COVER STORY, FEBRUARY 2005

CONTRACTORS BUSY WITH NEW CONDOS AND
CONVERSIONS
New construction and a recovering economy give Southeast contractors an optimistic outlook.
Dawn Pick Benson

Current Builders constructed the 212-unit Riviera Yacht Club in Hallandale Beach, Florida. The Related Group developed the 19-story beachfront condominiums.

As the economy makes a comeback, construction in the Southeast is once again picking up steam. A desire to capture lower interest rates and cut down on commute times is fueling a trend toward downtown condominium construction in cities like Nashville, Tennessee, and Atlanta. In Florida, destruction from recent hurricanes has created a continued need for housing. A focus on smart growth planning is taking place in Atlanta’s south Fulton County, where a lot of activity is anticipated. The construction industry is also experiencing commodity and resource price fluctuations, which has led to cost increases for contractors. Southeast Real Estate Business recently talked with several Southeast contractors to discuss these trends and to find out about new construction activity.

Downtown Demand

The Southeast is seeing a lot of high-rise residential construction, according to Tom Raney, senior vice president with Atlanta-based R.J. Griffin & Company. Fueling this trend, according to Raney, is the fact that money is available and lenders are willing to invest in successful developers. He says R.J. Griffin is either planning to build or is currently constructing high-rise residential projects in Charlotte, North Carolina; Tampa, Florida; Denver; Houston; Nashville; and Atlanta.

“Demand has proven to be strong for affordable condominium developments that are sized properly for the market and offer the right amenities,” says Raney. “The mixed-used component offers conveniences that make condominium living more enjoyable and easy. Individual condominium buyers are snapping units up, and in turn, are fueling more and more construction.” He says that many people are tired of long commute times and desire to move back into the city in a live/work/play environment.

Patti Morgan, president of Morgan & Bartos Constructors, a majority woman-owned company based in Atlanta, also sees an increase in demand for in-town living. “In Atlanta, we’re seeing a huge increase in this trend, which is driving condominium and multi-use construction,” says Morgan. “With all the activity going on in downtown Atlanta, a lot of people are looking to come back into the city.”

According to Bob Douma, senior vice president and general manager at Batson Cook Company’s Atlanta office, there are three reasons for this trend toward condominium construction in Atlanta: First, because of the amount of traffic in Atlanta, people have a greater desire to be near where they work. They don’t want to commute and fight the traffic. Second, younger people are not as enchanted with a suburban lifestyle. “They’re looking for a lifestyle that has more social interaction,” says Douma. “They want higher density living and to be closer to restaurants and public facilities.” Third, Douma says that interest rates are making it possible for people to buy higher-priced condos.

Jeff Powers, vice president of project development/pre-con at Current Builders, says this trend toward condominium construction is occurring in Florida as well. Developers that were once building apartments are now seeing a dramatic increase in demand for condominiums and for-sale product. “The major growth areas in Florida over the past few years have started to see significantly less land availability, and that has sparked urban infill development in a greater proportion,” says Powers. The fact that Florida has been hit by four hurricanes recently has also created a continued need for both rental and for-sale housing.

Other Trends

Currently, the Southeast construction industry is experiencing commodity and resource price fluctuations, according to Powers. “Unfortunately, the majority of these fluctuations have been increases in cost,” he says. Raw materials such as cement and steel, as well as secondhand-related products, have dramatically increased in price. “Traditionally, the market sees a 3 percent annual increase in construction costs across the board,” says Powers. “This past year, it’s been 10 percent or even greater.”

The reason for these price increases, says Powers, is a shortfall in materials and an increase in the price of raw materials. “We’re losing a lot of raw materials to foreign construction, which is up predominantly in China,” says Powers. There are also shortages of raw materials, such as steel, because it is no longer primarily produced in the United States. Simple economic principle says that an increased demand and smaller supply causes prices to rise.

There’s also a flurry of activity in south Fulton County, a largely untapped area south of downtown Atlanta. “In south Fulton County, there is a big push for a smart growth plan,” says Dwight Morgan, principal of Morgan & Bartos Constructors. He says that a new concept — transfer of development rights — is being considered in the area. “It’s an attempt to avoid the sprawl and uncontrolled growth that has happened in many areas of Atlanta.”

Transfer of development rights allows landowners to sell the right to build houses on their farms or ranches. In return for permanently preserving the land, they can get tax benefits and keep living on the property. Builders, in turn, buy the development rights. But instead of developing the farmland, they can transfer the number of homes they could have built there to nearby land where zoning allows more intensive development. Morgan says that through this concept, very concentrated development takes place in a few locations and the rest remains green space.

