Atlanta home builders say ‘Hello, Columbus’

Indeed, in the topsy-turvy world of post-boom Atlanta, many home builders, developers and bankers have fled the metro area’s moribund scene — the worst hit in the state — and scattered across Georgia’s usually slower-growing areas, looking for better pickings. In the process, they’ve ruffled some feathers, forcing some local builders to adopt new techniques or risk being underpriced.

The Columbus area, including the Fort Mitchell neighborhoods about 10 miles to the south, has become one of the biggest magnets for Atlanta’s home-building industry. Nearly a dozen developers or home builders have cloned their suburban Atlanta subdivisions around Fort Benning in the last two years. They’re also building near LaGrange, about 40 miles north of Columbus.

The reason: Columbus has become something of a economic hot spot this year, and even better days are expected.

Although the area’s unemployment rate hit 9.8 percent in July, rivaling Atlanta’s 10.7 percent jobless rate, employers have announced plans to add more than 20,000 jobs here in the next few years. Among the major additions: a big expansion by the Army at Fort Benning and the expected opening of a Kia auto manufacturing plant this year in nearby West Point. Insurer Aflac and ATM-maker NCR have also announced expansions.

“It’s like a small city moving in here,” said Craig Greenhaw, president of the Greater Columbus Home Builders Association. “We’re anticipating real good things to happen in this market,” he said, “but it’s a little early yet.”

A ‘means of survival’

For Atlanta-area developers like Hugh Morton, though, the time to build is now.

“I’m down here trying to generate some cash so I can pay my debt in Atlanta,” said Morton, president and owner of Peachtree Homes in Jonesboro.

Peachtree is building about a dozen well-appointed homes in Fort Mitchell, which gets its name from a frontier fort built by the Georgia militia in the early 1800s. The new homes are expected to house officers, sergeants and civilians transferring to Fort Benning.

Morton says his business wouldn’t have survived if he had kept building on the south side of metro Atlanta. He’s getting profit margins in Columbus similar to those he got in the good old days before the bubble burst, which are helping offset losses on homes he built in the Atlanta market.

“We went for eight months selling nothing,” said Morton. In Fort Mitchell, “we’re going to do well. It’s a market like we had in Atlanta two or three years ago.”

Well, not quite.

Even in its current state, Atlanta’s housing market is about seven times bigger than the Columbus area’s, as measured by year-to-date building permits.

But metro Atlanta also accounts for two-thirds of the 36,300 construction jobs lost in the state over the past year, according to the Georgia Department of Labor. And trends don’t point to better times soon. So far this year, building permits in metro Atlanta are down 75 percent from 2008, which was also a very poor year.

By contrast, the deep recession hasn’t hit as hard in Georgia cities such as Columbus, Augusta, Warner Robins and Hinesville/Fort Stewart, which have benefited from heavier military spending by the federal government or other localized economic stimuli.

In Columbus, building permits are down a relatively gentle 10 percent this year, according to HousingEconomics.com.

Atlanta builders have hit the road as “mostly a means of absolute survival,” said Kurt Cannon, owner of Rabun Builders and president of the Home Builders Association of Georgia. He said the state has lost 197,000 construction jobs since the real estate market crashed in 2006 and 2007.

He often competes these days with Atlanta contractors hungrily bidding for projects in north Georgia’s mountains. “They’ve got to feed their families, too.”

More than short-term?

Some Atlanta-area developers and lenders say the relatively vibrant Columbus market promises more than mere survival.

Mark Griswell, chief executive of Grand Lifestyle Development in Stockbridge, plans to put 1,400 homes and retail shops in a mixed-use development on 800 acres of farmland in Fort Mitchell. Morton is building homes in the project’s high-end section, called the Registry at Westgate.

Today, roughly 350 homes line the streets at the Villages at Westgate, the Registry and Griswell’s other developments near Fort Mitchell. He said military families, retirees and locals occupy about 80 percent of the completed homes.

