Sunday, February 17, 2008
Blacksburg "insulated, but not immune" to recession
Although Blacksburg is "insulated" from a recession, some projects around town have experienced difficulties.
Matt Gentry | The Roanoke Times
Constuction of Smith's Landing is under way at the intersection of Prices Fork and Plantation roads in Blacksburg. Bruce Smith — former Hokie and NFL player, now a Virginia Beach businessman — is developing the $50 million retail and residential project and said the tightening of credit slowed his project slightly in the beginning phases.
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Some economists predict a recession is coming. Others say it's already here. In Blacksburg -- where at least six major development projects are in planning or under construction -- the question is, does it matter?
The common perception among officials and civic leaders is that Virginia's largest town "is insulated, but not immune" to financial crises, as was recently explained by town finance director Susan Kaiser.
To some extent, business leaders agree, although some projects around town have experienced difficulties.
According to Mike Niemira, chief economist with the International Council of Shopping Centers in New York, de facto recession has been under way for several months already, and while "housing is the catalyst ... retail is the recipient of that downturn," Niemira said.
The crashing of the housing markets in some highly speculative areas such as Florida has both tightened credit restrictions and affected retail purchasing power. The retail fallout started in furniture sales and home electronics and has since affected the buying and selling of commercial property, Niemira said.
Bruce Smith -- former Hokie and NFL player, now Virginia Beach businessman -- is developing the $50 million retail and residential project called Smith's Landing. He said the tightening of credit slowed his project slightly in the beginning phases.
"Traditionally banks and other lenders have been very aggressive," Smith said. "But with the recession, they've been reluctant to lend."
When they do lend, investors want to see more collateral than in the past, Smith added.
The project -- located adjacent to the Tech campus on the site of the old Red Lion Inn -- is now well under way, however, and Smith said he expects to begin opening some of the buildings come mid-August.
On the south end of town, Fairmount Properties of Ohio is grading about 36 acres of its 40-acre retail project known as First & Main, and the company is close to qualifying for building permits for the first, and largest, phase of the retail center.
Fairmount Principal Adam Fishman could not be reached for comment on the effects of recession on First & Main, but he has already announced several tenants. Jim Cowan, the company's lawyer, has said recently that phase one is scheduled to open in the fall.
In the face of recession, housing prices in Blacksburg may have lowered slightly and contingency contracts might fall through more often, but the town's housing market for now seems stable, developers say.
Sales of homes in the downtown Fiddler's Green subdivision owned by Jeanne Stosser are slower than they have been in the past, but still steady, the Montgomery County developer said.
Blacksburg's housing prices are somewhat inflated relative to surrounding areas, "but there's no bubble here," said Bill Ellenbogen, a veteran commercial and residential developer.
And the area certainly has not seen the degree of speculation on residential properties that places such as Florida have suffered from, Ellenbogen added.
Many homeowners and investors in those overheated markets, who are now facing foreclosure, bought at the apex of the boom. As the market cools, they find themselves owing more on their mortgages than their properties are worth to potential buyers.
But according to Stosser, smart borrowers and wise lenders can still do good business in the current economic climate.
"It's still a great time to buy a house," Stosser said, because interest rates on most mortgages remain at lows not seen since the post-WWII housing boom.
Two of the largest planned residential projects -- an $80 million sports condominium hotel project called The Colosseum on South Main Street and a 148-bedroom gated community called The Legends of Blacksburg proposed for land adjacent to Tech's Lane Stadium -- have yet to break ground. Out-of-town representatives for the projects could not be reached for comment.
In general, during recessions projects already under construction will proceed, Niemira of the International Council of Shopping Centers said. But projects that haven't begun when the economy contracts may be delayed for a while.
The good news, according to Niemira, is that "recessions tend to be short."
