Category Archives: Market Trends

Green Shoots?

Caterpillar is expanding its Clayton facility, waterfront development adjacent to the new Wilmington Convention Center is moving forward, and the national economy netted an additional 240,000 jobs in January, including 21,000 jobs in the construction sector.

Some of this evidence might be anecdotal.  Still, pretty good week.  May it be followed by many more.

February 4, 2012 Update:  Let’s end the week acknowledging three other noteworthy development projects about which the News & Observer reported within the last two weeks:  out-of-state developers have broken ground on a $37 million, 291-unit apartment complex in Raleigh’s Briar Creek neighborhood; Greenfire Development is set to begin construction on a $10 million, 88-unit apartment complex in downtown Durham; and Capitol Broadcasting is set to break ground this spring on Diamond View III, a 130,000 square foot office building behind left field of the Durham Bulls Athletic Park (or “D-bap” to us locals).

Holy moly — new office building construction, in a central business district, in this economy?!  Again, maybe it’s only anecdotal evidence of a meaningful, lasting recovery.  But I’ll take it.

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Rock the New Year With a Few Resolutions

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A new year is upon us, with decidedly tempered expectations for the national construction industry.  Indeed, a poll of ENR Southeast readers does not disclose much optimism for significantly increased construction activity in the region.

All the more reason to be as vigilant as ever in the coming year.  Here are a few suggested resolutions to assist you in navigating the choppy waters that may await in 2012:

(1)  Do not to treat partial lien waivers lightly.  There are potentially very real consequences in representing that payment in full, less retainage, has been received through a certain date — particularly if at the time the representation is made, claims for extra work or delay damage exist.

(2)  Before you sign, read each line.  Construction contracts are risk allocations that courts and arbitrators are loath to alter once executed.  You need to understand how the participant above you in the contractual chain is seeking to allocate risk before you sign and mobilize.

(3)  Beware the subcontract buyout process.  If a subcontractor’s price appears too good to be true, it probably is.  And the potential legal headaches on the back-end are likely not worth it.  In other words, qualifications matter.

(4)  Report claims that may be covered by an insurance policy in a timely manner.  When things go bump in the night, you don’t want to be left holding the bag when your carrier argues that it was prejudiced by a late notice of claim.

(5)  Tread very carefully before terminating someone for cause.  The law abhors a forfeiture, and courts and arbitrators are likely to ensure that each and every contractual condition precedent to termination has been satisfied before concluding that a termination was proper.

I resolve to making N.C. Construction Law, Policy & News a vital and timely resource for a growing audience of construction industry participants and their counsel here in the Old North State.  I’m still on the blawging learning curve, but the foundation has been laid, and I expect to come “out of the ground” strong in 2012.

Until my next post, Happy New Year!

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New Condo Construction In Downtown Raleigh May Be Five Years Away, But The Multi-Family Rental Market Is Scorching Hot Today

This article from today’s News & Observer takes the temperature of downtown Raleigh’s current condo market, essentially making the case that while it’s still frosty, it’s at least no longer arctic.  The story counts the remaining units left to be sold in the four most-recent downtown developments and provides this chilly forecast:

Based on the recent pace of condo sales, it’s conceivable that the remaining new units will be sold by summertime.  After that, the only option for people seeking a downtown condo will be to purchase one that’s been previously occupied.

And that is likely to remain the case for years to come.  Given recent history, and the fact that banks now flinch at the mere mention of the word “condo,” it is highly unlikely that any new projects will be built in the downtown area for at least another five years.

In sunnier news, the multi-family rental market should remain hot now that the Raleigh City Council has approved a 250-unit mixed-use project on Oberlin Road.  For more on the state of Raleigh’s multi-family rental market, see my October 23, 2011 blog post here.

November 4, 2011 Update:  Raleigh’s multi-family construction boom appears to be part of a national trend.  According to Mark Obrinsky, Chief Economist for the National Multi Housing Council (“NMHC”), strong demand for rental housing is driving increased multi-family activity in most markets: “Powerful demographic trends along with changing attitudes about homeownership and tighter mortgage underwriting continue to drive a shift toward renting, which is fueling a ramp up in new construction.”   The NMHC’s October 27, 2011 news release can be found here.

November 6, 2011 Update:  More evidence of the multi-family construction boom can be found here, from the Charlotte Observer’s “Development” blogger, Kerry Singe.    The “Coming Rental House Wave” report mentioned in Ms. Singe’s blog post  can be found here.

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Unemployment Update: Construction Sector Posts September Gains; Should ARRA Get Any Credit?

The North Carolina Employment Security Commission (“ECS”) released its September unemployment report last Friday, and according to the report, the construction sector in the State posted a net gain of 2800 jobs since the end of August.  Overall, however, the State’s unemployment rate ticked up .1% to 10.5%, led by significant government sector losses.

ECS’s report indicates that in the last twelve (12) months, construction sector employment is down modestly — 400 net jobs.  That suggests to me that the construction labor market has stabilized somewhat from the steep declines seen during the two-year period from October ’08 –  October ’10.

Is the American Reinvestment and Recovery Act (“ARRA”), better known as the federal stimulus bill, helping to bolster construction employment in North Carolina?  Anecdotally, and as the N&O reports here, federal infrastructure spending is having positive ripple effects in connection with a $14.3 million road-and-bridge project in Johnston County.   Still, and as the N&O’s story suggests, whether ARRA was actually worth the outlay is a question unlikely to be answered until the first Tuesday of November, 2012.

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Multi-Family Rental Is “In,” Office Space Remains “Out” in Raleigh Commercial Real Estate Market

The $30 million Edison project in downtown Raleigh is shifting its focus.  The owner’s original program had been anchored by a 24-story office tower.  Now, developer Gregg Sandreuter’s revised plan features 239 apartments and ground-level retail, but no offices.  Coverage in today’s News & Observer can be found here.

Mr. Sandreuter’s project would have company.  While I was busy in arbitration last week, there was quite a bit of coverage in the N&O announcing three other significant apartment projects in the City of Oaks — see here, here and here.

Based on market trends prepared by CresaPartners LLC, a tenant-focused commercial real estate firm in Raleigh, Mr. Sandreuter’s move may not be all that surprising.  According to CresaPartners, the vacancy rate for Class A office space in downtown Raleigh has risen from 5.5% to 7.3% this year; meanwhile, the vacancy rate for Class A suburban office space is at 15.0%.  As long as tenants can find deals in the softer suburban market, and until more of that available space gets absorbed, it is unlikely we’ll see significant office development in the central business district.

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