Local commercial development on par with national trend
TRAVERSE CITY – While we are far from the construction craze of the mid 2000s, it appears commercial development is slowly on the rise, both nationally and in Traverse City.
Recent numbers released by the U.S. Census Bureau show non-residential construction spending at its highest levels since December 2009, when almost $287 million was spent on new developments. However, this is 29 percent less than what was spent during the same period in 2007, meaning the construction business is still building a new foundation after the recession.
The TCBN did some digging and found the numbers for commercial development in Traverse City are on par with the national trends. New commercial projects in Garfield Township have steadily increased by more than 20 percent annually over the past few years. Eight new commercial developments were approved last year, compared with six in 2010 and four in 2009.
"There's definitely a better vibe out there than a few years ago," says Michael Brown, owner and president of Burdco Inc. in Traverse City. "But it's going to be a gradual climb because there's still a lot of commercial inventory out there from businesses that didn't make it." He expects it to be a few more years before that inventory is absorbed.
Burdco has been building commercial developments in TC for more than a quarter century and is currently working on the Members Credit Union building on West Front Street and the West Creek project on Division Street. His partner in that project, developer Jerry Snowden, agrees that things are slowly improving since late 2008 when, as Snowden says, "everything came to a standstill."
"Lenders turned off the spigot," he said. "Financing for new development and redevelopment projects came to a halt. Many commercial property owners and real estate developers couldn't do anything but sit and wait for the market to turn."
Phase one of the West Creek development (approximately $3.2 million) is expected to be complete by May when the local Social Security office moves into the space. Construction on the second building, which will top out at 8,000 square feet, is expected to begin later this spring.
Garfield Township is not only seeing an increase in new commercial developments, but also a big jump in renovations and additions to existing buildings.
According to Building Department Manager Carl Studzinski, the number of permits issued for non-residential alterations jumped by 50 percent from 2010 to 2011 (27 to 54), with overall construction value increasing more than $3 million over the same period. Some of the bigger alterations in our area included Big Lots, Sam's Club, J.C. Penney and Target.
Last year, new commercial construction and renovation projects netted almost $75,000 in permit fees into Garfield Township. Studzinski wrote in a 2011 State of Operations report: "Garfield Township is truly fortunate. Even as construction struggles statewide, we continued to have strong investment in construction."
But while the number of commercial buildings are steadily increasing, it appears some developers are being more conservative when it comes to spending. The eight Garfield Township commercial buildings approved last year had a construction value close to $6.5 million, compared to nearly $11 million for six buildings in 2010.
"Developers are being very cautious and aren't taking a lot of risks with the economy still recovering," Brown said. "There's also not a lot of private investment out there and people are having trouble with financing."
Anthony Palumbo, Community Bank President of First Community Bank, said, "I think developers understand the concept of keeping debt levels at manageable levels and have become more in tune with looking at their cash flow and not overextending themselves."
He admitted underwriting standards are different than they were in past years, but adds, "We are doing our due diligence and are hungry to finance good projects."
Still, developers like Jerry Snowden are optimistic about the future and the availability of financing.
"Confidence is improving," he said. "Businesses are starting to expand. More money will be available, and the pace of real estate development will pick up again." BN