When the go-go years of the Flathead Valley’s building boom came to an abrupt halt a decade ago, contractors settled in for a sustained slump as the buckling economy and stagnating housing market gutted the region’s workload.
After years of untold growth and an explosion of retail, homebuilding and development projects, the housing market crash and a failed wood products industry left the region reeling. The poverty rate climbed while the number of building permits plummeted. Good-paying jobs became increasingly difficult to find and the unemployment rate soared above 10 percent.
The Flathead Valley stayed afloat mainly on allure, by capitalizing on tourism – an economic driver that continues to grow – as well as traditional components of growth like higher education and health care.
But with the recent surge of development projects, builders in the region – many of whom survived the recession by retooling their businesses to focus on smaller remodel projects while their workloads were slashed to one-third of what they were – are busier than they’ve been in years.
The spiking growth was initially alarming for those who watched the bubble collapse in 2007 and can’t shake the specter of another market crash. But industry insiders say the uptick is occurring at a more measured pace and doesn’t mirror the reckless, breakneck building boom that defined the Flathead Valley at the turn of the century.
“I am looking at this as being really healthy,” Kalispell City Planning Director Tom Jentz said. “We are not growing so fast that we’re going to be run over by it, but we are busy. It’s good.”
The Flathead County economy has made strides in almost all sectors and the unemployment rate dropped to 5.5 percent last month, the lowest figure in over eight years. Economists have said the local economy is one of the fastest-growing in the state.
Construction, a stalwart of growth, is a big reason why, and crews have been noticeably busy this summer.
The prolonged U.S. Highway 93 Alternate Route is nearing completion after decades in the works, a milestone that city officials predict will create a domino effect for further growth in the ballooning north section of Kalispell and redevelopment in the historic downtown. A similar transformative road project is taking shape in Whitefish along Highway 93 West, where crews are in the midst of reshaping the city’s west corridor.
Casey Malmquist, the head of Malmquist Construction in Whitefish, has been taking on a robust workload that he described as a mix of commercial and residential.
Having watched the market evaporate seven years ago, Malmquist is among those eager to see the well replenished. But Malmquist, who headed to the Bakken during the recession to build housing for oil workers and is pleased to be building locally again, also said he was wary at first of the surge in growth.
“Initially, the speed of this recent ramp-up was a little troublesome,” Malmquist said. “But the more I thought about what we are doing now versus what we were doing in 2004, when there was almost a greed element involved and everyone was overindulging and causing these fundamental systemic problems, this boom seems to be driven more out of desire.”
Out-of-state contractors began flooding the Flathead Valley around 2004, building a surfeit of houses in the $500,000 to $1.5 million range and, in doing so, created a glut of real estate inventory on the market.
When the market crashed, many of the builders who sought their licenses to capitalize on the exploding market were weeded out through the process.
Those who remained were altered by the crash, even humbled by it.
“After surviving the recession, people are reevaluating their priorities, and the Flathead has become a really attractive place for people to call home,” Malmquist said.
Even if it’s not the level of bustling growth and prosperity that defined the Flathead Valley 10 years ago – and probably shouldn’t be, builders say – Malmquist has a full plate, in part because potential home buyers are being priced out of the housing market and are increasingly looking to buy land rather than invest in existing houses.
“That certainly bodes well for developers,” Malmquist said.
Home sales are certainly on a roll, too. Residential sales in the valley are up 16 percent after the first six months of 2015, and at this pace experts are predicting a banner year.
Commercial development has similar momentum after experiencing hesitant growth since 2008.
The latest large-scale commercial development includes the 28-acre section of land surrounding Kidsports Complex, with a slate of new restaurants and retail stores anticipated in the next two years. Developers are proposing to divide the land into 14 parcels similar to the most recent phase of commercial expansion involving Cabela’s, Michaels and other adjacent businesses. That phase of development led to nearly 115,000 square feet of new commercial space, and the latest proposal has similar ambitions with plans to build four large “anchor” stores.
