The decision by Shell Chemical Appalachia to build a multibillion-dollar ethane cracker in Beaver County, announced this week, could be a big shot in the arm for real estate development — not only near the plant but throughout the region and even into West Virginia.
Pittsburgh-area real estate executives said the plant likely will spur manufacturing and industrial activity near the sprawling site in Potter and Center townships as well as additional office, commercial, restaurant and hotel development throughout the region. Add to that the space needed for engineers, contractors, lawyers, architects and others to support the cracker and spinoff activity, and the impact could be off the charts.
“This is a game changer. It’s an absolute game changer. The benefits are going to be better than anyone can imagine,” said James Scalo, president and CEO of Burns & Scalo Real Estate Services.
Jeffrey Ackerman, managing director of the CBRE real estate firm, recalled the opening of the Volkswagen plant in Westmoreland County in the late 1970s, where the auto manufacturer built cars for a decade. That plant produced a “tremendous amount of economic activity,” from suppliers who moved in to residential and shopping center development, he said.
Mr. Ackerman expects to see the same kind of impact from the ethane cracker, which will employ an estimated 6,000 workers during construction and 600 once it starts operating in several years.
In addition to the cracker, the Shell complex will include three units that will convert ethylene into polyethylene pellets that can be used in the manufacture of plastics and other products.
“In my opinion, this is a transformative opportunity for our region,” said Dan Adamski, managing director of the Jones Lang LaSalle real estate firm. Spinoff activity around the cracker could create three to four times the level of investment as the plant itself, Mr. Adamski estimated.
It might be more cost effective over the long run, he said, for a manufacturer that wants access to the pellets, for example, to build a plant close to the cracker rather than to transport the material elsewhere.
Hotels, offices, more
Real estate professionals see the impact of the cracker extending into different types of development, driven in part by the progress on the plant.
Mr. Ackerman is expecting a significant increase in hotel construction, particularly near where the plant is being built. He said rooms will be needed for workers during construction, which is to take about five years, as well as for others.
Meanwhile, Mr. Adamski noted more office development will be needed to support engineers, contractors and others working on the cracker and other projects that will spawn from it.
Gregg Broujos, managing director and founding principal of the Colliers International real estate firm, expects an uptick in restaurants and stores.
Since the official announcement came Tuesday, Colliers has been fielding calls from manufacturers, service providers and speculative investors inquiring about land close to the cracker, Mr. Broujos said. The company is even marketing a 56-acre site in Chester, W.Va., that it believes could benefit from the cracker, so great are the expected ripple effects.
The Parkway West corridor, which after several years of growth has slumped lately with the decline in oil and gas prices and cutbacks in the industry, may be poised for a comeback following the Shell announcement, brokers said.
And the plant could be a boon for the Allegheny County Airport Authority in its efforts to market land surrounding Pittsburgh International Airport for development. About 3,800 acres are available. The authority recently sent out a request for proposals seeking developers for five shovel-ready sites in the second phase of the Clinton Commerce Park development in Findlay.
The authority is hoping to turn a 195-acre brownfield site near the airport terminal into a world trade center. James Gill, the authority’s chief operating officer, said that could be a “marquee site” for a cracker-related development.
“We want them to know the airport is open for business as it relates to development opportunities,” he said.
Spiking land prices?
While impact of the cracker could be enormous, most don’t expect the surge to happen overnight.
“It can take up to a year or even longer to find a piece of property and build a building. So the question is: Would they start that right now?” asked James Kelly, senior vice president and principal with the Avison Young real estate firm Downtown.
“If you want to lease a building, you’re not going to lease it now and pay rent. I think it’ll be a bit of a delayed reaction from the supply chain side.”
Whether the Shell decision will result in skyrocketing land prices near the plant is an open question. Even before the announcement, CBRE saw significant increases in land values immediately around the site, Mr. Ackerman said. Shell had been prepping the site for possible development for several years, although there was no assurance the company would go ahead with the project.
Mr. Broujos, for one, doesn’t anticipate dramatic spikes moving ahead, noting that Shell has already bought the property it needs. Prices now range from $100,000 to $200,000 an acre for buildable sites and $50 to $75 an acre for “raw” undeveloped sites in Beaver County, he said.
However, Mr. Kelly sees them potentially going higher.
“I would think that if they had really well-located property, they would start raising their asking prices right now,” he said.
Staff writer Anya Litvak contributed to this story. Mark Belko: firstname.lastname@example.org or 412-263-1262.