If you’re a builder, developer or community planner, this is a good year to be doing business in Greater Des Moines.
Not a great year, mind you. A Business Record review of development statistics from 14 metro cities shows that the numbers still lag the heady days before the financial collapse of 2008 and onset of the Great Recession.
Still, it was not too long ago that Gerry Neugent, president and chief operating officer at Knapp Properties Inc., joked that he walked the through the company’s West Des Moines office asking the staff whether they still recognized the document he held in his hand. It was a closing agreement on a property sale.
Since then, there have been a lot of closings. Developers again are appearing before planning and zoning boards to lay out housing developments.
A Business Record review of building statistics for a dozen metro area cities shows some trends emerging in recession recovery. It also suggests that some cities are returning to prosperity faster than others.
WHAT WE FOUND;
• Grimes is the only city that is building more homes than it was in 2007. None of the other 11 equaled or surpassed the home building levels of 2007 in 2012.
• However, a boom in multifamily housing construction has helped several cities increase their construction activity significantly. We compared the total valuation of residential construction in 2007 to the same figure in 2012 for each city to find those leading in regaining residential growth. Grimes, Johnston, West Des Moines, Ankeny, Clive and Des Moines grew their overall residential construction from 2007 to 2012.
• Cities that haven’t yet regained their residential construction levels: Waukee, Indianola, Altoona, Norwalk, Urbandale and Pleasant Hill.
• The amount the cities charge residential builders for permits and other building fees (excluding development fees) varies significantly, according to responses to a Business Record request for costs on a 2,500-square-foot, two-story house with a partially finished basement, three-car attached garage, deck and fireplace. Costs varied from $5,143 in Waukee to $1,326 in Pleasant Hill.
• Lower fees do not seem to have a direct correlation to cities that are regaining traction in home building. Although Waukee has by far the highest permiting costs, and its home building recovery has been sluggish, Pleasant Hill also has had a slow return to housing activity and its fees are lowest.
• Des Moines is on the losing end in commercial construction. In 2007, the city issued 165 commercial construction permits for $266.5 million in value. In 2012, those numbers shrank to 112 permits and $79 million total valuation. Grimes, West Des Moines, Clive and Norwalk also had less commercial development in 2012 than in 2007.
• Waukee led the metro area in its percentage increase in commercial development. In 2007, it issued three permits for $1.1 million and in 2012, those numbers jumped to eight permits and $13.6 million.
• Ankeny and Urbandale also had gains in commercial growth in 2012 over 2007. Ankeny’s commercial permits jumped from 26 to 33 permits and the value of that construction came close to doubling - from $38.9 million to $73.6 million. Urbandale’s commercial permits went from 10 to 18 and from $15 million to $39 million in total valuation.
Choosing where to build
Creighton Cox, executive director of the Home Builders Association of Greater Des Moines, said the ease of working with city officials, whether the city has a residential tax abatement program, the city’s overall property tax rate, the appeal of its school system and land prices all influence builders’ choices of where to work.
“If there is a demand, a builder will build anywhere.” Cox said. But Cox, who also is an Urbandale city councilman, said city leaders who strongly value development can make a difference in their city’s attractiveness to builders and “growth is the difference between high taxes and low taxes.”
It is interesting to note that in Waukee - something of a wonderland for residential construction during the boom years - all of the commercial permits have been for retail projects, following the development adage that retail follows rooftops.
Mark Rupprect, president of R&R Realty Group, said developers want to offer their commercial clients access to nearby residential neighborhoods and amenities. The company is preparing to build its first multifamily project in two decades, and for a location, it has chosen its Country Club Office Plaza at Jordan Creek Parkway and Vista Drive in West Des Moines. For renters, the company is looking for young professionals who might work in or near the office plaza.
And it helps to plan a project for a city where you already own land, developers say. They say there is little $4,000-an-acre farmland for sale to developers, unlike in pre-recession days. At $12,000 an acre, it is unlikely that buyers will pay 10 times that price, as they as did for cheaper land before the real estate markets tanked.
Cox said residential tax abatement programs also influence builders, but the statistics don’t necessarily bear that out.
Grimes, Johnston, West Des Moines and Ankeny have shown the strongest recovery in housing construction and none of those cities have citywide programs to abate the owners’ property taxes on new homes for a series of years. Tax abatement programs, however, may help cities balance the scales on other disadvantages. Des Moines’ multifamily construction is up more than 1,000 percent, for example. Much of that growth is in the downtown area, where a special urban core abatement program is even more generous than in the rest of the city.
Matt Anderson, assistant city manager in charge of economic development for the city of Des Moines, remarked recently that projects underway in the city “just seem to come to us; we don’t have to go looking for them.”
So what are the cities doing right, or wrong, to encourage development?
In some cases, communities seem to thrive in spite of themselves. City leaders in booming Waukee are well aware that the fees they charge home builders are nearly double those of any other city. Waukee issued the second most permits for new homes in 2007 and the third most in 2012. A City Council goal is to address those fees and maybe also shorten the two-week turnaround to obtain a building permit.
West Des Moines has some of the most rigid development standards in Greater Des Moines. Developers will grumble about some rules, such as counting the number of cars created by commercial and residential developments down to the last taillight, but they add, “You just learn to deal with them.”
Joe Pietruszynski, vice president of land development for Hubbell Realty Co., said any city with a vast planning department is going to present more hurdles to jump. However, cities such as Waukee, Urbandale, West Des Moines, Des Moines and Ankeny have improved their appeal and efficiency with builders and developers by adding in-house economic development departments where developers can get quick and authoritative answers to their questions.
“When you need to visit about issues, such as incentives from a city, it’s important to know that the person is a city staffer,” Neugent said.
In the end, however, the most important issue is how much a developer paid for land and how much it can be sold for, he said, noting the costs of running sewer lines and building streets are roughly the same city to city.
“What are lots selling for? That really is it,” Neugent said. “I don’t think it’s any more sophisticated than that.”