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St. Louis Market
Sweet Tunes Heard In Gateway City
by Craig Barner
Not too many people in St. Louis are singing the blues about
construction in the Gateway City, where mostly high notes
are being heard.
"With respect to the St. Louis metropolitan and regional
market, we're in very busy mode through 2008," said Greg
Kozicz, president of St. Louis-based Alberici Corp., a construction
services provider.
Indeed, construction starts through second-quarter 2006 were
up 25 percent compared with the same period in 2005, to $3.17
billion, according to data from McGraw-Hill Construction,
publisher of Midwest Construction.
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Contractors credit the upbeat market to the overall economy,
consumer confidence and other contractor-friendly factors.
"We had a mild winter, which helped get things started,"
said Eric Gowin, president of Contegra Construction Co., a
general contractor in Granite City, Ill., which is close to
St. Louis.
Contractors say backlogs are up, and they are hiring.
"We just hired superintendents and hire project projects
administrators in the office to work with project managers,"
Gowin said.
Residential Flat, Commercial Up
Mirroring recent years, residential construction is strong
with nearly $1.7 billion in starts--still slightly more than
half of all building activity in the metropolitan St. Louis
area.
But the residential sector is flattening as the Federal Reserve
raises interest rates to keep a rein on inflation in a moving
economy.
Residential was up just 1 percent in the first two quarters
compared with the same period in 2005. Driving the increase
was multiunit housing, up 70 percent to $362 million, which
offset decreases in single-family-home and duplex construction.
Apartment, loft and condominium projects are dotting downtown
St. Louis for the first time in decades, including the 26-story,
$50 million Park East Tower project--the first high-rise residential
project in the city in 35 years.
Meantime, activity in the commercial and infrastructure areas
is picking up.
Commercial construction was robust, going up 74 percent, to
just over $1 billion.
Reflecting increasing wealth, the biggest increases were seen
in hotels (up 944 percent to $187 million); amusement structures
(up 352 percent to $99 million); and office buildings (up 326
percent to $139 million).
Data show that St. Louis over the first five months of the year
had the fourth biggest amount of commercial construction activity
in the Midwest--after Chicago, Detroit and Kansas City--and
the third biggest rate of increase after Detroit and Minneapolis.
"I have heard some people say that it (the market) is unprecedented
in their careers," said Kozicz, who transferred two years
ago from Alberici's Toronto office. "These are guys who
have been here 20 and 30 years."
Several megaprojects are in the early stages of construction,
including the $900 million Holcim (US) Inc. cement plant in
St. Genevieve County south of St. Louis, two casino projects
valued at $800 million--one downtown and the other in southwest
suburban Lemay--and the $200 million Pfizer Inc. laboratory
project in west suburban Chesterfield.
Infrastructure starts were also up, 63 percent, to $480 million.
Leonard Toenjes, president of the Associated General Contractors
of St. Louis, attributed the increase in part to Amendment 3
that voters approved in 2004.
The measure required that money derived from the motor-vehicle
fuel taxes, fees paid by highway users and similar sources be
used for highway, road and bridge construction. These funds
had been diverted for other uses.
As a result, repaving has started on Interstate 70 between St.
Louis and Kansas City and on Interstate 44--the former U.S.
Route 66--between St. Louis and Springfield.
Another project under way is on Route 367 in St. Louis County
and includes the construction of three steel-girder bridges.
In addition, dollars are starting to flow from the federal transportation
bill--formally named the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users, or SAFETEA-LU--that
President Bush signed in late 2005.
"For the next four to five years, we're in relatively good
shape, but we're starting to look at where we may be long-term
and trying to figure out what the future transportation needs
might be," Toenjes added.
A major project contractors are anticipating is the approximately
$535 million rebuild of Interstate 64 in St. Louis. Linda Wilson,
a spokeswoman in St. Louis for the Missouri Department of Transportation,
said the project is in procurement and expected to start in
spring 2007. A unique element is that it will be the first design-build
project ever for MoDOT.
Meanwhile, power plant construction is expected to drive a lot
of work in the infrastructure area.
In fall 2005, St. Louis-based Peabody Energy announced it had
received a permit for a coal mine from the Illinois Department
of Natural for the $2 billion Prairie State Energy Campus in
Washington County, Ill., which is 50 mi. southeast of St. Louis.
Other energy projects are also being considered.
Also on the Illinois side, some ethanol plants are being studied
as fears of global warming trigger entrepreneurs to investigate
alternative fuels.
Fees, Costs Up
Some sour notes are being heard in the otherwise up-tempo
market.
For instance, it is becoming difficult for contractors to staff
projects because of the demand for workers.
"In some cases, subcontractors bidding work are more short
of people than they normally would be," Kozicz said. "They're
not able to use all their regular forces, so they have to hire
people from outside." Both the local market and the impact
of external factors, such as the rebuilding of the Gulf Coast
in the wake of the devastating hurricanes in 2005, are affecting
the market.
In addition, costs are rising for subcontracting and design
fees and commodities.
Like the rest of the country, material increases are being experienced
in copper, fuel, asphalt, gypsum, plastic, concrete and steel.
The increases are being blamed on the hot construction market
nationwide, demand in China and the rebuilding in the Gulf.
Copper, in particular, has seen recent price spikes, including
in St. Louis, and geopolitical pressures in part are to blame.
"Regimes of copper-rich companies in Latin America are
turning anti-American," the AGC's Toenjes said. "Mines
have been shut down, and production has been restricted."
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St. Louis Starts (First two quarters;
in millions of dollars)
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YTD 2005
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YTD 2006
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% Ch. 06/05
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Commercial
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$583
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$1,011
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+74%
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Residential
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$1,658
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$1,678
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+1%
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Infrastructure
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$294
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$480
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+63%
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Total Construction
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$2,534
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$3,169
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+25%
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Source: McGraw-Hill Construction
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Commercial and infrastructure construction are leading the
way in St. Louis with significant gains in starts. Construction
overall is strong in the Gateway City.
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Top Midwest Nonresidential Construction
Markets
(first five months; in millions of dollars)
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YTD 2005
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YTD 2006
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% Ch., 06/05
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Chicago
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$2,249
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$2,318
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+3%
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Detroit
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$650
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$1,357
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+108%
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Kansas City
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$540
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$811
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+50%
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St. Louis
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$436
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$809
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+85%
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Minneapolis
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$338
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$678
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+100%
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Indianapolis
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$557
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$540
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-3%
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Cincinnati
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$642
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$485
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-24%
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Milwaukee
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$297
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$300
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+1%
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Source: McGraw-Hill Construction
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St. Louis had the fourth biggest increase in nonresidential
construction starts in the Midwest for the eight biggest cities.
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