Tech Expansion Fuels Construction Across the Region, Around the World

Submitted December 26, 2011, 4:53 PM

Sharon Simonson

Apartments have led construction’s nascent recovery. Now contractors say Bay Area demand is spreading, from multifamily to shop space to office renovation and development. One global contractor is predicting four pace-setting years, beginning in 2012, in which construction levels top those seen in the dot-com era.

According to The McGraw-Hill Cos., after five years of flat or shrinking construction starts, the San Francisco metropolitan area is seeing expansion. The statistical area includes San Francisco, San Mateo, Alameda, Marin and Contra Costa counties. Retail, office, warehouse and transportation-building work all are up year over year. Housing construction, mostly apartments, jumped last year and this year remains well off 2009’s floor.

Turner Construction Co.’s South Bay chief says “mega projects” will catapult the industry to new highs beginning next year and through 2015, including the $3.5 billion Apple campus slated to start in Cupertino next year and the $800 million Salesforce spread in Mission Bay, also posted to start in 2012.

“We consider anything over $100 million a ‘mega project,’” said Vice President and General Manager Kevin Antonelli. He forecasts construction starts valued at $8 billion next year, about the rate seen in 1999 and 2000. That is to be followed by construction starts exceeding $10 billion in 2013 and $12 billion in 2014.

He fears skilled-labor shortages involving tradespeople such as electricians or plumbers akin to what the industry experienced in the first Internet boom. “In 2014, 2015 and 2016, you have a lot of product coming on at the same time,” Antonelli said. He also wonders about the capacity of the general contracting community itself to handle the wave of huge jobs on the horizon.

In the South Bay, construction starts surged last year across all sectors from residential to commercial to institutional. This year, they have fallen back, excepting new housing, where starts are up again and running at roughly double the pace set in 2009, the cyclical bottom, according to McGraw-Hill.

Still, Silicon Valley companies also are fueling construction elsewhere. Bay Area-based Facebook Inc., which is moving from Palo Alto to a Menlo Park headquarters that it wants to expand, started a $200 million data center in Prineville, Ore., in October and recently sealed a contract to build its first non-U.S. data center in Sweden. Redwood City-based DPR Construction is building both.

Indeed, experts across the board said leasing, construction and business activity generally are driven by companies with a global reach, which the Bay Area has in abundance. “We’d say the bulk of the success that you are seeing in our top line is coming from global customers that are doing business with us all over the world,” David C. Sylvester, chief financial officer for global workplace product and office-furniture manufacturer Steelcase Inc., told analysts Dec. 21. Steelcase revenue in the third quarter exceeded $719 million, up from $673 million in the same quarter of 2010.

Ramin Golesorkhi, a vice president in San Francisco for consulting engineers Treadwell & Rollo, a Langan Co., said, “We have seen an uptick in certain sectors that we were involved in quite heavily before the crash: the high-rise market in San Francisco, which for all practical purposes started to go away.” Current proposals are for San Francisco housing and offices. His company sees projects a year or even longer before construction begins, though the vast majority of them go forward.

“I didn’t have these projects a year ago, and we see more and more coming in terms of requests for proposals,” he said. “I am definitely thinking we are seeing a lot more activity and that we are getting busier ourselves. But we have no big backlog either.” Golesorkhi, who has a doctorate in civil engineering from Berkeley, directs Treadwell’s engineering practice.

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