Scottsdale home permits dip, commercial sites up

Fewer new homes and condos are being built in Scottsdale, figures show, but interest in commercial projects and home remodels has continued to increase over the past few years.

The residential permit trends are consistent for a city that has already seen construction of its major master-planned communities and has shifted toward custom homes and smaller-scale infill projects.

In 2007, Scottsdale issued 1,356 construction permits for new single-family and multifamily construction, including apartments, condos and town homes.

That figure is about 600 permits less than in 2004, or a 31 percent decrease.

The annual permit figure documented in Scottsdale city quarterly growth reports shows permits have declined from 1,970 in 2004 to 1,465 in 2005, slightly up to 1,512 in 2006 before dropping again to 1,356 in 2007.

Scottsdale, with an estimated population of 241,750, is growing at about 1 percent a year.

But while new residential construction continues to decrease, a growing number of new offices and other commercial ventures - along with remodels of older homes - has pushed up total permits.

Michael Clack, the city's chief development officer, said there is an increase in home additions, new garages and roofs and other repair maintenance that require city permits.

"We're still busy, we're just busy differently now," Clack said.

Total permits have increased 33 percent since 2005. Those numbers have risen from 2,751 in 2005 to 2,968 in 2006 and 3,647 in 2007. The 2004 figure was drastically higher at 8,198, thanks to high numbers for commercial sign permits.

Rick Kidder, president of the Scottsdale Area Chamber of Commerce, said the total permit increases could be traced to strong commercial construction from 2004 through 2006. As that starts to slow, however, Kidder said there could still be a slight increase in tenant improvement permits.

"Scottsdale is pretty well insulated from the higher vacancy rates elsewhere but there are pressures on this market," Kidder said.

The city points to evidence of the overall permit trend in its latest south Scottsdale investment activity report that measures investment activity south of Chaparral Road between January 2003 and January 2008.

The city cites $3.3 billion of private and public investment, up from $3.1 million six months earlier.

It notes that over the past five years, 666 permits were issued for majoring remodeling and additions, with 6,504 permits for minor home improvements.

Permit revenue, however, is coming in less than expected this year, but is expected to stabilize in the coming years, Scottsdale chief financial officer Craig Clifford said.

Scottsdale earned $16.1 million in development fees through permits in the 2006-07 fiscal year. The city projected $16.5 million during the current fiscal year that ends June 30, but has since revised that figure to $15.5 million and even lower to $14.5 million for 2008-09.

Clifford said that's a reaction to the current economic conditions, but over the next few years, the city will expect to level off at $15 million to $15.5 million a year.

The current dip is not affecting Scottsdale as much as other fast-growing cities where new construction accounts for a higher percentage of city budgets.

"There's enough activity and it's steady," Clifford said. "And even if activity drops off a little bit it might be made up with a little higher price (of permit fees)."