The annual Midwest Construction survey of the top-120 construction managers and general contractors in Illinois, Indiana and Wisconsin found that billings for work in the tri-state region last year were $12.2billion.

The top contractors also reported that combined revenues for all work worldwide were $33.6 billion.

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Hustling Hoosiers

After years of drop-offs, the market for general contractors in Indiana appears to be roaring.

Construction starts in the Indianapolis area in 2003 went up 12 percent over 2002, to $5.2 billion. Indeed, 2003 was likely the first time in city history that starts went over the $5 billion mark.

"In Indianapolis and the state of Indiana, there will be a phenomenal amount of opportunities in 2004," said Jeff Hagerman, vice president in Indianapolis for Fort Wayne-based Hagerman Construction Co.

Gary Price, executive director of the Indiana Construction Roundtable Inc., an Indianapolis-based group of construction consumers, said several entities are experiencing "record-breaking" construction.

They include the Indianapolis International Airport because of the $975 million Midfield terminal project, and six projects apiece at medical products giant Eli Lilly and Co. and heath-care provider Clarian Health Partners.

Clarian is a partnership among Methodist Hospital, Indiana University Hospital and Riley Hospital for Children. Its activity alone is impressive: a hospital in north suburban Carmel, a hospital in west suburban Avon, a laboratory on Canal Street in downtown Indianapolis and other minor projects.

Other strong markets in the central Indiana city include bridges, up 247 percent to $110 million; warehouses, up 141 percent to $118 million; and stores, up 38 percent to $146 million.

Strong markets have led the ICR to project a shortage of 6,500 skilled craft workers by the summer of 2005. Initiatives are under way to attract workers.

On Wisconsin

In Wisconsin, starts in 2003 went up by even more impressive amounts: 24 percent in Milwaukee, to $2.8 billion, and 50 percent in Madison, to $1.5 billion.

Construction of power-generating and -transmitting facilities is pumping energy into the building markets in both cities. Projects were started because of the potential for an energy shortage in the state.

The jump in the Milwaukee area is mostly attributable to the $7 billion Power the Future initiative, an energy-producing development started by We Energies, the primary utility subsidiary of holding company Wisconsin Energy Corp. in Milwaukee.

The project is likely the biggest one in terms of cost in the Midwest, though the expansion of Chicago's O'Hare International Airport will eclipse it.

An $180 million cogeneration facility is being constructed for Madison Gas & Electric Co. in Madison. And, a $420 million transmission project, the Arrowhead-Western line, will result in a 225-mi.-long power line between Duluth, Minn., and Wausau, Wis.

The Milwaukee and Madison areas, like Indianapolis, expect gains in health-care construction, said John Rodell, vice president in Milwaukee of Madison-based J.H. Findorff and Son Inc. Activity is likely attributable to the need for facilities to provide care for the aging Baby Boomer population.

Work includes the construction of the Columbia St. Mary's Lake Drive Campus replacement hospital and work at Children's Hospital of Wisconsin, the Clement J. Zablocki Veterans Affairs Medical Center, both in Milwaukee, and the University of Wisconsin Hospital in Madison.

Activity is also coming from assisted-living facilities, specialty clinics and hospice facilities.

"We have done three hospice-care facilities," Rodell added. "They are a proven way of dealing with end-of-life situations."

Stores showed major increases, doubling in Milwaukee and up 72 percent in Madison. Public building and highways are also strong.

Steady Chicago

The Chicago area's starts dropped 9.3 percent in 2003, but context shows the area is holding steady.

In 2002, a major start in January was the $606 million Soldier Field renovation. That massive project inflated the market, and the area ended the year up 10.1 percent, at $15.2 billion.

With the completion of Soldier Field, construction starts fell back in 2003. Still, the dollar volume in 2003 matched that of 2001: $13.8 billion. Viewed over the-three year period, the Chicago area held steady.

"I think this year is going to be neutral - steady but not a spiked increase," said Michael Meagher, vice president of Chicago-based James McHugh Construction Co. Inc.

