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VOL. 6 | NO. 37 | Saturday, September 7, 2013

EMPHASIS Construction & Design

Handful of Projects on Horizon, but Construction Still Struggling

By Michael Waddell

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Commercial real estate construction activity in the Mid-South perked up modestly this year following a sluggish 2011 and 2012, and industry execs are cautiously optimistic that the positive trajectory will continue through next year.

Industrial Developments International is expanding the 478-acre Crossroads industrial park in Olive Branch, one of just a few construction projects happening in the area.

(Memphis News/Andrew J. Breig)

“We are guardedly optimistic and hoping that things will improve with the commercial market. We have seen a few glimmers of light, and we hope that trend continues,” said David Sink, executive director of the Mechanical Contractors Association of Memphis and the Sheet Metal & Air Conditioning Contractors Association of Memphis.

Sink cites recent encouraging news like International Paper’s plans to build a $90 million office tower, boosting its Poplar Avenue campus.

Big projects that have been underway across the Mid-South this year have included the Mitsubishi and Electrolux manufacturing plants, as well as a $173 million Baptist Hospital campus in Jonesboro, Ark.; a $200 million Methodist Hospital in Olive Branch; and a $110 million, seven-story tower for St. Jude Children’s Research Hospital in Memphis.

With industrial projects, Industrial Developments International Inc. is constructing a 241,000-square-foot speculative building at its Crossroads Distribution Center in DeSoto County, and it has plans to start and complete a 430,000-square-foot building there by the end of the year. And Panattoni Development plans to build a 500,000-square-foot facility in the coming months in Marshall County, Miss.

Other major commercial projects going vertical in town include Highwoods Properties’ current construction of two new restaurants, Season 52 and The Capital Grille, in front of its Crescent Center office building on Poplar Avenue in East Memphis.

“When those projects finish up, everyone is looking at what will go on in the future, and at the moment there does not seem to be too much out there,” said Sink, who is aware of no new major developments planned for retail.

Overall employment numbers locally have been up slightly this year compared to 2011 and 2012, according to numbers that Sink calculates based on number of permits filed and man hours worked. He has seen membership numbers grow accordingly this year for both associations he represents.

According to the U.S. Labor Department’s August report, the nation’s construction industry registered 9.1 percent unemployment, down dramatically from 13.5 percent just two years ago and 1.7 percentage points above the overall 7.4 percent unemployment rate across all industries.

“So far this year there seems to be more projects out for bid,” said Mike Jones, president of the Builders Exchange of Memphis and vice president/project manager at American Tile, which handles primarily commercial tile work in airports, hotel/motels, office buildings, schools and restaurants. “The economy seems to be a little bit stronger than last year and our company has been busy, but there are many companies that are not. We’ve been fortunate.”

Still, Jones has seen several companies go out of business this year.

“Our membership has dropped at the exchange,” he said. “The economy tightening up at the end of last year caused a few companies to cancel or drop out.”

The Builders Exchange provides job plans and specifications for contractors to look at either in a plan room or online in order to bid on potential projects from around the country. Jones has seen a slight uptick in hotel/motel projects that have become available for bid this year.

Overall, the Builders Exchange’s membership numbers dipped in the past 12 to 18 months from as many as 549 companies to roughly 430 companies today. Since the drop-off, however, in the past few months the exchange has picked up a few new members.

Jones remains a bit uncertain about the future but feels there is plenty of work at the moment throughout the Southeast U.S. Much of American Tile’s business currently comes from outside of Memphis.

This year has been a nice change of pace for American Tile, as business had suffered last year to the point that the company reduced its staff by September from roughly 70 employees to 27.

“Last year was a really tough year,” Jones said.

The increased workload this year means Jones will need to hire new employees in the coming months, but the company’s total staff is not likely to reach previous levels.

“We’ve got some big projects coming online in the late fall and early winter, so we’re going to need more people to handle the increased workload,” said Jones, who cited new upcoming jobs at Vanderbilt University in Nashville and a tractor supply headquarters building in Brentwood, as well as an upcoming contract to install terrazzo marble floors on all of the levels of St. Jude’s new tower here in Memphis.

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