Home building slows as public projects bolster commercial side

The boom may be over, but in post-meltdown America, local building contractors say the Springfield-area market is faring better than much of the nation.

"What I'm hearing and what I'm seeing is it could be a lot worse - and is a lot worse in other places," said Dave Robertson, an estimator for Prestressed Casting Co. and president of the Springfield Contractors Association.

Nationally, "from what we are hearing, 2009 is going to be down in the range of (5 percent) to 10 percent from 2008, then beginning in 2010 things should stabilize and start to pick back up," said Thomas Baird IV, director of sales and marketing for Conco Cos.

While the days of speculative building and easy financing are gone, for people who have the wherewithal to buy, build or remodel, contractors say there's no better time to do it. The current economy has created an unparalleled buyer's market. Competitive pressure is driving down costs of labor and materials while interest rates continue at historic lows.

Residential construction remains sluggish, while publicly funded work dominates the commercial construction sector, where competition is increasingly fierce.

Residential indicators

Residential construction has slowed to a crawl, with only a handful of new home permits being filed so far this year, but there are signs of life.

"I've had two or three calls in the last two weeks just on residential - new construction and remodeling," said Matt Bailey, owner of Bailey Co., in mid-February. Bailey doesn't think this necessarily indicates a turnaround, "but it does seem that people are starting to realize that this is the economy we're in, and those that are secure in their jobs are actually looking to do something now."

Bailey said he is confident the market will eventually rebound, but when it does, he expects it will return to the historic norm, not to boom levels.

Mike DeLong, manager of customer engineering and developer services at the CU TEC House, City Utilities' one-stop shop for builders and developers, reported that demand for new utility hookups is down.

"Residential is down about 50 percent" from a year ago, DeLong said, noting that demand for commercial connections seems to have remained fairly steady.

Commercial competition

On the commercial side, there are jobs available, but the competition for those projects is intense, said Bailey, whose company does residential and commercial building. In the past, commercial jobs would draw four, or five bidders. The last three jobs he's bid have drawn nine, 14 and 16 bids, respectively.

A state-funded project, the University of Missouri Extension Southwest Missouri center in Mount Vernon, recently drew 27 potential bidders representing several different states, said Jim Carson, vice president of Carson-Mitchell. This project, however, is not among the projects still slated to receive funding through the Missouri Higher Education Loan Authority.

While some privately funded projects are ongoing, new projects have largely dried up.

"Projects that have been planned, and even some that had been bid, have been put on the shelf for a variety of reasons. Some of them for financing, some of them for the cost of financing," Carson said.

While some companies continue to have a backlog of work, what happens when the backlog clears is the big question.

"It just depends on if this economic stimulus takes hold and small business owners continue to invest in the local economy," Baird said.

Meanwhile, publicly funded projects are the main game in town.

"The mantra lately has been school work, school work, school work," Robertson said.

Among ongoing school construction is an $8 million addition to Kickapoo High School. Completion is slated for spring.

A bright spot in commercial construction is CoxHealth, which is moving ahead with $119 million in projects, including the Meyer Orthopedic Center at Cox Walnut Lawn, a new parking garage and a new emergency department at Cox South.

Also under construction is accounting firm BKD LLP's $21 million, 109,000-square-foot headquarters in downtown.

Materials costs

The good news on reduced demand for construction is that some materials costs are down. The bad news is, it won't last.

"Every product has gone down - copper, steel, lumber, everything," Bailey said. "But what's happened is a lot of these places have cut manufacturing or shut down plants, and if demand goes up, they're not in a position right away to handle it, so of course, prices will go up."

In fact, Bailey added, he's been advised that prices on asphalt shingles and fiberglass insulation will rise at the beginning of March.