Nashville almost hit an all-time record in the value of building permits issued in the last fiscal year, but the total number of permits actually went down.
It’s a strange factoid that the Nashville Business Journal's senior reporter Adam Sichko wrote about last week, at the close of Metro Nashville's fiscal year. We talked to Adam about what these numbers mean.
In your article, you point out that the number of permits actually fell by 900 year over year. But the total value, $3.6 billion, was higher. Does that essentially mean just fewer, bigger projects?
Adam Sichko: I think, in effect, yes. Land costs continue to rise. Construction costs — both the materials for the building and the skilled labor to build those buildings — those numbers continue to go up, which as much as anything is driving the value of the building permit itself.
Do you think the business community is still concerned that we're about to hit the top of this market?
AS: What we've seen right now is that a lot of local banks are much more cautious about providing loans for new construction projects. And yet, there is a remarkable amount of money that is swimming around the region right now — all of these newcomer investors who are very eager to put their money to work. And we've seen some out of state banks who are eagerly pouring their own money into the market. So every time I think we get to cruising altitude, somebody else from out of town shows up with money to burn, and so it means that we're greenlighting yet another project.
The big question surrounding the building boom is how we keep seeing all of this growth but then the city runs into budget issues this year. What do you see as the root of that problem?
AS: Incentives are surely part of that equation. There [also] were a lot of big public works projects — Music City Center convention hall comes to mind, or the Nashville Sounds ballpark in Germantown — where some of those loans that the city took out, … the city is starting to make payments on those.
It has been a confounding scenario right on the face of it. It seems [like] two ideas that are totally in conflict with each other.