The Journal Gazette
Sunday, January 07, 2018 1:00 am

Growth in area brings good, bad

$1 billion in building permits, but costs are up


Fort Wayne home builder Barclay Allen is the kind of guy who sees the glass half-full – and half-empty.

Far be it for him to engage in irrational enthusiasm. He knows that along with every good thing in his business, there's also a not-so-good thing.

So while Allen is excited about last week's announcement that Allen County's residential and commercial building permits topped $1 billion in value for the first time, he also sees challenges on the horizon. 

Like labor shortages leading to higher labor costs. Higher prices for lumber and other supplies. And, ultimately, higher prices for buyers of new homes.

“I always like to be kind of measured and balanced when I look at things,” said Allen, owner of upscale custom home builder Timberlin Homes and new president of the Home Builders Association of Fort Wayne.

“The good news is that people are buying houses and the economy is strong. And, we have jobs and there's income and even surplus income,” he said. “But the negative is my job costs have gone up dramatically.”

Local government and industry officials at a news conference Thursday touted the 2017 surge in local building, saying the increases in permit values and numbers represented prosperity and regional growth.

But some in the building business, knowing theirs is a cyclical industry, view the numbers with a wary eye to the future.

According to the Allen County Building Department, the record 26,185 permits issued last year for residential and commercial construction set a record for value of $1.032 billion. That's about $100 million more than the previous record of $931.6 million in 2015. 

The dollar figure is driven largely by commercial permits –  6,253 worth $632.9 million or a little more than 60 percent of the total. About 40 percent of the dollar value, $399.1 million, was for 19,898 residential permits.

Residential permits include not only construction of new homes but also smaller jobs, including plumbing, electricity, remodeling, roofing and the building of accessory structures such as pools, garages, sheds and decks.

The dollar value for permits for unincorporated Allen County was just above the value in Fort Wayne and other incorporated areas, where commercial projects such as the Parkview Cancer Center and the $165-million Walmart milk-processing plant on Pleasant Center Road contributed. 

The numbers show balanced growth sustainable through this year and likely into 2019, officials said.

“This past year was truly remarkable in Allen County,” said Eric Doden, chief executive officer of Greater Fort Wayne, Inc. in reaction to the announcement. 

“We're especially encouraged that the investments are happening across the board – in downtown, suburban, and rural areas – and in both commercial and residential projects,” he said.

The business-oriented economic development group aims to increase the northeast Indiana population to one million.

Rob Young, senior director of business development for The Hagerman Group, Fort Wayne, concurred. He said Hagerman is organized into six specialty sectors – commercial, retail, industrial, institutional, educational and health care – to guard against downturns. 

“What's happening with us right now is that all six of those sectors are strong for us,” he said. Plus, the company and the community have many projects in the pipeline, he said.

Young said he could not disclose Hagerman's potential upcoming work. But still awaiting permits, he said, are the “boutique” hotel and the new Hampton Inn & Suites downtown, the riverfront's mixed-use housing and retail project and the rehabilitation of the former General Electric campus now called Electric Works.

John Caywood, Allen County building commissioner,  pointed to several projects likely to obtain permits in upcoming months – continuing Lutheran Health Network investment in health-care facilities, possible construction investment in Fort Wayne by Indiana University's health system, an additional hotel near Lima Road and a shopping center and a residential-retail project north of Dupont Road.

On the residential side, Maurine Holle, spokeswoman for the Home Builders group, pointed to housing growth in recent years not only in Fort Wayne and Allen County but also in the region's other five counties – Adams, DeKalb, Huntington, Wells and Whitley. 

With building department statistics showing 974 single-family home permits through November, Allen County already had surpassed the 942 permits granted in all of 2016, she said.

Through November, the number of 2017 permits was up 10.5 above the same period in 2016.

That is similar to a 10 percent increase statewide in that period reported by the Indiana Builders Association.

Holle cautioned that Allen County still was issuing only about half the number of single-family permits issued during the boom year of 2003, when 1,918 permits were issued.

But statistics also show home building in Allen County has been on a steady-but-gradual upward trend since 2010, she said. 

Among other counties, only Adams had a decrease in permits – of one – between 2015 and 2016.

“With Indiana's unemployment rate low and (existing) housing inventory tight, single-family starts should continue to make gains in 2018,” Lance Swank, Indiana Builders president, said in a statement at the end of December.

Nationally, home builders' confidence remains high. An oft-cited index rose 5 points to 74 last month – a score over 50 means builders see upcoming market conditions as good instead of poor. 

Tempering that locally are rising home prices. On average, new home prices rose modestly through November – about $2,000 compared to the same period in 2016.

But the average price of new homes in November, $278,513, was nearly $40,000 higher than the average price a year earlier, $239,295.

That amounts to about a 15 percent increase. 

Allen said infrastructure costs of development have risen. So have the prices of lumber and supplies – in part because of the high demand for rebuilding after 2016's wildfires in California and hurricanes in Texas, Louisiana, Florida and Puerto Rico.

Those disasters also have drawn at least some of the local construction labor force, but roots of the problem go deeper, he said.

“In 2008, 2009, even 2010, when the economy was at its lowest, we lost a lot of labor to other industries and other areas of the country, and we haven't recovered,” Allen said.

“My framing labor costs have gone up by 30 percent, and ... I'm having trouble finding people to do jobs,” he said, noting subcontractors have enough work to be able to pick and choose. 

But on balance, he said, “I would still take this economy. I think that outweighs the negative impacts.” 

Commercial builders face the same labor shortages, said Young, who noted older building-trade workers aren't being followed by as many young workers with the same skills.

“I would suggest to young people, to anyone trying to find a career, that this is a good one,” he said.

Lori Harvey, executive director for the Building Contractors Association, Fort Wayne, said 2018 promises not only building construction but also infrastructure projects like roads and bridges that don't show up in permit numbers.

Good times for construction mean good times for other segments of the economy, Harvey added, including area nonprofits supported by builders.

“There are huge investments they put back in the community,” she said of the 100-year-old group's 285 members. 

“The overwhelming majority of them are very positive. Throughout 2018 and 2019, we hope this all continues,” Harvey said. “It's just exciting times.”

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