The headlines are beginning to show up nationally: “Momentum slows.” “Only 38,000 jobs created in May.” “Banks stepping back on construction loans.” Is this the bad news we’ve been anticipating?
As a general contractor with nearly 30 years of experience, I have learned that you need to be prepared for business cycles, whether up or down. Last month at the International Council of Shopping Centers convention—an event that broke all previous attendance records—36,000 of us heard the forecast for the retail industry. Overall, the mood across the country was positive, with talk of expansion in many markets. But the biggest single topic was North Texas, and the optimism of regional and national retailers that are planning to expand here.
Developers know a good market when they see one. Last year, we added 117,000 new jobs in the Dallas-Fort Worth area. Our population grew by 144,704, with more than half coming from in-migration.
Here are some of the top takeaways from ICSC that portend a continued, healthy outlook for our region:
• Some well-known online retailers will be opening brick-and-mortar stores to complement their sales and elevate their brands locally.
• Big box stores will continue to roll into our region, particularly moving into fast growth suburbs with big square footage footprints for sporting goods, household furnishings, and groceries. Think Walmart, H.E.B., Dick’s Sporting Goods, Scheels All Sports, IKEA, Paragon Outlets, and Costco. They are chasing all the housetops.
• The vibrant, mixed-use developments, such as Legacy West in Plano, CityLine in Richardson, and The Star in Frisco will continue to inject momentum into the region. In addition, these developments will foster more retail, medical office buildings (MOBs), and commercial office projects.
From downtown to Uptown and Preston Center, rents are rising fast, which bodes well for both office and multifamily projects. Both the education and healthcare markets stand to prosper, too, as clinics and MOBs and new schools fast-track construction in order to open their doors as quickly as possible and meet demand.
With this strong development momentum, I also believe that the industrial and warehouse markets will continue to perform well.
So are we safe from a downturn? At mid-year, we couldn’t be safer, stronger, or busier. And next year? My outlook is the same: 2017 should be stronger than ever in our region. In fact, I can see this growth stretching out another four years to meet the demand of our growing population and job market.
Of course, there are a few caveats. As long as interest rates remain low, and we do not experience an unanticipated, devastating national or global crisis, our momentum persists.
And there is what I would call the “saturation effect” of so many commercial construction projects that depend on construction financing. One of my chief advisors at NorthMarq Capital, William Jackson, said that construction financing is getting tougher to come by because many banks have reached their construction loan limits. If they are about to be tapped out, those banks will be reserving their loans for their best customers. In addition, he explained, some product types—especially hospitality with its strong volume of construction underway—might be far enough along in its cycle to trigger a “wait and see” lending approach.
Another result from this “saturation effect” is the significant backlog of subcontractors that can impact construction schedules, from dirt work to utilities to concrete. Their ability to start work right away can be limited, and, for many larger projects, there are only so many subcontractors who have the ability to perform this work.
Finally, there’s the challenge of staffing, given our current labor market We have plenty of jobs to go around, but, like many general contractors, the market for talent and the skilled crafts has substantially tightened. Recruiting and hiring the personnel who value our culture and bring the best skills to the team is a constant.
The bottom line? We are blessed to be in North Texas, where opportunity abounds. Balancing growth for the long-term is important to everyone.
Charles R. Myers is CEO of MYCON General Contractors in McKinney and co-chairs the Industrial and Office Local Product Council for the North Texas District Council of the Urban Land Institute. He can be reached at [email protected].