According to Patti Morgan, south Fulton County will attract those looking for a new, environmentally sound way of living that allows them to get away from the “rat race,” yet still be convenient to a big city.

Another trend, according to Raney, is that healthcare construction is very strong right now, and there’s still a big demand for private schools and churches. In addition, Patti Morgan says she sees a restart in the speculative office building market in the Atlanta area, as well as the Southeast. “Projects that started a year or 2 ago are now coming off the shelf and getting a new life again,” she says.

What’s New?

R.J. Griffin & Company is currently building Viridian, a 553,000-square-foot, 31-story urban condominium in Nashville, Tennessee.

There are numerous new developments underway across the Southeast, and R.J. Griffin has several under construction. Viridian is a 553,000-square-foot, 31-story high-rise urban condominium consisting of a nine-story parking deck and 21 floors containing 305 condominium units. The 31st floor features an amenity area and pool. Located in Nashville, the structure’s owners are Novare Group and Giarratana Development. The architect is Smallwood, Reynolds, Stewart, Stewart and Associates.

R.J. Griffin is also constructing Spire, a 28-story, 728,000-square-foot, multi-unit apartment/condominium facility located in Atlanta. There will be 393 units, including two, two-story penthouses. Amenities will include a half-acre pool, a fitness center, an outdoor terrace deck and six levels of parking to hold up to 636 vehicles. The project broke ground in March 2004 and will be complete in August. The owners are Novare Group and Wood Partners.

Also in Atlanta, R.J. Griffin is constructing Twelve, a high-rise condominium and hotel with retail space. The project comprises two sites. The first site will include a 549,405-square-foot, 26-level tower with 101 hotel rooms on the first six floors and 404 condo units on levels seven to 26. The other site will hold parking, a 12,000-square-foot ballroom, 10,000 square feet of retail space and a 5,000-square-foot restaurant. The owners are Novare Group and Wood Partners.

Pompano Beach, Florida-based Current Builders recently completed the residential construction and some of the retail at City Place in downtown West Palm Beach, Florida. It’s a two-city block complex consisting of multiple structures. They include three separate five-story residential buildings with 264 apartments, four separate three-story town homes with 84 units, and a 12-story, 128-unit with retail space below.

The Related Group was the developer. “This was part of Palm Beach County’s plan to stimulate growth and an upscale climate in downtown West Palm Beach,” says Powers. “It’s now attracting some of the most well-known companies to come in and share retail space.”

Current Builders is also constructing The Moorings at Lantana in Lantana, Florida. This $50 million upscale project was designed by Roger Fry and Associates for The Related Group and Lennar Homes. It consists of a 6.5-acre site with 1.2 million square feet of construction. It includes 357 condominiums and 21 luxury townhomes. The project consists of seven-, six- and four-story buildings with retail and commercial space. There will be a six-story, 200,000-square-foot design-build parking garage with 585 spaces. Amenities include the marina on the Intracoastal with ocean access, pools, spas, gazebos, rooms and skywalks from the parking garage to the buildings. “The unique thing about this project,” says Powers, “is that it encompasses several different structural delivery methods. We did a design-build parking garage, and we also have conventional concrete construction, poured-in-place floors with post tension, and tunnel form construction.”

Batson-Cook served as general contractor for Paces 325 Condominiums, an upscale mixed-use development in Atlanta’s Buckhead area. The 209-unit, 22-story building includes 275,500 square feet of residential space, 132,000 square feet of parking space and 5,000 square feet of retail space. A tennis court, swimming pool and pool deck are located atop the parking garage on the fourth floor. The owner is Batard Partners, and the architect is Cooper Carry.

Batson-Cook recently began construction on the main hotel at The Cloister on Sea Island, Georgia. The 245,484-square-foot, five-star hotel of Spanish/European-style architecture will include 33 luxury suites, a meeting/ballroom, prefunction room, restaurants, state-of-the-art culinary facility and a solarium. The owner is The Sea Island Company.

A Look Ahead

Looking ahead to the next 3 to 5 years in the construction industry, Raney sees more mixed-use construction, including office, residential, hotel and retail. He says that healthcare construction will continue to be steady as older facilities are replaced or renovated to keep up with technology and improved patient care environments. Private schools and churches will also continue their building programs. “I also see the office market coming back slowly,” says Raney. “As the vacant space continues to fill over the next 2 to 3 years, the office market will begin to strengthen.”

“A good indicator for us,” says Patti Morgan, “is the fact that some of the major architectural and engineering firms are swamped with new projects, as well as old projects they started a few years ago. It’s a great time for us.”

Douma also has an optimistic outlook on the Southeast’s construction industry. “There’s a lot more work out there than there has been since 9/11,” he says. “Industry was down, but there’s just a lot more activity in the marketplace right now.”

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