Market outlook
South central construction looks healthier, but some markets remain down

By C. Richard Cotton

A war, the threat of terrorism and an economy that's up or down depending on whom you listen to are factors in south central construction.

Other factors, some closer to home, are also driving construction.

High material costs have affected construction projects and plans. A federal highway bill bogged down in Congress has some road contractors wondering when funds will be released for sorely needed road revamping and new highways.

Politicians' talk of an improving economy is tempered by the reality of the marketplace.

"We have a little bit of strength returning to the manufacturing sector," said Dr. Matt Murray, associate director of the University of Tennessee Center for Business and Economic Research.

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Traditionally a driver of construction, manufacturing has become less a part of the American economic landscape as more goods are procured from overseas suppliers.

Murray said manufacturing in Tennessee today makes up about 15 percent of the state's economy, or about half the 30 percent it constituted a couple decades ago.

Murray added that construction in Tennessee is being fueled primarily by residential demand, which is consistent with the national trend.

Tennessee's real driving economic force is in the service sector, he said. That is true especially in the leisure, hospitality, health and education fields. Murray said that area of growth tends to concentrate in urban areas, leaving rural areas of the state out of the loop.

Murray pointed out that Interstate 40, which cuts a concrete swath from one end of the state to the other, is undergoing some major upgrading. Three projects in Memphis, Nashville and Knoxville account for $181 million in construction contracts.

"The interstate really does need upgrading and expanding," Murray added. "The 'Catch-22' is that when they expand the capacity, everyone is going to use it more."

And that's just fine with most highway contractors, many of whom are anxiously awaiting passage of the Federal Highway Bill that has languished for months in Congress.

Murray agreed that the I-40 construction projects are absolutely necessary, especially to carry the tremendous truck traffic that he refers to as "the China Syndrome."

"They need to get Chinese goods to the East Coast," he said.

There are rumblings within the Tennessee Department of Transportation about building a cross-state railroad to handle some of the freight load that now depends on - and clogs - I-40, the state's sole continuous east-to-west traverse, Murray said.

He predicted the 2005 construction job growth would mirror his projection for the overall growth of jobs in the state: 1.8 percent.

That figure is echoed in Alabama, where Dr. Ahmad Ijaz, head of the University of Alabama Center for Business and Economic Research, reported that 102,600 workers are currently employed in construction, much of them in the residential sector.

He said that of the 2,000 construction jobs added in the past year, "1,000 of these jobs were related to building construction, 700 were in heavy and civil engineering construction and 300 were associated with specialty trade contractors."

Ijaz said that the construction spawned by automotive assembly plants locating to Alabama is nearing completion and will not see as much growth in 2005 as in 2004.

Nonresidential, primarily commercial construction, will grow by 3 percent during the year, Ijaz added.

In Mississippi, "2005 should be a good year for construction," said Dr. Bahram Alidaee, interim director of the Hearin Center for Enterprise Science at the University of Mississippi. "The economy is picking up, I can see it from many (angles)," Alidaee added.

He said the state's lower-than-average labor and living costs are attractive to industries seeking greener pastures. "They've been moving here for 30 years," he said.

He pointed out the Nissan automobile assembly plant as an example of that philosophy. The available workforce attracted the carmaker to the state, Alidaee said.

It's a different story in Arkansas, where Jeff Collins, director of the Center for Business and Economic Research at the University of Arkansas Sam M. Walton College of Business in Fayetteville, said, "There is a lot of impetus in Northwest Arkansas," and there are sporadic pockets of positive economic drivers in other parts of the state.

He pointed to a large shopping mall being built in Jonesboro, in the northeast corner of the state, and a Japanese truck parts plant started in Marion, west of Memphis.

But Washington and Benton counties, at Arkansas' northwest corner, are leading the pack in development and construction.

"There is some concern about some softness in commercial construction in northwest Arkansas," but it's likely a temporary glitch, Collins said.

Highway construction - or the need for it - is driving some Arkansas municipalities to pass sales tax increases to construct new highways.

"All things in Arkansas are about redistributing wealth," Collins said. He said the five highway districts of Arkansas, by law, all receive equal amounts of the annual highway budget. Districts that have less pressing highway construction needs receive the same monies as ones in dire need of highway construction and improvement.

"That makes it tough to build an economy," Collins added. "You can count on monies generated in one part of the state going to another part."

Collins said the inequitable practice doesn't take into account factors like Arkansas counties along the Mississippi River that have lost 8,000 people since the 2000 Census. "That equals all the people (who left) there in the 1990s," he added.

The majority of those émigrés tend to be "young and white," Collins said. When they don't leave the state, they move to urban Arkansas areas and add to the "cluster effect," where services such as shopping and medical care are more readily available.

"Some of the big construction projects in Arkansas are medical centers," Collins said.

The largest highway construction contract ever let by the Arkansas Highway and Transportation Department is underway right now in the Little Rock area. Weaver-Bailey Contractors of El Paso, Ark., is midway through its $57 million contract designed to increase traffic flow and reduce congestion along a 6-mi. section of I-40.

It is one of the four I-40 projects in urban areas of Arkansas and Tennessee. Project engineer and manager Brad Fryar said he began the multi-faceted project in April 2003 and will finish in late fall 2006. It is the final project of a 6-year-old bond issue that refurbished 90 percent of Arkansas interstate highways.

"We have to stage it," Fryar said of keeping traffic moving. "We have to maintain two lanes in both directions." The finished product will be a six-lane highway to carry the 45,000 vehicles that daily travel the highway section.

