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Sunday, 03 August 2014 22:00

Real estate and construction outlooks point to industry’s sustainable recovery

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Cornerstone Architects in Grand Rapids worked on The Franklin, a newly opened restaurant in downtown Traverse City. The project is one of a diverse array of work the firm has seen in recent months, said President Tom Nemitz Cornerstone Architects in Grand Rapids worked on The Franklin, a newly opened restaurant in downtown Traverse City. The project is one of a diverse array of work the firm has seen in recent months, said President Tom Nemitz COURTESY PHOTO

For Tom Nemitz and his associates at Grand Rapids-based Cornerstone Architects Inc. PC, business has seen a noticeable uptick in the first half of the year.

The company recently worked on The Franklin, a new restaurant in downtown Traverse City, and the REO Town Depot renovation in Lansing and has seen consistent work coming in through a range of projects.

Despite the work on the boards and a steady flow of business, Cornerstone — which also has offices in Traverse City and St. Clair Shores — had been slow to put much faith in the industry’s recovery.

“We were all cautious in waiting to see if it was just a bubble,” said Nemitz, the president of Cornerstone Architects.

But results of a new industry index released in July by the American Institute of Architects (AIA) seem to indicate the increased work is part of a more sustainable recovery.

The AIA’s monthly Architecture Billings Index (ABI) showed that the Midwest led the nation with a score of 56.3, ahead of the south (53.9), northeast (51.1) and the west (48.7). Architectural billings are a leading indicator for construction spending nine to 12 months out, according to the AIA.

For Nemitz, this positive news reinforces the perception that local firms have been busy.

“The backlog of work seems to be sustainable,” Nemitz said. “There were a lot of things coming online (a couple of years ago) and there was a lack of people in both construction and engineering. … But now the backlog seems to be evening out some.”

As of late, the firm has kept busy with a range of projects, from the adaptive reuse of office space and small school projects to mixed-use and multi-family residential, a sector which Nemitz said is currently booming in the metro Grand Rapids area.

But the strength of the multi-family residential segment goes beyond West Michigan. Nationally, the sector ranked the highest (57.7) in the latest AIA report, trailed by mixed practice, commercial/industrial and institutional.

“The recent surge in both design contracts and general inquiries for new projects by prospective clients is indicative of a sustainable strengthening across the construction marketplace,” AIA Chief Economist Kermit Baker said in a statement.

The AIA report should give West Michigan architects a sigh of relief as previous months had shown the industry was expected to contract. In just two months, the index score for the Midwest swung from negative territory to solidly positive, gaining about 10 points.

In an earlier report, Baker said he believed the industry would quickly recover.

“(The last contraction) was just a statistical blip,” said Josh Szymanski, business development director at Owen-Ames-Kimball Co. (O-A-K), a Grand Rapids-based construction company. “It didn’t impact anything we saw in the marketplace.”

O-A-K has a positive outlook for at least the next two summers, during which the company has a strong pipeline of work, Szymanski said. The construction company is preparing to begin renovations to common areas at the 25 Ottawa office building in downtown Grand Rapids. O-A-K will serve as construction manager for the renovations to the building, which was purchased last winter by Oak Brook, Ill. property management firm Franklin Partners LLC.

Other notable upcoming projects for O-A-K include general contractor services on the Borgman Ford Mazda auto dealer renovation in Grandville and a Comerica Bank branch renovation in Coopersville, Szymanski said.

“Our experience matches that of the Architectural Billings Index results in that we’re seeing a variety of opportunities across a broad segment of markets,” Szymanski said.

A variety of five different projects, either underway or beginning shortly, represent a combined $10 million in revenue for the company, he added.

Healthy spending in both the design and construction industries are positive economic indicators, according to the AIA’s report. Now the industry association says firms must begin ramping up hiring to meet demand.

“With the first positive reading since last summer in billings at institutional firms, it appears that design activity for all major segments of the building industry is growing,” Baker stated. “The challenge now for architecture firms seems to be finding the right balance for staffing needs to meet increasing demand.”

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