A lot of things have slowed down in the time of coronavirus. In Grand Forks, construction doesn’t seem to be one of them — at least, not yet.
It’s easy to get a sense of it just driving around downtown. The new Hugo’s supermarket is underway, as is construction on new retail, office and apartment space at The Argyle at the corner of DeMers and Fourth. Hal Gershman, president and board chairman for Happy Harry’s chain of liquor stores, owns a building between them that will soon host a new restaurant. At the city’s business park, both Midcontinent Communications and Pro Transport embarked on construction earlier this year.
And it’s not just marquee projects. City records show that, through August, the total number of building permits issued in Grand Forks is much higher than anyone may have predicted in March, sitting at 1,187, nearly matching the January-to-August five-year average of 1,198. That’s a number that covers a range of projects — from small home additions to giant apartments — but together they help tell a story. The 30 commercial building permits issued so far this year, for example, have already outstripped all years since at least 2010.
So what gives?
There are a few things happening at once, local leaders and economic experts say. Perhaps the most obvious is that many of the city’s biggest projects take months or years to conceive, finance and blueprint before shovels get involved. The six months of pandemic really didn’t stand to slow them down — at least, not yet.
“It appears like nothing has really slowed down because what you're seeing is what was already happening before coronavirus. There's been a slowdown, but it varies,” said Lonnie Laffen, chairman of the board for JLG Architects, which owns the Argyle lot and will be tenants in the building.
The other is that borrowing rates are falling. As of late last month, federal statistics clocked the average 30-year fixed-rate mortgage at 2.87%, marking a historic, five-decade low. That’s good news for home builders and buyers, and the market seems to be responding. The number of this year’s Grand Forks permits for single-family homes currently sit at 71, comparing quite nicely to the three-year average — for the full calendar year — of 93.
“Even despite the pandemic, we anticipate having a decent year in housing construction,” City Administrator Todd Feland said.
Not every project has been so lucky. Altru Health System’s new flagship hospital saw construction paused earlier this year as the company struggled to right its economic ship amid coronavirus. Laffen, who also chairs Altru’s board, vows that construction will continue, though he said he couldn’t yet offer a date for it to resume.
And of course, the proverbial party can only last for so long. In the case of large-scale projects especially, there’s concern that, at some point, new construction can’t simply keep going while the broader economy and the labor market suffers. According to state statistics, Grand Forks County’s pre-pandemic unemployment claims read just a few dozen cases a week in January or February; now it regularly cracks 100. Feland has his eye on January — the date by which next year’s summer construction season ought to be shaping up.
"We think things are going well now, but everyone's (wondering), 'OK, what happens six months from now?'" Feland said.
That loose, midwinter deadline hangs over more than just big projects and the housing market. A portion of the city’s sales tax appears to have been buoyed this year by big retail chains. CNBC reported last month that Home Depot’s second-quarter sales surged 23%, apparently as Americans in quarantine turned to their tool chests and home improvement projects to pass the time.
It’s unclear how much of that has supported the city’s sales tax revenue, which has held in a healthy range through at least midsummer, and as of July was 5.43% ahead of the summer before. UND economist David Flynn has previously warned that one-time consumer behaviors like home improvement projects might support an oversized share of that revenue. The problem, of course, is that homeowners tiring of housework — or otherwise feeling the financial strain of coronavirus — might pull back and bring sales tax revenues down.
But Mark Schill, a consultant with Grand Forks’ Praxis Strategy Group, puts it optimistically, if a bit bluntly: Grand Forks, hit with the Flood of 1997, downsizing at the Air Force Base and UND and the departure of a slew of big retail names, already has a lot of economic pain priced into the market.
Many of the jobs that remain in Grand Forks, he argued, are less subject to the ongoing economic damage as a result. He gave the example of cities with stronger ties to the aerospace industry and airlines, or still have more of its legacy big-box retailers to lose. Those places could have far more pain ahead.
"I would say that this community remained relatively resilient. No, it hasn't seen skyrocketing growth in places that we've seen in Fargo or Sioux Falls,” he said. “But considering the external factors that are raining down, I'd argue that we're in a relatively good place."