Commercial projects keep construction industry busy despite downturn in home building
Sunday, January 3, 2010
New hotels. New hospital buildings. New community centers, schools and park facilities.
All that and more are on the list of commercial construction permits issued by Cape Girardeau and Jackson in 2009, one of the best years locally for big projects despite a recession that has seen a steep decline in new home building.
The two cities issued $60.9 million in permits for commercial construction, both new projects and additions or renovations to existing buildings. That's 89.4 percent more than 2008's $32.1 million and the second best in the past five years, surpassed only by 2006 when home building was also in a boom.
Add in major road projects such as the Highway 34/72 project from Jackson westward and the result is a commercial construction industry that is helping keep the area's unemployment rate well below state and national averages. While several big projects will continue in construction this year, the question remains whether commercial construction is headed for a slowdown because of the economy or if the rosier overall picture in the Cape Girardeau area will keep investment flowing.
Opinions are mixed.
"I am not optimistic," said Tom Kiefner, owner of Kiefner Brothers Inc., a construction firm that specializes in large institutional projects. "I am not grimsville, but it is going to get tougher before it gets better."
But John Mehner, president and CEO of the Cape Girardeau Area Chamber of Commerce, said he expects investment decisions in the first three months of the year will set the tone for future commercial construction.
"I am reasonably confident we have several commercial projects in the hopper that will keep us going," Mehner said.
Voters could help sustain momentum on large projects if they approve a $40 million bond issue being considered for the April ballot by the Cape Girardeau School District.
In November, unemployment for Cape Girardeau County and the three neighboring counties -- Bollinger, Perry and Scott -- was 7.2 percent, compared to a national rate of 9.4 percent and a state rate of 9.2 percent.
"I would think that certainly is a piece of it," Mehner said. "But we are always below the state and national averages."
The jobs keeping commercial construction companies and tradespeople busy include the $84 million heart and cancer institute under construction at Saint Francis Medical Center, a $33 million cancer center being built by Southeast Missouri Hospital and an $8 million school project in Jackson. The Saint Francis building has a fall 2011 completion date, while the Southeast Missouri Hospital project will be completed by December.
Those projects cap several years where big construction jobs were commonplace. The Rush H. Limbaugh U.S. Courthouse, opened last year at a cost of $62 million, as well as the Southeast Missouri State University River Campus, opened in 2007 at a cost of $50 million, are two highly visible public projects. Other large jobs include the Jackson High School renovation and expansion, the Cape Girardeau Public Library reconstruction, new dorms on the Southeast Missouri State University campus and the $20.5 million project to widen Highway 34 in Jackson.
The weak housing market is prompting construction workers who normally build homes to seek work on commercial jobs. The same dynamic means thinner profit margins as contractors shave their bids to win work.
"In the open bid market, it is tough out there," Kiefner said. "We have bid several projects recently where there were more than normal amounts of competition and prices are driven down due to the overly competitive market. It is a sign of desperation."
Kiefner, whose clients include both hospitals, said his firm is lucky it's not as dependent as others right now on finding new jobs. "We're blessed," he said.
The leader of the Craftsman Independent Union, which supplies construction crews to Fru-Con at Procter & Gamble's Cape Girardeau County plant, said the commercial construction boom means many workers who would be idle are on the job. Fred Kelley said the union, which does not use strikes as a bargaining tool, has seen a surge in job seekers among construction tradespeople who normally build homes.
Without the big commercial projects now underway, "it would be extremely slow," Kelley said.
He likes the prospects for the coming couple of years. "I think next year is going to be good too," he said Thursday. "I think we have been blessed by the good Lord by this area not being hit by the recession."
Like Mehner, Kelley expects announcements in the spring that will keep the momentum going. "I think there will be major industrial developments," he said. "I am not at liberty to tell, but I think that will happen."
Commercial construction projects in 2010 helped keep Southeast Missouri from sinking deeper into the national recession. Stated construction values on building permits issued by Jackson and Cape Girardeau were 89.4 percent higher in 2009 than in 2008 and 21.5 percent higher than the five-year average. Figures for 2009 are as of Wednesday.
|2005||$41 million||$5.8 million|
|2006||$47.5 million||$22.2 million|
|2007||$32.1 million||$9.2 million|
|2008||$28.6 million||$3.6 million|
|2009||$50.2 million||$10.7 million|
|Average||$39.9 million||$10.3 million|
SOURCE: Cape Girardeau, Jackson
Cape Girardeau, MO