Based on its success with the bus terminal project, Diamante Custom Homes is now promoting its services to markets farther away. It relaunched its Web site to be more generic and spends more with search engines so that its name pops up more prominently for markets such as Austin, Texas. Sanchez says that he is planning to open a sales office in Port Aransas, Texas, a coastal vacation community two and a half hours from San Antonio, that would target both residential and commercial customers. He expects commercial construction to represent 25 percent of his business in 2008, versus 10 percent to 15 percent in previous years.
Builders such as Sanchez and Nakamura, whose companies have remained reasonably active on the residential front during the downturn, are also eager to sustain their remodeling and commercial businesses long term. That’s true as well of Lonnie & Chad Brown Builders in Versailles, Ky., a company that will build around 35 homes in 2008, down slightly from the 45 it built the previous year. It will also complete 25 remodeling projects. Owner Lonnie Brown says his company will continue to bid on remodeling projects even after the new-home construction market revives. When asked why he would continue relying on lower-margin renovations, Brown responds philosophically. “Well, you can’t eat a lot of filet mignon, but at least you can eat.”
Getting Started
Mixed-use communities are a good training ground for builders looking at commercial, says one developer.
Mixing it up: WRECO’s 586-acre development in New Bern, N.C., will include a town center with offices, parking, and a 300-room hotel, as well as 1,168 home units.
Credit: Courtesy Weyerhaeuser Real Estate Co.
The closest that most home builders get to commercial construction is their involvement in mixed-use communities that combine housing with offices, retail, and other nonresidential structures. But at least one developer thinks such projects are a good place for builders wanting to expand into commercial and industrial projects to cut their teeth.
“The processes and procedures for mixed-use developments are not all that different from strict residential,” says Taylor Downey, manager of community development for Weyerhaeuser Real Estate Co. (WRECO) in Madison, Ga. “You have more conversations with the local planning and zoning folks, and the infrastructure becomes more critical. It can also be more expensive, but there’s more potential for added value, too.”
WRECO has received “considerable interest” from builders wanting to be part of its 586-acre project in New Bern, N.C., that will have more than 1,000 housing units plus retail and a hotel. WRECO also has in the works an 800-acre development in St. Tammany Parish near New Orleans and a 2,000-acre mixed-use community in Onslow County, N.C. Downey says these “new kinds of developments,” with their live, work, and play components, are being brought on by “the economic and infrastructure demands in all of the geographies we work in. They answer a lot of demand questions and are what municipalities are looking for.”
He says WRECO has done similar communities in the Pacific Northwest, and the concept is now “migrating” to all of WRECO’s builder divisions.