Even with many sealed lips about project fates, evidence of the credit crunch can be vividly seen in stilled excavations and incomplete, mothballed commercial and residential structures from New York City to San Francisco.
Developers in New York City alone have stopped construction on at least 30 sites, says the buildings department, while the local Building Trades Employers’ Association (BTEA) reports nearly $5 billion of delayed or stalled projects.
Construction also is slow on the West Coast. In California, the dollar value of private nonresidential building in 2008 was an estimated $19.1 billion, down about 15% from 2007, and the value of residential building in 2008 was $18.2 billion, down by nearly 37% from 2007, according to one analysis of building permits. This year will make 2008 figures look good, say industry sources.
In San Francisco, Beacon Capital Partners of Boston in October pulled the plug on a $100-million, 27-story office tower at 535 Mission Street, after piles were completed. Myers Development Co., San Francisco, in December halted plans for the 21-story north tower in its $300-million Centennial Towers project in south San Francisco. CEO Jack Myers says the area’s “satisfactory leasing performance,” which may rebound this year, would be a signal to move forward. The developer’s 12-story south tower, which is just about done, has no major tenants.
In the Big Apple, developers have put the brakes on long-planned high-profile megaprojects such as Atlantic Yards and Hudson Yards. Boston Properties, Boston, recently suspended construction on its $980-million, 1-million-sq-ft office building at 250 West 55th Street after a major tenant backed out of its lease. At the end of December, Boston Properties reported the company had invested $425 million in the project. At that point, it was 22% leased and set for completion in 2011. Currently, the company expects to reduce its capital commitments on the project through 2011 by $450 million.
Boston Properties also shut down development activity on its 840,000-sq-ft Eighth Avenue and 46th Street office project. It took a charge of about $23.2 million in land- and air-rights losses, as well as forfeited contract deposits and planning and predevelopment costs. The developer held a 50% interest in the job.
Swig Equities, New York City, has halted plans to convert an office building at 25 Broad Street into condominiums and build a mixed-use, 62-story hotel and condominium tower at 45 Broad Street. Locally based Alexico Group declines comment on its 58-story 56 Leonard Street residential tower. Locals say it is stalled.
Some sites will stay dormant until developers get financing to go “vertical,” says Marylin Davenport, senior vice president of the Real Estate Board of New York. Louis J. Colletti, CEO of BTEA, adds, “I expect unless we make changes and decrease construction costs by 25%, unemployment could be as high as 50% by April or May.”
The Midwest has been feeling the chill for months now, with two prominent Chicago skyscraper projects the 2,000-ft-tall Chicago Spire and 1,047-ft-tall Waterview Tower on hold until the economy thaws out (ENR 10/27 p. 12). Though Spire had sold about 30% of its roughly 1,200 residences by the time foundation work was completed last summer, it was not enough security to keep construction loans flowing. Likewise, hospitality giant Shangri-La Hotels & Resorts pulled out of the Waterview project earlier this month, leaving developer-designer-builder Teng & Associates with an unfinished shell of a building in the city’s downtown Loop.
Mike Bohn, senior vice president and regional manager in Chicago with Providence, R.I.-based Gilbane Building Co., says that while most of his company’s projects are not being canceled, many are being delayed by six months to a year or more due to the high cost of raising money. “Even if you can sell bonds, the interest rates are so high,” Bohn says.
The hospital market has not been immune. Clarian Health Partners, a consortium of health-care providers in Indianapolis, says the $235-million Riley Children’s Hospital is being delayed until the fall due to the economy. The project was supposed to be finished this spring.
Texas has fared better than some other states as the U.S. economy faltered, but it also is slowing. “There is pent-up demand, but faced with a confused economic environment, clients are not making the key decisions,” says John Cryer, principal in the Houston office of architect-engineer PageSoutherlandPage.
Russell Hamley, president of the Greater Houston Chapter of Associated Builders and Contractors, says, “Many ABC members have said their projects are being delayed, postponed, put on hold or canceled,” in large part due to the credit freeze. The developer for the 46-story, 139-unit Museum Tower condominium in Dallas, which was supposed to break ground last year, is working on financing and is “on track” to start later this year, says Matt Papenfus, Turner Construction Co.’s general manager.
