Springfield-based Hammons Hotels & Resorts' plans for a $50 million, four-star hotel in downtown Springfield are on hold because of financing challenges.
The Stories That Shaped 2008, No. 6: Construction slows amid economic pressures
Dee Dee Jacobs
Posted online
Construction activity started off relatively stable in early 2008, but as the economy sank closer to a recession, many developers stopped taking risks and lenders pulled back the reins on project financing.
In the first quarter, building permits filed with the city of Springfield were on par with first-quarter 2007. But that was when major developments such as John Q. Hammons' downtown luxury hotel and St. Louis developer Kevin McGowan's Heer's renovations were still on the docket for 2008.
By the second quarter, building permits had dropped 10 percent compared to the same period in 2007, and the slide continued into the third quarter, when building permit numbers were down 14 percent compared to a year earlier.
"Residential (construction) took the hit first, and it took a little bit longer for it to hit the commercial (sector), but it certainly did," said Carson-Mitchell Inc. Vice President Jim Carson, who served as 2008 president of the Springfield Contractors Association. "And the projects that are still bidding are very competitive," he added.
More projects, both major and minor, faced delays.
Hammons Hotels & Resorts said in October that it was unable to obtain financing for a $50 million, four-star hotel next to Jordan Valley Car Park in downtown and wouldn't begin construction in 2008 as planned. The new schedule calls for construction to begin no later than April 1, 2010.
The Springfield-based hotel developer also temporarily shelved other projects, including a $50 million resort and golf club near Branson Airport and a $46 million convention center in Russellville, Ark., both of which were slated to begin in the fall.
McGowan, meanwhile, faced a similar dilemma. His initial plan for loft condos in downtown's Heer's building were deemed risky by lenders, and he began exploring other strategies, including a commercial tenant that would occupy several floors.
"The markets are not likely to improve for at least 12 months," McGowan told Springfield Business Journal in October. "I think the credit crunch that we're in is going to get worse well into '09."
Another 2008 project pushed back was Drury University's O'Reilly Family Event Center, because of challenges in fundraising and nailing down a construction cost. Drury now expects to break ground in spring 2009.
Some contractors cited high material costs, which skyrocketed in the summer due to petroleum and diesel prices. Those costs have tempered somewhat as oil prices and demand declined.
Year-to-date city building permit numbers as of Nov. 30 are down 8 percent to 1,523 compared to the same period in 2007, and city Director of Building Development Services Nick Heatherly said the year should close out at about that level. Year-to-date construction costs as of the end of November totaled $264.1 million, a 26 percent decrease from the same period in 2007.
Even an economic rebound in 2009 would likely mean another slow year for construction, Carson predicted.
"It takes time to get those canceled and delayed projects back up to speed," he said. "Even if we have significant recovery in '09, the building trades are going to be experiencing a fairly slow year, and hopefully by '10 we'll be back up and running."
Under the weight of rising health care costs, an increasing number of people are surging to the Health Insurance Marketplace rather than opting for employer-sponsored plans.
