Developing New Markets Mel Morris and Joe and Jeff Bostic originally had a simple plan for their business – build apartments within five hours of Greensboro, N.C. However, as Bostic Construction Inc. built apartments faster and faster, the distance grew to eight hours. Now, the company is building in Auburn, Ala., which is about eight and a half hours away. From 1992 through 2002, Bostic Construction built 99 percent of its units in North Carolina, South Carolina, and Georgia. But that number has dropped to 82 percent in these three core states.
There are two main drivers behind this expansion – its saturation in the Carolinas and Georgia, and its shifting niche, which is caused by a soft economy for market-rate rentals. After building almost 15,000 units over five years in the Southeast, it’s easy to understand why the company is looking for other places to build. “The bigger we get, the more territory we need to cover,” says Wink Hamill, development manager for Bostic Construction. “We have done so much in [our original markets] that we need to push into new markets.”
The shakiness in the North Carolina economy may have been an even bigger factor pushing the company into new territories. As financing market-rate units became more difficult, it began moving into active adult condominiums and off-campus student housing. “The market-rate stuff is getting soft, and we can’t continue to just build in Charlotte, N.C., Atlanta, or Raleigh, N.C.,” says Morris, the president of the company. “That’s the reason we went to student housing. It was very easy to transition our market-rate product to student housing.”
While the transition in the construction processes was easy, there are more land constraints to deal with in student housing. Though North Carolina has a fair number of colleges and universities, it’s a finite number, so Bostic Construction is looking towards the Midwest. “Finding sites for student housing is the hard part,” Morris says. “They have to either be near the university or close to a bus line.”
Though the active adult senior market is growing, it also presents challenges. For instance, the company needs to build its active adult communities near resorts, golf courses, or bodies of water to attract residents. Even then, these older residents can be a little tougher to please than the 18-year-old college freshman. This forces the company to focus a bit more on quality, which lengthens the construction cycle. For instance, student housing may take four months to build, while an active adult complex will take 12 months. The company also will have certain subcontractors specialize in just the condo projects because of the attention to detail that they require. “The seniors are more demanding,” Morris says. “They have higher expectations.”
