Market Outlook: Building

Construction will be booming despite hurricanes

By June Matthews

A tropical terror named Katrina is expected to have an impact on the 2006 south central construction building outlook beyond the Gulf Coast. And the followup visit from Rita didn't help.

The storms' fury could be manifested in rising labor and material costs across the nation. In addition, timetables may be affected as coastal rebuilding efforts take priority.

But according to some experts, early predictions of major delays and skyrocketing costs may have been premature. In Mississippi, work to the north is continuing apace despite the devastation at the southern end of the state.

"With or without Katrina, construction in North Mississippi is moving unbelievably forward," said Dr. Bahram Alidaee, interim director of the Hearin Center for Enterprise Science at the University of Mississippi. "There is a lot of boom here."

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The same goes for Arkansas, according to Kathy Deck, the associate director of the Center for Business and Economic Research at the University of Arkansas Sam M. Walton College of Business.

"We're in the middle of an incredible boom. It's just unbelievable what's going on here," she said. "There's new retail, new commercial, strong employment growth . . . and I don't think 2006 is going to be the end of that."

As to costs, Deck believes the "storm effect" is real, but manageable.

"Sure we've got to look at costs in terms of what's happening in the post-Katrina world," she said. "But the question I'd be asking is, 'Are the costs something I can pass along?'"

Alidaee believes that except for fuel prices, 2006 will bring no new problems to the industry.

"Construction costs will be the same as before - always going up because of the demand," he said. "In general, that hasn't changed much during the past 20 years. But the issue of oil and gas is a little different. In that area, I can see a lot of problems."

Dennis Hill, a division manager with Brasfield & Gorrie in Birmingham, Ala., is not so concerned with rising costs in the coming year as with getting the job done.

"The insurance and bonding markets are real fragile right now due to the disasters, and that's making it hard for contractors to bid as much as they have in the past," he said. "A lot of contractors are negotiating rather then bidding - which they'd rather do if they can fill up with work that way - but open bids are required for a lot of jobs. On the positive side, I think there will be plenty of work."

Hill also noted recent increases in the pricing of materials such as drywall, concrete and steel, but he expects those prices to level off. Material shortages due to coastal rebuilding efforts, he said, could mean some rationing.

Strong growth in several areas will continue to drive Tennessee construction during 2006, said Merrill Bowers, a project manager with Turner-Universal Construction in Nashville.

"For the last three years, we've primarily done healthcare, and we do not see healthcare tapering off in the next year," he said.

But Bowers also anticipates an increase in high-density residential spaces and office buildings, and continuing strength in the educational realm. He believes that commercial and residential factors will continue to play off one another to create work.

"Nashville and a lot of other areas tend to be growth areas and it comes down to which comes first - the chicken or the egg?" he said. "Commercial growth brings residential growth, but residential growth brings commercial growth."

Some of the top building projects in the south central region and their expected progress in the coming year include:

Medical Research Building 4, Vanderbilt University, Nashville, Tenn. The research program at Vanderbilt University Medical Center is one of the fastest-growing research programs in the nation. And as the program grows, so does the need for space.

Thus, the $120 million upward expansion of two existing buildings was designed to provide a total of 400,000 sq. ft. of usable space.

The project, said Merrill Bowers of Turner-Universal Construction of Nashville, is now in its second phase.

"The first phase was a three-floor addition above on of the buildings," he added. "The second phase is the overbuild over the existing auditorium."

Bowers said the project should finish on time despite increases in the demand and prices for materials caused by Gulf Coast rebuilding efforts. Begun in May 2004, the building is scheduled for completion in early 2007 with the potential for limited occupancy even earlier than that.

St. Mary's Mercy Health of Northwest Arkansas, Rogers Ark. In 2002, Mercy Health announced plans to build a $140 million regional healthcare complex to meet the fast-growing northwest Arkansas region.

The design calls for a 380,000-sq.-ft., 200-bed facility with space for emergency, trauma, cardiology, oncology, orthopedics, neurological, rehabilitation and outpatient services. The project also includes a 150,000-sq.-ft. physician office center. Ground was broken in 2004.

"After a year of site work, we're just starting the structure," said Brian Bea of J.E. Dunn Construction.

The project is on schedule, and Bea expects to be doing interior finishes in 2006. To avoid material shortages, "we're trying to pre-purchase," he said.

June 2007 is the project's scheduled completion date.

Baptist Memorial Hospital, Southaven, Miss. In April 2004, Baptist Memorial Hospital-DeSoto broke ground on a 450,000-sq.-ft. bed tower that will add 140 acute and critical care beds to the hospital. It will also add a new and larger emergency department, more operating suites and space for future expansion.

The tower is scheduled for completion by October 2006 and according to Paul Moffat of Bovis Lend Lease of Nashville, the project is running on time.

"We should be 'buttoning up' during the winter through the early spring," he said. "Then we'll be doing exterior site work and grading, and creating new roadways and parking lots."

Getting some materials delivered, said Moffat, has been somewhat difficult, mainly due to a shortage of flatbed trailers following Hurricane Katrina. In the New Year, however, he expects those difficulties to ease. He also expects a recent relief in steel prices to continue in 2006.

Kronospan Manufacturing Facility, Oxford, Ala. Excitement ran high in the small east Alabama city of Oxford when in April 2005 Kronospan Gmbh announced its intention to build a wood products manufacturing facility there. The Oxford plant will be the first Kronospan facility in the United States and at full capacity will employ 700 workers. Ground was broken in May 2005.

"They're moving a lot of dirt down there," said Mike Roberts, building official for the City of Oxford. "They're getting close to starting the foundation."

Barring winter weather delays, plans call for part of the facility to be ready for occupancy by the end of Summer 2006.

The project represents a capital investment of $500 million. The contractor on the project is James N. Gray Construction of Lexington, Ky.

Jackson-Madison County General Hospital Bed Tower, Nashville, Tenn. The centerpiece of a multi-phase expansion project at Jackson-Madison County General Hospital is a $65 million bed tower that will add more than 350,000 sq. ft. to the existing facility. Ground was broken for the tower in June 2005.

The 240 beds slated for the new addition will replace beds in the hospital's North tower. The rooms will be larger and state-of-the-art with family space and computer access. The entrance to the new tower will serve as the main entrance of the hospital.

The addition is scheduled to open in 2007. Contractor on the project is Centex Construction of Nashville.