Like its Midwest sisters, health-care construction in the Chicago area will likely see gains in the future, though the category dropped 36 percent in 2003.

Four new hospitals have been proposed for the southwest suburbs. Naperville-based Edward Hospital would like to build a facility Plainfield, and Hinsdale-based Adventist Health System Midwest Region has proposed a hospital for Bolingbrook. Oak Brook-based Advocate Health Care is eying a site in Tinley Park, while Blue Island-based St. Francis Hospital has proposed a care facility next door in Orland Park.

In the Northwest suburbs, preconstruction work has started on the $352 million expansion on the Elk Grove-based Alexian Bros. Health System Inc.

In the city, ground has broken for the $502 million Prentice Women's Hospital and Maternity Center, a replacement for the 29-year-old hospital with the same name at Northwestern University's Loop campus. Meantime, the University of Illinois Medical Center at Chicago is considering plans to replace the 25-year-old hospital on the Near West Side.

Contractors are already gearing up for increased health-care construction, such as Chicago-based Pepper Construction Co. "We see that area as a major expertise," said Richard Tilghman, senior vice president.

Also up in Chicago were bridges, 97 percent, due in part to the major project on Metra rail's Rock Island district line; warehouses, 23 percent, because of several projects on the Interstate 55 corridor and near O'Hare; and stores, 13 percent, due to the $70 million Algonquin Commons project in the northwest suburbs and the $50 million Chicago Premium Outlets Center in Aurora.

Construction of high-rise residential building continues to be steady in the Loop. An estimated 22 high-rise residential buildings are under way, and 2,319 units are expected to be delivered this year, said Gail Lissner, president of Chicago-based Appraisal Research Counselors Ltd.

"The mayor has done such a great job with the city that people are desiring to have a weekend place downtown, as opposed to Lake Geneva (Wis.)," McHugh's Meagher added.

The overall Illinois economy is inching forward, according to the University of Illinois Flash Economic Index, a weighted average of economic activity based on sales tax receipts, individual income tax receipts and corporate earnings. The index remains below 100, the line between growth and decline, but rose to 98.0 in November from 97.3 in October.

Other Factors

Contractors are watching several issues as spring arrives.

Nation's Economy: Economic activity is picking up, the stock market is rallying and lending rates are at all-time lows.

Nevertheless, the federal budget deficit of $521 billion and the federal trade deficit of $489 billion have executives watching. In Wisconsin and Illinois, the state budget deficits have been reined in but not erased.

"Deficits are bad news for the industry, but I think there are still going to be good capital projects that need to happen," Meagher said.

Rising Prices: With improvements in the economy, prices are going up for raw materials like steel, concrete and lumber.

Steel is particularly volatile due in part to insatiable Chinese demand, said Findorff's Rodell. Structural-steel prices only hold for about 30 days.

"A year ago, it was a buyer's market," he added. "Now scrap that used to sell at $70 a ton is selling in China for close to $300."

Insurance Costs: Insurance rates for liability and health continue to remain a cost concern for contractors more than two years after premiums started rising.

"For the longest time, we did not ask our employees to contribute to health care," said Pepper's Tilghman. "We have asked them to start contributing."

Set-Asides in Chicago: Contractors who do business in Chicago wait as the city reconfigures its program to set aside construction contracts for minority business enterprises and women business enterprises.

U.S. Federal Court Judge James Moran ruled in late December that the city's program - awarding 25 percent of contracts above $10,000 to MBE firms and 5 percent to WBE firms - was illegal, but gave the city six months to fix it.

Trump Tower Watch: The 90-story Trump International Hotel & Tower in Chicago, a facility that could cost $650 million, was recently tweaked, said Jeff Arfsten, president of central operations in Chicago for Bovis Lend Lease. The number of offices was reduced because of high vacancy rates in the Loop, but condominiums were increased.

"We are hopeful to start the project late in the summer," he added.