COVER STORY, JUNE 2007

BUILDING AROUND COST
With the rising material costs, Texas contractors find ways to construct quality products in a speedy manner.
Stephen O’Kane

Contractors throughout Texas are not having any trouble finding new projects to build. From residential to hospitality, there seems to a need for all types of properties in the Lone Star State. But along with the demand for new developments comes increased cost for materials and shortened time for delivery. Texas Real Estate Business recently spoke with three contractors to find out what trends are popping up in Texas, and what they are doing to fill the need.

With the population boost that is currently taking place in Texas, contractors are discovering new opportunities to construct several types of projects. In addition to the residential rise, many companies also are finding Texas to be a smart place to relocate their businesses. Contractors are realizing that, not only is the quality of the projects important, but the speed in which they are constructed. This is leading to the need for new technology in the workplace.

“The use of technology has been just enormous,” says Patrick Riordan, president of Riordan Construction Group. “It is the speed at which clients expect results that drives changes as fast as anything else.

According to Riordan, all the company’s job sites are wireless, offering a new kind of access and convenience to the construction process. By making communications easier between the companies involved, Riordan Construction Group is able to take on new projects and lead the attempt to satisfy the growth in the state. And with two projects on its palette, the company is doing just that.

Riordan Construction Group is currently building a new portion of the Hill Country Resort in Canyon Lake, Texas. The company is constructing Building 50 for the development, which is located at 17545 FM 306 S. The new three-story building, constructed with a wood frame, will be part of the private time-share resort facility owned and developed by Silverleaf Resorts. With sales peaking at Hill Country Resort, Riordan is building on a tight schedule in order to fully realize the potential of the project’s growth.

The company also is rebuilding the Dobie Center, a University of Texas residence hall located at 2021 Guadalupe in Austin, Texas, that recently received damage from a fire. The rebuilding project will feature amenities such as an academic computer lab, on-site laundry facilities, study rooms, a fitness center, free wireless Internet and free cable. Dobie Center also will house a mall featuring a movie theatre, restaurants and specialty stores located on the first two levels of the building. The 27-story building, which houses 930 residents, is owned by Dobie Austin.

Cost is another important element coming into play in current Texas market. The cost of materials is rising and companies are doing what they can to help ease the blow for developers and consumers.

“We have to be more flexible in our delivery methods,” says Riordan. “The cost of materials is ever-increasing. The number of manufacturers and distributors grows smaller every year as the costs for the fuel to manufacture and ship these materials increases. At the same time the developing world continues to grow faster than the West. Material costs will continue to increase faster than inflation for the foreseeable future.”

McCarthy Building Companies also is seeing the fluctuation of material costs. “Volatility in material pricing makes it more difficult to predict cost, which puts more pressure on project teams regarding establishing a project scope for a set budget,” says Chris Peck, vice president of McCarthy Building Companies in the Dallas office. “We utilize a myriad of processes and techniques to control cost. Our preconstruction processes have been refined to track costs of every building system in great detail. By understanding each cost variable we can work with our owners and designers to make decisions to control cost.”

McCarthy Building Cos. has completed the final phase of construction on the South Tower of The W Dallas Victory Hotel & Residences in Dallas.

McCarthy Building Companies has completed the final phase of construction on the South Tower residences for The W Dallas Victory Hotel & Residences located at 2440 Victory Park Lane in Dallas. The $125 million development, which was developed by Gatehouse Capital and is owned by Hillwood Development Corporation, comprises two towers and is positioned in the 72-acre Victory Park development near the city’s central business district.

The company believes it was fortunate in light of the recent spike in prices for certain building materials. With steel and copper prices rising yearly, the company purchased and stored steel prior to beginning construction.

“As we were procuring, or buying out, the work, we were at the very beginning of what has now been a 3-year period of very volatile pricing,” says Peck. “One of the things we did to maintain control of the budget was an early purchase of steel because we were concerned that prices would be increasing significantly. We were able to benefit the project by getting that commitment of that material early in the job.”

The 15-story South Tower houses 82 luxury condominiums as well as retail space, and features stone and wood floor interiors and European-style kitchens. The North Tower spans 33 stories and houses hotel rooms and residential condominiums. The first 17 floors of the building feature 252 luxury hotel rooms and the two-level Bliss Spa & Fitness center, while floors 18 through 32 house 67 residential condominium units. Also included in the North Tower is a 520-car parking garage and Ghostbar, an entertainment destination on the 33rd floor.

Contractors often face challenges when developing large-scale projects in urban areas. In many cases, such as with the South Tower of The W Dallas Victory Hotel & Residences, contractors are asked to build vertically. This can cause difficulties if the property was not planned for such an expansion.

“One challenge involved constructing the South Tower atop the parking garage spanning the site,” says Peck. “The South Tower had not been designed yet by the time the garage foundations were installed so McCarthy and the designers had to anticipate the loads and the foundations beforehand.”

Houston-based Tribble & Stephens Company, like many other contractors in Texas, is seeing the effect of rising costs and is adapting to meet the needs of developers and consumers.

“Changes effect our budget to build a project, so many times we need to revisit the estimates and allow for cost increases,” says Van Martin, chairman and chief executive officer of Tribble & Stephens Company. “If a contractor works with the developer from the inception of the project through the completion, keeping them aware of all material costs and re-budgeting, they will gain the confidence from the developer and respect of the team partnership.”

Tribble & Stephens Company is currently involved with a residential project in Austin, Texas, called Bridges on the Park. Located at 217 S. Lamar, the high-rise residential development, which is owned by CLB Partners, is within one block of Town Lake, a park positioned against the Colorado River that features opportunities for residents and visitors to walk, bike and participate in other outdoor activities. Upon completion, Bridges on the Park will house approximately 100 one- and two-bedroom units. The project also will feature underground parking and views of overlooking Town Lake.

Despite rising costs, Texas contractors see a bright future for the market. Many believe that LEED buildings will continue to gain popularity because of the money saving opportunities they provide. In the meantime, contractors are using experience, as well as current technologies, to  provide developers and consumers with high-quality developments at the best cost.


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