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It may be the construction industry’s “perfect storm” in Southwest Florida – a good economy, a growing population, low interest rates and an improving job outlook. They add up to a rosy construction picture in Southwest Florida that should last for a good while. Not that there aren’t some potential problems and pitfalls along the way, but most industry observers feel optimistic that the good times will last. Michael Reitmann, who heads up the Lee Building Industry Association, is one of those. “When it comes to construction, Lee has been the hottest county in the entire country over the past three years,” he says. Based on the number of building permits per residences, Lee is ranked Number One and Collier County is just slightly behind at Number Three. To underscore his point, Reitmann adds that Lee County experienced the highest number of permits in its history in March of 2005 – a total of almost 1,800. Whenever times are good in construction, builders are always looking over their shoulders at lurking dangers that could rain on their parade. The most obvious, of course, is higher interest rates. But despite the Fed’s concern over inflation, mortgage rates have not been hiked enough to dampen housing demand. And demand is the name of the game in the housing market, as the much heralded baby boomer generation discovers the many attractions that Southwest Florida has to offer. “In comparison to other parts of the country,” Reitmann argues, “this part of the country is one of the most attractive to potential retirees, whether it’s for a primary home, a second home or for an investment.” He adds that it is still relatively inexpensive, with median priced homes in Lee County under $250,000 as of April, 2005. A surging population growth in all of Florida, and particularly in the Southwest, is helping to fuel the current hot construction market and every estimate is that the trend will only continue to spiral upward. Official U.S. census figures project that the six-county Southwest Region of Florida will grow from 1,373,000 to 1,485,000 by 2010, an increase of more than eight percent, almost a full percentage point ahead of the projected growth statewide. David Ellis, EVP of the Collier Building Industry Association for six years before stepping down in May, 2005, is in general agreement with the healthy outlook in the industry, but issues some precautions about the future. “The regulatory environment is a big unknown,” he points out. He adds that we need to be concerned about the availability of land and the various unpredictable factors that could affect the good times. When you mention regulatory factors, the issue that stands out is impact fees. A proposed measure on the subject, one that would give relief to the building industry, died a quiet death in the last state legislative session. “Collier County has the highest impact fees in the state,” Reitmann says. “You can’t keep adding costs without suffering in the marketplace,” he adds. Impact fees are charged to builders based on the cost of additional services to be required when new homes are raised in an area of the state. The building industry believes that its members are bearing too large a portion of these costs. Builders are also extremely wary of what is happening to land costs. As an example, Reitmann cites a lot in Lehigh that sold for $3,000 just two years ago which now goes for $40,000. Ellis agrees that availability of land will continue to be a major challenge to builders. One problem that seems to have been eased for the foreseeable future is the availability of materials, particularly cement and steel. The Portland Cement Association cites a “stunning demand” for cement in 2003 as a major cause for the temporary shortage of this critical product. This country's reliance on imported cement to augment domestic production also played a role in the shortage because China began sucking up every supply of cement it could get its hands on since it won the 2008 Olympic Games contract. The worldwide industry has now adjusted to China’s demands and supplies to the U.S. are back on track. One unfortunate side effect of the construction boom is the loss of affordable housing in the generally upscale Southwest counties, a situation with which Reitmann sympathizes. Without such housing, critically needed service workers are being pressed to find any affordable living quarters within reasonable travel distances to their jobs. The shortage not only impacts individuals, but the economy as a whole. Lee County officials, for instance, project that the lack of affordable housing costs the county almost $250 million annually in lost wages, lost property tax revenue and other related losses. The median home price in Lee County has doubled in the past five years. Groups such as Habitat for Humanity and other nonprofits are trying to combat the problem and supporters in the legislatures and city governments in all Southwest Florida counties are working hard to find answers to this critical problem.
June/July 2005 Articles |
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