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Michigan construction outlook, 2007 Generally, the trend is up in Michigan

Date Posted: January 19 2007

Rocked and rolled by the fortunes of the low-riding automotive industry, the story of Michigan's woeful economic tale has been well-told in recent months.

Last year during our annual, informal economic roundup of construction activity around the state, we expected a barrage of bad news, but received word of surprising resilience in Michigan's construction industry. And surely this year, we expected that the lousy economic news in the state would migrate into construction.

In some areas it has, in most, it hasn't. Overall, we found that Michigan's construction industry, while still below the heydays of the late 1990s, is holding its own.

Here's what's happening:

Ann Arbor - It's a sign of the tough economic times in Michigan when the region that has been the state's most consistent construction employer over the last 15 years or so - Washtenaw County - hit a rough patch in the last quarter of 2006.

"Last year was good for the first three quarters, but things seemed to come to a screeching halt in the fall," said Greg Stephens, business manager of IBEW Local 252. "I think it was because a lot of school work wrapped up, but we lost a tremendous amount of work in the residential sector, too."

Stephens said Local 252 is experiencing 30-40 percent unemployment, which is unprecedented in recent years.

The University of Michigan has been the region's rock for the building trades - five major jobs alone at the university are creating $1.2 billion in construction activity. They include the new Mott Children's Hospital, work at the U-M football stadium, the Kellogg Eye Center, the North Quad and the new Business School.

In other areas, more than one million man-hours have been worked at the GM Willow Run plant. Pharmaceutical manufacturer Pfizer is a consistent employer. St. Joseph's Hospital in Ypsilanti has sponsored $100 million in new construction, including a yet-to-be-built new patient tower.

A new student union has been built at Eastern Michigan University, and a new wellness center is slated for Washtenaw Community College. Construction is ongoing to construct a new Ann Arbor High School. Toyota will be ramping up its $130 million technical center in York Township in 2007.

The slowdown in the region's construction momentum should start to turn around when warmer weather returns.

"I think we'll see a steady improvement once we get to springtime," Stephens said. "By then everybody should be back to work."

Bay City/ Saginaw/ Midland area - "A couple of times in 2006 we had everybody working, and it's been about a dozen years since we've seen that full employment," said Plumbers and Steamfitters Local 85 Business Manager Scott Garrison. "It sure beats the 50 percent unemployment we had a few years ago."

Work in the region includes projects at some "old reliables," including: expansion at the Hemlock Semiconductor plant, upgrades at the Dow Corning plant, new construction at Dow Chemical, and upgrades to the Consumers Energy Karn-Weadock plant.

Ethanol plant construction is growing like corn: Two more plants, in Ithaca and McBain (north of Cadillac), are both a go for '07.

The building trades have completed a new elementary school in Saginaw and worked on four other schools - and there will be as many projects in 2007. In upper education, Saginaw Valley State University will be getting new dorms in '07, and Central Michigan University will sponsor three projects.

Not unlike the rest of the state, health care projects are booming here, too. The

Bay Regional Medical Center is adding on 140,000 square-feet of space and 66,000 square-feet of renovated space, to the tune of $40 million. HealthSource Saginaw is undergoing a $35 million building replacement and improvement project. Gratiot County Hospital will be getting a four-story addition.

All told, Garrison said, "'06 was a good year and it looks to me like '07 is going to be even better."

Detroit/Southeast Michigan - Last month, the construction outlook for both Southeast Michigan and the entire State of Michigan was detailed at the Detroit Economic Club. It was laid out by Ron Hausmann, president of Walbridge-Aldinger's Heavy, Civil and Construction Engineering Group and 2007 chairman of the Michigan Association of Constructors.

We provided the highlights of his speech in an article last month that covered the entire state - now here's his forecast for Southeast Michigan (he included the Ann Arbor area).

"Bottom line for Southeast Michigan Construction as we move into 2007, is that we'll see about the same amount of construction spending, continuing to be less in residential, and more in many of the smaller non-residential construction markets," Hausmann said.

Big-ticket projects in the region include the new MGM, Greektown and Motor City casinos, the renovation of the Book-Cadillac Hotel, work at Beaumont Hospital in Troy, and the new North Terminal at Metro Airport.

Jobs that may start in 2007, Hausmann said, include work at the Detroit Medical Center heart hospital, Children's Hospital in Detroit, McClaren Hospital in Oakland County, the FBI facility in Detroit, modernization of I-94 in Detroit, and the Detroit Water and Sewage Dept. Oakwood Basin Program.

All-told, Hausmann said there are 17 known substantial projects approaching $3 billion. He said the construction industry in Michigan generated about $6 billion in revenue in 2006, about 3 percent less than in 2005 and "substantially" less than the peak in 2000.

About 45 percent of all the state's construction workers are in Southeast Michigan. The number of construction workers employed is down about 10.5 from 2000.

He said about 40 percent of SE Michigan's construction in 2006 was residential - down significantly from 2004 when residential exceeded 50 percent of the market. Housing construction is continuing to decline as a percentage of Michigan's overall construction industry.

