Where The Money Is Being Spent
Readers suggested a topic on trends in construction. “I’d like a thread from readers where the money is being spent/invested in your area. Our public television station just announced they were building a new spread downtown. The state is kicking in $5mm since they are renovating an existing building along w/new construction. Marriott just announced they were taking over some downtown buildings and renovating them w/M&T Bank backing. Our schools are still spending money on windows and grounds improvements. We have two hospitals w/new expansions. We have several new commercial retail building going up in our local villages. One is a center of businesses not just single business center. The money is flowing here from somewhere. And it isn’t just for meds, feds and eds.”
“But when you hear from say Colorado, it seems he’s looking at a totally different reality. I always felt commercial builders/contractors in this area had special ties to Albany and others that make things happen.”
“Is anyone else seeing this much new commercial construction being approved?”
“Maybe Blue Skye was right when he said upstate suffered their bottom in the 90s when everyone else was booming and now we’re on the way up? Not sure that feels right. I still think in the end no area will escape the overall reality when credit freezes up again. Sounds like our leaders are just still spending and lining pockets while it’s flowing.”
A reply, “It’s all public money funneled to private entities through the public/private partnership scams. Look no further than the “Global Foundry” scam in Malta, NY. Taxpayers are on the hook for all this kick the can down the road nonsense. It’s unsustainable.”
One added, “Here in metro Denver the new light-rail line connecting downtown Denver to the Jefferson County municipal complex is nearing completion. The line to the airport is scheduled to open in 2018.”
“The new IKEA opened on Wednesday to much hoo-ha. This is in an area already nearly built-out with retail and commercial office space, near I-25 and C-470. Throughout much of the metro, strip retail is peppered with vacancies.”
Another said, “The widening of I-75 from Cincinnati to Dayton recently started up the next phase (another 6 miles), the rebuild and expansion of the highest bridge in Ohio (on I-71 just north of Cincy) just started and should take a few years. New smaller commercial stores (tire stores, auto dealers, chain restaurants) continue to open up here. Casinos in Ohio’s biggest cities are about ready to break ground following the lifting of ban on such establishments. Cincinnati has a huge project under construction along the river, but it seems to get stalled for political reasons a lot.”
“Expansion in the Cincy/Dayton corridor has slowed from its torrid pace a few years ago, but road projects, commercial buildings, and houses are still going up.”
One observed, “On my stomping grounds, an old warehouse-thing was empty for about 10 years. A local said it had been a sort roller-rink for kids. After a year of renovations, it opened as an Asian supermarket last month.”
“An old Italian restaurant was half-torn down and renovated into a high-end pizza bistro. A store for kids bedrooms just opened next to the futon store. A 1-800 mattress store expanded from a strip mall into its own building. A one-story business building used to hold a Wachovia and a small piano store. When Wells Fargo bought Wachovia, they kicked out the piano store and are expanding into the space. After a little renovation they’ll turn rip down the Wachovia sign and raise the Wells Fargo flag. An old car dealership sat vacant for 5-6 years. There are signs out front that they are hiring and making it into a dealership for Mini.”
‘An old standalone Anthropologie store went down 5 years ago. The local Marlo furniture has a huge store, but they are moving the “tile kitchen bath” portion to the old Anthopologie. A cramped Whole Foods (used to be the old-school granola version) was in a high-end strip shopping center for decades, it seems. They finally moved down the road to larger and more yuppity digs. The old space was snapped up and is being renovated into a Fresh Market, which is almost the same thing.”
This is all private sector.
The Post & Courier. “In a break from the rest of the real estate industry, the apartment business in Charleston is busting out of the doldrums. Not all of the projects will spring from the ground anytime soon, but experts said the most financially feasible deals are likely to get done over the next two to four years. ‘The difference between now and five years ago is that the lenders are really going to control how much is developed,’ said Don Evans of Evans Rivers & Co., a Charleston-based real estate investment advisory firm. ‘It’s going to be lot more conservative.’”
The News Journal. “A vacant 505-acre tract here that had been approved for a large mixed-use, master planned community behind the planned Walmart Supercenter on Old Kings Road is now headed for the foreclosure auction block.”
