North Carolina Report: A Steady ’08 Ahead

Infrastructure needs are driving major projects while the state’s urban areas are booming.

By Bea Quirk

North Carolinians are generally upbeat about the economy and construction industry in their ever-growing state.

“North Carolina is still seeing strong population growth and in-migration, so we are not going to be hit with a slowdown like other parts of the country,” says Scott McLeod, executive vice president and area general manager for the Carolinas and Virginia for Skanska USA Building in Raleigh. “We feel positive about growth in North Carolina and don’t see it struggling.”

advertisement

Indeed, McGraw-Hill Construction’s Analytics Division is fairly positive about North Carolina as well. Though the company projects a 4% decline in overall construction start activity for the Tar Heel State, its nonresidential sector is considered the strongest in the four-state region. McGraw-Hill Construction, the publisher of Southeast Construction magazine, projects nonresidential starts will increase by 3% in ’08 to tally roughly $7.4 billion. That’s the only nonresidential market in the four-state region to have a positive forecast for the coming year.

In December, the U.S. Census Bureau announced that North Carolina was the sixth fastest-growing state in the country, adding nearly 200,000 people between July 1, 2006, and July 1, 2007. The rate of growth since 2000 has been 12% more than a million people giving the state a population of about 9.1 million, 10th largest in the U.S.

In addition, North Carolina’s housing market hasn’t shown the declines experienced in many other parts of the country. For example, the sales price for existing homes during November rose 3% from November 2006.

Still, no one is expecting 2008 to be a gangbuster year. University of North Carolina-Charlotte professor Tony Path, who compiles the quarterly Construction Barometer Report for the Carolinas Associated General Contractors, predicts the state’s construction industry will see a real growth rate of about 2%, down from the 2007 rate of 3%. He says that most of that growth will occur in the state’s urban areas around Charlotte, Raleigh and the Piedmont Triad.

Plath adds that although he expects to see less activity in the private sector, increased government spending on infrastructure, especially in the area of education, should make up for the decline.

Dave Simpson, North Carolina building director for CAGC in Charlotte, agrees. “North Carolina is in good shape, and a lot of jobs are being bid out, but contractors are saying they could use bigger backlogs,” he says.

In November 2006, Wake County (including Raleigh) voters approved a $970 million bond for school construction, and a year later, voters in Charlotte approved a $516 million school bond package. Both were the largest in each county’s respective histories.

The state’s 58-campus community college system currently has 78 state-funded projects under construction totaling $210.6 million. In addition, another 53 projects, totaling $131.6 million, are being built with local funds, such as county bond referendums or private-sector funding.

The 16 campuses in the state’s university system are spending the last of the $2.5 billion construction bond passed by the state’s voters in 2000. North Carolina State University in Raleigh broke ground on a $72 million, 110,000-sq-ft veterinary medical center in November with Bovis Lend Lease heading for a 2009 completion target.

Also in November, Balfour Beatty Construction of Durham began construction on a $65 million physical science building at UNC-Chapel Hill. And the contractor is building a $65 million student union at UNC-Charlotte set to open in the fall.

Duke University in Durham will soon begin work on several projects, including an $18 million Global Health Research Building, a $10-million building for its integrative medicine program, a $5 million initial phase for renovating Wallace Wade Stadium and a $9.5-million expansion of its research-focused Lemur Center.

Other infrastructure needs are growing along with the population. “There’s no question the Legislature has to come to grips with the need for new funding mechanisms for infrastructure for universities, public schools, water and sewer and transportation,” the CAGC’s Simpson says.

That’s especially true with roads. The state General Assembly has budgeted about $1.2 billion for new road construction and maintenance for 2008, about the same amount it is has funded in recent years. “But with cost increases of about 5-10%, it means we are losing ground,” says Berry Jenkins, highway division director for the CAGC.

Jenkins adds that the North Carolina Department of Transportation has estimated the state will face a $65 billion shortfall in meeting road construction needs over the next 25 years if it doesn’t develop new sources of funding. But he says he is heartened by the creation late last year of the 21st Century Transportation Committee, a group of 24 representatives from business and government formed to develop both short- and long-term solutions.

“We’re encouraged that this will be different from studies in the past, so it could make a dramatic difference in North Carolina’s transportation funding,” Jenkins says. The committee is expected to produce an interim report in time for the legislative session that begins in May.

Because of the state’s growing population, the health-care sector is also expected to remain strong.

In the Charlotte area, Carolinas HealthCare system, which opened a new children’s hospital and an additional surgical tower at its main location this fall, has asked for state approval to begin a $174 million expansion of its satellite facility in Pineville.

The Duke University Health System is also asking for permission to spend $596 million on a 548,420-sq-ft, seven-story expansion of its main hospital. Construction could begin as early as this fall.

UNC Hospitals is expanding its cancer center with a $180 million project in Chapel Hill that will be completed in 2009 by Skanska USA Building. In the eastern part of the state, Pitt County Memorial Hospital in Greenville is constructing the $110 million East Carolina Heart Institute. The contractor is a joint venture between Goldsboro, N.C.-based T.A. Loving Co. and McCarthy of Atlanta.

Charlotte, the second-largest financial center in the country, is booming, with both Bank of America and Wachovia building new office towers in the center city. They are being joined by several marquis projects, such as the NASCAR Hall of Fame, the EpiCentre complex, a Ritz-Carlton Hotel and an arts complex with three museums and a performance hall.

The state’s first light-rail line began operating in Charlotte in November.

In Raleigh, the state capital, the $222 million, 507,000-sq-ft Raleigh Convention Center, being built by a joint venture of Skanska and Tarboro, N.C.-based Barnhill Contracting Co., will open this summer, along with an adjoining  400-room Marriott Hotel being built by Atlanta-based Holder Construction Co.

The Raleigh-Durham International Airport is undergoing a $370 million expansion by Archer Weston Contractors of Atlanta.

In nearby Durham, Skanska should have the $44 million, 2,800-seat Durham Performing Arts Center ready to open late this year. Also in the Raleigh area, in the city of Cary, Arcadis has been selected to handle design and construction administration for the Downtown Cary Streetscape project, which will include more than 2 mi of streetscape and roadway improvement design at an estimated cost of $33 million.

Just north of Charlotte, in Kannapolis, the cornerstone of the $1.5 billion North Carolina Research Campus will open in June. The 311,000-sq-ft core lab will be the first building to open on the 350-acre site being developed by billionaire David Murdock as a biotechnology and life sciences center. Opening later in the year are buildings for UNC Chapel Hill’s Nutrition Research Institute and N.C. State’s Institute for Advanced Fruit and Vegetable Science.

The regional office of Turner Construction is handling construction of the three structures, which McGraw-Hill estimates will cost about $170 million-$205 million to build.  When completed, the campus will feature 1.7 million sq ft of research and educational space, 360,000 sq ft of office and medical space and 300,000 sq ft of retail and residential space.  It is expected to create about 5,000 jobs.