The Urban Land Institute’s new report on emerging trends in real estate for 2015 is aptly titled, “Sustaining momentum—but taking nothing for granted.”
I’ve learned a lot about construction cycles in the past three decades, much of which echoes the ULI’s sentiment. Although like every CEO who moves here, and those who build their companies here, I know it’s great to be in North Texas, where industry diversification continues to drive sustainable growth.
For 2015, there are notable real estate trends that suggest another robust year awaits us, although recent declines in oil and gas prices remind us that the energy sector is a major driver of the state’s economic health and job growth.
According to Metrostudy’s 3Q14 survey of the Dallas-Fort Worth housing market, new home starts have risen by 69 percent since 2011 and provide a good barometer for retail construction. Many of our developer clients have exciting plans on the drawing boards, including lifestyle centers, which track households and population growth. With grocery stores like Kroger and Whole Foods committing up to 40,000 square feet to anchor these centers, we anticipate many well-recognized brand names to follow. Companies like Walmart are optimistic, too, because for every dollar that their shoppers save at the gas pump, they can spend in their stores.
2015 also promises solid momentum in the industrial market. The 100,000-square-foot to 500,000-square-foot projects currently underway will pale in comparison to the even bigger projects of up to 1 million square feet on average, as logistics, distribution, and call centers look for space to accommodate their growth.
Another sector that will continue to grow through 2015 is the healthcare sector. Nationally, The American Institute of Architects forecasts spending increases of 4.9 percent over 2014, with Texas ranking among the top five states in the U.S. for new healthcare facilities. The ULI report suggests, too, that medical office use will be a strengthening trend for 2015 and beyond, as new approaches to urgent care and the repurposing of retail properties, both in the suburbs and inner cities, develop from the impact of the Affordable Care Act and aging baby boomer population.
Industry Challenges Persist
All of this being said, the commercial construction industry in our region is facing some serious challenges, too. One of the chief obstacles is hiring and retaining reliable and skilled labor. There are no quick solutions to the labor shortages that face our industry. Only long-term planning seems to help.
We have turned to recruiting young leaders from universities and grooming them. We get to know them as interns before we commit to them. For project superintendents, we are scouting the vocational schools and two-year colleges. Finding sharp young people who want to enter the construction business and pairing them with seasoned personnel helps us develop teams that work collaboratively and effectively with one generation transferring knowledge to the next generation.
Of course, if the energy industry slows, we may see those workers return to the woefully understaffed construction industry. And a pullback in oil and gas production may also curb the spiking construction cost increases brought on by the vacuum in West Texas, which has drawn so many of our resources there.
Overall, our industry confidence level is up to a record 77 on a scale of 100, based on a recent survey by Engineering News Record, which portends steady, sustainable growth for the next several years. That’s good news for our economy—and great news for commercial construction in our region.
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]