While Spokane-area home builders have been scurrying to keep up with rising market demand spurred by low interest rates, many of the general contractors here that vie for commercial building projects have been laying off employees and trimming expenses due to the weak economy.
The combined value of commercial building permits issued by the city of Spokane and Spokane County was down close to 25 percent through the first five months of this year compared with the year-earlier period. That construction-activity barometer had plummeted by 23 percent, to $248.1 million, in 2001, from about $323.7 million in 2000. It then bounced back to $296.4 million last year, skewed heavily by a couple of large hospital projects totaling about $74 million in value, before sliding downward again through the first part of this year.
Kootenai County, despite growing much more rapidly than Spokane County over the last decade, hasnt been immune from the swoon. Both Kootenai County and the city of Post Falls show sharp drops so far this year in valuations for projects classified as commercial. Coeur dAlenes latest building-permit figures show a 6 percent rise in such valuations through the first eight months of that citys fiscal year that began Oct. 1, but that follows a plummet of nearly 50 percent over its two previous fiscal years.
Some contractors here say, though, that they finally are beginning to see signsalbeit faint onesof a possible rebound in nonresidential construction activity. They say they expect, however, that it will be at least a year, and maybe several years, before such activity returns to what they consider normal levels.
I think its bottomed out, says builder-developer Dick Vandervert, president of Spokanes Vandervert Construction Inc., of the protracted decline in activity. He says he bases that partly on a noticeable rise in the number of inquiries his company is fielding about potential and pending projects.
Volume-wise, were probably going to be off about 25 percent this year from our norm of around $64 million in contract revenue, he says. Its just a sign of the times. The markets pretty soft. We go through these cycles about every seven or eight years.
Although the general-contracting market is showing signs that it might begin picking up, Vandervert says, Its probably going to take two or three years to get back to normal. I just think its going to be a slow growth.
Despite the slowdown, Vandervert Construction still is involved in a host of projects throughout the Inland Northwest. It currently is working on a Wal-Mart store expansion and remodel at Shadle Center on Spokanes North Side, upgrades at Bonneville Power Administrations Bell substation on the North Side, a retail building and self-storage complex on the South Hill, and a 132-unit apartment complex in Cheney. Outside of Spokane County, its recent or newly awarded projects include two new Yokes Fresh Market outlets in the Tri-Cities, a Fairfield Inn in Yakima, a Mormon church in Moscow, and an AmericanWest Bank branch in Kellogg.
Vandervert says the company recently has been doing a lot of Wal-Marts, Walgreens, and a lot of banks. Thats been the mainstay.
Terry Goebel, vice president of Robert B. Goebel General Contractor Inc., another of Spokanes largest contractors for many years, says he, too, has noticed some indicators of a possible upswing in commercial-construction activity recently, but adds that the lack of a work backlog still scares the hell out of us.
R.B. Goebels business was off 60 percent from normal levels last year, and probably will be down 40 percent this year, he says.
We dont really see our good year coming until next year. Weve already written this year off, in terms of seeing a strong upturn in revenue, Goebel says. Things have picked up enough, though, that the company got some good people back to work, which is a good thing, he says.
Goebel is the general contractor for whats currently being called the 41 West Riverside Building, a four-story, Class A office structure being developed at the east end of downtown where AmericanWest Bank plans to open a city-center office, and is just beginning work on a sizable upgrade at Boundary Dam north of Metaline Falls.
Dave Shea, president of Shea Graham Construction Inc., says, I would say this is probably one of the tightest economies weve operated in since the beginning of my tour of business back in the 1970s. Thats not just a local condition. Its a regional condition.
During the six-month period between November and April, Shea Graham was operating at a significantly reduced level from what our capacity or norm is, he says. Its Seattle-based parent, Graham Contracting Ltd., has been experiencing a similar downturn, he says. Now, though, based on more recent indicators, he says the company is at least feeling some optimism that there is a swing beginning to take place here.
Shea Graham got some disappointing news recently when the Washington Legislature opted not to fund WSUs proposed Academic Center project at the Riverpoint Higher Education Park. The Spokane company earlier had been named the general contractor on that planned $19 million construction project, and it has completed pre-construction preparations for it, Shea says.
Shea Graham has a number of other projects, though, that currently are keeping it occupied. Those include a 130,000-square-foot addition to a Jensen-Byrd Co. distribution center on the West Plains, a $1.9 million upgrade to Gonzaga Universitys Cataldo Hall, a Walgreens store in Post Falls, and a $2.5 million Consolidated Disposal Service Inc. facility in Moses Lake, Shea says. It also is doing work at a Deer Park retail center (see story page B2) and is the general contractor on a couple of projects on the Washington State University campus in Pullman, he says.
One general contractor here that claims it hasnt been slowed by the poor economy is Baker Construction & Development Inc.
We have been real busy, says President Barry Baker. We dont depend solely on Spokane for our livelihood. We operate now in 11 states, and our business is based on relationships.
Rather than doing much competitive bidding, Baker Construction employs salespeople who seek jobs for the company, he says. It then strives to build relationships that enable it to negotiate future projects with those clients without having to bid on them. Bidding competitively on projects is tough right now because there are fewer projects to bid on than in a healthy market, and contractors are slashing their project margins just to get jobs, Baker says.
Another plus for Baker Construction, he says, is that the company also is a developer, developing structures that it will own and lease out to tenants. We build them for ourselves, so weve tried to become our own best customer, Baker says.
The Spokane company currently is building several Big 5 Sporting Goods stores in California and Colorado and Moneytree stores in Nevada and Arizona, and is developing retail strip centers in Boise and Idaho Falls, Idaho, and Ontario, Ore., he says. Also, in Redmond, Ore., its developing a Walgreens store on land it owns, he says. Locally, it just finished work on the Northwest Neuroscience Institute at the former site of the Inland Northwest Blood Center at 507 S. Washington and won a contract to remodel a Rite-Aid store on the South Hill, Baker says.
Dearth of big projects
Two of the largest-valuation local projects for which building permits have been issued so far this year are the Big Easy Concert House and the 41 W. Riverside building, both downtown, listed at $5 million and $3.5 million, respectively. After that, the projects drop off quickly in size.
Individual projects aside, a review of city and county building permit statistics suggests that growth in nonresidential construction activity over the last 10 yearsdating back to Spokanes last economic growth spurthas been meager at best.
In the unincorporated areas of the county, building-permit valuations attributed to commercial activity grew just 25 percent, to $109.1 million, over the 10-year period that ended last year. Such valuations peaked at $191.5 million in the county three years ago. The county classifies all office, retail, industrial, educational, religious, recreational, and apartment buildingsduplexes excludedas commercial.
The city of Spokane doesnt break out commercial activity in its permit statistics. However, rough calculationsderived by subtracting out the same residential-related categories as those omitted in county commercial-activity figuressuggest it has fared worse than the county over that 10-year period. The city showed an overall building-permit valuation of about $187.3 million in those nonresidential categories last year, up only 20 percent over 10 years.
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