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Contractors Profit From Universities’ Growing Pains

Tue September 30, 2003 - Southeast Edition
Giles Lambertson



College campuses are a growth industry for general contractors. In an economy that is in transition from manufacturing to service and is struggling to regain its footing after the terrorist attacks of 2001, thousands of people are going back to school to reinvigorate their careers or to start new ones.

Add to that influx of second-chance students a general growth in college-age populations and you have campus infrastructure under stress. Construction companies are feeling this stress, but in a profitable way.

In 2002, colleges and universities in this country experienced the largest single construction year in history, according to an annual Dun & Bradstreet survey for College Planning & Management magazine. More than $11 billion was spent or set aside for projects last year, mostly for design and construction of new buildings, the magazine reported. A similar level of expenditure is expected in 2003.

By comparison, spending on campuses in the 1990s was at the $6-billion annual level. As recently as 1999, campus construction totaled $6.8 billion. Something of an explosion has occurred in the past four years.

States in the Southeast are among the leaders in campus spending and North Carolina’s experience is typical of the region. The Tar Heel state is in the midst of a seven-year building program on its university and community college campuses.

North Carolina voters approved a bond referendum in 2000 that earmarked $2.5 billion for the 16-campus university system. Add to that an additional $1.7 billion generated by on-campus fees plus some $500 million designated by state legislators for other campus projects and a number approaching $5 billion is in the pipeline. Fewer than half the designated projects are under construction, so work clearly is in place for several years to come.

Dave Simpson, director of the building division for Carolinas Associated General Contractors (AGC) of America, figures the bond issue money alone will create approximately 90,000 jobs.

“And that’s very good,” he said, “because construction work generally continues to be in bad shape. It’s just not there.”

The North Carolina AGC has approximately 3,000 members, for whom the surge in campus building “puts a lot of bread on the table,” Simpson said.

Two thirds of campus spending across the country is for new buildings, but the other third is modernizing some venerable structures or expanding them. “This is our 150th year,” said Miles Albertson, of the University of Florida, “so there always are a variety of buildings in need of infrastructure upgrades.”

Albertson is associate director of facilities planning and construction. From his front row seat, he has watched the university grow for 17 years. He said building on university campuses has been sustained through the years by normal legislative appropriations, gifts and grants, all in response to constantly growing enrollment.

“We have been consistently under construction for as long as I can remember,” he said. Yet, Albertson acknowledges that these are boom times. He estimated current projects total $300 million. “We’re in the midst of [a boom], maybe heading down a little. I think we’re at a peak, but we have projects on backlog that are coming up.”

The slope to lesser spending at the University of Florida indeed is pretty gentle.

For instance, a new proton beam cancer treatment building is approximately 10 percent completed at the university’s Shands Medical Center in Jacksonville. The 89,800-sq.-ft. (8,082 sq m) structure is a project of Perry-McCall Construction Company.

In Gainesville, on the university campus, remodeling of the first three floors of the pharmacy wing of the Stetson Medical Sciences building is in progress. PPI Construction Management Inc. is scheduled to complete that project in 2004.

Several other health care-oriented projects also have begun, Albertson said, along with work at the law school and the accounting school and at the university’s “cultural plaza,” where a butterfly collection and sculpture garden project is coming along. The construction activity is spread among a variety of contractors, Albertson said. “I think we do a pretty good job of distributing work.”

The University of Alabama at Birmingham (UAB) doesn’t date back 150 years, but UAB has been a mushrooming campus since its inception in 1936 as an adjunct to the University of Alabama.

Part of this can be attributed to its mission of health care, a burgeoning industry all by itself. The college began as a medical and dental school, but in 1969 became an autonomous university. The campus sprawls across 75 city blocks in Birmingham and has more than 100 buildings.

The number of structures is growing. UAB has 11 projects under construction, ranging from a 633-space parking deck to renovation of the Alys Stephens Center for the arts to a 12-story interdisciplinary biomedical research building named after Alabama Sen. Richard Shelby.

“It has become the largest employer in the Birmingham metropolitan area,” said Bill Caton, director of membership and public relations for the Alabama AGC. “UAB is always buying new properties and refurbishing them.”

Approximately 100 mi. away, Auburn University is experiencing similar construction activity. Much of it is keyed to agriculture, the result of an Alabama AG bond issue that is funding several new buildings there.

A $13-million large animal teaching hospital is one of them. Another is a 65,000-sq.-ft. (5,850 sq m) poultry science building with Georgian style columns fronting it and costing approximately $14 million. A third project — a forestry and wildlife building — has a price tag of approximately $15 million.

Conner Brothers Construction Company is intimately familiar with all this work. The firm has been involved in much of the construction at the university in Auburn for the past 50 years.

“We normally do a lot of campus work,” said Ab Conner, whose grandfather founded the hometown company 86 years ago. He said campus construction “goes in cycles,” but that work has been plentiful the past three years.

Both Alabama schools are erecting the most expensive type of campus building. According to the College Planning & Management survey, the most costly new campus structures are science buildings, with a median cost of more than $17 million.

The median cost per square foot for science buildings is $243. The next most expensive campus structures are technology buildings, with a median price tag of $227 a square foot.

In Georgia, university enrollment is projected to increase by 50 percent by 2020, according to a report by the university system’s board of regents. This continues an enrollment surge that began in the first couple of years of this century. That will mean a 30-percent increase in classroom and student space — ultimately requiring new buildings.

“At today’s prices, the cost to construct this increase in square footage will be in the range of $4 billion,” Linda Daniels, vice chancellor of the college board, said in a presentation in September. Throwing in refurbishment of existing campus facilities and general infrastructure upgrades, “We will need capital funding totaling $7 billion over the next 15 years,” she said

Daniels predicted that $2 billion of that would be funded through private sources, leaving a state investment of approximately $330 million a year for 15 fiscal years.

That bodes well for the state’s 600-member AGC.

“There is a well-documented need on our campuses for a number of different projects,” said Mike Dunham, the organization’s executive vice president. “Aging alone causes some of it. The University of Georgia has been around for a long time.”

School campus construction in general, from kindergarten through university-level, has been a critical component of the construction industry in Georgia in the last two years, Dunham said.

“It has been a mainstay of the Georgia market since 9/11 [2001] and all the other things that have affected the economy,” he said. “It is a very strong market.”

Dunham said university work typically is spread among the various campuses, with contractors and chancellors jockeying to land contracts. He sees that level of competitive work continuing for the foreseeable future.

“They don’t print enough money to satisfy the needs of the university president,” he said.

A project at Kennesaw State University (KSU) typifies one way Georgia is trying to leverage resources to upgrade campuses. New dormitories going up at Kennesaw, which is located just northwest of Atlanta, are the result of a private-public marriage. Private sources are building the residential facilities and will operate them on state-owned land.

Several dorms to house several hundred Kennesaw students are going up, the first one completed in 2002. The project is a joint venture of the university, the KSU Foundation and Place Properties. An estimated $53 million in bonds were issued in June by the Cobb County Development Authority to fund construction.

Residence halls as a rule are less expensive to construct than higher tech academic buildings, which is encouraging to private investors. According to last year’s annual survey by the American School & University organization, the median dorm project in 2001 cost approximately $128 per square foot.

Finally, if all of these traditional campus needs aren’t enough to keep contractors working, a new type of building is being raised on some campuses. It is one not traditionally associated with higher education.

According to the College Planning & Management report, 10 colleges in the United States in 2002 were building facilities to care for preschool children.

While the median cost of the structures is relatively small, longtime observers of higher education consider it significant that universities are now setting aside valuable campus space for day care centers.