“That’s another 28 acres of commercial space about to come online,” Jentz said. “There’s a lot of pressure for development, and a lot of demand right now.”
Malmquist’s most visible project is nearing completion at the corner of Second Street and Baker Avenue in downtown Whitefish. Called “The Galleries,” the prominent, two-story affair is constructed out of reclaimed timber siding and iron, and will feature retail space and condos.
Down the street, construction has begun on a three-story, 89-room hotel at the gateway to downtown Whitefish that is owned by Sean Averill, of the Whitefish Hotel Group, who also owns and operates The Lodge at Whitefish Lake along with his brother Brian and father, Dan.
Malmquist says he’s lining up another Whitefish project in his queue, one that would be similar to The Galleries, and has an eye toward three other residential projects – a townhome, apartment and condo.
“We’re busy. Everyone is. We’re busy all around,” he said. “Thinking back to the crash, I have never seen anything disappear that fast, but at the same time I haven’t seen anything reappear this fast. The turnaround in the market was extremely fast.”
Malmquist said one notable trend he’s noticing is a much smaller percentage of the homes he’s building are second homes, but are instead primary residences with price-points ranging from $500,000 to $3 million.
Construction crews have broken ground on a massive subdivision project in Kalispell, one that has been on the backburner since the economy imploded and is now coming to fruition. The Bloomstone Development is located on 79 acres west of Kidsports Complex and represents the latest large housing subdivision to emerge after the recession. Developers plan to establish more than 500 housing units of varying size and price, ranging from apartments for rent to single-family homes.
The growth is not isolated to Kalispell and Whitefish.
In Columbia Falls, Xanterra Parks and Resorts, Glacier National Park’s concessioner, moved into and cleaned up the old First Citizens Bank building, converting what was a hole in the downtown core into an active business. Meanwhile, single-family homes are cropping up all over town.
Contractor Jason Mueller, of Rock River Builders, has taken on residential projects from the shores of Flathead Lake to Columbia Falls, and said while business has been incrementally improving for several years, he hasn’t seen anything like the current growth in years.
“We have been wanting something like this for a long time,” Mueller said. “It dried up like a dry sponge, and just in the last couple of months it has exploded. It’s all over the valley.”
Another of Malmquist’s project, SmartLam, a manufacturer and distributor of cross laminated timber products, has plans to develop a new building in Columbia Falls, estimated at 120,000 to 160,000 square feet. The city council on June 15 reviewed a request for a zoning change at the industrial park, which would open the door for SmartLam’s possible expansion.
In Bigfork, Craig Stoddard was among the pool of big-ticket general contractors whose workflow dried up around 2007, and his high-end custom homes stopped selling.
At the height of the building boom, Stoddard was overseeing construction of three or four new homes each year, all of them designed with his signature Craftsman style, with Douglas fir timber framing, cedar shakes, rustic oak floors and cherry cabinets.
When the market crashed, he was lucky to build one new home a year, and to make up for the lost work he supplemented with remodel jobs.
Today, he’s building high-end custom homes throughout the valley, and says Whitefish is the busiest market.
“I am booked for two years. That’s how good things have turned around,” Stoddard said.
Because housing prices are coming back, Stoddard says he’s not cutting costs or skimping on his bids.
“It really is getting back to where it was,” he said. “But I don’t think it will ever get back to how it was in 2005 and 2007. And it probably shouldn’t.”
The Flathead Valley has further established itself as a regional trade center and popular visitor destination in recent years, driven largely by continued commercial growth.
Tourism continues to become a tent-pole industry in the valley, and the growing influence of visitors has driven a lot of commercial development.
Last year there was over 100,000 square feet of new commercial space built in Kalispell and $13.22 million in new commercial projects, marking the second year in a row of over $13 million in new development.
