Slowdown Among the Pines

Northern Arizona Activity Report

Construction activity has slowed dramatically in the past year, but some projects are still underway, including Aspen Place at the Sawmill, several NAU projects and a new gas pipeline.

By Michèle Van Haecke

Northern Arizona’s once-active volcanoes could serve as models for the economic state of the local construction industry. Solid markets have melted away. Financial backing has dissolved in vapor and ash.

The $120 million Aspen Place at Sawmill features a distinctly local personality with quaint, awning-shaded sidewalks leading to buildings comprised of local stone, brick and weathered steel.

Image courtesy DAVIS

While no one knows how long this formerly explosive market will remain dormant, experts agree it won’t stir soon.

“It took a while to get into this situation,” says Ronald Gunderson, a Northern Arizona University economics professor for more than 30 years and a frequent adviser to regional community and economic leaders. “To correct it will take time as well.”

Fundamental shifts in the credit market and supply and demand are necessary for recovery, and there’s no quick fix, he adds.

According to the Arizona Department of Commerce, the state’s construction industry lost 37,200 jobs (16.4%) between August 2007 and August 2008, the largest such decrease in a decade. The unemployment rate is up in northern communities where construction is big.

Around Flagstaff and Prescott it’s above 5%; Mohave County 7.4%; Navajo County 9.5%; and Apache County 11.4%.

“It’s a reversal of what we’ve seen in all these areas,” Gunderson says. “Our primary leg to stand on has been knocked out.”

As elsewhere, residential construction has been hard hit. U.S. Census Bureau data shows single-family permits in the five northern counties fell from 10,032 in 2005 to 6,987 in 2006 to 3,902 in 2007, a 44% drop. By August 2008, permits for Flagstaff, Prescott and Lake Havasu City-Kingman totaled 938. Permit figures don’t show planned building that never started, such as 3,500 homes in Flagstaff’s Villagio Montana community scuttled by the developer in 2007 or a Young’s Farm project deadlocked in Dewey-Humboldt.

While some commercial activity continues, local development officials report trouble here, too. A Sam’s Club and two hotels will be completed this fall in Prescott Valley, but a Super Wal-Mart has been postponed two years. Other commercial and municipal projects in town are awaiting funding.

Money trouble has stalled or scrapped at least 10 approved projects around Payson, and in Prescott several are gathering dust.

“I’ve never seen anything anywhere near this severe or this prolonged,” says Arizona Contractors Association vice president Larry Adams, a Prescott native who’s owned commercial and residential Pueblo Construction in Bullhead City for 43 years. Adams says the industry is “on life support” and cautions against banking on commercial jobs. “Commercial always follows residential,” he says.

There are exceptions, including a pipeline extension, work at Northern Arizona University and several local municipality projects.

An additional 500 million cu ft of natural gas per day will soon be flowing to metro Phoenix and parts south. The Transwestern Pipeline Co. Phoenix Expansion project will bury 258 mi of 36- and 42-in. pipe from its San Juan mainline in Ash Fork to Pinal County.

The Houston-based company’s $850 million project will include 105,000 tons of steel pipe and provide a second gas source to distributors, currently served by El Paso Natural Gas Co.

The project has been planned since 2005, says Don Hawkins, Transwestern senior vice president of operations and engineering. It gained authorization from the Federal Energy Regulatory Commission in November 2007 and began construction in January. The route primarily parallels the El Paso line.

Contractors were selected years ago because expertise and availability are vital, Hawkins says. “A pipeline crew has a lot of different people who are experts at what they do,” he says.

Universal Ensco and Gregory & Cook, both based in Houston, are doing most of the expansion’s work. In full swing, the project includes 20 to 25 crews of engineers, welders, inspectors and other specialists numbering about 1,000.

“The team we have out there is one of the best,” says Ronnie Wise, Gregory & Cook vice president, who has built cross-country pipelines across the West and constructed his first in Arizona in 1984. “To watch a pipeline project with 25 crews all working [in succession] is really something to see.”

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Transwestern’s pipe is made in Italy, shipped to Houston and sent by rail to “pipeyard” staging areas. The route is cleared and graded, then 40- to 80-ft sections of pipe are “strung” alongside. Trenches are excavated following topography and allowing at least 3 ft of cover. The pipe is bent and joined, a meticulously engineered process.

For the first time, Transwestern is using mechanized welding, hydraulically bending and welding the steel from within. Then the pipe is coated with fusion-bonded epoxy and lowered into place. Crews are usually able to lay between 1.5 and 2 mi of pipe a day, Wise says.

The crew zipped through most of Yavapai County, but populated, rocky areas around Black Canyon City often slowed progress. In addition to archeological sites, subdivisions and rock, the area’s numerous washes required bending pipe in advance, burying it extra deep and adding erosion control measures.

But the washes were nothing like crossing the Verde River north of Chino Valley, Wise says. Crossing the narrow canyon required coating the pipe with special concrete and using a bridge to lower it into place. Coordination included contractors, public agencies and contract fisheries biologists on hand to temporarily remove the river’s endangered native roundtail chubs. Wise had 48 hours to complete the crossing before the fish came home.

