The Real Deal

By Sharman Egan Lagniappe columnist

Still wondering why several thousand cell phones rang in unison a few Fridays ago, late in the afternoon, followed by a collective “hello” that resounded throughout Mobile?

And what about that loud slapping noise that followed?

Unless you’ve been adrift in the Gulf for the last few weeks you know that slapping sound was a couple of thousand people high-fiving simultaneously as the news of Mobile’s latest coup came down. The cacophony of different ring tones was Mayor Sam Jones personally calling everyone in Mobile to convey the news: the U.S. Air Force had just awarded one of the largest defense contracts in U.S. history to Northrop Grumman Corp. and EADS North America, with the assembly work to be done at two new plants at the Brookley Industrial Complex just south of downtown Mobile.

Even after all the big wins in the last few years – the Carnival cruise ship, the container port, ThyssenKrupp, the racetrack, the RSA Tower and more – did you ever think it would come to this? Mobile is about to join Seattle, Washington and Toulouse, France as one of just three centers for large aircraft manufacturing in the world.

Once you get past all the well-deserved hoopla, you have to wonder how much impact the new plants will actually have in our area. They are expected to employ 1,500 people and while that’s a bunch of folks, it’s a tiny increase in the local workforce on a percentage basis. I spoke to several leading figures in the local real estate market to try to get a handle on the impact.

“It’s going to be phenomenal,” said Sandy Purvis, president of the Mobile Area Association of Realtors and manager of the Saraland office of Roberts Brothers, Inc., one of the largest real estate brokerage firms in the Mobile Bay area. ””With this and ThyssenKrupp and the container port, everything is coming together. I’m not sure it’s correct to say there will be a housing shortage but there will definitely be some supply and demand issues and rising home values.”

Purvis expects the impact to be spread throughout the Mobile Bay area, including Baldwin County. And she thinks it’s going to be awhile before we see much effect on the market. “In Mobile, you’re twenty minutes from anywhere so people won’t necessarily buy homes close to Brookley. It won’t happen overnight, and it won’t be just a particular area,” she said.

So, should we all run out and list our homes at premium prices, then retire to Costa Rica? If you have a house on the market, should you raise your price?

“After the TK announcement, asking prices in north Mobile went up immediately,” said Purvis. “But asking and getting are two different things. Buyers determine the price in the end. Prices will rise but it will take awhile.”

Merrill Thomas, owner of Merrill P. Thomas Company, agreed. “After the racetrack and TK announcements, everyone in north Mobile raised their prices but nothing sold. We’re 18 to 24 months out. Depending on your needs, this is a good time to either buy or sell but I wouldn’t recommend raising your price.”

J. Reid Cummings, president of The Cummings Company, develops waterfront properties and residential subdivisions in Mobile and Baldwin Counties. He agreed with Purvis that the new plant will help the slow market in Baldwin County, although he expects a greater impact in Mobile County. “There’s a lot of inventory in Baldwin County versus Mobile County,” he said. “It has to be good for Baldwin County, and great for Mobile County. I hope it will be great for both.”

Sonny Nichols, co-owner and broker of Prudential Nichols Real Estate in Fairhope, also agreed. “With 1500 people, that in itself will get us into a not so top heavy inventory,” he said. He thinks now is the time to buy. “A year and a half from now, it will switch from a buyers market to a sellers market. The procrastinators will be sorry. They’re waiting for a better deal but prices are down and it’s a good time to buy.”

The Northrop Grumman/EADS deal won’t just impact the residential sales market, of course. It will also have an effect on the rental and commercial markets, and those markets may be affected more quickly. “The first impact will be on apartments then homes will begin to creep up,” said Cummings. Purvis agreed, saying that many of the workers who come here to build the plants will be here a year or less so they will rent rather than buy.

Merrill Thomas specializes in leasing commercial property, primarily retail, with properties on both sides of the bay. He foresees a positive impact on the retail market but he says he can’t forecast specifics. “It’s difficult to put your finger on what’s going to happen. There are only three places in the world where they do this so it’s difficult to predict exactly how it will play out.”

Thomas anticipates a bigger impact from the suppliers to EADS than from the EADS plant itself. He says those suppliers may locate fifty or more miles from Brookley and cites the Hyundai plant in Montgomery as an example. “We didn’t see any commercial growth in Montgomery from the Hyundai plant. But there was growth in outlying areas as a direct result of the plant.” He explained that a major supplier built a facility outside of Montgomery, and that led to significant commercial development in the area.

Sharman Egan is Lagniappe lagniappe columnist. Contact her at Sharman@SharmanEgan.com.

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