"The overall residential downturn in our construction industry in SE Michigan dollars has largely been offset by steady gains in non-residential segments," Hausmann said, which is good news for union construction.

In various construction sectors he projected:

  • Offices: up 2% in 2006 and up another 4% in 2007
  • Retail: same in 2006 and up 6% in 2007
  • Medical, health : up 10 percent in 2006 and up 10% in 2007
  • Manufacturing: doubled in 2006 from 2005; same level in 2007
  • Education: same levels of spending overall 06 and 07
  • Highways: up 31% in 2006 and up another 12% in 2007

Flint - There weren't any large jobs to speak of around here in 2006, few mid-sized jobs, and a lot of small ones that did what they could to keep area trades employed.

"Last year held its own, but man-hours were down compared to '05," said Zane Walker, president of the Flint Area Building Trades and a business agent with Iron Workers Local 25.

Construction of the GM L-6 Engine Plant wound down in '06, taking away a nice baseline employer for the trades. Some of the slack is being picked up at hospitals and with school work. McLaren Hospitals in both Lapeer and Flint are putting on significant additions.

The Carman-Ainsworth School District, north of Flint, is sponsoring construction of new elementary schools and school additions. North Branch High School is getting a $25 million addition, and the district is getting a $25 million new elementary school.

Mott Community College has ongoing improvements worth about $10 million, and Baker College consistently has a small amount of work ongoing.

The best news the area has heard in a long time, Walker said, came on Jan. 10 with the announcement by E 85 Inc. of the planned construction of a $150 million ethanol plant in Corunna.

"I think, for us, '07 is going to be a lot like '06, with our people employed by a lot of small jobs," Walker said. "It's going to be slow, and we're going to have some of our people traveling for work."

Grand Rapids/Muskegon - There's a nice boom going on in the City of Grand Rapids, where the city reports that $513 million in ongoing construction activity, part of $1.1 billion in total work that's planned over the next few years.

There's more good news in nearby areas as well, as the building trades will be putting their skills to work in a wide variety of projects that should keep them busy in 2007.

"You take a look at what's going on, and we're definitely sitting a lot better than we were in '03, '04 or '05," said Bruce Hawley, business manager of Iron Workers Local 340 and president of the West Michigan Building Trades Council. "We had a pretty good '06, and this year is looking to be at least as good."

In Grand Rapids hundreds of Hardhats are toiling on "Hospital Hill," which includes work on the $190 million Devos Children's Hospital, the Spectrum Cancer Pavilion, a women's health center and a new phase of the Van Andel Institute. The $60 million Icon on Bond condo project is moving along, as is a new $100 million Marriott Hotel, a new museum, in addition to a new $60 million River House at Bridgewater Place condo development.

In other parts of western Michigan, more than 1,000 trades workers are toiling at Consumers Energy's J.H. Campbell plant.

Major water treatment plants are being built along Lake Michigan near the Campbell plant, and in Wyoming. Big new casinos are being erected in New Buffalo and Weyland.

While K-12 education work has slowed, major projects are in the works at Grand Valley State University and at Ferris State.

"It looks like we're going to be pretty active," Hawley said.

Kalamazoo/Battle Creek - The new year is starting slow, but it seems to be a lull between a good 2006 and probably a better 2007.

That was the appraisal of the Southwest Michigan Building Trades Council President Hugh Coward, who said construction workers should be putting their skills to work in a variety of sectors this year.

One of the biggest jobs going is the $160 million Four Winds Casino in New Buffalo. The 52-acre development include six restaurants, 124,000 square-feet of gaming space, and future phases are expected to include a 160-room hotel and special events center.

In Kalamazoo, the new eight-story Miller-Canfield building is under construction. Johnson Controls will provide some employment. So will Stryker.

School districts that have had construction include the recently completed Lakeview High School and Pennfield High, which will be completed this summer.
School district construction bond issue votes are slated in May for Battle Creek ($85 million), Marshall ($75 million) and Portage ($145 million).

Two projects at Western Michigan include dorm renovations Kohrman Hall and Brown Hall. A new $28 million Kalamazoo County Juvenile Facility will start this year.

The health care sector is well-covered, with work coming up at Calhoun County Medical Center in Battle Creek, another phase of construction at the Battle Creek Health System, and more employment at Bronson Hospital in Kalamazoo.

And, yet another ethanol plant is on its way, a $90 million project in Watervliet.

"All in all we're looking at a real good year for the Southwest Building Trades," Coward said.

Lansing area - Last year at this time, the $800 million GM Assembly Plant in Delta Township was in its final stages, school and hospital work was strong, and construction employment was pretty good in mid-Michigan.

"Unfortunately, '06 was a lot like the month of March: it came in like a lion and went out like a lamb," said Scott Clark, business manager of IBEW Local 665 and secretary of the Lansing Area Building Trades. "Things dropped off at the end of the year, and I don't really see them rebounding much in 2007."

