(Janesville, WI) By Jim Leute, Gazette
Commercial construction—both new buildings and additions—continues to be the driver of the local building industry.
That's the takeaway from a review of 2013 permit data from the city of Janesville, which also shows Janesville and Rock County lagged the state and nation in growth in housing starts.
Contractors pulled 27 commercial permits for new Janesville projects in 2013, a 59 percent increase over the previous year. They also took out 147 for either additions or remodels, which also was an increase over 2012.
While both were six-year highs, what's more significant is the amount of investment those projects bring to the local economy.
The permits for new Janesville buildings indicated a construction value of $34 million, more than eight times the value of projects in 2012.
Additions and remodeling projects at existing businesses added another $21 million, nearly doubling the amount of permit value reported in 2012.
Notable commercial projects in Janesville include the new GOEX plant on Highway 14 and an addition that will double the size of United Alloy less than a mile away. Others includes several outlot projects along Milton Avenue.
"Things are really good," said Barry Badertscher of Badertscher Commercial Real Estate in Janesville. "We're working on several nice projects, and I've been getting more phone calls than I ever have since I've been in business."
Those callls, he said, are much more positive. In recent years, many callers have asked about Janesville being a "dying city."
"Now, people see Janesville as a town with opportunities," he said. "And you can sense it in meetings around town."
"Five years ago, pessimism would overtake the room. Now, it's completely opposite, and we don't talk about problems, we talk about solutions."
James Otterstein, Rock County's economic development manager, said the county's commercial sector continues to be strong, and that's evidenced by continued investment in new building projects and expansions. "The Milton Avenue corridor in Janesville and the Milwaukee Road corridor in Beloit have seen a steady uptick in outlot projects, and we've seen a number of redevelopments of existing footprints and new projects," he said.
Otterstein agrees that existing businesses and outside developers see opportunity in Rock County. That's attributable to an improving local economy and the cost advantages that can be found locally when compared to other metro areas, he said. "All of this activity demonstrates buying power in the marketplace, the ability for investors to received their identified rates of returns and the fact that Rock County continues to be a regional draw," he said.
HOUSING STARTS STAGNANT
In a comparison between 2012 and 2013, housing starts in Janesville and Rock County were down 8 percent and 10 percent, respectively. On the state and national levels, permits for the construction of new homes increased at least 18 percent last year.
That's somewhat of a disappointment for local builders who entered 2013 with the belief that things would get better with a slowly growing local economy, favorable interest rates and an improving real estate market with more existing homes being sold for higher values.
"In general, last year shaped up to be a little stagnant," said Eric Richards, owner of Eric Richards Construction in Janesville. "Personally speaking, we had a full workload, at least as full as we wanted to be."
Richards said interest in home building, at least with his company, started to pick up last fall. He believes that could translate into work this year.
"I met with a lot of people with plans in hand or drawings being made," he said. "I really think it's a confidence thing. A lot of people have been looking at existing homes and not finding what they're looking for. They think they've waited long enough, interest costs are still low and material costs are fairly steady, so maybe it's time to build."
Richards also said he expects the market to improve because appraisals for loans have moved far closer to the actual cost of building a house. In the past, he said, appraisals often came back far below a project's cost, which often derailed the loan and therefore the project.
REMODELING REMAINS SOLID
What may be lost in new home construction and real estate sales is often made up in remodeling projects. Some homeowners, unwilling to pull the trigger on a new home, are instead investing in home improvements.
"Last year was a good year for me personally," said Jeff Steffensen, owner of Distinctive Craftsman in Janesville. "People seemed to be much more decisive in what they wanted to do.
"Some decided they were going to stay in their house, and there were certain things they wanted to do. Others decided that in order to sell down the road, there were certain things they had to do."
Steffensen, president elect of the South Central Wisconsin Builders Association, said the remodeling business has been good in recent years.
While he's a small operation with low overhead, he said many other traditional home builders had to shift their focus to the remodeling market to weather the economic downturn.
From what he's heard, the local outlook for this year is optimistic.
"What I'm hearing is people say that they believe they can get the sales," he said. "The biggest concern is on the production side, the ability to get people into the skilled trades, either through apprenticeships or other ways.
"There's always going to be a need for this type of work."
Steffensen was referring to an industry problem that goes well beyond the Rock County borders.
Initially hampered by a lack of work, the construction industry is rebounding. But it's doing so at a time when it has lost older workers to retirement and younger workers put off by extended layoffs to different careers.