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Area Commercial Construction Continues to Rise in Wake of COVID Uncertainty

There has been very little, if any, slowdown in commercial building in Huntsville and Madison throughout the COVID-19 pandemic.

While the weight of uncertainty related to the pandemic has not disappeared, commercial builders and developers continue to work through it like Marshall Space Flight Center engineers work through the challenges of the space program – always moving positively forward; always working the problem from a pragmatic standpoint; and never accepting failure as a final outcome.

According to Shane Davis, Director of Urban & Economic Development for the City of Huntsville, new construction permits, and permit inspection requests have not declined throughout the pandemic and the City continues to see strong growth in all building sectors.

“In terms of the overall environment, we continue to see multiple new projects looking at the Huntsville market as a new or expanding location,” said Davis. “While COVID has slowed the number of potential new companies and their projects, active projects are very strong and diverse in varying business sectors.

“Ongoing construction activities have been hindered by reduced workers, intermediate quarantining, and delays due to the availability in building materials. But while these conditions have slowed the overall construction pace, all ongoing commercial and industrial projects continue to move ahead with a shift in completion deadlines and openings.”

He points to the very visible and very active downtown construction happening on what seems like every block.

“City Centre is under construction with Phase II – lofts, retail, and a parking garage,” he said. “Two new public parking garages are going up at Greene and Monroe streets. Both the Curio Hotel and Hampton Inn and Suites are in the midst of construction, and the new Huntsville Hospital Tower is taking shape.

Last year, Russ Russell Commercial Real Estate set a land sales record for downtown Huntsville at $56 per square foot for the Hampton Inn and Suites project. Located on the corner of Clinton Avenue and Monroe Street, the land is prime downtown real estate across from the expanded Von Braun Center.

“It is one of the few corners that has been vacant with no building on it,” Russell said. “Out-of-town developers look at these parcels of land with fresh eyes are willing to pay a premium because they can see it developed, where sometimes local people can’t because they drive past it every day.

“I set up an ugly tent with cold beer and rare velvet Elvis artwork, and you will be surprised how it brings that vision into full view,” he said.

Mitch Coley, division Manager at Robins & Morton, said they are working on a variety of projects in the greater Huntsville area. Some of the most visible include Huntsville Hospital’s Orthopedic and Spine Tower, Redstone Federal Credit Union, 106 Jefferson, Pelham Street Park and Redstone Gateway 7100 and 8100’s new office building.

“Mid-year there was a decline in new projects and delays in projects in the planning stages as owners and developers hesitated, wanting a clearer picture of what was ahead,” said Coley. “But the industry is seeing some of these projects resuming. The good news is that those projects haven’t gone away and that’s providing strong start for next year.”

He said they are seeing a decrease in the number of new projects reported as upcoming opportunities from architect and design firms, but they believe this will manifest itself in a market-by-market and city-by-city basis. Huntsville is not likely to be as affected by what would ordinarily predict a nationwide downturn because Huntsville’s market sector is so diverse.

“Looking back at the recession of 2008, the construction industry contracted,” Coley said. “It was different from what we’re facing today because of the lack of capital during the Great Recession, but it resulted in a pent-up demand for construction.

“There was still a backlog when COVID-19 surfaced. Although some clients expressed hesitancy to proceed with projects in the very early stages of planning mid-year, we’ve seen many of them resume.”

Russell sees positive signs everywhere. From the construction of the $40 million Autograph Collection by Marriott hotel being built to replace the southern portion of the Von Braun Center parking deck; to the long-awaited downtown Constellation development, which begins Phase I construction this fall.

In addition to these large-scale projects, downtown continues to see new businesses opening up and the redevelopment of existing spaces in the core, Davis said.

“The biggest impact on new commercial projects and hospitality projects has been the pause in project financing,” Davis said. “We have dozens of projects that still have approval from both the private equity and brand/retailer sides. However, COVID-19 has caused a pause in the start of construction due to the ability to close on the financial package.

