Pamela V. Brown
Write Path, an L.L.C.
Kauai Business Report April 2004
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Pamela V. Brown Write Path, an L.L.C. |
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Kauai Business Report April 2004 |
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Kauai's Continuing Construction Boom Keeping Island Contractors Hopping By Pamela V. Brown Too much of a good thing can be a mixed blessing for Kauai building contractors who are in the middle of the island's building boom and who are working hard to keep pace with demand. Fueled by continued low interest rates and revamped priorities in a post-9/11 world, construction projects continue to hit the books, keeping most of the island's building industry busy and learning to juggle. "On Kauai when it's good, it's really good and when it's bad, it's really bad," said Kendall Struxness, president of Kendall Pacific, Inc., a North Shore-based general contracting firm, noting that these are definitely the good days. "We're booked (with work) through the end of 2005," Struxness said. "It's enough to survive on and then some," he said, noting that in a notoriously up-and-down industry, it's a nice feeling to know he's financially safe to make capital investments and to purchase equipment. "It's been really busy," said Clyde Shigematsu, owner of C Shigematsu Construction. "I think I can say that for almost every contractor on this island." Shigematsu, who completed the Aloha Medical Centers building across from Kauai Island Utility Cooperative (KIUC) in Lihue late last year, is preparing to build the Pacific Eye Center near the Lihue Taco Bell soon. Now that he employs a crew of 10 men, he worries about insurance and other legal requirements. And how to keep up with demand for his services. "We're pretty much staying pretty busy," he said. "For me it's pretty hard to turn down jobs but it gets to a point where we're definitely turning jobs down." The tricky part, Shigematsu said, is that home owners often come to contractors with their building permit in hand and want construction to begin on their house right away. "Tomorrow!" he said. "I guess you can't blame them because probably they've been going through the permit process for months." Shigematsu's advice for project owners is to look for a contractor early in the process. "(People) try to wheel and deal and find a cheap deal, but right now I don't think it's the right time to do that," he said. He also strongly recommended that owners use only licensed contractors. Russ Boyer, founder and Chief Executive Officer of Aloha Lumber Company in Kapaa, explained that a number of factors have conspired to create the frenzied pace of building on Kauai, the foremost of which is continuing low mortgage interest rates. Borrowers can qualify for larger mortgages than they could five years ago, but still have an affordable monthly payment. For the last three to four years the county has held steady, issuing an average of 110 building permits per month, said Don Lutao, Kauai County code enforcement officer, primarily for residential and small commercial projects. But Boyer said Aloha Lumber has experienced a dramatic spike in business just in the past year. "Only one year ago I was the only person drawing (house) plans here, and there are eight of us now," Boyer said. "I will typically get at least one new call a day. Four or five years ago I would typically have eight or nine jobs going at one time. Now we're doing 28." There is so much construction business right now that even the arrival of giant retailer Home Depot on the island hasn't seemed to hurt Aloha Lumber, Boyer said. The company's most recent fiscal quarter, which coincided with Home Depot's first three months on Kauai, netted a 7% increase in sales from the prior fiscal year, which had been a banner year in itself, he said. "I'm not saying we're superior to Home Depot by any stretch," Boyer said. "But what I am saying is the volume of activity is such that in spite of that (Home Depot's opening) we have seen that sort of volume." Boyer said that changes in the capital gains tax law four or five years ago have also helped spur construction. Certified Public Accountant Bill Blackburn agreed, explaining that a homeowner can now sell a home and avoid capital gains tax if he has used the home as his principal residence for only 24 of the preceding 60 months. Blackburn cautioned that there are profit limitations and slight exceptions to the rule if the house has been used as a rental during any of that time. But overall, Blackburn said, the tax law change has allowed home sellers to pocket much more money than before, clearly piquing the financial interest of speculation builders. Can't Take it With You Boyer said it seems that the big boom has also been stimulated by changes in thinking in the aftermath of the September 11, 2001 terrorist attacks. People view Kauai as safe and somewhat insulated from the ills of the world, so when "people wanted to get out of Dodge," Boyer said, they began coming here and building in larger numbers than before. Anne Barnes, communications director at KIUC and a homeowner who recently just completed her own remodeling project, said it seems that since 9/11 people are spending more time at home and have turned their attention to creating a nice nest for themselves. "I think they're thinking that you only live once and you can't take it with you," she said. "This is the life you get." Honsador Lumber branch manager Jeff Mira said that right after 9/11 the county and former Mayor Maryanne Kusaka took steps to cut a lot of the red tape involved in getting building projects off the ground. "And as soon as interest rates started dropping, residential construction skyrocketed," he said. Mira noted that there are also a number of large commercial projects happening on the island, including lots of condominiums and time share units, the Kauai judiciary complex being built by Unlimited Construction Services and assisted living quarters in Puhi being built by Shioi Construction. But with all this activity, customers often have to figuratively stand in line. "The worst part is that people are willing to wait," Mira said. "Contractors are signing contracts for 2006." North Shore custom homebuilder Bruce Cosbey of Cosbey Construction, LLC, compares the high demand for contractors to the post-hurricane years. "I call it Iniki without the trauma situation," Cosbey said. "I've been calling it that for two years and it's just getting worse, not better. "We all need 30 hours a day and eight or nine days a week. That's how extreme it seems to be." Cosbey, who only works on one project at a time, specializing in high-end homes that each typically take two years to build, said because of his particular type of work, he's somewhat insulated from the crush of demand. But he said as a general contractor, he can be left in limbo waiting if his subcontractors find themselves overbooked and unable to report to a jobsite on schedule. Indeed, one general contractor who wished to remain anonymous, said that part of the problem is that some subcontractors often don't know when to say "No." "They have always had a tendency to not say 'No' to bidding on jobs," he said. "If everybody takes their bid, there's no way they can humanly satisfy. They promise too much." The general contractor noted that some subcontractors have been exceptionally good about managing their workloads during these overwhelming years, but that those who haven't done so, create huge domino effects as one delayed job, delays the next one, throwing a long line of jobs behind schedule. "A snowball becomes an avalanche," he said. Optimism Runs High Cosbey said that despite the stress of trying to meet the needs of many people, Kauai's building boom is providing some security in an insecure world. "It's wonderful. My guys know their mortgages are going to get paid and their kids are going to be fed," he said. "I've committed to some wonderful employees and I want to make sure they've got work." Struxness of Kendall Pacific said that even though he's busy, his company still has capacity to handle more work if the right job comes along. Picking and choosing customers and projects is one of the luxuries that high demand creates. He said he likes to work on homes that are more creative in design than the norm, and with home owners who aren't fixated on cost. "It's not so much the money," he said of his ideal client. "They want a really well-built product at the end. Those are the people we like to work with." Struxness and other island contractors will likely have no problem finding their ideal clients for at least a couple more years, said Honsador's Mira. "There are no signs of yet of slowing," Mira said. "It's still going pretty hog wild." |
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Contact Information: Pamela V. Brown (808) 651-3533 cell (808) 821-1027 fax |
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