Residential, commercial development improving
New commercial construction in East Baton Rouge Parish fell 20 percent in 2012, while new residential construction increased by a third, figures from the city-parish Department of Public Works show.
Local contractors, however, are upbeat about prospects, saying commercial projects are increasingly coming from the private-sector and falling housing inventories will continue to fuel new home construction.
COMMERCIAL: The city-parish permitted $240.1 million in new commercial projects in 2012, compared to $300.2 million in 2011. Total commercial construction was down 32 percent $365.6 million and commercial additions, often a sign of an expansion or remodeling, were down 47 percent to $125.6 million.
It’s important to note, however, that commercial construction can be erratic, since one major project can influence the numbers greatly. The 2011 figures, for example, include $85 million for the Pinnacle Casino.
The numbers also do not include Zachary, Central and Baker, state and federal projects (including LSU and Southern University) and industrial construction.
Nevertheless, “it is a barometer,” said Mike Polito of Mapp Construction, adding last year was a little quieter before picking up later in the year.
“There’s work out there, and there’s talk of the Commerce Building and several other pretty good-size projects, so I think we’ll have a better year than last year, but not as good as ’07-’08,” he said.
“The most encouraging thing for us is we’re seeing more private work and it’s new construction,” said Bill Firesheets, president of Buquet & LeBlanc.
Buquet & LeBlanc’s volume was up by a third in 2012. Firesheets said the company could add staff at the administrative level because of the uptick.
“We’re very encouraged and upbeat about what’s happened over the past 12, 14 months,” he said.
Firesheets said the spate of major industrial expansions — chemical plants and natural gas facilities — bodes well for the industry.
“They’re anticipating a pretty good boom in industrial construction late this year and in years to come,” he said, noting industrial work tends to spur commercial construction.
Commercial work also has cycles by industry segment. Firesheets said there has been a lot of school construction in the last couple years, though it seems to have tapered off as the bond revenue that funds that kind of work gets used up.
“If you do a lot of health-care work, you’re swimming in work now,” Polito pointed out.
Firesheets and Polito said that while credit markets aren’t as bad as they were a couple years ago, it is still a constraining factor.
“It’s still an issue,” Firesheets said. “Our developer friends and clients still express that concern, that it’s harder to get financing. Their projects just have to be more sound, and in the end that’s healthy.”
“There is some pent-up demand out there and the money has loosened, but not greatly,” Polito said. “Deals are getting done and potential deals are getting talked about. It’s just the business cycle.”
New apartment construction, which is counted under commercial, was up 154 percent to $126.9 million last year from $49.9 million in 2011.
D. Wesley Moore, of appraisers Cook Moore & Associates, said that while it took a few years for the local market to absorb the post-Katrina apartment construction bubble that peaked in 2008, apartment developers have become more aggressive at finding marketable sites and financing for new construction.
“I expect even more apartment construction permits to be filed in 2013,” he said.
RESIDENTIAL: On the residential side, new residential construction was up 33 percent last year — $195.4 million compared to $147.1 million in 2011. Additions and remodeling projects fell 10 percent to $35.0 million, compared to $38.6 million.
Local homebuilders say they noticed things started to turn last summer.
“Things are getting a lot more positive in the market,” said Todd Waguespack, of Level Construction. “I definitely think a lot of the inventory has come down and it’s getting to historically reasonable numbers.”
Scott Bardwell, owner of Bardwell Development and executive director of the Baton Rouge Growth Coalition, said buyers have been sitting on the fence for a few years while cable news channels predict economic collapse. They have started to realize interest rates are still low and industrial projects continue to come to the state, he said.
Bardwell Development, which is developing Audubon Square on Tiger Bend Road, already has eight homes under construction there this year that will be sold in the coming weeks. It sold eight there all last year.
Waguespack, whose developments include Shadow Brook at Jones Creek and Harrell’s Ferry and Notting Hill on Hoo Shoo Too Road, said tight credit is still a constraining factor, but not enough to dampen the driving influence of lower inventories.
“I think it will keep moving up steadily,” he said. “There are no huge momentum changes and I think it’s going to head positive.”
In East Baton Rouge, Waguespack said, most of the action is in the $240,00 to $300,000 range.
“There’s very few lots in the market that are priced below that,” he said. “It’s hard to get under $200,000 in this market.”
Bardwell said that there has been some movement in the $300,000 to $400,000 range, which has been dormant for quite some time.
Bardwell said the custom home market is getting tighter because many property owners are choosing to sell lots to large-scale production homebuilders such as D.R. Horton and DSLD Homes.