Commercial Real Estate Construction Still High in Volusia, Flagler Counties

Fewer new homes are being built in the Volusia-Flagler housing market, but commercial real estate projects keep coming out of the ground.

“It’s still a housing boom compared to most of the country, but compared to what we’ve had, it’s a softening of the housing market,” said Rick Michael, director of Volusia County’s economic development department. “On the positive side, strong commercial permitting shows there’s still some good things happening from a business standpoint.”

Michael’s agency recently announced 638 new home permits were issued countywide in the third quarter of the year, slightly more than a third of the 1,814 issued in the same period last year by the county. City and county permitting officials predict less than 3,500 residential permits will be issued for all of 2006, roughly half of the 6,856 issued last year.

During that same third quarter, 49 commercial permits worth $54.1 million were issued by the county and its municipalities. For the first nine months of the year, 198 new commercial and industrial permits worth a combined $204.7 million were issued countywide, up slightly from $192 million posted in the same period in 2005. This at a time when the South Florida housing market is in decline and leaving many observers worried.

“Businesses are still growing, jobs are still going up (in numbers) and the workforce is still increasing. There’s no slowdown in immigration into Volusia County,” Michael said.

It’s a similar tale in Flagler County.

“I don’t have any figures, but I know from working around the area the commercial side has a lot in the pipeline,” said Byron Lalande, business resource specialist at Enterprise Flagler.

Housing construction in both counties has slowed to a crawl because there is so much inventory and many homes remain unsold, said one builder.

“We’ve been overbuilding for a solid 24 months,” said Bob Fitzsimmons, a West Volusia home builder. “Everybody’s inventory has grown, so they’ve got to slow down or stop building until the inventory is absorbed.”

Fitzsimmons cited a monthly report from the University of Florida’s Bureau of Economic and Business Research. In August, the latest figures available, 231 residential building permits were issued in Volusia County, and 78 in Flagler County. A year ago, Volusia recorded 561 residential permits and Flagler logged 388.

The year-to-date numbers aren’t any prettier for residential permits, the report said. Volusia County and its cities issued 2,370 permits the first eight months of this year, versus 3,782 in the same period of 2005. Flagler County and its cities issued 1,339 this year, compared with 2,433 in the same period a year earlier.

“Some of the problem can be placed on flippers and investors, but the building community was stupid drunk with demand and produced more homes than the market could consume. The underlying household creation is still growing 3-4 percent a year, (which is) a solid foundation to the economy,” Fitzsimmons said.

The rise in Florida mortgage rates and cooling of demand has resulted in a downturn that has led to layoffs at many home builders. But some builders are still holding steady, or at least are doing their best to.

KB Home, for instance, doesn’t build unless a buyer is under contract, said spokeswoman Cara Kane, so its inventory of unsold homes is smaller than many other companies.

“KB doesn’t build on speculation, so we have less inventory on hand,” she said.

Still, some buyers walked away from their contracts, so KB does have a few homes without ready buyers, she said.