“It’s a sign of the times, said Don Tobin, owner of GoToby.com Realty in Palm Coast. ‘There were a lot of developers that had big plans five years ago and did not make it,’ he said. ‘This was going to be pretty significant development with lots of homes, shopping centers, a school and fire station.’”
“Officials with JX Properties declined to comment on the loss of the property, which the Flagler County Property Appraiser says has a taxable value of about $2.8 million. The only work done on site was a narrow trail cut into the property’s northwest corner off Old Kings Road for some preliminary engineering work.”
From Financially Fit. “Here’s the dirty little secret about home renovations: Most of them don’t pay off. According to Remodeling Magazine’s annual survey, only steel entry-door replacements can be counted on to boost home value enough to recoup 100 percent of costs.”
“Homeowners can get a lot of value out of renovations before they even put the home on the market. “If you have a dated kitchen or the stove doesn’t work, you can invest money now to glean some enjoyment as well as make the home more appealing when you sell it,” says Kit Hale, general manager of MKB Realtors in Roanoke, Va.”
“That’s what Erin Schaff and her boyfriend did when they decided to upgrade their two-bedroom condo in Victoria, Canada, several years ago. ‘It wasn’t in horrible shape, but we wanted to upgrade,” she says, so they spent about $10,000 replacing the baseboards, window trim, and floors. They also remodeled the bathrooms and upgraded the hardware. In addition, they put new cabinets, appliances, and granite countertops in the kitchen.”
“Schaff and her boyfriend enjoyed all those upgrades before deciding to sell their home earlier this year. She believes the renovations paid off, too. ‘Had we not renovated, we probably would have lost money as we had purchased the condo at the peak of the real estate boom. Instead, we turned a profit and covered most of the costs of purchasing the house we now live in,’ she says.”
From Vail Daily. “Mike Dantas had a big decision to make as the local real estate market started crumbling a couple of years ago: either keep making payments on vacant land or build something. For Dantas, co-owner of Dantas Building Co., the decision was fairly simple — build. ‘We’re builders — that’s what we do,’ he said.”
“But more specifically, Dantas and his brother, Dave, are in the business of building ’spec’ homes — homes built without a specific buyer in mind. What Dantas ended up building in Avon’s Wildwood neighborhood is a foundation and two fairly modest homes. The foundation was sold to another builder — something spec builders don’t usually do. The other two homes will sell for between $550,000 and $649,000. In 2007, those prices would have been much higher.”
“‘We believe we have the right product,’ he said. ‘Right now, our competition is foreclosures, banks sales and duplexes.’”
“Dantas believes he’s taken the right approach with his project in Avon. ‘These days you’re not going to make money on the land, and you’re going to give a lot of the labor away,’ he said. ‘You don’t make a profit like you used to, but we’ve tried to build what the valley doesn’t have right now.’”
‘For the last few years the stalled Presidio in the Pines housing project has been literally disintegrating. But a recent agreement between the city of Flagstaff and the American Contractors Indemnity Company (ACIC) to tap two bonds tied to the 91-acre project could move the project forward in the coming months.’
‘City officials believe the funds will go a long way toward the completion of necessary infrastructure before the city can begin issuing building permits. The city also has settled with ACIC to build a million-gallon water tank designed in part to service the planned 900-unit development.’
‘With the city responsible for 57 percent of the construction of the tank — which will also service other west Flagstaff developments — final construction of the tank is estimated to cost $66,620. City engineers estimated in 2008 that Presidio needed roughly $13 million to finish the required infrastructure and roads. It is unknown what the figure currently is, although it is believed to be more now because some of the exposed infrastructure has fared poorly over the last three years.’
‘A lawsuit filed by the Presidio homeowners association and several developers could also delay the project.’
From a construction stand point, what I see is the business is concentrated in wealthy hands weather that be the private sector or Corp’s…
There is not very much work for the small contractors…The bigger guys are moving down the food chain to gobble up projects that in the past they would not even look at…That takes the small guy out at the knees…
I have a good friend who finally folded his painting company after 20 years..Just not enough work and the work that is available there are five bids with people willing to work for very low pay..He went to work for a “Big” painting firm…
“I have a good friend who finally folded his painting company after 20 years … Just not enough work and the work that is available there are five bids with people willing to work for very low pay … He went to work for a ‘Big’ painting firm.”
