Commercial Construction Picking Up

But increased competition and tighter lending practices are affecting the industry

The cranes, cyclone fencing and trucks bearing the names of construction companies are welcome signs around town.

One of the largest construction projects is the $220 million, nine-story, 390,000-square-foot tower being built on Carle's Urbana campus.

Work continues on the Ikenberry Commons project, the 14-year, multimillion-dollar redevelopment of a group of residence halls on the University of Illinois campus. The two-year, $58 million renovation of Lincoln Hall will wrap up for the building to reopen this fall.

It seems every school district is either building or doing maintenance work, thanks to the countywide 1 percent school facilities sales tax. The Champaign district has built two new elementary schools, and the Urbana district made substantial improvements to its athletics complex and is renovating its high school auditorium.

And the Vineyard Church in Urbana is adding 20,000 square feet to its existing building.

Those are positive signs after the hit the construction industry took during the recession.

"The whole construction industry has been in a slump since 2008," said Mike Hynds, president of English Brothers. "I believe this year, compared to the last two years, there is a little more work to bid."

The Carle project, Ikenberry Commons and the Lincoln Hall renovation are providing a lot of work for the 660 members of Carpenters Local 44.

Randy Johnson, business agent for the local, said things have turned around in the past year. He had 185 union members who were out of work 12 to 14 months ago. That list is down to 85 now, he said.

The school facilities sales tax has helped too. "We've generated a lot of man-hours because of that 1 percent tax increase," Johnson said.

The Commercial Real Estate Development Association reported total construction spending nationwide fell for four straight years, from 2007 to 2010, the last year for which figures were available when the organization issued its report early this year.

Spending on office, industrial, warehouse and retail construction was down 53.2 percent from 2007, and the amount of square feet of new building space decreased by 72.8 percent when compared with 2007.

But demand for industrial space was expected to grow at the low end of the normal range in 2012, increasing somewhat in the second and third quarters of the year, the organization reported in February.

While there is construction under way, much of the work that businesses such as Petry-Kuhne Co. would be doing -- office buildings, grocery stores, banks -- is not available, said the company's president and CEO, Pat Dorsey.

"The bottom line for contractors such as myself -- I consider us a typical commercial contractor -- is the business we would have by the first of April is a lot more than what we have right now," he said.

There is also more competition for projects, especially the large ones.

"These (Carle and Ikenberry Commons) projects are so big, it basically does bring in a lot of people from out of town," Dorsey said.

Bill Walter, operations manager for A&R Mechanical Operators, agreed.

"We're seeing more firms out of the geographic area," Walter said. "There are not as many (local) general contractors involved in large projects. They might get parts of bid packages, but it's almost like a subcontractor, with a construction manager handling the project."

Another factor affecting the industry: tighter lending practices by banks in the last few years. And "surety companies have started really looking at customers with a fine-toothed comb, tightening up credit going to local contractors," Hynds said.

He said tighter surety practices have affected contractors' ability to bid on very large projects, "so people who would have bid a Carle project or Lincoln Hall can't do so."

Hynds said rather than working on three or four large projects, English Brothers has been doing more smaller projects, including work for ADM and the Scovill Zoo in Decatur, St. John's Hospital and a nursing home in Springfield, and an addition to the Mahomet-Seymour Junior High School building funded by the 1 percent sales tax increase.

Petry-Kuhne is doing some work at Carle, Dorsey said, and it has done a number of smaller projects recently, including remodeling offices in the Illini Media building on campus and rebuilding a Green Street building gutted by fire last year. The company also has several big steel projects Dorsey expects to be working on soon.

The amount of work is up for A&R Mechanical Operators, which is a subcontractor for heating, air-conditioning, ventilation and plumbing work.

"I feel like we have been growing in a manner that is contradictory to what the industry is showing," Walter said. "Fortunately for us, we're up in terms of our backlog."

The Carle project is providing quite a bit of work for the company, and it has just picked up work on the mechanical systems for a new electrical engineering building on the UI campus.

"We are very fortunate. Central Illinois has really treated us well," Walter said. "But it's always a daily struggle to continue to keep that volume up."

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