The Ripple Effect: New Construction

By: Lisa McDivitt Email
By: Lisa McDivitt Email

In today’s tough economic times, a decrease in new construction around the grand valley is taking a toll on many. According to the county, over the past few months, building permits for single family homes were down by nearly half compared to this same time last year, and they expect commercial permits to fall about the same. This change in the construction industry is having a ripple effect that touches every entity catering to new building.

Bart Stephenson’s locally owned siding business has seen some very good times. But recently, with a decrease in new construction, things are changing for Stephenson’s Siding.
“It's affected us,” says Stephenson. “And it's been very humbling.”

Stephenson has had to make adjustments to the way he does business, including cutting his work force in half, and finding ways to budget even more effectively during tough times.

But Stephenson's siding business is just once piece of a much larger puzzle. A recent downturn in new construction has affected everything from land sales and equipment rental to mesa county revenue.

David Myers, CEO of the Western Colorado Chapter of Associated Builders and Contractors, says that the construction industry is closely tied to the community.

"Construction as a whole affects the entire community, and it's a symbiotic relationship,” says Myers. “The community benefits from what happens in the construction industry, and the construction industry benefits from what happens in the community."

If lot sales are any indication, so far this year, the community is pulling back from new construction. Sid Squirrell, of Bray Commercial Real Estate, has seen this first-hand.

"Right now, I think people are nervous,” says Squirrell. “There's no confidence whatsoever.”

Squirrell adds that only a handful of residential and commercial lots were sold in January and February of this year; he estimates around 4 or 5 of each.

And, as Bart Stephenson knows, this affects other elements of the industry.

"It affects me, of course,” says Stephenson. “And with the builders, it affects the foundation guys all the way up through the roofers and all the other trades."

Myers says some worker wages have dropped from $35 to $25 an hour, and some companies are downsizing.

The downturn of construction in the past four months has roots in several different factors, according to Myers, including the financial crisis in the banking industry to more local changes in the oil and gas industry. Companies aren't expanding, and homebuyers aren't building.

But Meyers says it isn't all bad news. "We're not nearly as bad as it is in the rest of the U.S. As a matter of fact, we're very healthy in the way our economy is going right now...")

And while on any given day sparks are flying and new beams are being placed around Grand Junction, Meyers says financing for these new projects were already secured last year.

"Where we are seeing a bit of a downturn is what we call back log, where the pipeline of projects coming in to it about 4 months from now,” says Myers. “That area is looking to be weak currently."

But even with different parts of the industry feeling the effects of the downturn at this moment, there is some light at the end of the tunnel.

"It could be a market correction that's going to see us with stronger companies in the end,” says Myers.

And Squirrell agrees that things will get better. "When this thing comes around, and it will come around, I think there will be a lot of pent–up demand,” says Squirrell. “There hasn't been a lot of construction, but Grand Junction's still growing."

Both Squirrell and Myers think new construction will pick up again in either the third or fourth quarter of this year.

For Bart Stephenson, though, this is still a time for adjusting and coping until things do turn around. "We've had it really well for the last 10 years,” says Stephenson. “And hopefully you've got a good reputation, which we do, or you're not going to work in this town, because things are getting really slim. They're getting skinny."

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