Stalling recovery

Construction photo courtesy RSV Building SolutionsA short time after the recession led Clark County builders to a screeching halt, the fledgling industry is now trying to scramble back to its feet and get back to work. However, a hopscotch building climate continues to stall recovery, according to some builders and contractors.

“There’s so much going on in the background that it’s hard to figure out,” said Ted Aadland of Aadland Evans Constructors in Portland and former president of the Associated General Contractors of America.

One thing is certain, he said: Construction firms are ready to swing hammers again. But it’s a tricky proposition as the area continues its recovery from the recession and its aftershocks.

Fees

County building fees rank as a top concern for area builders.

Crane photo courtesy RSV Building SolutionsDave White, who plans to develop a 130-unit townhome projects on his property at Northeast 162nd Avenue in Vancouver, said fees for his proposed project have increased eight times in eight years.

“I’ve got about a million dollars in fees for traffic, schools and parks,” he said.

According to White, there were no building fees associated with the property when he purchased it in 1995; it was annexed into the city in 1996.

“They really piled [fees] on during the boom years, but they didn’t adjust for the [economic] collapse,”  White said, figuring that fees account for about $13,000 per unit on his townhouse project.

Builders say they saw fees spike during the economic height, around 2006, and they’ve yet to come down, which would make project construction a much more doable enterprise.

If his housing project (and ones like it) doesn’t move forward, White explained inflationary pressures could drive up the city’s overall cost of living, including rents.

“The builders are being very selective. The banks are being very selective. If Vancouver isn’t going to pencil because of the fees, people aren’t going to invest here,” he said.

Boyd Williams, White’s partner, is also looking at jobs. He estimated that 50 trade craftsmen per month will work on his project over the course of its 18- to 24-month life. Once built, he said the project will employ a staff of four or five full-time employees.

Ron Frederiksen of RSV Building Solutions in Vancouver echoed White and Williams.

“The government is out of step with reality,” Frederiksen said. “There are issues with them (building fees) and, frankly, that is why you don’t see new construction out there.”

Prep for concrete - VBJ ArchiveFee holidays (the subject of Clark County Community Development Director Marty Snell’s column on page 8) passed late last year by the Clark County Board of Commissioners to reduce project fees won’t help stimulate construction growth, according to Aadland. He said projects
 may get stalled and if a “holiday” window is missed and the project’s financials get out of whack, it will skew its economic viability.

“Everything has to pencil,” said Aadland.

Financing

Financing projects has been a difficult prospect for contractors who want to get construction projects moving again, according to Aadland.

“We’re just not seeing a lot of private work out there and the banks are just not loaning the money,” he said.

In some cases, construction firms are still feeling the fallout from failed banks and dried-up financing. White, for example, had submitted building prints at a cost of $30,000 to the county. But when the Bank of Clark County collapsed in January of 2009, he said his project funding went with it. Without financing, his project sat, stalled in its permitting process.  Now, two years later, he’ll need to pay another $30,000 to submit those prints again, he said.

“It really kicks the builder in the mouth again after the Bank of Clark County fiasco,” White said.

When it comes to private investors, they’re selective, too. Ed Prezkop, a Vancouver-area developer and investor, for example, looks at the whole project – fees included – before committing to financing. He said the magic is in the pencil.

Building redesign

It’s not all doom and gloom for area construction firms.

Despite a difficult climate for new construction financing and a glut of empty buildings, Frederiksen said he’s working with a number of clients to redesign existing buildings to satisfy their needs. These often involve a fair amount of redesign, but it’s far cheaper – and easier – than a whole cloth building project, he said.

An added boon to businesses: Frederiksen said real estate prices are low and he expects them to appreciate in the coming years as the economy recovers.

Cost increases

Counter-intuitive as it may seem, Frederiksen sees a price spike on the horizon for new-construction projects. He said stilled construction firms don’t want to raise rates and drive away business, but inflationary material pressures are creeping in, driven by fuel and shipping costs.

“It’s going to affect construction costs,” he said.

Looking ahead there are glimmers of hope on the horizon, according to area builders. For now, they said the challenge is getting the wheels greased and getting the whole construction machine (i.e. financing and fees) working again.

“One thing leads to another and it gets the fire built,” said Prezkop.  “Activity makes for more activity.”

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