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Construction prospects in Michigan: Maybe not great in'08, but not bad

Date Posted: January 25 2008

Michigan is said to be in a one-state recession, but someone should mention that to the construction industry.

Our annual, completely unscientific poll of construction activity in different regions of the state finds pockets of fairly robust economy for the building trades, with 2008 expected to be an overall good year, after a 2007 that wasn't bad, either.

Some areas of the state have stronger prospects than others in Michigan - but for most trades, jobs are expected to be available if workers don't mind a longer commute.

Here's what's happening in various corners of Michigan:

Ann Arbor - A 15-year run of good - no great - employment for Washtenaw County came in an abrupt end in 2006, with substantial unemployment rearing its ugly head. There was more unemployment into the first quarter of 2007, directly attributable to the closing of Pfizer. The sharp decline in the housing market also hit the unionized building trades, which have had a substantial foothold on the residential market.

"It was definitely a down year for us in 2006," said Greg Stephens, business manager of IBEW Local 252 in Ann Arbor. "We lost jobs for 50 or 60 guys at Pfizer when they announced they were closing, and it took us a while to get back on track."

Employment in the area last year was led by work at Toyota's $130 million technical center in York Twp., the new Ann Arbor Skyline High School, and as always, work at the University of Michigan.

The electrical workers have about 60 on the bench right now, and the pipe trades have even more unemployment. But that situation is not expected to last.

"It looks like 2008 is going to be a banner year," Stephens said. "U of M is ready to bust right open this year. They're setting steel at Mott Children's Hospital ($500 million) now, and when it gets going later this year, we're going to have 200 electricians on that project alone."

Other projects that will be major building trades employers in Washtenaw County this year include the U-M Ross School of Business, expansion of the U-M Football Stadium, the new Kellogg Eye Center, a new patient tower at St. Joseph Mercy Hospital the North Quad project, as well as the $171 million Broadway Village at Lower Town, a mixed-use development.

Bay City/ Saginaw/ Midland area - Building on a good 2006, 2007 was even better and 2008 is "going to be booming" in the Tri-Cities region, according to Plumbers and Steamfitters Local 85 Business Manager Scott Garrison.

Right now, in the dead of winter, the local is employing more than 300 travelers. Their primary employers: Hemlock Semiconductor, where a $500 million "Phase II" expansion will wrap up at the end of February - getting ready for a "Phase III" project that will cost about $1.2 billion. Hemlock makes polycrystal components for solar panels.

And at nearby Dow Corning in Midland, raw materials for the Hemlock plant are produced - and a $200 million expansion is ongoing.

In addition, a boiler outage began Jan. 11 at Consumers Energy's Karn Weadock power plant, following up a nearly complete installation of an ash recovery system.

The Fabiano Bros./Marketplace Corporate Center near Midland has just begun. A new middle school is under construction in Saginaw. Major addition/renovation work is going on at HealthSource in Saginaw and Bay Medical in Bay City, as well as smaller jobs at St. Mary's and Covenant Health in Saginaw.

And in the spring, the Midland Co-Generation Venture is expected to install four to six new boilers. Construction on an ethanol plant in Ithaca may start in the spring. Down the road, Consumers Energy has declared it intention to build a new power plant on the ground of the Karn-Weadock site - if state regulations can be changed to make the regulatory environment more fair to established utilities.

"We worked close to 1.5 million man-hours last year, and that was the best in a dozen years," Garrison said. "2008 looks to be good if not better. They keep talking about how Michigan is having these job losses - well, we're booming here in the Tri-Cities."

Detroit/Southeast Michigan - "Cautiously optimistic."

That was the summation of the construction outlook for this area suggested by Andrew Shmina, President and CEO, A.Z. Shmina, Inc., and vice chairman of Associated General Contractors of Michigan.

Focusing on Southeast Michigan, Shmina said despite Michigan's "nine-year-long economic downtown," there is still "a healthy optimism" about prospects for work opportunities.

Shmina said that the national construction economy is expected to grow at a 3-percent rate - "tempered by a whopping 25-percent plunge for single-family housing." He added: "Construction in Southeast Michigan and across our state will lag behind the national picture and, in fact, see a decline of up to 2 percent."

The slowdowns in the residential and multi-family housing sectors - not traditional strongholds for union construction - are primarily what's causing the lag. But Shmina said office, retail and general government work are also part of the slump. So to is road and bridge building, expected to drop by $300 million, or 18 percent statewide in 2008.

However, manufacturing and health care sectors are projected to increase by 14 percent and 36 percent, respectively. He said K-12 school construction is expected to see "a robust increase" over 2007, thanks to the passage of bond issues in Southeast Michigan. And spending of $1 billion for state, county and local projects will remain consistent with 2007.

