Duluth schools lone bright spot in grim building yearLast year probably wasn’t so hot for you if you work in residential construction in Duluth.
By: Peter Passi, Duluth News Tribune
Last year probably wasn’t so hot for you if you work in residential construction in Duluth.
But prospects held relatively strong for Duluthians engaged in nonresidential construction, a bright spot that helped shore up an otherwise sagging industry.
“We’ve been kind of an island in the state,” said Craig Olson, president of the Duluth Building and Construction Trades Council. “The rest of the state has not been so fortunate, but we’ve held our own.”
Duluth issued 211 permits for nonresidential projects last year worth more than $95 million. The value of nonresidential projects permitted in 2011 climbed 12.9 percent compared with 2010.
But the picture was far different on the residential front.
Only 41 units of new housing were built in Duluth in 2011 at a cost of about $6.4 million. That’s 56 percent less than what was spent to construct 55 units of housing in the city in 2010, according to building permit records.
Improvements to existing buildings didn’t do much to fill the gap, either. The city issued building permits for about $70 million worth of work on residential and commercial additions, alterations and repairs in 2011 — 47.7 percent less than the previous year.
“It’s been grim,” said Arno Kahn, a managing partner at Builders Commonwealth of Duluth. “We’ve weathered about as much as we could withstand without going out of business, and unfortunately a lot of other people have.”
To make it through, Builders Commonwealth has had to make some difficult adjustments. Kahn estimates the firm has shed 18 to 20 employees and is now about one-half the size it was in 2006 or 2007.
But Kahn remains hopeful 2012 will prove better.
“I’m more optimistic than I have been the last couple of years,” he said. “We’ve been getting more calls, and I think there will be more activity in the residential market this year.”
That’s not to say Kahn expects residential work to return to the levels he saw eight years ago, before the recession.
Ron Edmunds, a broker with Edmunds Co., a Duluth real estate firm, said the large inventory of homes already on the market at attractive prices has suppressed new residential construction.
Still, Edmunds anticipates that as the market settles down, there will be renewed opportunities for builders of new homes. Times aren’t as slow as they were in 1982, when Edmunds built his own home in Duluth’s Woodland neighborhood. That year, he recalls, fewer than 10 permits for new homes were pulled, as compared with 23 in 2011.
“We’ve seen highs and lows before, and we’ve always come out of them,” Edmunds said.
Recent investments in educational buildings have bolstered the local construction industry. Permits issued for schools and other educational facilities totaled $42.8 million in 2011. That’s 45 percent of the nonresidential work permitted in the city last year and nearly 20 percent of all building activity in Duluth.
The University of Minnesota Duluth completed work on its $14 million Ianni Hall, a dormitory housing 280 students, in 2011.
Duluth public schools were definitely the biggest spenders, as the district continued to execute its long-range facilities plan. The school district will pump additional money into the local construction industry this year, with continued construction at the new Lincoln Park Middle School, Ordean East Middle School, Congdon Park Elementary and Myers-Wilkins (formerly Grant) Elementary.
Considerable investments will be made in 2012, said Kerry Leider, the school district’s property and risk manager.
“We will start to have less effect next year, but you should see money flowing into school construction at least through the end of 2013,” he said.
The school projects have delivered a much-needed shot in the arm to the local construction scene, said John Erickson, a partner with DSGW Architects of Duluth.
“The timing couldn’t have been any better,” Erickson said of the school spending. “It stabilized the market. Otherwise, we would have taken a much bigger hit.”
While school spending certainly has shored up Duluth’s construction industry, there also have been significant investments made by others, including local hospitals, which tackled nearly $20 million in projects during the past year.
“We’ve seen a fair amount of private- as well as public-sector projects,” said Drew Digby, a labor analyst for the Minnesota Department of Employment and Economic Development. “It’s been a nice mix.”
He pointed to the new Kenwood Walgreens and CVS’ plans to open a couple of stores in Duluth, as a few recent examples.
As of the second quarter of 2011, Duluth employed more than 1,900 construction workers — 17 percent more than during the same period in 2010 — according to the latest jobs data available from the Minnesota Department of Employment and Economic Development.
“The payroll numbers are definitely back up,” Digby said.