable urban community aspect. Approximately 20 acres across three city blocks are currently undergoing a complete transformation to create a unique, vibrant mixed-use development in the center of Salt Lake. National retailers like Nordstrom and Macy’s will anchor the project while Harmons Grocery Stores will construct a full-service grocery store to provide necessities for an increasing urban population. Underground parking will accommodate more than 5,000 vehicles and 500,000 square feet will be available for retail shops. Although no definite designs have been approved, Lofgren’s business will develop a housing project on Block 74 of City Creek Center. It hasn’t yet been determined if the project will consist of condominiums, apartments or townhomes. “Our part in this has proved to be a little bit fluid,” Lofgren says. “It’s no secret that the market for ‘for sale’ is not what it was a couple of years ago. It might not be decided for a couple of years.” In the Pipeline General contractor Okland Construction is a part of the City Creek Center project erecting the 22-story, high-rise office and parking structure. Jeremy Blanck, Okland project executive, says that instead of being hurt by the economy, the struggling financial system has actually helped the business. “It’s been challenging,” he says. “But low prices and the availability of labor are very good. We’re in a non-growth mode. We’re still anticipating a decrease in the volume of work. We hope this turns around in the next 18 months.” Okland Construction is currently working on Intermountain Healthcare’s Park City Medical Center. Scheduled for completion in November 2009, the center will provide emergency care, state-of-the-art surgery suites, diagnostics and general medical care for the growing community. In the pipeline for Okland is the United States District Courthouse to be built on the corner of 400 South and West Temple. The approximate cost for the project is $180 million and will take an estimated three years to complete. Once finished, the current Frank E. Moss U.S. Courthouse, directly across the street from the new construction, will become the bankruptcy arm of the federal court system. According to Blanck, projects for the State of Utah, higher education and energy-sustainable projects for the federal government continue to roll in, allowing the construction industry to survive. Schools for grades K-12 are always needed and with several school districts going out for a bond election, there should be money for new school construction. Building the Future Thorn agrees development for universities, hospitals and schools (especially charter schools) will continue to increase while companies like eBay and Proctor & Gamble will add another boost to the construction industry. He adds Hill Air Force Base always has a large amount of construction going on, especially considering the large Falcon Hill development. Skilled manpower is always a challenge with contractors on the lookout for the best and the brightest to fill jobs, while safety issues become paramount in order to keep employees healthy and on the job. “The biggest assets we have are our people,” Thorn says. “We want to make sure they are working in a safe environment. We need to enhance awareness of workforce safety and not put our people in harm’s way. Safety is a top priority for contractors in our industry.” Thorn is hopeful about the future believing now is the time to be cautiously optimistic. “We think the construction industry is going to lead us out of this recession,” he says. “We create immediate jobs which causes a trickle through the economy. It really has a dramatic impact.”
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