Plans for new construction in Greene County has plunged to a 5-year low and some are attributing the fall to fears over defense spending cuts.
While the county’s economy is among the healthiest in the area, there is concern that the 49 percent drop in the value of building permits in the past year could signal a wider downturn.
“In general we’ve seen a lot of projects on hold due to sequestration. Some of that’s new construction. Some of that is tenant expansion,” said Jerad Barnett, president and CEO of Synergy/Mills Development Companies — one of the largest developers in Greene County.
Barnett also attributed the slowdown, which was sharpest in the second half of 2012, to the uncertainty during the presidential election.
Last year marked the second lowest value for Greene County building permits within the last decade, according to county data. Residential and commercial construction permit values in the county totaled $294.7 million in 2012 compared to $575.4 million reported in 2011.
“The growth in the Dayton metro (area) is not robust,” said Doug Harnish, president and CEO of Market Metric$ LLC, a Kettering based economic and market analysis consulting company that works with local governments. “It’s stagnate. One of the bright spots is Greene County.”
Greene County’s annual construction permit values tend to be higher than other Dayton area counties, according to data collected by the Dayton Daily News. Montgomery County had $169.2 million in permit values in 2012, while $47.9 million was reported in Miami County.
Nationwide, construction spending in March dropped 1.7 percent to $856.7 million compared to the previous month, however that number is a 4.8 percent increase compared to$817.8 million in March 2012 , according to a recent report published by the U.S. Census Bureau.
Greene County showed signs of economic recovery last year with sales, lodging and property tax collections surpassing pre-recession levels. Interstate 675 has been a hot spot for major development projects. And in addition to increasing tax revenues, the county has had one of the lowest unemployment rates in the region.
Despite gains in these areas, county permit values have been on the decline since 2009 when these values dropped 7 percent, from $652.8 to $608 million, compared to the previous year. The exception was in 2011 when permit values realized a 2 percent gain.
Defense spending has been a driving force behind Greene County growth, according to experts. Wright-Patterson Air Force Base, the county’s largest employer, accounted for 44 percent, $86 million, of the commercial building permits in 2012, according to county data. The City of Beavercreek followed with $32.1 million the same year.
“When you don’t know what kind of contracts are going to be met by the government, when you don’t know what kind of impact is going to be had on a respective business or a respective community, certainly that’s going to push the developers to be a bit more cautious and make a little bit slower investment, said Scott Koorndyk, the Dayton Development Coalition’s executive vice president of economic development and operations. “So I think that it (sequestration) certainly impacted it.”
Barnett, of Synergy/Mills, said new development projects have not been as “active” as they have been in the past
“It’s uncertainty, and uncertainty is bad for business,” Barnett said.
Some companies are postponing new construction or expansion plans because of the uncertainty about the federal budget.
Peerless Technologies Corporation, a Fairborn-based federal government contractor, bought two acres of land in 2012 to add to its 17,000 square-foot facility in anticipation of future growth needs, said Michael Bridges, the owner and president. However sequestration, and increased competition among defense contractors, have put those plans on hold.
“Those two things have put us in a position to wait and see,” Bridges said. “Instead of building a building on speculation, we’ll build at a point when it’s absolutely necessary.”
Bridges said he is watching to see the final outcome for the federal defense budget and programs.
Greene County Administrator Howard Poston says the federal spending cuts have had a minor impact on the county.
He noted some potential projects that could materialize in the next few years that could help boost construction values.
“At this point I would’ve thought it would have leveled out by now,” Poston said.
Koorndyk expressed a similar outlook. The coalition has invested in 13 tech companies all of which are performing well, he said.
“What it does suggest is if sequestration has depressed investment or made developers hesitate a little bit, the reality is Greene County is continuing to diversify its economy, Koorndyk said. “So you’re going to see these other diverse elements of the economy rise in importance to Greene County over time off setting some of the challenges it faced when an issue like sequestration comes up.”
Non-defense related industries are ripe for growth right now and could hold opportunities for new development, said Barnett
“We’ve got several large users that are non-defense related that are looking at some existing buildings and some new build opportunities,” he said. “…On the defense side there’s no doubt the sequestration and the uncertainty have a lot of people on hold. On the flip side we’ve side, we’ve seen a lot of new non-defense activity that we’re very excited about.”
Growth in the county could be resuscitated once the details related to federal cuts have been finalized, Barnett said.
Meanwhile even with construction slowing down, there are some positive indicators that the Dayton area economy will pick up within the next couple of years, Barnett said.
“Even in Montgomery County we’ve seen a lot of growth that frankly hasn’t been there in the past five years,” he said. “A lot of small businesses are making investments that I think they’ve been concerned about making. We see that happening a lot. So I think we expect 2013 especially 2014 to be pretty good years for us.”
Q & A with Jerad Barnett of Synergy/Mills Development Companies, one of the Greene County’s largest developers
Q: How has sequestration affected Greene County?
It’s uncertain and uncertainty is bad for business.
For us business has been very steady, but it hasn’t been as active as we would typically see on the new construction front.
We started hearing from people it was initially the uncertainty of the election and that flipped to the uncertainty of the federal budgetary process and what the impacts of sequestration will be. And I still don’t think people really know.
Q: How long do you think the effects of the sequestration will last?
A: I’m hopeful that sometime in the summer we’ll have a little clarity, but I tell you the government seems to be moving very slowly so it could be something we feel the effects of the entire year.
Q: What needs to happen to jumpstart the local economy?
A: We, from a national standpoint, all expect the economy to be fairly flat here for a while. I do think even with the government, presumably we hear from our contractors, going to spend less on defense for the foreseeable future, there’s still going to be a lot of opportunities in Dayton.
I think the decision making on where the cuts are going to happen will help spur some growth. Even in a cutting mode, Wright Patterson has typically fared pretty well. The government still spends a lot of dollars on defense. I think that as they get out of this period of are we going to furlough, are we going to cut this program and they make decisions, I think that once that’s done we’ll see growth. I think we just need the decisions at the federal level to be made.
The Dayton Daily News continues to report on how federal budget cuts are affecting the local economy.