“This area is our main focus,” said Griswell, who began pulling out of the then-overheated residential market in Henry and Clayton counties in 2006.

Rick Duncan, chief lending officer at the Bank of Georgia, said the Peachtree City-based institution has loaned about $15 million to Griswell, Morton and other home builders working on the Westgate project. He said it is now the bank’s largest group of loans — and one of its best-performing.

“What is going on at Fort Benning is creating a totally different situation as in Atlanta. They’re growing here as opposed to an oversupply in Atlanta,” said Duncan, a co-founder and board director at Bank of Georgia.

Several other builders from McDonough, Villa Rica, Senoia, Newnan and other Atlanta suburbs have built hundreds of houses in dozens of projects in the LaGrange area, Columbus, nearby Phenix City, Ala., or the small towns near Fort Benning’s entry gates.

Senoia-based Jeff Lindsey Communities has about a dozen subdivisions in various stages — from on paper to sold out — scattered from Fort Benning to LaGrange.

“In these markets, it’s going fabulous,” said marketing director Linda May.

Making an impact

The Westgate development looks like a suburban Atlanta subdivision plopped down in cotton fields near a century-old backcountry church. The semi-rural setting appealed to Randi Warren and her husband, an Army mechanic who was transferred to Fort Benning from Fort Campbell, Ky.

After house-hunting in Columbus and Phenix City, they bought a four-bedroom home in Westgate in June. The house is “just nicer,” she said, and it’s close to the Fort Benning entry gate. “We wanted to be in a nice, quiet area,” she said.

The Warrens’ two-story, 1,885-square-foot home also embodies something of a revolution that Atlanta’s builders have wrought in the Columbus area.

The new arrivals sent shock waves through Columbus’ tight-knit home-building business, hitting the local market with big two-story homes that forced some Columbus builders to tear up their old business blueprints. The bigger homes cost less per square foot than the single-story ranch homes that Columbus builders favored.

Some builders fear Atlanta developers are also overestimating the likely demand for new homes and could replicate the housing glut that helped ravage the Atlanta industry.

“I hear another 500 or 600 [homes] are in the pipeline” in Phenix City and Fort Mitchell, said Dave Erickson, president and owner of Grayhawk Homes, one of Columbus’ largest developer/home builders. “If they keep coming from Atlanta, they’re going to lose their [shirts],” he predicted.

Back to Atlanta?

But in the meantime, Erickson said, the lower-cost Atlanta builders have toppled some Columbus-based builders.

“They’ve elbowed the little guys to the curb,” said Erickson. “Once these guys showed up, the market stalled real bad,” he said, partly because local builders relied almost exclusively on single-story homes in relatively small developments, which kept their costs relatively high.

“A big player in the Columbus market did maybe 50 homes a year,” he said. But in 2007, the Atlanta builders introduced industrial-scale subdivisions filled with two-story designs, undercutting local builders’ costs by 25 percent to 30 percent, said Erickson.

After sales of his own homes stalled, “I took 70 percent of my business model and threw it out,” said Erickson. He switched to the two-story designs, allowing him to offer bigger homes with more amenities at a lower cost per square foot. He expects to sell about 150 homes this year, down from 250 at the market’s peak in 2006.

The gold rush to Columbus “is a little bit overblown,” said Erickson.

His town, he said, has always been “a good, steady, dependable market.” Once the big city recovers, he said, “I personally believe the guys in Atlanta will go back to focusing on Atlanta.”

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How we got the story

The Atlanta Journal-Constitution visited subdivisions and homes being built by Atlanta-area developers and home builders in Fort Mitchell, Ala., and interviewed lenders, developers and others involved in the home-building industry in metro Atlanta, Columbus and north Georgia.

Statistics on construction permits and construction jobs were obtained from the National Association of Home Builders’ Web site, HousingEconomics.com, and the Associated General Contractors of America at www.agc.org.