Construction reduction: 2005 has been busy year, but it couldn't match 2004

Tuesday, October 25, 2005
Construction workers from Stockade Builders worked on a 4,800-square-feet building on Broadway that will be the new location of New Creative Trim & Performance in Cape Girardeau. (Diane L. Wilson)

Last year, Cape Girardeau saw several exciting high-profile commercial construction projects get underway, such as Sears Grand, the Holiday Inn Express and Kohl's. The city of Jackson also had a big year with multimillion dollar projects like Ashley Furniture.

So what does that mean for this year when both cities are seeing decreases in commercial building permits?

Basically that years like 2004 don't come along all that often.

"In '04, there seemed to be a feeding frenzy because of the unusually low interest rates nationwide," said Robb McClary, director of inspection services for Cape Girardeau. "I think that caused people and corporations to get projects going while the lending rate was so favorable."

Now, interest rates are rising again, possibly causing some entrepreneurs to rethink their investments. And as colder weather sets in and the construction season winds down, the numbers are suggesting that may be what happened.

In 2004 through September, Cape Girardeau had 45 new commercial building permits, with a valuation of $31.47 million, according to the inspection services office. This year through the same time period, there have been fewer than half of last year's total, with only 21 new commercial building permits, with a valuation of $14.92 million.

However, the one piece of good news is that the number of business remodels and additions in Cape Girardeau are up from last year. In 2004, there were 66 with a valuation of $14.55 million. This year, there have been 95 such remodels and additions -- such as the one done at La Croix United Methodist Church, the Southeast Missourian and the King's Center on Kingshighway -- with a valuation of $16.24 million.

But McClary was quick to add that this year hasn't been a bad year for commercial construction, pointing to new projects like the Olive Garden, Panera Bread and Lambert Plaza on Siemers.

"But there obviously aren't as many," he said. "The primary factor, I think, was the low interest rates. Now, there's a lot of uncertainty in the banking business."

Jackson is seeing a similar slide in its permit numbers. From Jan. 1 to Oct. 18, it had 18 new commercial building permits, a number that fell to 10 over the same period this year. The valuation for 2004 for that time period was $5.71 million, but it fell to $3.68 million this year.

"I really don't know if it means anything," said Jackson Mayor Paul Sander, who also is a licensed real estate agent. "I can't really put a good finger on it except that some years have bigger ticket commercial items that come in. A few big ones and it gives you an inflated view from one year to the next."

Still, the drop doesn't alarm him, he said.

"We've seen ups and downs over the years," he said. "I'll reserve comment for another six months or a year and see if it's a trend or if it's just something that happened this year."

Others in commercial real estate say it's always a mixed bag, which can -- and does -- change from one year to the next, depending on interest rates, market activity and, often, blind luck.

Tom Kelsey of Lorimont Place said he believes that the numbers ignore the businesses that are relocating into existing buildings. It's a situation where some businesses feel like it's less expensive to move into an existing building than building a new one.

"There are several businesses that have been absorbing existing space and facilities," he said, citing the recent decision of Buchheit moving its trucking service into the SuperValu building in Scott City.

But Kelsey thinks the situation is improving.

"It's still not at the level of activity that we would like to see," he said. "Our perspective buyers and perspective tenants have an attitude of guarded optimism."

David Donley of Commercial Real Estate Specialists and Divine Homes said that he has seen a stellar year for commercial real estate.

"It's been our best year," he said.

Donley helped broker the deal for the new Sonic on North Kingshighway and the new Shogun's Japanese Steak and Sushi bar on Broadview, as well as other developments outside the Cape Girardeau-Jackson area.

"I think we'll continue to spur on," he said. "I know the rates are going to go up, but it was five short years ago that the rates were nearly 10. I look for the market to grow and grow."

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