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Sunday, December 23, 2007
Cost of some building materials drops in wake of housing slump
The much-discussed slowdown in the housing market hasn't been all bad news for local builders, as the cost of building materials has dropped back to more reasonable levels.
During the housing boom and in the aftermath of major hurricanes along the Gulf Coast, the price of concrete, lumber, copper and other staples rose to record levels, resulting in higher costs for contractors, home builders and consumers.
With the residential market slowing down, that has led some vendors and suppliers to lower their prices.
For contractors specializing in commercial construction, such as Jim Cooper, president of Jim Cooper Construction Co. Inc., that is a welcome sign.
"That really helps drive down prices a little bit and bring the commercial market back to a decent level," Cooper said.
He said some materials, such as copper, are at their lowest levels in years, while others have adjusted to more manageable levels.
While Cooper said the local commercial market is still providing plenty of work, the price breaks are also good news for homebuilders, even if they don't have as many starts now as they did during the housing boom.
Barry DeLozier, senior vice president of Signature Homes, said vendors have also felt the pinch of the slowdown and have made price reductions to help their own business.
"We are finding people wanting to be even more competitive than normal and what they are doing is recognizing that their customers who are buying materials need their help," DeLozier said. "They'd much rather be selling some lumber at a lower price than no lumber. It's a typical trickle-down effect."
DeLozier said Signature Homes began planning for a slowdown in the market back in 2005, which he said has helped the company end 2007 well above its 2006 pace.
source: bizjournals.com
During the housing boom and in the aftermath of major hurricanes along the Gulf Coast, the price of concrete, lumber, copper and other staples rose to record levels, resulting in higher costs for contractors, home builders and consumers.
With the residential market slowing down, that has led some vendors and suppliers to lower their prices.
For contractors specializing in commercial construction, such as Jim Cooper, president of Jim Cooper Construction Co. Inc., that is a welcome sign.
"That really helps drive down prices a little bit and bring the commercial market back to a decent level," Cooper said.
He said some materials, such as copper, are at their lowest levels in years, while others have adjusted to more manageable levels.
While Cooper said the local commercial market is still providing plenty of work, the price breaks are also good news for homebuilders, even if they don't have as many starts now as they did during the housing boom.
Barry DeLozier, senior vice president of Signature Homes, said vendors have also felt the pinch of the slowdown and have made price reductions to help their own business.
"We are finding people wanting to be even more competitive than normal and what they are doing is recognizing that their customers who are buying materials need their help," DeLozier said. "They'd much rather be selling some lumber at a lower price than no lumber. It's a typical trickle-down effect."
DeLozier said Signature Homes began planning for a slowdown in the market back in 2005, which he said has helped the company end 2007 well above its 2006 pace.
source: bizjournals.com
Market watch: Nonresidential construction closes gap
Nonresidential construction continues to catch up to residential in total private construction dollars spent nationally, according to the most recent figures from the U.S. Census Bureau.
The value of total private construction put in place nationally in October 2007 was $863 billion, a drop of more than $40 billion from October 2006.
According to the monthly report, the total value of nonresidential construction made up 41 percent of the total construction dollars. That's an 8 percent increase from October 2006.
Residential construction still represented the majority of total construction dollars, but the sector's total decreased from 66 percent last year to 58 percent in October 2006.
That's not a huge surprise amid the slowdown in the national housing market and the number of residential building permits issued continuing to fall.
According to the Census Bureau, the number of housing units authorized fell by 1.5 percent nationally between October and November of 2007 and have fallen 24.6 percent since November 2006.
source: bizjournals.com
The value of total private construction put in place nationally in October 2007 was $863 billion, a drop of more than $40 billion from October 2006.
According to the monthly report, the total value of nonresidential construction made up 41 percent of the total construction dollars. That's an 8 percent increase from October 2006.
Residential construction still represented the majority of total construction dollars, but the sector's total decreased from 66 percent last year to 58 percent in October 2006.
That's not a huge surprise amid the slowdown in the national housing market and the number of residential building permits issued continuing to fall.
According to the Census Bureau, the number of housing units authorized fell by 1.5 percent nationally between October and November of 2007 and have fallen 24.6 percent since November 2006.
source: bizjournals.com
Pfishin' for business
A Pflugerville development that's been in the works since 2004 has added more commercial acreage, and now has 384 acres set aside to attract big businesses.
The planned project has already caught the attention of one of Round Rock's largest employers, which is considering a move there.
The development, comprised of three tracts named Wildflower, Wildflower Commercial and Wildflower North, was at one point a largely residential project called Capitolio Tejas with two main pieces named Cactus and Wildflower. Both Cactus and Wildflower were slated for single-family and some multifamily homes in 2004 when Tejas Viejo Land Co. President Wayne "Sandy" Rea put the land -- 1,600 acres total -- under contract. The original Cactus piece, originally planned to hold about 50 acres of commercial development, will now be almost entirely taken up by commercial tenants. Pflugerville's city council gave final approval to the conversion two weeks ago.
While there's been no activity on the ground, the project has seen some significant change since 2004. Rea is no longer the project's developer, and original investors Clark Wilson and Austin-based Athena Equity have been replaced by Doug Kadison, Charlie Nichols and the project's current developer, John Lloyd, says Charles Simon, director of the Pflugerville Community Development Corp.
Lloyd, an Austin-based developer, has helped increase the commercial portion. The project's total acreage has also expanded to approximately 2,284 acres. The development will likely hold 5,000 single-family and multifamily units, Lloyd says.
The commercial piece is at the northeast corner of Pecan Street and State Highway 130. The total project, including the residential portion, will contain five municipal utility districts in order to bring utilities to the former farmland.
Lloyd says with SH 130 bordering part of the development, it made sense to expand the commercial portion. While he says he can't name the exact cost of the project, Lloyd says it will likely be more than $100 million by the time it's built out -- the commercial portion will be built out over five to six years -- and could contain more than 1 million square feet of commercial space.
The commercial space will be a mixture of light industrial, office space, warehouse and retail, Lloyd says. Lloyd says he has a letter of intent from Sysco Food Services of Austin LP to take space in the development, which could bring up to 350 jobs to Pflugerville, but says Sysco is still evaluating other options.
Sysco Food Services of Austin President Bill Loftin says the company is looking for land to build a new distribution center, which currently employs 335 and could grow to 500 employees. But Loftin declines to say where Sysco is looking or what location it may land on. Sysco is currently on Chisholm Trail in Round Rock.
Simon says the city has been talking to other large-scale users that could potentially bring hundreds of employees into the city.
"This would be the kind of thing that would put Pflugerville in the game," Carlton Schwab, president of the Texas Economic Development Council, says of the city's chance to score a large employer. "It indicates that they're trying to do real economic development ... that would be good for Pflugerville, and kind of a statement that they've got some land they could do something with -- something unlike anything they've done yet."
In August Verde Corporate Realty Services announced plans for a more than 1 million-square-foot industrial park in Pflugerville called Verde Springbrook Corporate Center. That center will hold Span International's Austin-area operations.
source: bizjournals.com
The planned project has already caught the attention of one of Round Rock's largest employers, which is considering a move there.
The development, comprised of three tracts named Wildflower, Wildflower Commercial and Wildflower North, was at one point a largely residential project called Capitolio Tejas with two main pieces named Cactus and Wildflower. Both Cactus and Wildflower were slated for single-family and some multifamily homes in 2004 when Tejas Viejo Land Co. President Wayne "Sandy" Rea put the land -- 1,600 acres total -- under contract. The original Cactus piece, originally planned to hold about 50 acres of commercial development, will now be almost entirely taken up by commercial tenants. Pflugerville's city council gave final approval to the conversion two weeks ago.
While there's been no activity on the ground, the project has seen some significant change since 2004. Rea is no longer the project's developer, and original investors Clark Wilson and Austin-based Athena Equity have been replaced by Doug Kadison, Charlie Nichols and the project's current developer, John Lloyd, says Charles Simon, director of the Pflugerville Community Development Corp.
Lloyd, an Austin-based developer, has helped increase the commercial portion. The project's total acreage has also expanded to approximately 2,284 acres. The development will likely hold 5,000 single-family and multifamily units, Lloyd says.
The commercial piece is at the northeast corner of Pecan Street and State Highway 130. The total project, including the residential portion, will contain five municipal utility districts in order to bring utilities to the former farmland.
Lloyd says with SH 130 bordering part of the development, it made sense to expand the commercial portion. While he says he can't name the exact cost of the project, Lloyd says it will likely be more than $100 million by the time it's built out -- the commercial portion will be built out over five to six years -- and could contain more than 1 million square feet of commercial space.
The commercial space will be a mixture of light industrial, office space, warehouse and retail, Lloyd says. Lloyd says he has a letter of intent from Sysco Food Services of Austin LP to take space in the development, which could bring up to 350 jobs to Pflugerville, but says Sysco is still evaluating other options.
Sysco Food Services of Austin President Bill Loftin says the company is looking for land to build a new distribution center, which currently employs 335 and could grow to 500 employees. But Loftin declines to say where Sysco is looking or what location it may land on. Sysco is currently on Chisholm Trail in Round Rock.
Simon says the city has been talking to other large-scale users that could potentially bring hundreds of employees into the city.
"This would be the kind of thing that would put Pflugerville in the game," Carlton Schwab, president of the Texas Economic Development Council, says of the city's chance to score a large employer. "It indicates that they're trying to do real economic development ... that would be good for Pflugerville, and kind of a statement that they've got some land they could do something with -- something unlike anything they've done yet."
In August Verde Corporate Realty Services announced plans for a more than 1 million-square-foot industrial park in Pflugerville called Verde Springbrook Corporate Center. That center will hold Span International's Austin-area operations.
source: bizjournals.com
A new lease on downtown
Any given day, Austinites driving through Central Austin's core have to maneuver through the numerous, towering condo projects currently under construction. Downtown, East Austin and the University of Texas campus area are brimming with present and future residential construction sites, with apartments increasingly gaining a large portion of the market.
Despite an 8 percent increase in apartment vacancy rates for Austin in 2007, and more increases projected for 2008, the growing market isn't expected to slow down.
Jennifer Weibrand, a development associate with Gables Residential, says there are enough full properties in the area to prove the demand for more apartments exists. She says Austin's strong economy and job market are huge pulls for the area, ensuring the city remains a hot market where people want to live.
A 2007 report released by Marcus & Millichap, a national brokerage firm specializing in real estate investments, shows that area builders are expected to complete 4,800 apartment units by the end of the year. This is in addition to the 2,350 units added last year, and the more than 4,500 units planned for completion in 2008.
Steve Hollingsworth, an associate in Marcus & Millichap's Austin office, says the city's climbing vacancy rates are attributable to the large number of stock that's available right now. He predicts the numbers will even out as rising interest rates and tighter credit force many out of the homebuying market and into the rental market.
"Lower-tier buyers can't afford homes or condos and their property taxes, which leads to an increase in renters," Hollingsworth says. "Rents will also increase as normal entry-level homeowners aren't able to get financing and the employment and population growth push rents up even more."
The average price for a one-bedroom apartment in Austin is $707 per month, with rents expected to reach $822 per month for new properties this year. Still, experts believe apartments downtown and in Central Austin have a competitive edge over condos in the area, citing the high demand from students and young professionals in their 20s and 30s who aren't looking for a long-term commitment or who wish to test out the area before buying.
"Renting in downtown and in the central areas is a really good way to try it out and to save on half of your monthly housing expenses," Weibrand says. "All else being equal, monthly expenses for condos are almost double with mortgages, property taxes and association fees."
ZOM Inc., which is building The Monarch, a 305-unit residential tower at Fifth Street and West Avenue, recently announced that it's turning its apartment-turned-condo high-rise back into apartments, proving the demand for downtown rental units is strong.
Gables currently has over 2,100 apartments in the Austin market and will be delivering almost 600 more units from now until 2010 through projects like Gables Pressler, 5th Street Commons and Gables Park Plaza. But Gables and ZOM aren't the only developers taking advantage of the building boom.
source: bizjournals.com
Despite an 8 percent increase in apartment vacancy rates for Austin in 2007, and more increases projected for 2008, the growing market isn't expected to slow down.
Jennifer Weibrand, a development associate with Gables Residential, says there are enough full properties in the area to prove the demand for more apartments exists. She says Austin's strong economy and job market are huge pulls for the area, ensuring the city remains a hot market where people want to live.
A 2007 report released by Marcus & Millichap, a national brokerage firm specializing in real estate investments, shows that area builders are expected to complete 4,800 apartment units by the end of the year. This is in addition to the 2,350 units added last year, and the more than 4,500 units planned for completion in 2008.
Steve Hollingsworth, an associate in Marcus & Millichap's Austin office, says the city's climbing vacancy rates are attributable to the large number of stock that's available right now. He predicts the numbers will even out as rising interest rates and tighter credit force many out of the homebuying market and into the rental market.
"Lower-tier buyers can't afford homes or condos and their property taxes, which leads to an increase in renters," Hollingsworth says. "Rents will also increase as normal entry-level homeowners aren't able to get financing and the employment and population growth push rents up even more."
The average price for a one-bedroom apartment in Austin is $707 per month, with rents expected to reach $822 per month for new properties this year. Still, experts believe apartments downtown and in Central Austin have a competitive edge over condos in the area, citing the high demand from students and young professionals in their 20s and 30s who aren't looking for a long-term commitment or who wish to test out the area before buying.
"Renting in downtown and in the central areas is a really good way to try it out and to save on half of your monthly housing expenses," Weibrand says. "All else being equal, monthly expenses for condos are almost double with mortgages, property taxes and association fees."
ZOM Inc., which is building The Monarch, a 305-unit residential tower at Fifth Street and West Avenue, recently announced that it's turning its apartment-turned-condo high-rise back into apartments, proving the demand for downtown rental units is strong.
Gables currently has over 2,100 apartments in the Austin market and will be delivering almost 600 more units from now until 2010 through projects like Gables Pressler, 5th Street Commons and Gables Park Plaza. But Gables and ZOM aren't the only developers taking advantage of the building boom.
source: bizjournals.com
At Work
Kristin Mainz went to work in downtown rentals and sales three years ago with InTown Properties, which was launched in Dallas by her family in 2000. She's lived in Austin for 15 years and taught junior high school English for 12 years before deciding to get her real estate license.
Q: How has demand been for downtown rental units from your perspective?
A: I see a lot more demand for rentals than I do for sales. There's definitely a strong rental community.
Personally, I think it's because there are so many different businesses in Austin. There's lots of contracting work, so people may come for one year and then travel to a different city the next year. They're not going to purchase now, but they may purchase later. Some of my clients may lease a property downtown and have a house on the lake, using the apartment as a weekend getaway.
Lots of my clients like to lease apartments to have for UT games. They like the life downtown with all its excitement.
Austin is also a big place for singles. People come downtown and then don't want to leave.
Q: How has this changed?
A: I've seen the demand for downtown living increase in just the last three years. For example, I get a lot of demand for AMLI Downtown -- the original on Block 20 -- and they've now built AMLI Downtown number two on Block 22. In my personal opinion, I don't think they would've built a second one if there wasn't demand. I also see an increase in rental numbers that show downtown rentals are anywhere from 94 to 98 percent occupied year-round.
Q: What do you see happening to downtown rental living?
A: More than likely, there are going to be a few more buildings built. There are only a few complexes for lease downtown. I foresee more for lease because the demand is there. I'm hoping to see a few more options for clients who come to us looking for something. Gables is building the Commons on West Fifth. I think there could possibly be more built in the Warehouse district. I see more coming in that area.
source: bizjournals.com
Q: How has demand been for downtown rental units from your perspective?
A: I see a lot more demand for rentals than I do for sales. There's definitely a strong rental community.
Personally, I think it's because there are so many different businesses in Austin. There's lots of contracting work, so people may come for one year and then travel to a different city the next year. They're not going to purchase now, but they may purchase later. Some of my clients may lease a property downtown and have a house on the lake, using the apartment as a weekend getaway.
Lots of my clients like to lease apartments to have for UT games. They like the life downtown with all its excitement.
Austin is also a big place for singles. People come downtown and then don't want to leave.
Q: How has this changed?
A: I've seen the demand for downtown living increase in just the last three years. For example, I get a lot of demand for AMLI Downtown -- the original on Block 20 -- and they've now built AMLI Downtown number two on Block 22. In my personal opinion, I don't think they would've built a second one if there wasn't demand. I also see an increase in rental numbers that show downtown rentals are anywhere from 94 to 98 percent occupied year-round.
Q: What do you see happening to downtown rental living?
A: More than likely, there are going to be a few more buildings built. There are only a few complexes for lease downtown. I foresee more for lease because the demand is there. I'm hoping to see a few more options for clients who come to us looking for something. Gables is building the Commons on West Fifth. I think there could possibly be more built in the Warehouse district. I see more coming in that area.
source: bizjournals.com
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