Real Estate: Mixed signals in Riverhead

02/22/2014 8:00 AM |

Workers with Shirk Construction of Pennslyvania put up trusses on the addition to the Long Island Cauliflower building on Marcy Avenue in Polish Town.

Last year was a mixed bag for construction in Riverhead: new home-building in town reached a more than 10-year low in 2013, according to permits filed in town hall. Several large-scale commercial build-outs were started, however, and permits issued to expand existing premises were on the rise. 

The number of building permits issued for new single-family residential structures dropped from 34 in 2012 to 25 in 2013, according to numbers from the town’s building department — a far cry from the town’s most recent peak of more than 380 residential permits issued in 2002.

Single-family permits fell by more than half following the real estate crash of 2007-08 and rebounded slightly in following years. In recent years, however, the residential market has dropped once again, as builders seem reluctant to invest until what’s already built has been sold.

“Until the inventory is sold out, I don’t think anyone is going to take the risk of building new residential development,” said attorney Peter Danowski, who represents a number of builders in Riverhead Town.

“There’s an inventory of existing homes for sale and developments that have been fully approved and not totally built out,” he said.

Last year, Riverhead Town changed the way it compiled data about building permits, breaking the totals out into more categories. Previously, permits issued for new construction were simply grouped as either residential or commercial. Permits for residential construction are now broken out to differentiate single-family, manufactured and modular homes.

Even using the old approach, however, it’s clear that the number of new home starts, considered a leading economic indicator, is nowhere near what it was in the early 2000s.

In 2001, the town issued 217 new residential construction permits. In 2002, the number of new permits peaked at 381, then fell back to 271 in 2003, 184 in 2004, 190 in 2005, 119 in 2006 and 124 in 2007. During this period, the real estate crash sent permit numbers plummeting to only 59 permits in 2008, followed by 71 in 2009, 81 in 2010 and 58 in 2011, according to town statistics.

Between 2012 and 2013, permits for new manufactured homes dropped from 14 to 11, while modular home permits increased from five to 10. Added to the single-family home numbers, this yields residential permit totals of 53 for 2012 and 46 for 2013.

Only four condominium units were issued permits last year, compared to 21 in 2012 — though that category wouldn’t fall into the single-family home category, which some say is on its way up on the wider scale. In fact, nationwide numbers, according to U.S. census data, show building permits issued in 2013 were up more than 17 percent over 2012.

Though that boost hasn’t quite translated to Long Island.

“Countywide, there’s been a slight uptick in residential construction in 2013, but not by much,” said Mitch Pally, executive director of the Long Island Builders Institute.

“We’re hoping that 2014 will be a better year than 2013, which shouldn’t be difficult,” Mr. Pally said.

Officials said that in the commercial sector, officials said, nine commercial buildings were issued building permits last year, compared to four in 2012. Commercial permits are now subdivided into many more categories, including warehouse, office and building shell.

These new projects include the new Walmart and the other buildings on the same property, the Costco warehouse, the Costco gas station, the Allied Building Products warehouse off Edwards Avenue, two office buildings in the Northville Commerce Park, East End Eye Associates on East Main Street and the Saber-Riverhead shopping center, which houses Dick’s Sporting Goods and Buffalo Wild Wings.

Riverhead Supervisor Sean Walter said the new construction on Route 58 in the past year or two will contribute between $500,000 and $750,000 in new taxes to the town — and even more to the Riverhead School District.

“If we get $500,000, that means the school gets about $1.5 million,” Mr. Walter said.

He also said he’s confident the economy will rebound.

“I think it’s coming along,” Mr. Walter said. “It’s not any great rebound, but it’s coming along.”

While the building permit stats show new construction declining, alterations and additions to existing structures were more active last year than in 2012.

Permits for additions to residences rose from 55 to 61, accessory structures on homes increases from 23 to 28, in-ground swimming pools increased from 37 to 48, alterations from residences increased from 91 to 132, solar panel permits increased from 21 to 56, and renewals of previously issued residential permits that had expired increased from 58 to 81.

On the commercial side, permits for commercial accessory structures increased from 14 to 34 and commercial alterations permits rose from 80 to 117.

Mr. Danowski, who has represented some large commercial developments, including the Shops at Riverhead/Costco shopping center, feels commercial development is important for the town’s tax base.

“When I have clients wanting to build residential homes, the criticism is that you’re going to put kids in the school system and, therefore, it’s a net loss for the taxpayers, according to the opposition,” he said.

“But when you do commercial, they say there’s going to be traffic problems and the area is not going to be what it used to be. But you need commercial development and if you didn’t have it, the tax bills would be that much higher.”

Town records indicate that commercial properties along Route 58 will pay about $14 million in taxes this year.

tgannon@timesreview.com