According to Dodge Data & Analytics’ 2016 Construction Outlook report, the value of construction starts will reach an estimated $712 billion this year, and a large chunk of that work will come our way to Texas.
Despite the slowdown in the energy industry, commercial construction in North Texas continues at a lightning pace. With the first quarter already behind us, the projects in our pipeline are representative of the diverse needs of a growing population, among these: healthcare, higher education, industrial/warehouse, mixed-use retail, and worship facilities.
Traditional commercial projects have involved the selection of an architect or engineer to design the project with the general contractor receiving a bid solicitation package to construct that project. However, construction timelines are shorter today, and many projects in various market sectors rely on fast-track construction, which involves selecting the general contractor early in the process before design plans and specifications have been completed. The contractor assists with design development and prices the proposal before the design and engineering phases have been finished, offering a guaranteed maximum cost and allowing for some contingencies.
The advantage for the owner/developer is a compressed schedule and cost savings. In the retail sector, fast-track construction enables the developer to start collecting rents as soon as the stores are built. Successful retail contractors have to move at an accelerated pace to satisfy this turnkey demand.
In the industrial sector, we continue to see schedules being compressed. There is a 1 million-square-foot industrial facility, for example, that is being built in just nine months. This fast-track construction is as challenging as retail, but, in this region, North Texas is at the epicenter of construction activity in the industrial sector. That means developers who have the sites want to know how cheaply you can build a new facility and how quickly. To survive in this market sector with approximately 80 million square feet in play, you have to be price-competitive and experienced. Speed to market dominates.
Another growth sector is in the healthcare market. Healthcare schedules are becoming increasingly faster, which magnifies the importance of the team selection and the preplanning efforts. Standalone emergency clinics are using a retail delivery approach. The appeal, of course, is having an emergency clinic right in the neighborhood next to a CVS or Walgreens or at a busy intersection. Due to federal changes in Medicare and Medicaid, many facilities are also having to modify their space and equipment in order to deliver the appropriate services that facilitate reimbursements. Fast-track construction is an important part of the equation.
Success in fast track projects always begins upfront. Often, a project is won or lost based on the early planning stages. Selecting the best subcontractors for the job is a priority. Their ability to respond, their financial stability and their teamwork are all important factors. The project schedule is crucial as is having the right design consultants on board. These decisions are not always driven by the lowest price.
Safety and quality tend to be most at risk with these types of projects, and a contractor’s reputation rises and falls based on these two critical performance issues. Those contractors with strong processes and procedures in place tend to outperform.
When weather impacts a project, as is often the case in this region, and there is an unmovable completion date, your team relationships are key to success. Finally, being prepared long in advance of the project’s start helps to brace for sudden changes in the commodities used for the project, including glass, timber, concrete, and copper. Industry disruptions are very hard to predict.
Depending upon the complexity of the job, there may be only a handful of contractors and their subcontractors who can do a fast track job. They need to have numerous capabilities, from building information modeling to laser scanning to using LEAN processes, a greater degree of sophistication, technology on the job site, and careful planning and sequencing of a project.
To play in this space, you must know your role as the builder and have the ability to dodge all of the other bullets that may be buzzing around you. You have to be a strong risk manager who understands the pitfalls and the traps, including the need to look over the owner’s shoulder and those of your design partners. You have to come to the table with critical, creative thinking. That starts with a company’s people and its culture. We love this challenge.
Speed to market is the compelling motivation to choose fast track construction, and it is showing up in service-oriented markets. Even higher education has fast track needs, especially for projects, such as student housing.
Of course, other delivery methods are gaining in popularity, including design-build and design-assist which minimize the owner’s risks by enabling early teaming with a skilled design builder. According to the Design-Build Institute of America, the top three states with the highest design-build ratios in non-residential construction projects are Oregon, California, and Hawaii with Texas ranking among the top 20. This construction process is an art: to manage a design team and commit to a turnkey price before a project is designed and permitted. It takes skill and guts to tell a developer that a project can be built for “x” amount of money.
In the future, we expect more projects to embrace the emerging integrated project delivery method which means that all the members of the project team share in the risks and the rewards. Clearly, the faster you can get it done, the more the owner/developer likes it. For our industry, that means developing strong teams that trust each other, know how to execute, and share in the common goals of providing a quality product that has safety as its foremost guide.
Charles R. Myers is CEO of MYCON General Contractors and co-chairs the Industrial and Office Local Product Council for the North Texas District Council of the ULI. He can be reached at [email protected].
