🔒Commercial development is booming, but concerns grow over shortages of skilled laborers

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Contractors around the state are reporting that they're busier than ever as aging demographics, demand for housing and relatively low interest rates are creating new project opportunities.

“I think that we're heading in a better direction this year than we have in quite some time,” says Matt Marks, CEO of the Associated General Contractors of Maine.

Kevin French, co-founder of Landry/French Construction Co., says that the firm saw a 67% growth in revenues in 2016 and that it has a significant backlog for the year ahead.

“There's a lot of work out there now,” French says. “Everybody has confidence in the direction the economy is going.”

Mark Adams, president and CEO of Sebago Technics Inc. in South Portland, says that 2016 has been one of the most successful years in company history.

“We're seeing very strong activity,” says Adams. He is particularly heartened that demand for survey work remained robust even as snow fell. “It's another great indicator that people are wanting to sell or survey property in preparation for development,” he adds.

In addition to seeing a larger volume of work, contractors are reporting that they're seeing larger projects.

Scott Tompkins, director of business development for PC Construction Co., noted that in the past the company's largest projects in Maine had topped out at around $40 million. Last year, the company completed a $61.3million project at Bath Iron Works. PC Construction is serving as construction manager on a three-school, $46 million school renovation project in Kennebunk for RSU21, as well as projects totaling $95 million for The Jackson Lab. That Jackson Lab work includes $74 million worth of work on its planned research center in Ellsworth and a $21 million Center for Biometric Analysis in Bar Harbor.

“There's a lot more of the mega projects out there than there have been in the past,” says Tompkins.

What's driving the growth

While interest rates have inched up slightly, financing is still cheaper than it has been in the past. And that has prompted developers, businesses, colleges and municipalities to charge ahead on projects that they'd put off during the recession.

“A lot of folks have realized that you can't defer projects forever,” says Tompkins. “The longer you wait, the more expensive they tend to get.”

Demand for housing in Portland is driving a spate of new condominium projects around Portland. Landry/French has been working on three residential projects there. That includes a $10.5 million condo project at 62 India St.; the $8.5 million Luminato Condo project at Franklin and Newbury streets; and the $10.5 million Seaport Lofts at 113 Newbury St.

Elsewhere, construction is underway at 101 York St., a $15 million apartment and retail, and parking complex on the former site of El Rayo Taqueria; it is expected to be completed this year. Also due for completion this year is 667 Congress Street, a $22 million complex with apartments, offices and retail space off Longfellow Square.

Looking ahead, a developer has filed plans to build a housing complex on Portland's Commercial Street, at the site of the former Rufus Deering Lumber Co.

It's not just high-end housing that's on the horizon. In December, the Federal Home Loan Bank of Boston announced that it would provide $17.5 million in subsidies to help finance 13 affordable housing projects throughout the state.

Aging demographics are creating a need for long-term health facilities and critical health care services.

In Bangor, Eastern Maine Medical Center expects to complete a $305 million expansion project this year. In Portland, Mercy Hospital expects to break ground in 2018 on a major expansion at its Fore River campus. Maine Medical Center recently announced plans for a $512 million expansion expected for completion within five years. Also in Portland, a $20.5 million expansion and renovation of Park Danforth senior living facility is winding down. In both Wells and Brunswick, $20 million is being invested in new Avita Memory Care Centers to provide services for residents with Alzheimer's, dementia or memory loss.

There are significant state projects underway. In Augusta, a $17 million, 90,000 square-foot office building to house state agencies is expected to be completed by 2019.

In Windham, a $150 million renovation and expansion of the Maine Correctional Center in Windham has been proposed.

In the private sector, companies have embarked on major expansions.

In March 2016, Tyler Technologies broke ground on a $15 million project to add 94,000 square feet to its campus in Yarmouth. Less than two miles north on Route 1, construction got underway in October on a new office complex for Patriot Insurance.

ImmuCell Corp, a Portland-based biotech firm, plans a $20 million production facility due for completion in the fall of 2017.

Wright-Ryan Construction Inc. is undertaking work at the Coastal Maine Botanical Gardens in Boothbay, Waynflete in Portland, and at Inn by the Sea in Cape Elizabeth, says John Ryan, president of the firm. The three projects will total $35 million to $40 million in work.

In Waterville, Colby College plans to spend up to $250 million on new campus buildings, including an athletics complex and performing arts center. The college also bought five buildings in downtown Waterville that it plans to redevelop. Work will begin this year on a 42-room hotel, which is expected for completion in 2018.

Meanwhile, aging roads and municipal water and wastewater systems, in need of upgrade and repair, are expected to create more opportunities for contractors, engineers and all related trades. A report by the American Society of Civil Engineers recently issued Maine a grade of a C-.

What's ahead

Looking ahead, Marks at the Associated General Contractors of Maine is hopeful that energy and hydropower projects could provide more opportunities for contractors in the short term and, in the long term, help mediate the cost of doing business in Maine, while encouraging private investment.

“Energy development was a shining light during the great recession,” Marks says. “I think everyone is watching to see what direction Maine will take in the next few years with regards to energy policy.”

Yarmouth-based Ranger Solar, for example, has work underway at the Sanford-Seacoast Regional Airport and the Loring Commerce Center, and in Farmington. The Sanford project, which is expected to cost at least $50 million, would be the state's largest solar project and is expected to begin permitting this year.

Marks also hopes to see more activity around the state, like the investment in the International Marine Terminal in Portland.

“If we can expand and develop more in these areas, we can connect Maine nationally and internationally,” he says. “We should be able to do that in other parts of Maine. Getting those roads, bridges, waterways in place, then we can support the industries that come here.”

The outlook

Though optimistic, industry leaders are watching a variety of factors that could impact growth. There's the perennial concern about the labor shortage — which is particularly acute amongst skilled laborers like drywallers and plumbers, as many workers left the state or the industry during the last downturn. (See related story on page 25.)

Marks is concerned that so much of the activity is concentrated in the southern portion of Maine.

“I want to see the momentum to move north,” he says. “We need to find opportunities where Maine can encourage more economic activity in areas where population declines are a serious problem. It is clear people are leaving to find work and opportunity and we can't afford that to be a continued trend.”

This problem affects all of Maine's industries — not just construction and development.

“If we don't have a diverse portfolio of activity throughout the state, we're only going to have greater problems,” Marks adds. “As a state we still need to focus on ways to encourage private growth.”

Adams, of Sebago Technics, is keeping an eye on the housing market, which is driving so many projects. “That's an area that can slow down very quickly if people feel anxiety about their jobs or general economic conditions,” he says.

The industry is also keeping a close watch on interest rates.

“One just never knows when that extra increase is going to make a pro forma not work for an investor, or they're going to decide that they're just not willing to take the risk,” Adams adds. “We're still very aware of the last great recession, and we understand that a lot of this could change quickly.”