ST. LOUIS, MO - Five years ago when Tony Raineri and his wife started their St. Louis-based construction company, their focus was on building multifamily housing, especially loft-style condominiums. With the housing market suffering through its worst downturn in years and the condominium market taking an even steeper dive, Raineri Construction has been forced to widen its pursuits. "We spend more time chasing commercial work now," said Tony Raineri, the company's director of business development. "I would say the economy is helping us take a turn."
While some construction companies in the St. Louis region have gone belly up or turned away skilled crews because they have so little work, others like Raineri have found themselves branching into other areas of the construction world. Diversify is the name of the game these days. "You either find something else to do or you don't eat," Raineri said.
Some companies have expanded into home remodeling and renovation. Others have ventured into commercial construction, which has not suffered with the economy like its housing counterpart. Jerry Rombach, executive officer of the Home Builders Association of Greater Southwest Illinois, explains: "Companies have found the need to look at every aspect of their business and make adjustments."
In the last two years, thousands of residential construction jobs have gone away, based on the drop in new single-family house permits issued throughout the St. Louis region. Rombach estimates there were 4,045 fewer jobs in his area in 2007 than in 2005, based on a National Association of Home Builders formula. In 2005, a peak year for new houses, 3,738 single-family house permits were issued in the nine-county area, compared to 2,240 in 2007.
Remodeling and commercial construction have given some builders the relief valve they need to stay afloat and maintain their work force, said Patrick Sullivan, executive vice president of the Home Builders Association of St. Louis and Eastern Missouri. "They have the choice of diversifying first and the choice of really drilling down on the residential markets that remain to them second," Sullivan said. "Beyond that, a reduction in labor is next."
Some builders have found moving into both remodeling and commercial construction an obvious transition. While some house builders were already doing commercial work, they have seen that side of the business grow despite the decline in the new house arena. Dan Barnard of St. Charles-based Greater Missouri Builders said his company is fortunate to have its commercial division with "a fairly solid commercial portfolio that keeps things going." Barnard said his company's reduction mirrors that of the industry, declining between 50 percent and 60 percent. "I think every builder is doing what they can to support their good employees," he said.
As some prospective house buyers hold off on purchases, many appear to be updating and expanding their existing houses. Padgett Building and Remodeling in Swansea has seen its percentage of custom house construction and remodeling work nearly flip-flop in the last three years, said Ron Padgett, company chief executive officer. In 2005, the company that specializes in custom-built houses had about a 40 percent/60 percent split between remodeling and new house construction work, respectively. Today, that split is more like 70/30. "Instead of somebody going and buying a new house," Padgett said, "They're adding on."
Not only are builders relying more on the demand for remodeling, but recent earnings reports by two of the nation's largest home improvement chains, Lowe's and Home Depot, indicate an uptick in do it yourselfers maintaining and improving their own houses.
While they haven't forgotten their roots, some local builders say branching out allows them to keep their crews busy so they won't go elsewhere or leave the industry entirely. For some, they've built years-long relationships with plumbers, electricians and heating and air-conditioning workers.
"It's a matter of control," said Rombach, with the Illinois builders group. "Your reputation is on the line with every home you build or remodel." Even so, construction executives and observers say they have not given up on new house construction. They note the industry's cyclical nature. New house construction will undoubtedly increase with time.
"The good thing about it, even with one of the most severe downturns in memory, people still need homes and homes wear out," said Barnard, of Greater Missouri Builders. "Once we get the credit mess figured out, it will recover. It has to." As for Raineri, multifamily construction was once a majority of its work. Today, co-founder Tony Raineri said, "I don't think we focus on one particular thing." And the result? "We're busier now than we have been in a long time," he said.
Source: stlToday.com