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Surprising trends in O’Fallon building permits

At the Aug. 8 City Council workshop, O’Fallon economic development director Patrick McKeehan, planning director David Woods, and St. Charles County community development director Mike Hurlbert briefed the council about five-year trends in building permits.

Overall, the trend in commercial building permits is down in the city and the county, and the trend in multi-family permits is up.

Hurlbert forecasted that population in the county will increase by 75,000 by 2030.  In general, he expects to see 3% growth in single-family residential building permits, and even higher growth in multi-family permits but noted that the county still needs more affordable housing. He summarized commercial building permits as declining from 59 [$500 million] in 2018 to just 11 [$50 million] through June 2019 and said something is going on. He noted that the county is looking at this.

Mayor Bill Hennessy asked “if the cost of land is a factor in the decline.” Hurlbert said it is. He clarified that St. Charles County used to have an advantage with lower cost land than St. Louis County, but that “no longer is the case because those land costs now are about equal.”

Council member Rose Mack [Ward 2] commented that she sees “Warren County and Lincoln County as O’Fallon’s and St. Charles County’s competition, due to their having lower cost land and less regulation cost.”

Hurlbert agreed and said that “62% of St. Charles County residents leave the county to go to work.”

Council member Dr. Jim Ottomeyer [Ward 4] added that “mall decline and online sales combine to reduce local retail,” presenting another problem for the county and local municipalities.

Council member Dale Kling [Ward 3] said he is just now seeing more demand for rental properties.

McKeehan put forth the need to preserve and protect O’Fallon’s remaining undeveloped land in the city as commercial property and to keep that zoning. He said the current pipeline for commercial development in the city is thin, with not much on the horizon, so his economic development department is focusing on Streets of Caledonia and similar properties where prepared sites can be ready quickly when a developer applies. He said the department is “getting leads” on a regular basis, but “don’t have any place to put them.”

McKeehan pointed out that St. Peters had 20 commercial developments in 2018 [mainly businesses moving from malls to a strip area north of I-70)] but that number is down to two so far in 2019. He added that Wentzville is about ready to bring 140,000 square feet of retail space online but that could be just moving businesses around as happened in St. Peters.  The threat, he cautioned, is that, with 140,000 square feet sitting available in Wentzville, businesses might find it easier to go there than find space in O’Fallon.

Wrapping up, McKeehan mentioned that interest in medical marijuana facilities is growing and that potential operators of cultivation sites, production facilities and dispensaries are contacting his department with increasing frequency. That includes interest in existing building locations and new construction. He said the city will need commercial land for those uses.

Woods then provided a handout with graphs depicting O’Fallon commercial building permits growing from four in 2015 to 20 in 2018, but down to just four again so far in 2019. He explained a bit of good news that commercial building permit cost is based on construction cost, so that while the number of permits is down so far in 2019, the cost of commercial construction is up from $28.7 million in 2018 to $47 million so far in 2019.

Woods also pointed out that while single-family detached home permits are projected to be about 300, the same as in 2018, single-family attached home permits are down to zero so far in 2019. Multi-family [apartment] permits are up from one in 2018 to 13 in 2019.

Woods commented that there currently is a lot of pressure to build multi-family residential on commercial land and suggested that the movement toward R-1 PUDs provides developers with more flexibility to mix the types of dwellings offered in O’Fallon.

 

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