Expansions lift construction
New commercial construction in East Baton Rouge Parish dropped sharply in 2011, but expansions and renovations picked up the slack and total commercial construction ended the year up just under 1 percent.
Permits filed with the Department of Public works show that new commercial fell 22 percent in 2011 to $300.2 million from 2010, but commercial additions shot up 60 percent to $235.4 million. That additional $88 million helped total commercial work finish 2011 up slightly at $535.7 million.
“That’s probably a result of people being extra cautious and doing incremental expansion instead of going out and building an all-new facility,” observed Bill Firesheets, president of Buquet & LeBlanc. “People had a tendency to build what they needed to get by and not stick their necks out too far.”
“If you don’t build new, you’ve got to maintain,” agreed Chris Stuart, owner and chief executive officer of Stuart & Co. General Contractors. “That’s why there was a lot of expansions going on.”
Both men were optimistic about 2012, noting the tail end of last year and the first two months this year suggest things may be picking up.
“There’s going to be a mix,” Stuart said. “We did a lot of remodels and additions last year, but I think you’re going to see an upturn in new construction this year.
“The encouraging thing to us is we’re seeing more activity in the private sector than we’ve seen in several years,” he said.
While it’s nothing like the swell after 2005’s Hurricane Katrina, Firesheets said, “we are starting to see some $8- to $10-million projects that we haven’t seen in the last several years.”
Stuart said that if the trend continues, it will help the residential market, which finished 2011 with 581 new homes built in the parish, down 27 percent from 797.
“Residential follows commercial and industrial,” he said. “You’ve got to have the jobs and as those jobs are created up and down the (Interstate) 10/12 corridor, that brings people in from out of state.”
Firesheets said the recent uptick in industrial expansions bodes well for commercial sector because there is always a spillover effect.
Economist Loren Scott said his conversations with industrial contractors suggests there will be a boom in industrial projects in the second half of 2012.
“Any bump in the chemical industry — and the chemical industry is doing really well — in turn is going to create more income and the more income created the more spending is going to take place, which will require more strip (shopping) centers and office parks for the new businesses that come in,” Scott said.
He added that the economic multiplier effect for chemical plant work is high, as much as five or six additional jobs created for every one in the chemical sector.
Scott said the main question will be whether credit markets will loosen sufficiently to fund the work.
“My gut feeling is financing is still tight and they’re not financing like they should,” Stuart said. “When that money starts to loosen up and they start lending to developers, you’ll see (more work). Until that happens, you’re going to see stagnant growth.”
Firesheets agreed credit markets remain tight, but there is pent-up demand and firms that do have the access to capital, but have been sitting on the sidelines in recent years, are getting off the fence.
“The people who are really strong and able to get financing are finally starting to make a move,” he said. “There’s a little more confidence that is driving that. People have to meet their space needs.”
Firesheets and Stuart pointed out that much of the last decade has been one anomaly after another.
“Really, from 2000 until recently was very abnormal,” Firesheets said. “The dot-com boom that put a lot of money into real estate, then Katrina and then everything hit the fan in ’07 and ’08 …. I think we’re back to what we saw in the ’90s, just steady growth year over year. And I think most everybody would settle for that these days.”
“We haven’t had normal since the turn of the century,” agreed Stuart.
The largest projects permitted in East Baton Rouge Parish in 2011 were: Pinnacle’s casino complex on River Road, $85.1 million; The Woodlands of Baton Rouge on Ben Hur Road, $39.4 million; H&E Equipment’s headquarters on Airline Highway, $16.5 milllion; the Sam’s Club on Cortana Place, $11.4 million; Woman’s Hospital’s medical office building on Airline Highway, $10.5 million; the downtown Hampton Inn & Suites, $9.2 million; St. Joseph’s Academy Arts Center on Broussard Street, $6.0 million; Phase 1 of the North Boulevard Town Square downtown, $5.7 million; and the Toys R Us/Babies R Us on North Mall Drive, $5 million.
The permit figures do not include Zachary, Central and Baker, state and federal projects (including LSU and Southern University) and industrial construction.