Building Out

By Hannah Wallace February 28, 2007

With the soft residential real estate market driving big players such as the St. Joe Company out of building altogether (although it's still doing land development, including its SevenShores high-rise project in northwest Bradenton), it's no surprise that some well-known area homebuilders are diversifying into commercial building-a sector that is still showing steady growth.

That's a trend the Florida Home Builders Association is encouraging. Last year the trade association formed a Commercial Builders Council to provide homebuilders with information and support on getting into the commercial market.

Both John Cannon Homes and Bruce Williams Homes have launched commercial divisions over the last few months, after watching residential volume drop by about 20 percent in 2006.

"We're trying to do what we wanted to do four years ago, but couldn't devote our resources to," says CEO John Cannon, whose company specializes in $1-million-and-up luxury homes from Sarasota to Hillsborough counties. "With a little bit of a slowdown, the time is right."

Bruce Williams Homes' CEO, Britt Williams, made the same calculation when residential revenues dropped from $101 million in 2005 to $83 million in 2006. He's expecting to do half that in 2007. Williams' homes range from $200,000 to $1 million, one of the hardest hit market segments.

In January, Williams opened BW General Contractors with six employees; three are executives splitting time between the residential and commercial divisions. "It's always been part of our strategic plan," says Williams. "The timing was right with the market."

Both companies have developed strong reputations on the residential side, and the Home Builders Association says that's key to giving them a leg up on marketing their commercial divisions.

"We have so many people we build houses for who need an office," Cannon says. A homebuyer who is also planning a restaurant will be Cannon's first commercial client. He expects to do about $10 million in commercial deals in 2007, including a few offices.

More than just the soft market drove the decision, both executives say. "It's not just the economy, it is places to build," Cannon says. "There's not enough that's semi-affordable."

The trend toward mixed-use developments-such as Lakewood Ranch and Williams' Crosscreek in Parrish, which will have 1,050 homes with a 100,000-square-foot commercial town center--was also a factor. It makes economic sense to have the expertise to handle both homes and offices.

"A lot of residential [development] in the future will have a mixed-use component," says Cannon, who recently opened a mammoth, 58,000-square-foot company headquarters in Lakewood Ranch. "We're partitioned to take advantage of that."

When planning Crosscreek, which is the final approval stage, Williams was going to hire a commercial builder to construct the clubhouse, but has instead decided to use his new company.

"We're going to start there and see what comes our way," says Williams, who expects to contract for $6 million in commercial this year. "One of the things we see is being able to leverage the market as a green builder." It's an expertise Williams gained building residences in Lakewood Ranch, where it is mandated.

To a lay person, constructing an office may not be so different than a home, but it is nuanced enough that both companies had to hire people with strong governmental and commercial building experience as they've cut back staff on the residential side.

"Our biggest challenge was getting our ducks in a row with our marketing," Williams says.

And residential building will still be the dominant focus of their businesses, both men say. "It's not a matter of substituting, it's adding something to what we're doing," Cannon says. "Even though there's a little bit of a slowdown, we're still busy."

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