CHARLOTTE – Economics professors often use the pie analogy when explaining the concept of markets.
You’ve heard it. The more competition in an individual market, the smaller the slice of pie each competitor is able to take. But Isaac Lidsky, CEO of Orlando, Fla.-based ODC Construction, said those principles may not be governing the Charlotte homebuilding market.
“We’re not talking dividing slices of the same pie,” he said of his company’s foray into the Charlotte market. “This pie is expanding and we expect it to continue doing so.”
So great are Lidsky’s expectations for the short-term future of Charlotte’s homebuilding market that he expanded his company and this month opened a Charlotte office of ODC Construction, just the company’s second office outside its home state.
And ODC, which calls itself the biggest shell builder in Florida, is wasting no time in trying to entrench itself in Charlotte. Lidsky said the company is deep into negotiations with production homebuilders that work in the city and he expects to start working in the area within the next month.
ODC is a construction services company that builds shells of single-family homes, town homes and smaller apartment buildings.
Lidsky wouldn’t specify the homebuilders with which ODC is negotiating in Charlotte, but said in Florida the company has done work for M/I Homes, DR Horton, Pulte Homes and Meritage, among others. Each of those homebuilders has a presence in the Charlotte area.
“Obviously there is an incredible revitalization of the new home market going on,” he said. “Among the cities we hear our builders are looking for additional support from construction (companies), Charlotte was one of the markets that we kept hearing about.”
So move into Charlotte ODC has, looking to mirror the work that has seen them grow into one of the biggest shell builders in the Sunshine State. The office, at 2525 Burkholder Road in west Charlotte, is up and running complete with a two-man management team and 30 laborers.
Bring on the work, Lidsky said.
After the housing crash that was a primary cause of the recession, the next few years were tough on the homebuilding market. Subdivisions stalled – some of which are just now being revived – and several homebuilders either went out of business or left the market for pastures new.
But as 2013 is drifting toward 2014, several signs have emerged in Charlotte and across the nation that the housing market is steadily returning.
Dave Simpson, building director of Carolinas Associated General Contractors, said the signs are pointing toward a period of prosperity for homebuilders in the state.
“The residential market is picking up in the Carolinas and the way we see it, that’s good for everyone.”
A second-quarter study of the national multifamily market by Reis showed that apartment vacancy rates last quarter didn’t decrease for the first time in 13 quarters. Couple the static vacancy rate with exorbitant average rents – higher than prerecession figures – and multifamily analysts are predicting a return to home buying.
Also this year in Charlotte, building permits for single-family homes are way up over previous years. According to the Mecklenburg County building permits database, so far this year homebuilders are pulling an average of 300 permits per month, which puts 2013 on track to be the best year for residential construction in the county since 2008.
Based on the sharp increase in new homebuilding, along with other signs he’s reading, Lidsky is confident ODC can ride this new wave of activity to gain a foothold in the market.
“In Charlotte, like Orlando, where we started, the city faces a structural imbalance when it comes to new homes,” Lidsky said. “The pendulum swung too far in the other direction. There aren’t enough homes for the buyers or the demographics.”
Added to the dearth of homes is the fact that some area homebuilders aren’t in the market anymore. Lidsky said it was time for another company to come into Charlotte.
“In the doom and gloom times, the labor went away and a lot of the builders slashed their ranks in the fields,” he said. “There’s no question that the housing market is a cyclical industry. The pace at which homes are being built is crazy. 2014 will be even crazier.
“That’s not going to be a sustainable base for 20 years, but will it be for the next five or 10 years? I think it will.”
Lidsky predicts in Carolinas this year, ODC will do “several million (dollars) in work.”
But just because Lidsky predicts success in Charlotte – what CEO wouldn’t? – doesn’t mean the ODC made the expansion decision without reservations.
The Carolinas offices, including one in Columbia, S.C., are the first Lidsky’s starting from the ground up. All the other ODC offices were acquired and converted to ODC locations, he said.
“We bought an existing business in Florida and we grew into other markets in Florida,” he said. “This is the first time we’ve struck out and said let’s see if we can start that from scratch.”
And Lidsky noted another challenge in the Carolinas: Materials companies – such as 88 Lumber – will often do some of the work on homes, taking business away from other subcontractors. This isn’t the way it’s done in Florida, he said.
“Everyone in Florida is comfortable with the idea that you work with a construction services company and it’s all part of one price,” Lidsky said. “What we’ve learned about the Carolinas is the materials companies do a lot of their own work.”
Despite the novelty of the Charlotte homebuilding market, Lidsky said he thinks the promise of homebuilding over the next few years will mean solid opportunities all around.
“No, we’re not worried about other companies coming in and taking work from us,” he said. “There’s plenty of work out here for folks.”