Prescott Realty Group, Dallas, stopped work on the $75-million Heritage at the Stoneleigh Dallas condominium project after contractors reached about the 10th floor of the 22-story project. Completion had been expected this month. Work will proceed when the balance of the financing is in place, say sources.
In Utah, some contractors have a backlog that should take them through the year, but new private-sector projects are in a down cycle. In southern Utah especially, firms are seeing a significant slowing in commercial construction.
In Idaho, Bruce Poe, president of Boise-based Modus Architecture, says the commercial and retail markets are virtually “nonexistent,” while hospitality struggles.
Commercial and residential projects in Arizona are in trouble as well. Construction has been idled for about 10 months at Centerpoint Condominiums, a $200- million, three-tow- er condominium development in Tempe, after the 22-story and 30-story towers were topped out. The developer’s lender, Mortgages Ltd., went bankrupt after Mortgages’ owner killed himself. Since then, the bankruptcy courts have been trying to restructure the lender’s obligations, which has tied up all money for Centerpoint’s developers, Avenue Communities.
The view in Las Vegas keeps getting dimmer. The city is delaying construction until mid-2010 on a planned $890-million convention-center upgrade, amid falling visitor numbers and reduced gaming receipts. It will cost the convention center authority up to $5 million annually to service the project’s existing debt. About $140 million has been committed to the project thus far, of which 68.5% is being financed. Construction was scheduled to finish in 2011. In February 2006, MWH Global Inc., Broomfield, Colo., with HNTB, Kansas City, Mo., was awarded a four-year, $45-million contract as construction manager.
Harrah’s Entertainment Inc. recently announced it will delay opening a $375-million hotel tower at Caesars Palace on the Las Vegas Strip due to fewer visitors. The 23-story, 665-room Octavius Tower, which topped off in October, was scheduled to open this summer as part of a $1-billion casino-resort upgrade and expansion. Las Vegas-based Harrah’s is expected to finish the building exterior this summer but will leave interiors unfinished.
GSG Development recently renewed its lawsuit against former partner Harcourt Development of Dublin, Ireland, over costs associated with a failed project called Sullivan Square in the southwest Las Vegas Valley, a planned $1-billion mixed-use complex. Plans originally had called for eight buildings from 12 to 20 stories. The first phase entailed a 20-story, 159-unit high-rise building with residences priced from $375,000 to $1.8 million. It reportedly was 80% sold out. Deposits still have yet to be returned, according to reports. The first units were set to open early this year.New Owner
Work has halted on portions of the twin 600-ft tower, 2,998-unit Cosmopolitan Resort & Casino on the Las Vegas Strip. The owner, Deutsche Bank AG, which bought the 8.5-acre property during a foreclosure sale in August for $1 billion, wants the interior redesigned. Adopting a new look would undo months’ worth of work by general contractor Perini Building Co. The newest makeover marks the project’s third interior redesign. Miami-based Arquitectonica is the design architect, and Friedmutter Group, Las Vegas, is the architect of record.
Progress on the 2,998-unit condo-hotel tower slowed last year during the ownership change, moving the completion date from December 2009 to mid-2010. The project additionally has been slapped with two class-action homebuyer lawsuits asking for deposit returns. The suits claim the project’s delayed opening has cost homebuyers money. Cosmopolitan uses a condo-hotel concept that enables owners to rent out their residences as hotel rooms when not in use by the owners.
In the southeast section of Washington, D.C., Poplar Point, a planned $2.5-billion development that was billed as the largest economic development project in the city’s history, has been put on ice. Clark Realty Capital, Arlington, Va., and the district have parted ways as the uncertainty of the recession looms. “In this extremely challenging economic environment it is no longer practical for Clark to pursue the deal structure we currently have in place,” says Neil Albert, deputy mayor for planning and economic development.
In Georgia, Emory University has halted plans for a $1.5-billion makeover of its two health-care campuses. Emory expects the project, which includes a 250-bed hospital at its Decatur campus, to be on hold at least through the end of the year.
In Florida, the proposed $425-million Dr. P. Phillips Orlando Performing Arts Center, designed by Barton Myers and Associates, appears to be on hold. Balfour Beatty was in negotiations to build the 330,000-sq-ft project.