Building permits zig, construction costs zag

The Amazon distribution center in Chesterfield County, show in May 2012.

When it came to the business of moving dirt and raising roofs, the scene in 2012 was a mixed bag.

Building permit records for 2012 in Richmond, Chesterfield County, Henrico County and Hanover County show the effects of more people staying put and the bigger dollars spent in the suburbs on a few large projects.

Chesterfield saw a 51 percent year-over-year increase in construction dollars spent in the county, with an estimated $392 million in construction costs, according to permit totals from 2012. That’s compared with $261 million in 2011.

But Henrico County saw a precipitous decline in construction dollars spent last year, dropping 50 percent year-over-year, with an estimated $101.4 million spent. The 2011 total in Henrico was $202.6 million.

The big jump in dollars in Chesterfield is at least in part due to several massive commercial projects such as the expansion of the Sabra plant and construction of the Amazon distribution center.

Accounting for the drop-off in Henrico is trickier, especially because the number of permits was up slightly from 2011.

Gregory Revels, a building official with the Henrico County, said most of the drop-off could be attributed to people choosing to renovate their current spaces, rather than build new homes or offices.

“The data we’re seeing shows that while permits may be up, it’s mostly additions and alterations, which cost less than a new building,” Revels said, noting that the building costs listed in permits are self-reported estimates from builders.

Fewer homes were constructed in Chesterfield in 2012. The county issued 2,722 residential building permits in 2012 compared with 3,089 the previous year, but building costs listed in the permits were up about 7 percent year-over-year.

Hanover County saw a 60 percent jump in construction dollars spent in 2012 over the previous year, with an estimated $159 million spent in the county.

Hanover got a big boost this from the construction of the Vitamin Shoppe distribution center.

In Richmond, where the bulk of the big-dollar permits are tied to multi-family projects, 360 building permits were issued in 2012 for a total value of $224 million.

Bud Ohly, head of Henrico-based Eagle Construction, said that he saw some good signs for homebuilders in 2012 but that 2013 would still be challenging.

“I think we achieved some price stability in 2012, and maintaining that in 2013 is important,” Ohly said. “But that’s not going to be easy. We’re seeing two things: the cost of construction is rising, and financing is still constrained.”

Ohly said that one effect of tighter lending standards is that cancellations among prospective buyers are down significantly.

“The quality of our buyer seems to have improved, certainly over the go-go days in the middle of the last decade,” he said. “We just don’t get a lot of marginal buyers. If someone is looking to buy a home these days, it’s because they are pretty sure they can afford it.”

Tom Dickey, principal at Monument Construction, said he expects demand for apartments, a big part of his company’s business over the past few years, to stay high in 2013.

But he said his company is also starting to slowly get back into the single-family home business.

“We did three spec homes this year and sold all of them,” Dickey said. “We did a spec renovation in the Fan, which sold for about $600,000, and we did two homes in Westover Hills, which sold in the upper $200,000 to lower $300,000 range. We’ll probably do more of that in 2013 and stay in about that price range.”

The Amazon distribution center in Chesterfield County, show in May 2012.

When it came to the business of moving dirt and raising roofs, the scene in 2012 was a mixed bag.

Building permit records for 2012 in Richmond, Chesterfield County, Henrico County and Hanover County show the effects of more people staying put and the bigger dollars spent in the suburbs on a few large projects.

Chesterfield saw a 51 percent year-over-year increase in construction dollars spent in the county, with an estimated $392 million in construction costs, according to permit totals from 2012. That’s compared with $261 million in 2011.

But Henrico County saw a precipitous decline in construction dollars spent last year, dropping 50 percent year-over-year, with an estimated $101.4 million spent. The 2011 total in Henrico was $202.6 million.

The big jump in dollars in Chesterfield is at least in part due to several massive commercial projects such as the expansion of the Sabra plant and construction of the Amazon distribution center.

Accounting for the drop-off in Henrico is trickier, especially because the number of permits was up slightly from 2011.

Gregory Revels, a building official with the Henrico County, said most of the drop-off could be attributed to people choosing to renovate their current spaces, rather than build new homes or offices.

“The data we’re seeing shows that while permits may be up, it’s mostly additions and alterations, which cost less than a new building,” Revels said, noting that the building costs listed in permits are self-reported estimates from builders.

Fewer homes were constructed in Chesterfield in 2012. The county issued 2,722 residential building permits in 2012 compared with 3,089 the previous year, but building costs listed in the permits were up about 7 percent year-over-year.

Hanover County saw a 60 percent jump in construction dollars spent in 2012 over the previous year, with an estimated $159 million spent in the county.

Hanover got a big boost this from the construction of the Vitamin Shoppe distribution center.

In Richmond, where the bulk of the big-dollar permits are tied to multi-family projects, 360 building permits were issued in 2012 for a total value of $224 million.

Bud Ohly, head of Henrico-based Eagle Construction, said that he saw some good signs for homebuilders in 2012 but that 2013 would still be challenging.

“I think we achieved some price stability in 2012, and maintaining that in 2013 is important,” Ohly said. “But that’s not going to be easy. We’re seeing two things: the cost of construction is rising, and financing is still constrained.”

Ohly said that one effect of tighter lending standards is that cancellations among prospective buyers are down significantly.

“The quality of our buyer seems to have improved, certainly over the go-go days in the middle of the last decade,” he said. “We just don’t get a lot of marginal buyers. If someone is looking to buy a home these days, it’s because they are pretty sure they can afford it.”

Tom Dickey, principal at Monument Construction, said he expects demand for apartments, a big part of his company’s business over the past few years, to stay high in 2013.

But he said his company is also starting to slowly get back into the single-family home business.

“We did three spec homes this year and sold all of them,” Dickey said. “We did a spec renovation in the Fan, which sold for about $600,000, and we did two homes in Westover Hills, which sold in the upper $200,000 to lower $300,000 range. We’ll probably do more of that in 2013 and stay in about that price range.”

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