Construction Industry Delays - Experts Weigh in on How We Grow Now
By Cece Nunn, posted Jul 22, 2022 on WilmingtonBiz.com
Heath Clark can’t help but think of 2019 with some nostalgia.
“It was a solid year ... we were able to get the things we needed … the market was stable,” said Clark, owner of Bill Clark Homes. “Everything was just fun.
“But then 2022 comes around.”
Homebuilders like Clark in the Wilmington area and beyond have been hit this year by supply chain issues, increases in material costs, labor shortages and more challenges that seem to have loomed larger since the COVID-19 pandemic reached the U.S. in March 2020.
But Clark said he’s working on being optimistic about the future, quipping that builders have a tendency to be less optimistic than real estate brokers. He was sharing these thoughts with a room full of real estate industry professionals at The Terraces on Sir Tyler on Thursday for a Wilmington-Cape Fear Home Builders Association (WCFHBA) event.
In addition to Clark, the broker breakfast panel, hosted by the Cape Fear Sales & Marketing Council, included Kenneth Waldroup, executive director of Cape Fear Public Utility Authority (CFPUA); Rebekah Roth, planning and land use director for New Hanover County; Jason Cline, partner in Cline Law Group; and Ben Andrea, director of planning and inspections for the Brunswick County town of Leland.
Roth said she has seen a shift since 2019 in New Hanover County’s development pipeline.
“If you're looking at residential, we do know that the past couple of years, the [number of] building permits that have been issued for new residential units is quite a bit lower than what we were experiencing prior to that, where we were running about 3,000 building permits a year for new residential units for the unincorporated areas and the city of Wilmington combined,” Roth said. “That has dropped substantially at this point, largely because a lot of that was being driven by multifamily development within the city.”
She said last year, for the first time, new residential units in the unincorporated county actually surpassed what was being permitted within the city limits.
“We've seen a shift when it comes to geography; we've seen a shift when it comes to the type of product we are seeing in the pipeline,” including more projects that offer a mix of uses, Roth said.
“There has been a growing demand for detached units that are combined with single-family and multifamily within a single project and that's been one of the more successful models of what's been used at least in the unincorporated county,” she said.
In the past year, commercial development seems to have rebounded.
“It has come back and it's a little bit ahead of what we would normally project at this time of year. So there is some optimism from the commercial standpoint,” Roth said.
Andrea said the town of Leland is only seeing a slight slowdown from 2020, which was “our biggest year as far as single-family detached [homes] since 2008.”
“We do have a lot of stuff in the hopper. As far as inventory goes right now, there are over 6,000 units between the approval process from a technical review standpoint and permitting standpoint,” he said, “so those are all units that can obtain or seek building permits at any time.”
Looking to the future, Andrea added. “We also have been in conversations with various developers for easily over 10,000 additional units, so we have plenty of supply I think in the pipeline.”
Moderator Cameron Moore, executive officer of the WCFHBA, asked Andrea about the impact recently approved, Leland-specific annexation legislation
(https://www.wilmingtonbiz.com/government/2022/07/15/government/23440) will have on the town.
“It's going to require leaders to be more strategic about how we grow and have important conversations about the consequences of growing out further than what we're accustomed to,” Andrea said.
In New Hanover, the “last frontier” for development is clear, Roth said.
“When I am describing the unincorporated portions of New Hanover County whenever I give a presentation, I talk about the widely held understanding that there is no land left and very quickly am able to dispel that because there is a large acreage of undeveloped land in New Hanover County,” she said, “but it's pretty much all located within the northern portion of the county, especially in the northeastern portion of the county. And this is unfortunately the area where we have not in the past made investments in water and sewer. It is more environmentally constrained. But this is definitely an area that we've been working with CFPUA on over the past several years.”
Like everything, development there is expected to be more expensive and potentially more complicated. Waldroup said in CFPUA’s experience, project costs in general have increased 15 to 30%.
“We've actually had to cancel a couple of projects,” he said, in one instance because the authority couldn’t get the 36-inch pipe necessary to finish it before spring of next year.
But some good news in the real estate industry can be attributed to COVID, panel members said. Cline noted that the pandemic sped up some trends that could help the real estate industry, including state legislation that will enable completely electronic closings.
“By this time next year, we should be able to essentially get onto a secure portal with somebody sitting in Austin, Texas, or on a naval ship in the middle of the Atlantic Ocean, and close their homes remotely … I think COVID obviously showed us why we did that,” Cline said. “In addition to just modernization of the world and how we do business was the idea that we shouldn't have to physically be in a room to finish off paperwork.”
By Cece Nunn, posted Jul 22, 2022 on WilmingtonBiz.com