Numerous bridges are also part of the project, including one overpass to be completely rebuilt in North Little Rock that is 2,600 ft. long and 85 ft. tall at its zenith. Fryar said the bridge actually comprises two complete and separate structures and traffic will be moved to one bridge while the new replacement is built.

Traveling east, the next major construction project on I-40 is the $52.9 million bridge rebuilding in downtown Memphis, where the cross-country highway meets the city's circumnavigating Interstate 240. That tangled mess of spaghetti is being completely reworked by consolidating 16 bridges into seven, said Fred Clayton, project manager for Brentwood, Tenn.-based Ray Bell Construction.

The firm began its work in July 2003 and should complete the project in November 2006. Clayton said the construction calls for 12,000 cubic meters of concrete.

"It's a metric job," he added. Twenty-two retaining walls, designed to expedite traffic flow and utilize former slope space to reduce the number of right-of-way purchases, are also part of the project.

"We're working on six bridges at one time, eliminating all the sharp turns," Clayton said. With a traffic count of 110,000 vehicles per day, "The toughest thing is traffic control, shifting the detours," he said.

Farther east, Fred Logue said that maintaining traffic flow at his project, the $65.7 million Nashville I-40 undertaking, has been tough, too. The project manager for Jackson, Tenn.-based Dement Construction Co. makes his traffic switches at night.

The company began the work January 2004 and should finish in June 2006.

Logue said rising material prices "have impacted us," but one commodity, steel, has not risen from the originally bid contract prices.

"Our suppliers are trying to honor the prices they quoted to us," Logue added.

The scope of the project entails widening the highway from six to 10 lanes in places, while some portions will remain as four lanes. Briley Parkway is also being widened where it crosses I-40. Of the 10 bridges to receive Dement's attention, six of them will be full replacements.

Fifteen retaining walls and one sound wall are also part of the project.

Chad Woodroof, project manager for Sevierville, Tenn.-based Charles Blalock & Sons Inc., is looking at 18 retaining walls in his $62.4 million I-40 project in western Knoxville. He said two of the four noise-suppression walls on the 6-mi. stretch total 8,100 ft. long.

"It's a substantial part of the project," Woodroof said. He added that the noise walls comprise pre-cast concrete panels held by columns anchored in 12- to 16-ft.-deep augered holes.

Three of the 12 bridges on the job will be widened, with the remainder being replaced. The highway itself will be widened from six lanes to eight in the effort that has required the movement of 1.3 million cu. yds. of earth.

Woodroof said his project was the largest ever contracted by the Tennessee Department of Transportation when it was awarded in December 2002, but it was surpassed by the Nashville job.

He said his project is "one of the first jobs where the TDOT put the utilities in our contract," and that putting supervisory control over that part of the project has resulted in fewer requests for delays.

Paul Leonards, project manager for Falkner, Miss.-based Hill Bros. Construction & Engineering Co. Inc., said his $58.8 million job "is on schedule." He is charged with building new bridges and road surfaces to "redirect traffic into new lanes at the intersection" of Interstate 20, Interstate 55 and U.S. 49 in Jackson, Miss.

One of six new bridges - one other will be widened - will fly U.S. 49 over I-20. The seven bridges are expected to eat 4 million lbs. of structural steel beams and 18,535 cu. yds. of concrete.

Leonards said he expects to finish the complex project, which began in February 2003, in December 2006.

Numerous building projects are under way in the South Central region, though several are so wrapped in secrecy that scarcely any construction information is available. Among them are the $175 million Patient Bed Tower addition to Baptist Memorial Hospital-DeSoto in Southaven, Miss., and the recently completed $100 million Altima plant at Nissan's Canton, Miss., facility.

The 10-story bed Baptist Hospital tower will add 140 beds to the facility and enable it to offer all private rooms. The project also will add an expanded emergency department, more operating suites and space for future additions.

What little information is available about Japan-based Hino Motors' truck parts plant being built in Marion, Ark., comes from Marion Chamber of Commerce's Kay Brockwell. She said sitework on the $110 million project being built by South Carolina-based Lockwood Greene is nearly complete.

The Hino enterprise should employ 280 workers when it opens in the spring of 2006.

Don Miller, senior project manager for O'Neal Constructors of Greenville, S.C., is more forthcoming about the chopped-strand fiberglass plant he's building in Clarksville, Tenn. The $100 million, 133,000-sq.-ft. steel frame-and-siding plant is owned by a joint venture, MW/MB LLC.

Miller said the work began in April 2004 and should be completed in time for production to begin in January 2006. He said that while the main building is pretty much a run-of-the-mill structure for this sort of enterprise, the four large field-erected 100-ft.-tall raw materials silos are not.

"We have had to deal with (rising) steel prices," Miller added. "We have had to estimate the best we could when bidding. Our crystal ball was not always as clear as we would have liked."

Useful Sources

For the complete economic report published by the University of Tennessee's Center for Business and Economic Research, go to: http://cber.bus.utk.edu/tefslist.htm

For the complete economic report published by the University of Alabama's Center for Business and Economic Research, go to: http://cber.cba.ua.edu/publications.html#outlook

For more information about the University of Mississippi's Hearin Center for Enterprise Science, go to: http://hces.bus.olemiss.edu/welcome.html

For more information about the University of Arkansas' Sam Walton School of Business, go to: http://waltoncollege.uark.edu/