“The ability for these projects to keep the private equity and national brand approvals shows the current strength of the Huntsville market.”

Don Beck, partner in The Shopping Center Group of Alabama concurs.

“The banks are lending money and it is cheap,” said Beck, whose company specializes in retail developments. “Bankers know the Huntsville market is good because its employment base is there with federal dollars coming from Redstone Arsenal and subcontracting coming from Cummings Research Park. With the jobs there, the banks are a yes for lending.”

On the other hand, many banks are showing hesitancy toward some restaurants and hotels.

According to Joey Ceci, president of the Breland Companies, “We have several cases where regional hotel and restaurant owners are ready to move forward but in those two industries, it is almost impossible to get financing, despite their financial statements looking fine. Accessing capital is very important to companies that are expanding so this has been a deterrent.”

SouthPoint Business Park (Photo/Hollingsworth Companies)

Outside of downtown, Davis points to growth and the success of other commercial projects throughout the region.

SouthPoint Business Park, off Interstates 65 and 565 and five miles from the Mazda Toyota Manufacturing plant, broke ground on its 11th facility at the 1.9 million square-foot industrial park that is already home to six companies. The new building is the region’s largest spec industrial facility and, according to Davis, it is almost full.

SouthPoint is a component of the larger regional economic strategy, and Davis calls out regional leaders and partners for that expansion, as they continue to focus on the bigger picture and work to be successful in those areas.

“Cummings Research Park remains the location of choice for big business,” Davis said. “Several entities have plans for expansion and the city continues to invest in new and updated infrastructure as part of implementing the updated Master Plan. Even with the COVID events, projects are in the works for 2021 and we believe will be a big year for CRP.”

At MidCity, construction slowed due to COVID, but retail, hospitality, and the initial multi-family components are still on schedule to start construction this fall.

“Most of the infrastructure construction, site grading, and utility relocations are wrapping up such that the redevelopment plan can go vertical,” said Davis. “We believe 2021 will be an exciting year for MidCity as the building architecture that has been shared through the Master Plan will come to life.”

One of the worst kept secrets in Madison County is all that red clay moving around at the corner of Town Madison Boulevard and Zierdt Road.

The newest Huntsville Starbucks location and Outback Steakhouse are moving forward, while Town Madison continues to build a retail center across the street from Toyota Field. The buildings are 50 percent complete and will welcome a chef-driven Italian restaurant to its tenant line-up.

“Economic development continues to be a primary focus for our Madison team,” said Madison Mayor Paul Finley. “Our YTD sales tax is up over 10 percent from last year despite the COVID-19 situation, and we continue to see success in growing our retail sales tax base.

“Town Madison, Madison Boulevard, The Avenue Madison downtown, Midtown, the (U.S.) 72 corridor, and County Line Road have all seen growth in restaurants, retail, and groceries,” Finley aidd. “Redevelopment of Hughes Plaza, Madison Boulevard and Hughes Road all continue to give Madison an upgraded, new and positive look.”

“Retail follows rooftops,” said Beck of TSCG. “The good news is that Huntsville is still growing; we still have a housing shortage; we still have over 10,000 jobs coming into the area; and there is still a lot of demand, even pent-up retail demand.”

Beck, who has developed retail projects throughout the region, said he is positive about the future as he sees developers moving towards mixed-use projects with a housing component and perhaps an office of medical office component fitted together with traditional retail.

“We are still seeing expansion downtown and on the south part of town with the Hays Farm development,” he said. “Scottsboro, Athens and northern Madison County, Hazel Green and Meridianville are showing continuous growth.

“Athens, for instance, is getting a second Publix where the old Kmart used to be. With its proximity to the interstate and Toyota Mazda, Athens is a great commuting city for Huntsville and Madison, and it should soon see a boom as it grows together with Madison.”

He also said smaller towns such as Hartselle and Priceville are seeing growth as well because the commute time to Huntsville or Madison is workable.

“If you moved here from Atlanta or (Washington) D.C., you have an entirely different perspective on commutes,” he said. “And it is less expensive to live in those smaller towns.”

The disconnect he said is with forced reduced sales volumes. Can retailers justify the construction costs and afford the rent?

“We don’t know the answer to that yet, but at some point, business must open back up and people have to get back work,” Beck said. “There’s no way these restaurants with construction costs being where they are, can at 50 percent capacity and a limit on the hours you can sell alcohol, justify new construction costs.”

He said while rent must go down, at the same time, landlords have mortgages and they have to make mortgage payments. The good part is that developers and landlords are being creative in finding ways to make it work.

“On pre-COVID leases, landlords are working on rent deferrals or rent reductions where the tenant pays partial rent for the time being, and when things get back to normal, going back to full rent and perhaps adding a longer lease time, like an extra year on the lease.

“As long as there’s housing demand, retail will be all right, but we also don’t yet know how the Amazon effect will affect big box retail,” he said. “There are still a lot of people who want to shop in stores. Shopping is a social event just like going out to play golf or tennis. But throughout this pandemic, Amazon has filled that space and we don’t know yet how much that convenience will carry over into everyday life once things get back to normal.”

Coley too said there is still a lot of uncertainty, but his company Robins & Morton believes most people are hopeful that we will gain control over the pandemic in the not-too-distant future.

“When you think that it can be two years or more from planning to completion for a project, you can understand why a lot of active construction hasn’t slowed down,” said Coley. “You’re always building for the future, and I think that’s what we’re seeing here in Huntsville.”

Huntsville Raising the Roof with Hotel Construction

Another hotel is ready to rise in downtown Huntsville.

The city council recently unanimously approved plans to build a Hyatt House on a vacant lot at the intersection of Jefferson Street and Holmes Avenue, across from the federal courthouse building.

The city has designs on having more than 1,000 hotel rooms available downtown for conventions and other large events within walking distance of the VBC.

“We’re getting there,’’ said Shane Davis, city director for urban and economic. “We need to get to about 1,500 rooms. Conferences need available rooms. The Monday through Friday traffic is already reserving existing rooms.’’

Southaven Associates LLC of Birmingham will build the Hyatt, which will add 145 rooms to the city’s goal. NAI Chase Commercial is the development coordinator and Visionquest Capital is the capital and financing partner for the $35 million project.

“Hyatt is one of the most widely recognized brands in the world,” Charlie Grelier Jr., president of NAI Chase Commercial. “We are thrilled to be part of this exciting new downtown development. The hotel is expected to become a top choice for business and leisure travelers due to its ideal location in the heart of the Entertainment District.”

The nine-story hotel will be at the corner of Jefferson Street and Holmes Avenue and will include a full-service restaurant, meeting areas and a rooftop bar.

The restaurant space will be at the lobby level in an open setting with access to a courtyard connecting the restaurant and hotel to the heart of the entertainment district with direct walkable access to additional retail, restaurants and pubs along with a newly constructed public parking deck,” said Mark Elrod Sr., NAI Chase vice president of retail.

Construction is set to begin Jan. 1 with completion date set for Dec. 31, 2021. Davis said construction could be shortened by five months if the weather cooperates.

The city continues to add to not only it’s hotel portfolio downtown but various other businesses such as restaurants. The square and city skyline hardly resemble what they looked like just a few years ago as building in the area continues.

The Hyatt will join other new hotels in downtown such as the AC Hotel that opened this year at the site that once housed the Huntsville Hilton.

Davis said city administrators aren’t fazed by talk from national economists warning a recession might be looming.

“On a national scale there is talk of a small recession,” he said. “(Mayor Tommy Battle) said it best when we recently went for a bond rating. The mayor said there might be a small recession, but we’re not going to participate.”

Davis’s comment was echoed by the financial backers.

“Huntsville is the perfect emerging southeastern market for our capital investment and growth,” said Michael Hanks, founder and managing partner of Vision Quest Capital. “We look forward to investing in its future.”

The city will also purchase land at the hotel site for some $600,000. It will be used to expand the Washington Park area to provide what Davis called a “gathering spot.”

The city will also pay for infrastructure and street improvements at the site that Davis said were budgeted prior to the introduction of the hotel project at an estimated cost of $750,000 to $1 million.

The city will also lease the Hyatt up to 205 parking spaces at the Clinton Avenue garage and a planned garage on Greene Street.

While Residents are Goin’ ‘Round Huntsville Mountain, Businesses are Assessing the Fallout

Huntsville residents are used to going around things.

Most people have skirted around Redstone Arsenal for 65 years to get where they are going.

And, after all, when you live in a valley, there are going to be some mountains to traverse, but the priority $18 million Cecil Ashburn Drive road improvement project has been challenging for a lot of people since it was closed in January for a widening project.

Cecil Ashburn connects commuters from east Huntsville, Marshall and Jackson counties to downtown Huntsville, Redstone Arsenal, Cummings Research Park and beyond.

While the through pass is closed, there are three routes connecting Big Cove/Hampton Cove to Huntsville and destinations to the west and all three require going around Huntsville. U.S. 431 via Governors Drive; South Memorial Parkway via Hobbs Island Road; and U.S. 72 via Eastern Bypass/Rock Cut Road are all viable, if not the shortest, routes.

Construction on Cecil Ashburn Drive is progressing. (Photo by City of Huntsville)

Almost since it opened in 2000, the winding two-lane shortcut through Huntsville Mountain from Jones Valley to Hampton Cove has been over-capacity. More than 17,000 vehicles travel it every day and, in the past 11 years, there have been 782 vehicle wrecks and 11 fatalities recorded along that 3.4-mile stretch of road.

The City of Huntsville knew it was going to be a bitter pill, but officials tried to alleviate as much pain as possible to improve traffic flow, increase capacity, and improve safety. The project will widen the road from two to four lanes between Old Big Cove Road and Four Mile Post Road, and safety improvements include eight-foot shoulders along each side of the roadway.

“We changed the scope of the project to save time and money and to minimize the impact on our residents and businesses,” said Huntsville Mayor Tommy Battle.

The Effects on Local Business

“The closure occurred just after the first of the year and, for us in the health and exercise business, January and February are our busiest months,” said Kim Edmunds, manager of Hot Yoga of Huntsville, at 326 Sutton Road on the east side of the construction. “We were outwardly worried people would have difficulty getting here for their appointments, but we have been surprised it is not any worse than it is.”

She said there has been a fall-off in attendance at the popular late-afternoon class, the one that attracts people on their way home from work between 4 and 6 p.m.

“We also see what we believe is a hesitation from our short term and trial members to make a long-term commitment while travel is limited,” she said. “We believe this will change when at least a couple of lanes are reopened this fall.”

Carl Stanfield, interim store manager for Alabama Outdoors, said during the week foot traffic to his store at 2030 Cecil Ashburn Drive in Jones Valley, seems to have slowed down, but weekends are still very busy.

“Checking with our corporate headquarters, we have seen a 25 percent drop in headcounts since the first of the year, so we think there may be some negative effects from the construction,” he said. “But the closure came the second week of January just as the holidays came to an end and school started back. That could also account for a natural drop-off after the holidays.”

Tropical Smoothie Café manager Tyisha Burt said her business at 2075 Cecil Ashburn Drive opened in September, so there isn’t any history to compare.

“We have been very busy the past few months I think because of the warmer weather,” she said. “But we believe, once the pass is opened again, things will be even better than they are now.”

Donna Denson, patient concierge at Austin Physical Therapy, drives in to the Jones Valley location from Scottsboro every day.

“The day before the road closed, I decided to try the Green Mountain route using Old Big Cove Road,” she said. “But it was foggy that day and it was too unfamiliar, so I started taking Hobbs Island Road to Bailey Cove. It is an hour drive, but not a bad drive at all.

“It takes a little extra time, but they say 17,000 cars travel Cecil Ashburn every day. That means a lot of people are taking some extra time and I see it as only a temporary lapse.

Denson said there has been a “significant” in appointments between 4 and 6 p.m. and 7 a.m..

“Lucky for us though, we have another location at the foot of Monte Sano when you come on Governors Drive,” she said. “So, rather than losing patients, they seem to just be booking the other location.”

Business seems to be more negatively affected on the Jones Valley side than the Hampton Cove side and the restaurant business seems to be the most negatively affected.

Heavy equipment breaks through the rocks to create extra lanes on Cecil Ashburn Drive. (Photo by City of Huntsville)

Moe’s Barbecue closed its doors due to a lack of business, according to neighboring tenants, but will be opening a location downtown.

Ben Patterson, manager of the Jones Valley Mellow Mushroom, said there is no escaping the reality that dinner has fallen off since the closing. But his customers are so loyal, they have expressed their commitment to making it in whenever they can.

“It was sort of like ripping off the Band-aid,” he said. “We had hoped they would not have to close down Cecil Ashburn completely, but we also know that the improvements will lead to a smoother, safer thoroughfare that will hopefully, when it opens again in October, lead to more traffic coming across from Hampton Cove.”

For Anaheim Chili, the lunch crowd still shows up but the dinner crowd has dwindled.

“People are certainly not comin’ ‘round the mountain’ as far as we can tell,” said manager Scott Harriman. “We have definitely seen a fall-off in dinner customers, but lunch is pretty steady.

“Where we see the biggest drop-off is Monday through Wednesday for dinner. A lot of people stop to eat on their way home or to grab take out, but they are not doing that right now, probably because it takes people off their route and it takes longer to get home.”

Tough Decisions

While no one likes to hear that the main access from one side of the mountain to the other side of the mountain is closing down for 10 months, the City of Huntsville and the contractor, Carcel & G Construction, have taken steps to ease some of the pain.

Originally, the project came in at $25 million with a timeline of nearly three years. The proposal had a caveat – one lane would stay open open during peak traffic times, something that sounded good to retailers and businesses in Jones Valley and Hampton Cove.

However, city planners said that plan would have been a costly, 32-month ordeal that posed additional safety concerns. City engineers came back with a new schedule and an adjusted $18 million budget they felt best addressed the needs and concerns of the community.

Crews work on the drainage system for the Cecil Ashburn Drive project. (Photo by City of Huntsville)

Those adjustments called for a complete shutdown of the roadway for 10 months beginning in January. In order to keep the project on track, the contractor has been offered financial performance bonuses of up to $2 million for each day work is ahead of schedule or meets the abbreviated construction timeline. Alternately, the contractor will be penalized up to $2 million for scheduled delays.

They are also incentivized to make sure at least two lanes of traffic will reopen within the first 10-month period, which takes us into October.

“We’re saving taxpayers millions of dollars and cutting two years of public pain in the construction process,” said Shane Davis, the city’s director of economic and urban development.

Currently …

Clearing operations are complete and the highly unpopular blasting operations that have disturbed residents of the area are approximately 80 percent complete. The storm drainage installation is close to 70 percent complete. The contractor is coordinating with utility companies to begin relocation efforts.

Huntsville Utilities has completed the electrical relocation and others are scheduled to begin their work. The contractor will also begin installing water lines soon to complete the utility work.

They will begin to construct the roadway subgrade shortly thereafter.

“This schedule provides the least disruption course and gets motorists safely back on the road before the 2019 holiday season,” Battle said.

Aerial photo provides and overview of the construction work on Cecil Ashburn Drive. (Photo by EQB)