Chicago-area construction companies occasionally battened down during the early 2000s as the poor economy raised storms for an industry grown accustomed to smooth sailing.

The high seas appear to have subsided in 2004, though the industry still has its leaks to fill.

Data for the Chicago metropolitan area depict an industry that in general is gliding along.

The dollar value for area construction starts in the first half of 2004 rose 18 percent, to $7.9 billion, compared with the same period in 2003, according to McGraw-Hill Construction's Dodge Analytics division.

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The spending is likely the second highest first-half in Chicago history after the $8.3 billion recorded in 2002, when the Soldier Field reconstruction project started.

This year, the market is getting a boost from the expansion of the McCormick Place Convention Center south of the downtown. Work has started on the $849 million McCormick Place West Building, though contracts for the project are only starting to be activated.

"Our market is good," added Richard Tilghman, senior vice president of Chicago-based Pepper Construction Group. "We got several big-ticket items on the horizon."

Poor Infrastructure

But enthusiasm will likely be tempered because of the huge falloff in infrastructure starts.

Data show starts in this area dropped 24 percent, to $1.0 billion.
Starts in the highway and bridges segments tumbled significantly, 35 percent and 42 percent, respectively.

The situation is causing companies that normally focus on road construction to cast a wider net.

"We have increased the number of projects we're bidding on," said Jennifer Krug, a spokesperson for Lemont-based K-Five Construction Co., a general contractor.

The spending drop is partly attributable to state budget cutbacks. The appropriation for highway spending in the most recent budget fell 11 percent, to $1.5 billion, according to Matt Vanover, a spokesman for the Illinois Department of Transportation in Springfield.

Infrastructure spending has also dropped because of the end in 2003 of Illinois First, a $12 billion bond program instituted in 1998 to fund highway, bridge, school and other infrastructure projects.

Compounding the situation, federal transportation funds are on hold because Congress has not yet passed a transportation plan to replace the appropriation that expired in fall 2003, Vanover said. Had the federal bill been approved, funds to the state likely would have offset the shortfall.

Overall Look

The Illinois economy overall shows a mixed picture.

After steady increases for much of the last year, the University of Illinois Flash Economic Index fell to 100.0 in July, the most recent reading, from 100.3 in June. A reading above 100 indicates economic growth, and a reading below 100 points to contraction.

State sales-tax receipts were up in July compared with the year-ago period, but individual income tax and corporate-tax receipts were down slightly, said J. Fred Giertz, the economist who released the data.

"My expectation is the rest of the year will be a little stronger because Illinois is lagging the country a little bit," he added.

The economic situation is keeping some industry executives anxious.

Frank O'Lone, secretary-treasurer of the Chicago and Cook County Building and Construction Trades Council, said trades employment depends on the craft.

The unemployment rate is under 5 percent in areas that include bricklaying, tile setting and carpentry, but it is high in mechanical and other areas.

"Most of the trades feel there is work on the horizon," he added.

Residential Remains Strong

Gains in other areas are keeping the Chicago-area construction market afloat.
Data show residential starts went up 17 percent, to $3.9 billion.

The downtown area bounded by Cermak Road and North Avenue is holding steady in high-rise residential construction.

Gail Lissner, president of Chicago-based Appraisal Research Counselors Ltd., is projecting the probability of 3,442 condominium and apartment deliveries in 2004, and the potential for the delivery of an additional 848 units.
The higher figure exceeds the 1997-2003 average (4,068 deliveries), and both 2004 projections exceed the 1994-2003 average (3,205 deliveries).
"Last year developers laid low to see how the market would react and see how demand was," Lissner added.

Increases in starts were seen in other key areas: