Storms deliver 2008 economic boom to regional building industry

by The City Wire staff ([email protected]) 78 views 

Fort Smith 2008 building permitsThe April hail storm and June wind storm that hit the Fort Smith region was followed by an economic stimulus “storm” that dropped at least $80 million in commercial and residential building activity in Fort Smith.

(Photo at right: Residential building activity in a new subdivision near Arkansas 253 South and Interstate 540.)

Fort Smith officials issued 9,610 building permits valued at $193.24 million in 2008, a 26.2% increase in value over the 2,533 permits valued at $153.1 million in 2007.

Of the 9,610 permits issued in 2008, 8,674 were for repair permits for homes (7,641), apartments (127), duplexes (202) and commercial structures (704). Not all the permits were related to damage from the storms, but the number of repair permits issued in 2008 was 488.4% greater than the number issued in 2007.

“You’re correct in the crediting the two major storms we endured last year for generously contributing to our housing economy,” replied Dave Hughes, executive director of the Greater Fort Smith Association of Home Builders, when asked if it was safe to assume the storms bolstered the regional building economy. “That put a great deal of money into the local building supply industry, and it continues today with 203 (Fort Smith) repair permits in December. … Factor in Van Buren and non-incorporated areas and the sum will be staggering.”

Hughes estimated the regional repairs are 90% complete, and said a local window manufacturer can now fill orders within one week, whereas about six months ago “there was at least a 30-day wait.”

Fort Smith and Van Buren city coffers also benefited from the storm repair work. Fort Smith collected $1.09 million in permit fees in 2008, 81.6% higher than the $605,543 collected in 2007

Van Buren, according to Martin, charged a flat fee of $20 per repair permit, netting the city $83,460 on the 4,173 permits it issued in 2008. Van Buren did not issue repair permits in 2007, but began doing so in April 2008.

RESIDENTIAL BUST IN VAN BUREN
In Van Buren, the city issued 71 building permits for new commercial and new residential construction valued at $20.91 million, down more than 35% in value compared to 2007.

However, Van Buren issued 4,173 permits for roof and siding repairs. Unfortunately, the city of Van Buren does not record a value on the repair work when it issues repair permits.

It’s a good thing the storms kept the industry moving in Crawford County because 2008 brought a 59.6 percent decrease in the value of new residential construction permitted. The city issued 136 new home permits in 2007, but just 56 in 2008.

“That is just the economy,” said David Martin with the city of Van Buren. “They (builders) are just pulling back a little.”

The city issued fewer new commercial construction permits in 2008 (15) compared to 2007 (20), but the $10.97 million value of the 2008 activity was 36.6% greater than the 2007 value.

FORT SMITH FUNDAMENTALS
The value of new residential and commercial construction in Fort Smith fell 33.2 percent in 2008 ($66.39 million) when compared to 2007 ($99.51 million).

Again, the storm repairs took the sting out of the more than $33 million value decline in new residential and commercial construction in Fort Smith during 2008.

Ray Gosack, deputy city administrator for Fort Smith, predicts very little new retail construction in 2009 “given the national economic climate” and the amount of retail vacancies on Rogers Avenue. Rescuing the expected lack of commercial construction related to retail will be the “significant building permits” for the new PRADCO and Umarex projects at Chaffee Crossing.

Fort Smith-based PRADCO announced in July 2008 it would invest $21 million in a new 300,000-square-foot plant at Fort Chaffee. Pradco now occupies three buildings in Fort Smith and employs 150 people.

Umarex, the fourth largest airgun manufacturer in the world, is expanding its operations in Fort Smith by building a new assembly and distribution center at Fort Chaffee.

Gosack does predict “brisk activity” for new home construction.

“There are several new subdivisions underway – three in the Chaffee Crossing area and one at the intersection of Howard Hill and Rye Hill Roads. These represent more than 400 lots. Also, the very low interest rates seem to be helping homebuyers make the decision to buy a first-time house or to move up in size,” Gosack explained.

Hughes said he thinks the Fort Smith region avoided the problems of residential overbuilding — like that seen in Northwest Arkansas and other parts of the nation — “due to our conservative business practices in the local housing market.”

Hughes predicts a slight increase in new home construction in the region in 2009 barring further deep deterioration in the national economy.
 
“My optimism goes back to the fact that the areas suffering the most now (were) overbuilt and were in a weakened position when the credit implosion occurred flooding their markets with repo’s,” Hughes said. “Neither of those factors were in play in this market. Yes, we’ve had some foreclosures, but nothing to the extent of areas like Florida, California, and Nevada.”

NUMBERS TO PONDER
Fort Smith
New Commercial Construction
2008: 44 permits, value of $36.25 million
2007: 42 permits, value of $75.5 million

New Residential Construction
2008: 199 permits, value of $30.14 million
2007: 210 permits, value of $24.01 million

Commercial Repair
2008: 704 permits, value of $33.96 million
2007: 201 permits, value of $7.47 million

Residential Repair
2008: 7,641 permits, value of $41.24 million
2007: 1,228 permits, value of $7.94 million

Total for all categories
2008: 9,610 permits, value of $193.24 million
2007: 2,533 permits, value of $153.1 million

Van Buren
New Commercial Construction
2008: 15 permits, value of $10.97 million
2007: 20 permits, value of $8.02 million

New Residential Construction
2008: 56 permits, value of $9.94 million
2007: 136 permits, value of $24.62 million

Total for all categories
2008: 71 permits, value of $20.91 million
2007: 156 permits, value of $32.64 million