A survey of 24 general contractors found that only two respondents were pessimistic about the prospects for 2008. Others said they expected the level of work to be about the same, others said they feel 2008 will be a good year - "maybe even a strong year," Shmina said.

Nearly every contractor, he said, cited the struggles in the automotive industry as having a negative impact on their business whether or not their firm had ever done work for an auto manufacturer. "You cannot escape the problems of the auto industry if you make your living in Michigan," was the common refrain, he said.

Shmina's said there is "one major pocket of prosperity right now in Michigan that should be highlighted given its significance, and it's the City of Detroit." He said Detroit is experiencing a number of notable new construction projects.

They include the work, much of it completed, at the Motor City and MGM casinos, as well as the ongoing construction associated with the Greektown Casino. There's also the renovation of the historic Book Cadillac and Fort Shelby hotels, and numerous loft project downtown. Marathon Petroleum is planning a $1.5 billion expansion of its Southwest Detroit refinery, and there's health care work at the Detroit Medical Center, Henry Ford Hospital and St. John Hospitals.

Regionally, Ford announced last year it will invest $866 million in its Southeast Michigan plants. General Motors reported it will be investing at least $500 million in plant improvements over the next two to three years. And construction is ongoing at the new $700 million, 26-gate North Terminal at Metro Airport.

"So as we look ahead to 2008 and prospects for more projects in the pipeline and shovels breaking ground across our state," Shmina said, "let's view the economic outlook with the cautious optimism expressed by so many. And given the difficult environment faced by those of us in the construction industry, that's perhaps the best way to be."

Flint - "The Flint area held our own in 2007," said Zane Walker, president of the Flint Area Building Trades and a business agent with Iron Workers Local 25. "We sent a lot of our guys to Detroit, Ann Arbor and Up North last year for work. This year will probably be a little better, but not much better, than '07."

The big news is east of Flint, near Port Huron, where construction of the $730 million Chrysler Maryville Assembly Plant will be ramping up this year. And, at some point, GM has pledged to build a new engine plant at the Buick City complex.

But locally, pickings have been slim. The area has offered some school work, in Swartz Creek, Lapeer and North Branch. Light commercial projects have remained fairly steady, Walker said, but overall, "it's been an ordeal." He said the out-of-area work has been very helpful.

"There's work, but you have to drive to it," Walker said. "I tell people if you want every job to be 10 or 15 minutes from your house, you better have a wife with a good job."

Grand Rapids/Muskegon - Last year at this time more than 1,000 Hardhats were working at the shutdown of Consumers Energy's J.H. Campbell plant. The project ended last spring, but "a lot of work followed the outage," at the plant, said Bruce Hawley, business manager of Iron Workers Local 340 and president of the West Michigan Building Trades Council. "The work there really helped us to have a good year in 2007."

Work at Consumers Energy's B.C. Cobb Plant and the Campbell plant will be significantly less this year, although an SCR pollution control is expected to be installed on Unit 2 at the Campbell Plant later this year.

In 2008, the massive "Hospital Hill" or "Health Hill" development will be the major regional construction employer, and will be in full swing through the year.

"Grand Rapids has never experienced anything near the concentrated magnitude of the medical research, training and patient facility construction now occurring on Health Hill," said an article from last July in the New York Times.

All told, nearly $1 billion in construction is taking place on a hill along Michigan Street. Included is a new medical school, a children's hospital, a biomedical research center, a cancer treatment center, and two medical treatment and office buildings. Also under construction is a seven-level underground parking garage; it will hold 2,300 cars and cost $30 million. The buildings will cover 1.2 million square feet.

Also in Grand Rapids, two nine-story hotels are in the works.

Out at the Gerald Ford International Airport, construction is under way on a new $115 million "parking project," which includes the relocation of roadways and the building of a four-story, 4,900-space enclosed parking structure across from entrances to the terminal.

Plans also include a 600-foot-long canopy between the parking structure and the terminal, a gateway plaza, elevators and escalators from the upper parking levels to the terminal's main level.

"Overall in 2008, it looks like activity is going to be down a bit from last year," Hawley said, "but it should still be good. We've got some real good prospects in the works."

Kalamazoo/Battle Creek - "All in all a good year," said Southwest Michigan Building Trades Council President Hugh Coward, about 2007. "In '08, there are a number of jobs that should keep us busy."

Among the highlights: some 450 Hardhats are upgrading the USG paper mill in Otsego. The D.C. Cook Nuclear Power Plant has scheduled a 45-day shutdown starting in March, and the Palisades Nuclear Power Plant is expected to have a shutdown in the fall.

Construction on the $270 million Firekeepers Casino in Battle Creek could begin as early as March. The Gun Lake Casino, if a lawsuit holding it up is settled, could start just about immediately. That's also the potential start-up month anticipated for a new ethanol plant in Watervilet. A Monsanto seed production facility is expected to start in Constantine. Kellogg's is expected to expand its research and development area, to the tune of $40 million in Battle Creek.