Note: A lot of jobs can be exported to places where the costs are lower and a lot of these exportable jobs have already been exported or are in the process of being exported.
But painting is a job that cannot be exported. Nevertheless the EFFECT of having such a job is the same as the effect would be if the job could be exported.
There is no longer enough cash flowing about through our economy to support all the workers that the economy used to support during the borrow-and-spend boom times. This shortage of flowing cash forces down spending for construction projects and the jobs associated with construction projects - in this case, painting - produce a surplus of workers and each of these workers act to bid down the price of their labor.
This is what DEFLATION looks like, for those who are slow in getting it.
As our economy slowly morphed into a consumer-based economy the country’s job loss due to the export of production was masked by the increase in construction spending - mostly spending for housing.
But this spending was not fueled by earned money - the earned money was earned somewhere else, it was earned whereever it was the production jobs were exported to; The spending was instead fueled by borrowed money.
Earned money spent for consumption spells prosperity for a country. Borrowed money spent for consumption spells doom for a country.
And when the borrowing finally comes to a halt then the expansion caused by the borrowing comes to a halt and the economy goes into reverse, meaning it goes into a contraction.
Bottom line, IMHO: The root cause of our economic problems is our economy has morphed into a consumer-based economy. Unit we fix this our economy will always be short of money because whatever money that flows through our economy for consumption will quickly leak out and flow to where it is that those things we consume are produced.
Interesting.
combotechie said, “This shortage of flowing cash forces down spending for construction projects and the jobs associated with construction projects - in this case, painting - produce a surplus of workers and each of these workers act to bid down the price of their labor.”
However; If there’s “Just not enough work” the workers leave the sector and find work elsewhere, possibly for more money, and the labor pool of painters shrinks, allowing wages to rise. The ‘Big’ painting firm captures more business and is able to pay the higher wages allowing the workers to bid up prices of goods and services in other areas.
The income of the ‘Big’ painting firm rises too and they help to bid up prices in place of the guy who had the small business for 20yrs. Everybody bids up prices… and then some of the fiat Dollars sloshing around the world works its way into the system allowing the financing of these boondoggles to continue and prices go up.
This is what InFLATION looks like, for those who are slow in getting it.
workers act to bid down the price of their labor ??
True, but there is clear “inflation” in the cost of materials and the soft cost associated with construction (permits)…1-inch copper is $5.00 per foot… That’s $100. for a twenty foot stick plus tax…$80. for a roll of 12-2 Romex and so on…
Meh…. PEX is approved for residential crap in lieu of L copper tubing. Plumbers hate it because it’s so fast but builders love it. Some states(Delaware) sched40 plastic is acceptable.
There is no longer enough cash flowing about through our economy to support all the workers that the economy used to support during the borrow-and-spend boom times.
Then define for all of America: 5% unemployment , without housing, without Mfg., with reduction in overall Gov’t $pending…or would you rather just quote a $ir Knight: “…it’s a Conundrum!” or I reckon ..you… could suggest a solution other than Ca$h is King?
‘… or I reckon … you … could suggest a solution other than Ca$h is King?”
So you are implying - what? - that this is all my fault?
And, yes, cash is king whenever and whereever there is a shortage of the stuff. But this isn’t my doing either.
I assume I will see deflation push down the cost of my own labor if a lot of software engineering contract jobs are cut in the upcoming deficit deal.
Yes this drives home the point that cash is king - to me.
“…they spent about $10,000 replacing the baseboards, window trim, and floors. They also remodeled the bathrooms and upgraded the hardware. In addition, they put new cabinets, appliances, and granite countertops in the kitchen.”
“Schaff and her boyfriend enjoyed all those upgrades before deciding to sell their home earlier this year. She believes the renovations paid off, too. ‘Had we not renovated, we probably would have lost money as we had purchased the condo at the peak of the real estate boom. Instead, we turned a profit and covered most of the costs of purchasing the house we now live in,’”
It is impossible to determine whether making those upgrades helped Schaff ‘turn a profit,’ as one would have to turn back the clock and sell her home again, sans value added from renovations less $10K+ in renovation costs.
But the math is easy to explain:
Extra ‘Profit’ due to Renovation = (increase in sale price from price that would have been realized w/o renovations) - (renovation cost).
