Coronavirus downturn touches Boise-area housing, commercial developers. Here’s how
This week, downtown Boise was mostly silent, save for the sound of hammering echoing among the empty office towers from construction sites.
As the coronavirus grinds the economy down, Boise developers are still pushing forward as they race to meet deadlines and budgets.
But signs of a slowdown loom. Some of the Treasure Valley’s biggest developers say that they have put some new commercial and residential projects on hold as they wait to evaluate the nascent downturn’s impact.
“It has had some chilling effect,” said David Turnbull, owner of Brighton Corp., a Meridian developer of houses, apartments and and commercial projects.
This hit to developers will depend on the severity of the pandemic, and just how long it takes the country to return to its normal routines.
Tommy Ahlquist, CEO of Meridian’s Ball Ventures Ahlquist, a developer of office, medical, and other commercial buildings, said the virus has affected several deals with prospective partners.
“Most of them are being cautiously optimistic and saying, ‘We’re going to push the pause button for 30, 60 or 90 days,’” he said.
“We’re all kind of flying blind,” said Scott Schoenner, a partner and Boise director of Rafenelli and Nahas, which is building a 10-story building at 11th and Idaho streets in downtown Boise.
Housing market still strong
This downturn won’t be as bad as the last one, predicts Wes Jost, Zion Bank’s director of Idaho’s real estate banking group.
“We see this as a temporary interruption,” Jost said by phone.
During the Great Recession, which began in 2008, and its aftermath, credit markets dried up. Developers couldn’t get financing to build, but people still kept moving to Boise. The slowdown in building then is one reason home prices have risen so steeply as demand continued to outstrip the backlog of supply.
“Developers and other clients who are working with us now that would like credit to construct their projects — we haven’t pulled that back at all,” Jost said. “Capital is still available for those projects.”
People are still moving to Boise, and developers want to be ready for that.
“I don’t see any reason to stop residential building,” said Clay Carley, who is working on two mixed-use buildings on Grove Street that will include hundreds of apartments atop ground floor office and retail space.
“Boise still has high allure, and growth is going to continue,” Carley said in a phone interview. “We’re under-supplied, and people are coming. So more housing is necessary.”
Jost also added that many of the office buildings that Zions Bank has funded are still moving forward.
Still, some types of projects could be put on hold, such as fitness centers and some retailers.
Over the last few days, Jost and other lenders have been glued to their phones, making arrangements to help clients weather the downturn.
“We’re looking at payment deferrals and in certain cases, extensions,” Jost said.
Supply chains could be hurt
Beyond access to credit, developers may have to maneuver around disrupted supply chains, which operate on a global scale.
Even in Idaho, many of the materials for housing construction come from Europe and China. Turnbull, of Brighton Corp., imports the tile for his houses from Italy.
“That’ll last for some time, but as some of our selections run dry we’ll have to go to alternative sources,” he said by phone.
Right now, many developers say they have the materials needed to finish ongoing projects — but that could change.
“If you’re looking for things to be manufactured and shipped to you, it’s going to be harder to get those materials,” Ahlquist said in a phone interview. “Anyone that tells you that supply chain is not drastically affected just doesn’t understand it.”
Virus alters construction sites
On Wednesday, Gov. Brad Little ordered that all Idahoans stay home, with the exception of some workers staffing essential businesses. Commercial construction is considered essential.
Construction contractors have altered workplace practices as the crisis evolves. Andersen Construction, a general contractor with several projects around Boise, has assembled a COVID-19 Task Force, which meets daily to discuss how to change their operations, depending on shifting government protocols.
While work continues, Andersen has ordered that its workers be spaced out to ensure they are properly separated to reduce the virus’s spread, wrote Matt Blandford, Andersen’s Idaho operations manager, in an email.
The company also put in place “environmental cleaning practices” at their job sites meant to help slow the spread of the virus.
Stay-home orders have delayed some general contractors that rely on subcontractors from outside the Boise market, Jost said.
“That just extends the date of delivery — it doesn’t cancel anything,” he said.
From downtown Boise, Scott Schoenner said he remains on schedule to finish the office tower at 11th and Idaho by October.
“We’ve not had any issues with materials our, our manpower,” Schoenner said by phone. “All of our subcontractors are working away. Everyone’s working hard. We continue to move down the path that we’re on.”
Could pandemic reshape development?
Developers are optimistic that this downturn will be short-lived. Growth has been surging in the Treasure Valley. In 2018, developers across the Valley filed 8,299 building permits, the highest number since 2005, just before the real estate bubble burst.
Yet some developers are realizing that even completed projects aren’t doing them much good — at least, not for the moment.
On Monday, Carley opened up his 550-spot parking garage that has been under construction in downtown for the last year.
“There was not one car in it,” he said.
He expects traffic will pick up as soon as people start to head back to their offices.
For now, Carley is making use of empty garages downtown himself. “I’ve been riding my bike up to the top of the garages and flying down,” he said.
As he bicycles around downtown, Carley is curious about whether the habits that workers are forming during this freeze in daily life will become ingrained in our habits for the long-term.
“A lot of people are recognizing they aren’t losing any efficiency by working remotely,” Carley said. “I wonder if that’s going to change the built environment and what developers need to build for the future.”
Correction: David Turnbull is the owner of Brighton Corp. A previous version of this article incorrectly referred to him as the company’s CEO. In fact, the CEO position is currently held by Robert Phillips.
This story was originally published March 27, 2020 at 4:00 AM.