Battle Creek Public Schools are expected to undertake $69.7 million in building renovations and expansion this spring. And a number of smaller job, including school projects in Kalamazoo, are keeping the trades busy.

"In the New Year, things wound down pretty quickly, and we have people around Michigan and in Milwaukee and Chicago," Coward said. "But it won't be long this year, first the iron workers followed by the other trades, that we're going to come out of the chute like gangbusters, and we're going to be pretty busy."

Lansing area - "Last year was somewhat of a down year for work for us," said Scott Clark, business manager of IBEW Local 665. "And through this spring, there doesn't look like a lot of relief."

But in the good old summertime and into the fall, work should be picking up in mid-Michigan. The Accident Fund has chosen the historic Board of Water and Light's Ottawa Street Power Station in downtown Lansing to house its new $182 million headquarters building.

Delta Dental is planning to expand their operations in Okemos by 115,000 square-feet of office space in two buildings - to the tune of $85 million. The Michigan State Police are expected to build a $45 million post in downtown Lansing. Auto Owners Insurance Agency is expected to build a new $45 million data retention facility in Delta Twp. Jackson National Life, which built its Alaeidon Township headquarters in 2000, is already looking to expand, in a project that may cost $60 million.

The Capitol Club Tower could break ground next month. It would likely be a 20-story building whose developer expects would cost up to $40 million. On the site of the old Lansing City Club, the building would have 80 residential units, restaurants, a gym, and maybe a grocery store and swimming pool.

Michigan State University has a few major projects being planned, including a new recycling facility and an art museum.

"Unfortunately, I see the beginning of this year a lot like last year, with the chance for a turnaround for the greater Lansing area taking place in the summer," Clark said.

Monroe - "Last year wasn't bad - everyone who wanted to work, could work, if they were willing to drive," said Ron Sweat, business manager of Plumbers and Pipe Fitters Local 671. A number of area trades workers were able to find work in Washtenaw County or in Toledo.

This year a flue gas desulferization project at DTE Energy's Monroe Power Plant is expected to improve job prospects significantly, especially towards the middle of the year.

"There's going to be work at the Monroe plant, but not a lot else," Sweat said. "But during the summer and through the rest of the year, that project should employ everybody we have and then some."

The Fermi 2 plant underwent a refueling outage in November, and won't see much significant work until the next refueling outage in 18 months. There will be ongoing work decommissioning Fermi 1, however.

Light commerical and residential work is slow, Sweat said, but with workers traveling, "we're not in too bad a shape for this time of year."

Traverse City/NW Lower Peninsula - "We didn't have quite as good a year in 2007 as we did in 2006," said Jeff Bush, business manager of IBEW Local 498. "This year is expected to be slow to start, but may turn out well if the jobs I'm hearing about go union."

A "Main Street America" amusement park has been proposed for Grayling, although approval of the $160 million plan is on hold. The state wants more proof from developers that they have the money to proceed. Also on hold is the McBain ethanol plant

New Meijers stores are being discussed in Petoskey and Grayling.

Casino work in Petoskey and Manistee kept the trades working in '07, and work is ongoing at the $80 million Turtle Creek Casino along M-72 in Williamsburg. The trades also did a significant amount of work at the Merritt Energy Gas Plant in Kalkaska in '06 and '07.

"There wasn't much school work in '07 and we'll see a little more in '08," Bush said. "We're doing some service work, and some work in small stores, but it's slow right now."

Upper Peninsula - Last year was one to forget in the U.P., with most union trades down 25-35 percent in man-hours, reports Tony Retaskie, executive director of the U.P. Construction Council. "Some projects just didn't materialize, or were delayed into '08, which of course, is good for us this year," he said.

As a result, a variety of projects are in the pipeline for 2008. "We're sitting on about $1 billion in work, especially as we move into late '08," Retaski said. "I'm very optimistic about our prospects for work."

Northern Michigan University in Marquette has been a dependable employer, as usual. It has been renovating dorms in the summer on a regular schedule in recent years, and in '08, the trades will be converting the campus' Ripley Heating Plant from a gas-burner to a coal and bio-fuel burner.

The Empire and Tilden iron ore mines, also traditionally dependable employers, are looking into converting to a nugget production process for high-grade iron. Construction of the $150 million Kennecott Eagle Nickel mine near Marquette is expected to start this year, unless it's stopped by legal action.

A new Bell Memorial Hospital in ongoing in Ishpeming, and will go through the summer of '08. There is also a new Schoolcraft Memorial Hospital to go up in Manistique, and a new Emergency Department at St. Francis Hospital in Escanaba.

Also in Escanaba, a new Besse Fine Arts Building will get under way at Bay College.