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[caption id="attachment_33769" align="alignleft" width="216" caption="Roger Nelson, president of Midstate Construction, surveys local architecture firms about their current and expected workload, a metric he calls the Nelson Index. Such surveys can show how much business the construction industry can expect several months or a couple of years in the future. (click image to enlarge)"][/caption]

Potential for significant projects on the horizon is limited to a few "bright spots," or business sectors that are moving forward with construction, according to a poll of North Bay architecture firms to be presented at the Business Journal’s Construction Conference 2011 on Tuesday.

Construction Conference 2011

Tuesday, May 10, 2011

Construction overview

Paul Campos, vice president of governmental affairs and general counsel, BIA of the Bay Area

"Super-regulators" of the Bay Area

Roger Nelson, president of Midstate Construction

Nelson Index survey of future local construction activity [see related story]

Keith Woods, chief executive officer, North Coast Builders ExchangeGreen Construction Panel

Michael Kimberlain, regional engineer, KriStar Enterprises

Dave Leff, president, Leff Construction

John McGarva, president and CEO, Western Water Constructors

Mark Soiland, president, Soiland Co.Read responses from the Green Panel to several questions on industry trends.

Opportunities Panel

Paul Elmore, president, RNM Properties

Bob Mitsch, vice president for facility planning and development, Sutter Health

Keith Rogal, partner, Rogal + Walsh + Mol, redeveloper of the Napa Pipe plantRead responses from the Opportunities Panel to several questions on industry trends.

This year, 10 of the 14 polled design firms are looking for work this year and next and are doing so with substantially reduced staffs, according to responses from about a dozen firms collected by Roger Nelson, president of Petaluma-based commercial general contractor Midstate Construction. Results of his informal barometer of building business activity on the horizon -- what he calls the Nelson Index -- have been presented at the Construction Conference over the years.

"It is certainly down from 2000 and 2007, when it was done before," Mr. Nelson said about the survey.

The indexes for expected workload in 2011 and 2012 were both 1.36. An index of 1 means a firm is "actively looking for projects"; 2, "busy but room for new good projects"; and 3, "full plate," or "all the work we can handle." The indexes for 2000 and 2007 were 2.55 and 2.44, respectively, suggesting the pipeline of projects was nearly full at the time.

2000 and 2007 were turning points in local construction. The first was amid a white-hot commercial real estate building boom to meet demand from telecommunications systems developers and software companies; the second, the year after the housing bubble burst.

Schools and public projects are most of the types of jobs Nelson Index firms are tackling, and less than a quarter of their work is coming from office, industrial and retail projects, the firms told Mr. Nelson.

And because of the large inventory of available commercial space and flurry of recent leasing activity from firms taking advantage of low rents on buildings that have sold recently for as little as a third of the cost to build new ones, contractors should be gearing up to do more tenant-improvement jobs for the foreseeable future, he said.

Indeed, while total building permit value for Sonoma County increased nearly 9.5 percent last year from 2009, nonresidential alterations and additions -- the Construction Industry Research Board classification that includes tenant improvements -- increased 50 percent and was the major factor in the 31 percent jump in nonresidential construction in that timeframe. [See building permit activity chart.] Such work on existing buildings in the county increased to 72 percent of all nonresidential permits last year from 63 percent in 2009.

However, permit value for tenant improvements and related work in five North Bay counties declined last year because a decline in total nonresidential work outside Sonoma County.

The nonresidential alterations in Sonoma County offset virtually no growth in homebuilding permits for Sonoma County last year from 2009.

"All over our market area, everything is down -- both commercial and residential," said Keith Woods, chief executive officer of the North Coast Builders Exchange, which covers Lake, Mendocino and Sonoma counties.

But home renovation permit activity in Sonoma County increased 42 percent from 2009 through 2010, accounting for 38 percent of residential construction activity last year. First-quarter nonresidential permit growth from a year before offset declines in total residential and home-alteration permits.

With local construction activity slowed substantially from the peak in 2006, contractor groups have been reaching out to local governments to expedite the review of the projects set to take bids from a local construction industry eager for work, according to Mr. Woods.

"Governments' not getting in the way when someone wants to do something would be the best economic stimulus we could have," he said.