Bottom line: Unless they could sell for more than $10K above what a buyer would have paid w/o the renovations, they lost money.
I remain firmly convinced that most of the people who think they did better by sinking lots of dough into renovations just before selling don’t get the math right, and further that many bubble-era sellers who believed they did better by renovating just before selling confounded the effect of renovation on the sale price with bubble price increases.
I remain firmly convinced that the purpose of renovation is to *enjoy the house*, not to try and turn a profit. I know full well that the house that we bought–a fixer-upper–is going to eat more money than we’ll get out of it, that far-future day we decide to sell. That’s not the point. Every time we renovate, large and small, it’s going to be with the sole aim of making this house more usable and pleasant to our own particular tastes.
Unless you get some magic renovation fairies in, you’re not going to recoup your investment.
(I wouldn’t mind some magic renovation fairies.
)
“I remain firmly convinced that the purpose of renovation is to *enjoy the house*, not to try and turn a profit.”
I totally agree with you, but it sounds like Ms. Schaff thought she had magic renovation fairies helping her to turn $10K+ in renovation costs into gold.
In Houston, commercial construction is on-going24/7, it’s all a matter of degree. Things have been slow and compared to normal, still are.
In the highrise, Class A sector, a very large highrise hotel/condo has just opened in a very large suburban medical center near a very large remodeled mall. The whole area has been under constant renovation and new construction for the last 10 years and has not slowed down.
In the smaller commercial sector, a new storage center is being built just few blocks from my house.
In the large residential master plan sector, a large project that will have one of the largest man-made lakes in Texas (and that’s saying something) has been restarted after being mothballed due to the recession. This is a mid-to-upper middle class residential project.
In the public works sector, the light rail system is being slowly expanded and is bringing much needed fresh air to some very stagnate parts of the city.
A 3rd outer highway ring (6-8 lane) is well on it’s way to completion after being stalled for 3 years. A complex overpass crossing another 10 lane highway is in progress at this moment.
No new strip centers (outdoor “malls” some hear call them) are being built, but some of the more prime location ones that have fallen into neglect are getting total overhauls and they look really good and are 50% occupied.
Some surprising demolitions, both large and small, have recently taken place and mostly for the good.
It seems no new major master planned residential project are underway.
Locally, several dead-end streets have now been pushed through to connections. These are 4 lane, grass median, main bvlds.
Meanwhile, a brand new $30 million cruise ship terminal built by the Port Authority still sits empty from lack of a contract to any cruise line.
There are reports of some residential and commercial projects stalled or abandoned during the bust moving forward in New York, in some cases under new ownership.
In New York City, the demand was always there. It is enormous. The question is, at what price? Obviously the land and partial developments have been written down. And the construction unions have agreed to savings. But whether prices will come down to levels affordable for normal people, and whether new construction can be profitable at those prices, remains to be seen.
“they spent about $10,000 replacing the baseboards, window trim, and floors. They also remodeled the bathrooms and upgraded the hardware. In addition, they put new cabinets, appliances, and granite countertops in the kitchen.”
Is this the HGTV blog? HGTV is the only place you can do all that renovation for $10,000.
What a fantasy story. Why? Whats the point of these home renovation fantasy stories?
It’s the first sentence that purportedly cost $10k (baseboards, window trim, floors, bathrooms, hardware). They don’t tell us what they spent on the kitchen.
I agree that two bathrooms plus the other stuff for under $10k still sounds like a bit of a stretch, unless it was mainly painting.
My understanding is that the $10K merely covered the cost of replacing the baseboards, window trim, and floors. All the other crap cost them a pretty penny more, but the additional amount is not mentioned in the story.
And all these outlays somehow helped them turn a tidy profit on their sale. Why am I so suspicious that they forget to include the renovation costs in their profit calculation?
I did all that myself for less than 10k, but that was utilizing craigslist for appliances, ikea cabinets (even cheaper than the cheapos at home depot), and of course I did all the labor. Also, I used cheap ikea countertops, no granite. Even granite wouldn’t have pushed it near 10k though.
If you have time, tools and an eagle eye for the bottom line, you can do things a lot cheaper than those who pay contractors.
I believe that resellers are getting ravaged in locations where builders are building. They certainly are in Kent and Sussex Co Delaware.