Development's Biggest Challenges

Arch-Con prez Michael Scheurich (speaking at Bisnow’s New Construction & Development Summit Tuesday) says construction materials pricing isn’t too bad in general (a 2% to 3% increase per quarter is manageable). But concrete has been volatile (which is the opposite of what "concrete" means). Now it’s in the mid $90s/yard if you’re buying in bulk, over $100 if you’re not, and it can take a long time to get a shipment. (That’ll continue for the next 18 months, thanks to the Grand Parkway.) He predicts labor and material costs will get brutal next year. Michael says the sequence of development has gotten wonky; things like elevators that used to require little lead time now can hold up delivery of your building.

But the biggest timing hurdle might be power. Pieper Houston Electric CEO Bud Walters says CenterPoint should be one of your first calls when you start planning a building. It's integral to every project and overloaded, so it can take months to get power arranged. He’s particularly concerned about labor—the average craftsman is 54 years old, and we’ve got stiff competition from other industries. Bud says we need to look at healthcare benefits, wages, hours, and such to make the construction industry more appealing. He also advocates Texas H.B. 5, which proposes changes to high school education to improve our skilled labor pool.

Ziegler Cooper senior principal Kurt Hull (whom we found with Elevated Houston’s Eric Keller) says whether it’s from materials or labor, construction costs are influencing what and when deals get done here. They’re especially making it hard to do 30-plus story highrises because it’s difficult to pinpoint accurate numbers. It’s also impeding mixed-use development (already a challenge because of its inherent complexities), which hurts us—he believes that’s the answer to our traffic/infrastructure problems.

Here’s our superstar panel: Howard Hughes EVP Paul Layne, TIAA-CREF director of acquisitions Duane Hale, Thompson & Knight partner Bruce Merwin, Kurt, Michael, and Bud. Yesterday, we shared the craziest things that the first trio has ever done, and now for the next three: In 1974, Bud hitchhiked from Houston to Canada and back. Michael ended up riding a moose on top of an outfitters store on his 21st birthday, and Kurt battled acrophobia to climb mountains in Yosemite.

Here’s what Houston’s No.1-rated waste company looks like—we snapped our sponsor Waste Connections’ Ruben Munoz, Alex Urena, Norma Lopez, Gregg Wroblewski, and Jimmy Falsher.