You could be driving down Reston Parkway in Fairfax County, along Martin Luther King Jr. Avenue Southeast in Anacostia or on K Street downtown, and you would get a glimpse of the same thing out your window, what is jokingly referred to as the official bird of commercial real estate.
The cranes. They’re back.
It isn’t just in one neighborhood or another. Developers are shelling out to build apartments in transit-accessible neighborhoods with gusto, and in the toniest areas a few have financed condominium construction. Others are lucky to be providing space for government agencies. The cranes never really left NoMa, the neighborhood behind Union Station, where construction workers are assembling the very structure that many thought wouldn’t be back so soon: a speculative office building — meaning one built without leases in place — by StonebridgeCarras and Walton Street Capital.
Does having more cranes in the air mean the Washington area’s building industries — the construction, landscape and engineering firms that employ thousands of people — are back from the abyss? It’s encouraging to see dump trucks rumbling down the street, but it’s hard to tell if they indicate a real improvement in business for the area’s top companies, many of which shed hundreds of jobs in the recession.
So, how is business?
“We are beginning to see a rise in construction demand,” said Jim Davis, president and chief executive of James G. Davis Construction. “It still has been primarily driven by government needs, but we are starting to see some private sector increases, especially with apartments.”
The company, based in Rockville, was one of many local builders that experienced deep cuts after real estate values plummeted and financial markets froze in 2008. Davis said business dropped by about one-third and the company made an equal cut in its workforce.
But recently Davis has scored some major projects. It is building one of the area’s only new condominium projects, Gaslight Square, the Rosslyn project by Abdo Development, and a 1.7 million-square-foot underground parking garage as part of the Reston Station development, near a coming Silver Line Metrorail station. The garage will go seven levels underground at its deepest point, take 27 months to build and require 1 million man hours of labor.
With business picking up, Davis said he is making some strategic hires, particularly professionals in areas like underwriting and three-dimensional modeling. He has hired about 60 people in the Davis offices in the past six months, putting the company over 700 employees again. He does not, however, see a robust comeback just yet, particularly if the federal government gets serious about cutting its budget. “The private sector is trying to get going but financing is still very tough,” he said.
Local construction job numbers show an industry still reeling from losses but possibly turning a corner. The Bureau of Labor Statistics, using non-seasonally adjusted figures, said the Washington area employed 378,200 people in construction last month, up from 368,800 in March of last year — the first such gain since 2007. The bump helped the Washington area tie for the lowest jobless rate among metropolitan areas in the country in March at 5.2 percent.
“From the perspective of the private sector, things are marginally better, and I guess I put the emphasis on marginal,” said Michael Snyder, senior vice president at Dewberry. Based in Fairfax, Dewberry has architecture, engineering and consulting businesses, and it was able to endure the downturn with around 1,800 employees by re-assigning people away from private sector work to larger government and infrastructure projects. About 15 employees in Snyder’s private development group, for instance, were assigned to help with work on the Intercounty Connector when the recession arrived.
One sector of Dewberry’s business where Snyder sees growing private sector demand is the land and pre-development services it provides to apartment developers.
“What we’re seeing, part with the demographics and those changes, is this is where people are preferring to live,” he said.
That has Bob Kettler, chairman and chief executive of Kettler, the McLean-based apartment developer and manager, sitting in the catbird seat. Kettler oversaw the shedding of hundreds of jobs when land values plummeted during the recession, as much as 35 to 40 percent in some parts of the area. Rents were also falling, 10 to 20 percent from 2007 to 2009 in some cases, and the company was often forced to offer a month or more of free rent in order to fill its units.
With development dry, Kettler expanded the company’s management business to work for other owners, all the way from the Carolinas to New Jersey. In the process, he is hiring almost 300 people (though not all locally).
While he was at it, Washington rebounded — rather spastically — into the best place in the country to build apartments. “Rentals were absolutely taking off at a much higher rate than anybody predicted,” Kettler said. Now he is quickly signing new deals, and the company has nearly 600 employees, up from a recession low of 460.
“We’ve closed on four projects last week, about 800 units, and are closing on another three projects in the next month,” he said.