The growth is significant, even though it remains less drastic than a decade ago, when the total construction value surpassed over $100 million annually compared to $45 million last year. But development is continuing at a steady pace.
In Kalispell, the remaining lots near Cabela’s are spoken for, with Discount Tire, Dress Barn and other new stores moving in over the next few months. Next to Kidsports Complex, developers are preparing to build 14 parcels, including four large anchor sites. The new 28-acre plot is expected to turn into nearly 115,000 square feet of new commercial space over the next two years. The city of Kalispell issued a $1 million permit for the remodel of the old Sizzler building at Hutton Ranch Plaza, which will be Buffalo Wild Wings. The Toggery is slated to open in downtown Kalispell June 29. Kalispell Regional Healthcare also received a permit approving a $2.7 million remodel of part of its campus. Several other commercial projects are currently under review, according to city staff.
In Whitefish, two new hotels are being built this summer while the remaining empty pads in downtown are also soon to transform into commercial space. The Galleries, a prominent, two-story site built in downtown, will feature retail space and condos. Spotted Bear Distillery plans to open in the Railway District. Downtown Whitefish will also receive a massive makeover with the redevelopment of City Hall, a project that is expected to be completed in 2017.
The Flathead Valley real estate market is in the midst of a banner year for sales. After bottoming out in 2009 with fewer than 1,000 homes sold, the valley is on pace to approach 1,800 sales this year, which is near the record total set in 2006. Through the first three months of 2015, residential sales are already up 14.3 percent over last year. There were 271 homes sold between January and March. In that same span in early 2006, there were 355 homes sold. The average median sales price in the valley is $235,000 this year, a 6.8 percent increase over 2014. In 2006, the median sales price was $222,000.
Residential land sales have dropped 10 percent over last year with 96 plots sold in the first three months of 2015 compared to 107 last year and 230 in the first quarter of 2006.
New home development in the cities has stalled due in large part to a lack of available affordable lots, according to city planners.
In Kalispell, there have been 20 residential housing permits issued compared to 39 this time last year. In Whitefish, there have been 30 permits issued for homes or apartments; last year there were a total of 82.
“It’s not so much the demand we lack; what we lack is a broad availability of affordable lots, whereas Flathead County still has a plethora of affordable lots,” Kalispell Planning Director Tom Jentz said. “When they went through the recession, there were so many lots in rural Flathead County, but our (city) lots have pretty much been absorbed. There are still a lot of lots in the county where price has dropped and a lot of construction in the county that would have happened in the city.”
Planes, Trains and Automobiles
Infrastructure is a simple yet pivotal part of every community, but it is especially significant in the Flathead Valley, where a network of roads ties a broad range of cities and rural communities together. The main thoroughfare — U.S. Highway 93 — is at the center of attention in Kalispell and Whitefish. The U.S. 93 Alternate Route, or bypass, is nearing completion and could be finished in 2017, ushering in a new era for transportation through the valley’s largest city. The latest phases of development are expected to move forward in the coming months. When completed, the final 3.5 miles of road will feature four lanes resembling an interstate highway that travels from Reserve Loop near Glacier High School to U.S. Highway 2, where the south portion of the bypass currently ends.
In Whitefish, the western corridor is undergoing a transformation of its own on a smaller scale but with no less of a potential impact. The second phase of the project is scheduled for completion in July. The third phase will extend to mile post 133.
Air travel is also experiencing an increase in activity. Glacier Park International Airport is on pace to match last year’s record number of passengers. A total of 109,701 people flew in and out of the valley from January through April, the same as this time last year. May is expected to see an uptick as well as the tourism season picks up.
Amtrak’s Whitefish station is also expected to match or surpass last year’s ridership total of roughly 50,000 passengers. The city of Kalispell and partners are working together to build an industrial railroad park off Whitefish Stage Road, which will allow the tracks to be removed in downtown as part of a broad core area revitalization plan. The $21 million project could begin surfacing in the next six months.
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