Special reclamation crews arrive about 15 days after each section is done to restore the area. Hawkins says the project, originally scheduled for November completion, is now expected to be in service sometime in December.

Construction at NAU has bucked the trend and has actually been on the rise.

In 2005 the university completed an engineering building expansion and the $24 million W.A. Franke College of Business. In 2007, it added the $26 million Applied Research and Development Facility, second in Arizona to go LEED platinum. The same year, it partnered with the city of Flagstaff to build the High Country Conference Center, a $22 million convention space and hotel.

Other projects include housing, infrastructure, athletic fields and parking.

NAU’s capital development trend is set to continue. Its $170 million share of Arizona Stimulus Plan for Economic and Educational Development funding will go to eight projects including an $80 million Health Professions Building, which will aim for LEED silver and include classrooms, offices and clinic spaces.

The university was negotiating with a prospective architect and contractor in October. The balance of funds will be used to add floors to a 250,000-sq-ft Health and Wellness Center expansion; renovate the Liberal Arts Building and The Inn at NAU; and upgrade the Skydome, Ardrey Performing Arts Center, North Student Union and infrastructure.

The projects couldn’t have come at a better time, says Tim Kinney, who has managed several NAU projects through Flagstaff-based Kinney Construction Services. “It will probably maintain 200 to 300 jobs in Flagstaff alone,” he says.

Kinney’s company is construction manager at risk for the university’s Distance Learning Center project, a $12.5 million School of Communications expansion that consolidates programs scattered among three locations. It includes a 24,500-sq-ft addition and 13,500-sq-ft renovation that will house videoconference classrooms, TV production facilities, conference rooms, offices and a connective multistory atrium. It also remodels the existing two-story TV Services space and adds a 1,500-sq-ft television studio.

Project architect Burns Wald-Hopkins Shambach Architects, the Tucson firm that designed the applied research facility, designed the project to LEED silver specifications.

Schematic design began with orientation of the addition, pivoted at its connection with the existing building for a true-south elevation. A three-story, wedge-shaped atrium connects the structures, maximizes daylight and serves as a striking entry. An adjacent exterior will be covered with local sandstone and a SolarWall, a prefabricated, perforated metal trombe wall that captures solar energy to boost heating in winter and shading in summer.

Other green features include an active chilled beam HVAC system, two living walls, water reclamation for toilets, lighting controlled for daylighting and occupancy, and water-efficient, regionally appropriate landscaping. The parking lot will be relocated and converted to open space and pathways redesigned.

To meet a fall 2009 occupancy target, the project was fast-tracked through university approval and design. In August, Kinney crammed his crew onto the tight brownfield site to begin excavation. As usual in the Flagstaff area, soil presented immediate challenges, as did overexcavation and drilling for caissons. His crews relocated a busy road and underground utilities.

The Start of Something Big

The City of Flagstaff is so confident a $120 million downtown mixed-use urban-infill project will spur redevelopment, it’s put $20 million toward construction. A city improvement district is helping build Aspen Place at the Sawmill, a pedestrian-friendly center including 155,000 sq ft of retail space and a residential component.

Developed by Scottsdale-based The Aspen Group and designed by Tempe-based DAVIS, the project sits on a 38-acre former sawmill site at the intersection of Butler Avenue and Lone Tree Road.

The bond ordinance came in spring 2007 when clean-up cost estimates threatened to kill the project. “There are not many 40-acre sites in Flagstaff and we saw the incredible potential the size of the site and location offered,” says Aspen Group founder and CEO Donald Meyers. “The city realized the value of the improvement.”

The project has plenty of benefits, says James Duval, the city’s project manager for construction. It turns a vacant lot into tax base, removes an eyesore and creates an appealing destination, he says.

Work started June 2007 but was soon interrupted by monsoon rains. Crews removed stumps as far down as 6 ft, encountered rock shelves and doubled estimated earthwork.

Excavation dragged into autumn, then winter shut everything down. Waiting on the sidelines was project contractor Ryan Co. of Phoenix. The start date was a moving target, the weather a tyrant and, once begun, construction was a collaborative endeavor that required meticulous attention, says Casey Cartier, Ryan Co. construction division manager.

Buildings feature pitched roofs and local stone, brick and weathered steel with awning-shaded storefronts. A central common area includes an outdoor amphitheater and event space. “The village feel of the project is very site specific,” says Joe Murray, principal with DAVIS. “You couldn’t transplant it anywhere else.”

It will include about 40 retail and restaurant spaces anchored by a 23,000-sq-ft New Frontiers Natural Marketplace, a grocery store that opened in May. By October the first phase was 70% leased and phase two was under way.

“Despite the current downturn in the market it made sense to move forward, and our retail tenants wanted to move forward as well,” Meyers says. “It is in the best interest of the long-term development of the project to continue to build the retail/commercial sector and have the residential follow.”

The project’s 321 residential units were planned prior to the housing collapse. To adapt, Aspen Group added a phase and postponed residential construction to 2010, though “we will be watching the market closely to do what makes the most sense,” Meyers says.

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