Spring is almost here, according to the calendar and the Midwest's Top 2005 Contractors.

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Just as the weather is moderating, executives with construction management and general contracting firms are making warm forecasts about the industry for 2005 and 2006 in Illinois, Indiana and Wisconsin.

"I'm seeing really positive signs, and I'm expecting things to be better than last year," said Mark Luetkehans, vice president of Park Ridge-based Ragnar Benson Inc. He attributed the uptick in part to the pent-up demand that has resulted due to the economic downturn that can be traced to the Sept. 11, 2001, terrorist attacks on New York and Washington, D.C.

Other executives echoed his comments about positive trends welling up.

"We have an enormous amount of opportunities these days," said Richard Tilghman, senior vice president of the Chicago-based Pepper Construction Group. He cited areas that include health care, institutional and retail as providing the richest veins to mine.

States other than Illinois, the biggest market in the tri-state region, appear to be expanding, too.

Projections from McGraw-Hill Construction, publisher of Midwest Construction, show that Indiana is expected to see a 2 percent increase in construction starts this year.

"I would agree with that, particularly in some large project categories," said Ben Wilhelm, vice president of Indianapolis-based Shiel Sexton Co. Inc.

"Health care is in its third or four year of fairly solid expansion, particularly in Central Indiana."

However, public spending is a concern partly due to state budget deficits and other factors. Illinois is projected to have a $2 billion deficit and Wisconsin a $1.3 billion shortfall; Indiana's constitution requires a balanced budget.

"One area that concerns us is with school funding," said Jeff Riemer, principal in charge in Chicago of New York-based Bovis Lend Lease. "It isn't flowing great now as it did a few years ago."

Offsetting economic factors provide fodder for both optimists and pessimists.

Stimulating the economy are lending spurred by the Federal Reserve's low interest rates, President Bush's business-friendly preference for low taxes and government spending on the Iraq war and homeland defense.

On the downside, hiring is middling in part because of out-of-control health-care costs; prices for oil, steel and other basic commodities are high; and the federal deficit is through the ceiling.

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

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

A Strong 2004

Data show the three biggest metropolitan regions ended 2004 with $23.7 billion in starts, up 6.7 percent from 2003's $22.2 billion.

Chicago led the way with $15.5 billion in starts in 2004, up 10.4 percent from the previous year.

The expansion of the McCormick Place Convention Center with the construction of the $850 million West Building had the biggest single impact.

Residential construction, which was up 9.8 percent in starts in 2004, continues to get a boost from the nearly two-dozen high-rise projects in the city.

Most important, demolition of the Chicago Sun-Times building along the Chicago River was expected to be complete in March to make way for the 90-story, $750 million Trump International Hotel & Tower, Bovis' Riemer said. The company, which is serving as the project manager, expected to begin laying foundations in April based on a building design from Chicago-based Skidmore, Owings & Merrill LLC.

The University of Illinois' Flash Index of Economic Growth shows the state's economy is cruising after enduring several years in idle.

The index continued its recent strong performance by rising slightly to 103.1 in January, the latest reading, from 103.0 in December. Since September, readings have been above 100, the dividing line between economic growth and contraction.

J. Fred Giertz, the university economist who released the data, said individual income tax receipts were strong in January, "suggesting that this is no longer a jobless recovery." Sales-tax receipts were up slightly compared with a year ago, though corporate receipts were relatively weak in a month when revenues are traditionally low.

Like Chicago, Indianapolis had an increase in starts, of about 1 percent, to $5.4 billion in 2004.

The State of Real Estate event at the city's Butler University in January showed several indications of vitality.

The Indianapolis office vacancy rate fell two percentage points since fourth-quarter 2003. In retail, six new shopping centers have opened since 2004, and seven are proposed for 2005. And residential experienced its fourth consecutive years of unit sales increases in 2004.

Most significant, an $800 million development was proposed that would result in a new stadium for the Indianapolis Colts football team and expansion of the Indiana Convention Center into the RCA Dome where the Colts currently play. The Indiana General Assembly and city council still have to approve the plans.

Milwaukee was the only weak spot with a 5.9 percent decrease in starts to $2.7 billion. The drop is partly attributable to the inflated 2003 figure due to the start that year of elements of the $7 billion Power the Future Initiative, an energy development at the Port Washington and Oak Creek generating stations.

The $810 million Marquette Interchange project should shore up the city's construction picture. Two legs of the project involving the rebuilding of 26 mi. of downtown interstate were let in late 2004.

A steady market in nearby Madison where the University of Wisconsin and state government are located has partly offset the declines in Milwaukee.

"I think the next several years are going to be growth years," said Bob Barker, executive vice president of the Associated General Contractors of Wisconsin Inc.

Indeed, the Wisconsin Department of Workforce Development recently released a report that predicted vigorous job growth in the Badger State. It said that between 2002 and 2012, general contractors are anticipated to add 5,610 jobs, an 18.1 percent increase. Specialty trade contractors are expected to add 18,960 jobs, a 23.8 percent increase.

Other Issues

As executives sort through market issues, certain trends appear to be strong.