Colorado Springs News, Sports & Business

Colorado Springs-area residential and commercial construction rebounds from recession

By Rich Laden Updated: January 6, 2014 at 12:01 pm

Colorado Springs-area construction activity that sagged during the recession has rebounded in record-setting fashion, led by a resurgence of the single-family housing market.

The combined dollar value of residential and commercial building permits - for homes, apartments, stores, restaurants, offices and utility structures, among other types of construction - totaled almost $2 billion in 2013 in El Paso County, according to the Pikes Peak Regional Building Department.

It topped the previousrecordof $1.5 billion, set in 2012, and more than doubled the dollar value of building permits during the height of the recession five years ago.

"It's been a busy year," said Henry Yankowski, who heads the Regional Building Department.

Of last year's nearly $2 billion in building permits, single-family, detached homes accounted for a little more than half of the total, Regional Building Department records show. It was the first year that the dollar value of single-family home permits surpassed the $1 billion mark.

Since 2009, the dollar value of single-family permits is up nearly 185 percent.

Industry experts creditpent-up demand and mortgage rates that were well below 4 percent for the first half of last year as the mainforces driving the residential recovery.

Not surprisingly, the increased activity has had a ripple effect within the construction industry, especially for businesses that specialize in residential work.

Positive Electric, a decade-old Colorado Springs company that wires homes for about 10 local homebuilders, saw its business start to ramp up about a year ago, said owner John Mays.

By midyear, his company was so busy that Mays and his employees were having a tough time keeping up with the workload.

"In the early summer to the end of the summer, we were working overtime on a consistent basis, asking the guys to put in extra hours because we couldn't hire anyone fast enough to keep up with the increase," Mays said.

Homebuilder John Bissett, founder and owner of JM Weston Homes, said he expects to hire two people in 2014 to add to his six-person staff. His company, which builds homes in Gold Hill Mesa on the Springs' west side, is expanding to Wolf Ranch on the far northeast side; Bissett said he'll need to add a salesperson to market homes and someone to manage and coordinate the homebuilding.

"We can't do it with just the people we have now," Bissett said. "It's just not possible."

Gary DeJong, president and owner of American Overhead Door in the Springs and a board member of the El Paso County Contractors Association, bought his company about 31/2 years ago; it installs garage doors and repairs and replaces existing doors for residences and commercial buildings.

Since he bought the company, DeJong said he's added about 15 employees and nine vehicles and doubled the amount of square feet his company leases on North Prospect Street.

"Three years ago, we were putting Band-Aids on doors, trying to get them fixed and for them just to hold together," DeJong said. "And now, the last year-and-a-half, people have been replacing the doors and they're putting money back into manufacturing facilities and into their homes."

Last year was a good year, DeJong added. "And 2014 looks to be better."

Idaho-based Building Materials and Construction Services, which provides building materials for residential construction, is expanding its Springs operation by adding a second location on South Academy Boulevard.Atruss manufacturing operation that the companyrelocated to Fort Lupton as the recession began is being brought back to the Springs, said Doug Whiting, BMC's market manager for Colorado.

While the company remains cautiously optimistic about housing, "we wouldn't be doing it if we didn't feel confident in the market," Whiting said.

Commercial construction has rebounded as well, but the pace has been slower. The dollar value of commercial permits totaled about $396 million last year, an increase of almost 44 percent since 2009 - far less than the gains made in residential construction over the same period.

Mike Trapp, whose nearly century-old Olson Plumbing & Heating Co. does mostly commercial work, said the improvement in commercial construction in the Springs trails that of Denver and Pueblo, based on work his company does in those cities.

"Things are definitely better," Trapp said. "I wouldn't say that they're so much better here."

The area needs more businesses and jobs, which would lead to more construction of offices, industrial buildings and other commercial projects, Trapp said.

"You don't see a lot of new business coming right yet," he said.

Likewise, some industry members say commercial construction typically lags a residential recovery.

Before developers and retailers launch new medical office buildings, stores, shopping centers and the like, they want to be certain that new residential developments take shape as planned, the experts said.

Also, many commercial projects typically are bigger, costlier and take longer to design, build and complete, Trapp said.

"It doesn't cost nearly as much money to build a house as it does a $20 million expansion of some building or a business," Trapp said.

Kent Miller, whose Frontier Mechanical Systems does about 75 percent of its plumbing and other work on the commercial side, said lenders also are more cautious making loans to businesses after an economic downturn - another reason commercial construction hasn't recovered as quickly as residential.

For now, some industry experts and economists expect residential construction will remain strong in 2014. Even though homebuilding slowed slightly in the last quarter of 2013 as mortgage rates crept above 4 percent, economist Fred Crowley of the University of Colorado at Colorado Springs said local housing is poised to take off again. In his latest quarterly report on local economic conditions, Crowley said he expects another round of pent-up demand from buyers to propel homebuilding. Also, he said, people will have gotten used to the idea of long-term mortgage rates in the neighborhood of 4.5 percent and will move ahead with plans to buy homes.

"I see no reason why it's not going to continue," Crowley said about housing construction. "People are going to have to realize you've missed the boat at 3.5 percent. It's not coming back."

Yet, based on historical averages, rates of 4.5 percent remain "an incredible buy," he said.

The rebuilding of homes in Mountain Shadows and Black Forest - devastated by wildfires in 2012 and 2013, respectively - also will contribute to residential construction activity, Crowley said.

Commercial construction, meanwhile, will continue to trail residential until vacant spaces are filled and until developers are convinced the residential recovery is sustainable, he said. The combined vacancy for local office, industrial and retail properties stood at 11.4 percent in the third quarter of last year - down almost a full percentage point from a year earlier, but still higher than before the recession, according to Turner Commercial Research of Colorado Springs.

"It will be another year or two before we see another boom in commercial space," Crowley said.

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Contact Rich Laden: 636-0228

Twitter @richladen

Facebook Rich Laden

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OTHER NUMBERS

- The dollar value of residential and commercial permits for remodelings, additions and alterations was $368 million in 2013, more than double the total of $169.5 million in 2009.

- About half of the $396 million in commercial construction building permits in 2013 was for public service and utility projects, such as an SDS water treatment plant being constructed by Colorado Springs east of Marksheffel Road, between U.S. 24 and Colorado Highway 94.

- Construction of offices, banks and professional buildings totaled $31.3 million last year, compared with $196.8 million in 2009.

Source: Pikes Peak Regional Building Department; Gazette research

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