The Construction Coalition, led by 11 building industry associations and companies, has been making progress toward this goal, even with significant cutbacks in local government staffing, according to Doug Hilberman, president of Axia Architects of Santa Rosa and chairman of the coalition.

"One thing that is very beneficial for agencies and the construction industry is to facilitate dialogue earlier in the [building department efficiency policy-making] process, so we can bring resources in to suit their needs," he said. All permitting departments are involved in the "very respectful dialogue" to one degree or another, he added.

Examples are ongoing discussions with the Sonoma County Permit & Resource Management Department since budget talks last summer to review customer-service practices, and final recommendations are being drafted now.  A handful of ideas came from the two dozen-plus economic-development recommendations developed by the city of Santa Rosa last year with help from local builder and business groups.

A major permit streamlining effort in the final stages now is the alignment of green-building ordinances in most Sonoma County locales from various levels of adherence to the BuildItGreen residential and LEED commercial standards to an augmented version of the new state green-building code (CalGreen), effective in January, according to Mr. Hilberman. The Construction Coalition has been providing governments with best practices and experiences from jurisdictions around the Bay Area and elsewhere that already have done so.

Construction Conference 2011 at the Fountaingrove Inn in Santa Rosa starting at 7:30 a.m. Tuesday will feature an overview of Bay Area "super-regulators" by Paul Campos, general counsel of the BIA of the Bay Area, as well as two panels of local experts.

On the Green Construction Panel will be Michael Kimberlain, regional engineer for KriStar Enterprises; Dave Leff, president of Leff Construction; John McGarva, president and chief executive office of Western Water Constructors; and Mark Soiland, president of Soiland Co. [Read their responses to several questions related to the outlook for green construction.]

Members of the Project Opportunities Panel will be Paul Elmore, president of RNM Properties; Bob Mitsch, vice president for facility planning and development at Sutter Health; Keith Rogal, partner of Rogal + Walsh + Mol, redeveloper of the Napa Pipe plant. [Read their responses to a number of questions about opportunities for contractors.]

North Bay construction activity

Value of building permits issued in Lake, Marin, Mendocino, Napa and Sonoma counties in millions of dollars

CountyPeriodRes.

alter.Total

res.Single-

family

unitsMulti-

family

unitsNonres.

alter.Total

nonres.TotalChangeLakeQ1 2011$0.59$1.8760$0.49$2.24$4.11-25.90%Q1 2010$0.58$2.0590$2.41$3.50$5.552010$3.89$12.83460$4.67$8.73$21.56-33.10%2009$5.48$16.66570$9.65$15.58$32.24MarinQ1 2011$26.22$30.8980$12.00$15.66$46.54-11.31%Q1 2010$29.90$33.8590$15.14$18.63$52.482010$144.55$203.23720$50.94$93.60$296.84-5.95%2009$138.76$200.136597$90.49$115.50$315.63MendocinoQ1 2011$2.59$6.11192$0.87$3.79$8.465.22%Q1 2010$1.99$4.67220$1.35$1.93$8.042010$10.89$32.4712235$9.00$15.17$47.64-6.92%2009$9.56$26.811122$16.45$24.38$51.18NapaQ1 2011$6.98$13.13160$8.46$24.25$37.37-12.69%Q1 2010$6.93$14.79160$22.37$28.01$42.802010$32.18$101.221152$57.67$94.25$195.47-22.80%2009$36.88$120.861266$57.33$132.38$253.23SonomaQ1 2011$11.11$39.119844$14.57$18.59$57.700.10%Q1 2010$12.20$41.6954138$11.72$15.96$57.652010$54.56$142.78284186$65.12$90.03$232.829.47%2009$38.41$144.1035971$43.32$68.58$212.68North BayQ1 2011$47.48$91.1014746$36.40$64.52$154.18-7.40%Q1 2010$51.60$97.05110138$52.99$68.03$166.512010$246.07$492.53639223$187.40$301.78$794.33-8.17%2009$229.09$508.56719176$217.24$356.42$864.96

Source: Construction Industry Research Board. Note: Total residential permit value, residential alterations and additions, single-family units vs. multifamily units, total nonresidential permits, nonresidential alterations and additions, and total building permits.

[back to the discussion of building-permit activity]