Construction has been picking up its pieces and building its way up this year with more projects on the horizon now than it had this time last year.
The industrial sector has seen the most construction activity in developments, and in the past year, has seen some speculative industrial construction, largely within the O’Hare market and in the I-55 corridor.
A number of build to suit projects are also underway with a large portion of that work being driven by the needs of the transportation and shipping services industries. There’s also been quite a bit of activity in the food and beverage sector, both in the area of manufacturing and cold storage, according to Howard Green, Executive Vice President at Meridian Design Build.
“We are working on a large freezer building in Romeoville that is unique because of its 72′ clear ceiling height,” he said. “The building structure has been designed around an automated storage and retrieval system that utilizes automated cranes and the additional clear height to optimize storage density. That facility is under construction now and will be completed in the 2nd Quarter of 2016.”
Other noticeable activity is on infill sites— parcels that may have been overlooked or remain undeveloped due to unsuitable soils, wetland or flood impairment, or another issue that would make the site more costly to develop. Green said that the current demand for new industrial product in those markets is such that developers and users are willing to pay the premium to build on those types of sites.
The high demand for construction, Green said, is creating its share of challenges.
“It’s great to see the uptick in activity but we’re finding that there is a finite supply of resources at all levels which in some cases means it is taking a bit more time or effort to get projects done than it has in the past,” he said
Green believes this is because every piece of the cycle is getting dragged out— architects and civil engineering firms are busy, and it takes a long time to design the building. If municipalities are backed up, he said it takes longer to get a permit.
Green thinks it puts the burden on those that need buildings to plan ahead and start the process sooner than they needed to in years past when the economy was slower and less robust.
Meridian has been seeing a trend of people developing sites in more urban areas where there’s employment.
Michael Sullivan, CEO at Peak Construction said Peak has experienced the majority of work in both industrial and hospital sectors for new hotels.
Sullivan said that while demand is greater than supply in many areas, it has not been sustained enough time to justify the expansion of production facilities
“Prices to date have risen annually, but at sustainable levels for strong future growth,” he said.
Additionally, there have been several noticeable trends this year.
Energy efficiency is one— between more LED lighting to reduce operating costs, changing the installation in the roofing costs, or adding more concrete pavement, which tends to be more durable and requires less maintenance than asphalt.
Brian Paul, Executive Vice President at PREMIER Design + Build, LLC, also mentioned the continued focus on efficient, cost-effective products. He said operational savings seem to be more on the end-users’ mind.
“With the uptick in the market, there is definitely a big shortage of qualified labor,” he added. “In General Contracting Project Management, 3-5 years of experience labor is sparse.”
Technology is also improving the design process in planning stages and visual simulation.
Sullivan said that most building design objectives now include sustainable efficiencies for energy and operation, whether or not they pursue LEED. He said on the actual building side, one trend is that ductilcrete continues to be used more and more on floor and exterior paving.
But construction has been experiencing a concern— construction labor is getting tight and lead times for key materials are getting extended out significantly.
“Precast wall panels that are used in industrial for example, have a lead time of five to six months, whereas previously, it might have been two to three months when things were slower,” he added.
The demand for many key materials have seen shortages as well. Sullivan said some of these include steel, cement, precast concrete wall panels, glass, and piping. Like Green mentioned, Sullivan said they are seeing longer lead times to get materials.
Another issue? Municipalities are all busy. Permit reviews are taking longer than they have, based on the volume of projects that are underway right now.
“As a general rule it is taking governmental agencies longer to complete their reviews,” Green said. “They’re dealing with a finite number of staff doing a larger number of drawing reviews.”
With the overall demand remaining high, he anticipates that this will only become a bigger challenge in the year ahead.
As for the remainder of the year, Paul believes there will still be a hesitance for major capital expenditures and investments, despite the optimism. He said a lack of supply of labor has resulted in increased labor costs, which is being passed on through construction costs.
It’s hard to predict what construction will be like in the next few years, but many remain optimistic.
“With what we all have been through, we are cautiously optimistic, however, we are aware that there will be a downturn at some point,” Paul said.