Some of the good news in the region includes the ongoing construction of the $67 million, four-story West Wing expansion at Sparrow Hospital, and the $50 million expansion of Ingham Regional Medical Center. The HardTech Mason plant is expanding to the tune of $74 million, and construction of a new Michigan State Credit Union has started.

School work is usually a stalwart sector, but three major school projects have been completed in recent years, and the outlook in '07 is slim, so far. Spinoff work from the Delta Township plant also hasn't materialized.

Clark said he'd have a better handle on the coming year when bid packages go out in a month or two.

Mike Crawford, secretary-manager of the Lansing-based Michigan Chapter National Electrical Contractors Association, and area representative, acknowledged the slowdown, and said area trades and contractors are looking long-term at attracting new businesses.

"A common theme that has cropped up in mid-Michigan is support for the Prima Civitas group that was founded by David Hollister," he said. "There's a lot of excitement about the alliances formed with Michigan State University and the mid-Michigan Construction Alliance, and the focus that's being put on attracting new business and industry."

Hollister, the former Mayor of Lansing and director of the Michigan Department of Labor and Economic Growth, founded Prima Civitas as a non-profit regional economic development organization.

The organization's goal is to "leverage the area's assets in higher education and K-12; auto and other manufacturing; agriculture; and emerging life science and information technology sectors to build a new economy." Grant money from the state's 21st Century Jobs Fund is being leveraged to attract new kinds of businesses - the multitude of state ethanol plants are one example as are other types of energy development.

Monroe - As they have for years, area Hardhats have looked to DTE Energy's Monroe Power Plant and the Fermi 2 Nuclear Power Plant as cornerstone employers in the area.

The two power plants continue to be major sponsors of work. In 2006, through 2007 and into 2008, the Washington Group, DTE Energy and the trades are installing new pollution controls at the coal-burning Monroe Power Plant, in a $700 million project that employed some 600 trades people at peak employment last summer.

Unfortunately, this year, there will be a lull in the project until scrubbers are installed in the fall.

Meanwhile, at Fermi 2, an 18-month refueling outage is also expected to begin in the fall, although there has been little information released so far, said Ron Sweat, business manager of Plumbers and Pipe Fitters Local 671.

"We had a pretty decent year in 2006, with most of our members employed," Sweat said. "It slowed down before the holidays, and I don't see it picking up again until the fall. All in all it looks like a pretty slow year around here."

Sweat said area trades workers in '06 completed the Dundee Engine Plant, rebuilt a furnace at Spartan Steel in Frenchtown Township, put up an addition to Mac Steel in Monroe, and got spotty work at Plastech, where nonunion trades have been a problem.

The slower work picture in the Washtenaw area has had a domino effect in surrounding areas like Monroe, Sweat said, where up to 10 Local 671 members regularly have been employed. That's not the case now.

Traverse City/NW Michigan - Construction work has slowed down this winter, as it usually does, but prospects are good in 2007.

"Last year was a heckuva lot better than in '03, '04 or '05," said Jeff Bush, business manager of IBEW Local 498. "We had a real good summer and fall in 2006. We're looking pretty good into 2007, and maybe into 2008 if the work that's out there goes our way."

The major employer in the area continues to be the new $140 million Odawa casino in Petoskey. The trades are also working at the Little River Casino in Manistee, Merritt Energy in Kalkaska. Other projects that will provide employment in '07 include the Munson Medical Center in Traverse City, condos in Boyne City and a Charlevoix harbor project.

"We've done pretty well in light commercial, and residential work was also pretty good until the market dried up like it did everywhere," Bush said. "But overall this should be one of our better years if the projects I'm hearing about go union. If not, it could be pretty slim around here."

Upper Peninsula - "The year 2006 was pretty good for construction activity in the U.P.," said Tony Retaskie, executive director of the U.P. Construction Council. "In '07, we're looking forward to more opportunities for work and a better year."

Work on higher education campuses are expected to be major sources of work in the Upper Peninsula, with miscellaneous improvements at Michigan Tech, an ongoing expansion at Bay Community College, and the remodeling of a hall at Northern Michigan University. There are also various K-12 education renovations and additions throughout the U.P.

The trades are also working on the Hannahville Casino, a wastewater treatment project in Marquette, and a new $3.2 million DNR dock on Mackinac Island. There will be some work in the mines, including the prospect of the start of construction of the Kennecott nickel mine, which is expected to include an investment of $100 million. Paper mill work will also be available.

Retaskie said there are also "plenty of rumors" of big box retail coming to Iron Mountain, Escanaba and Marquette.

It's almost unheard-of that there would be no snow on the ground throughout many areas of the U.P. in the second week of January, but that's the case across the Midwestern and Eastern U.S. Retaskie said the warmer weather probably hasn't had much of an effect on the construction industry - with the exception of allowing Hardhats to work a little more comfortably.

"Maybe some projects have a little more going on, but we all know that there's a lot of winter to go this year," he said.