COVER STORY, JUNE 2009

READY TO BUILD
A lack of spec development causes many of the state’s contractors to look to new areas for steady business.
By Lindsey Walker Marcec

Walton Construction Company didn’t expect military construction to become the firm’s bread-and-butter work when it got into the sector in 2004, building barracks at Fort Hood near Killeen, Texas. But, a few years later when the recession hit, and the firm’s typical commercial jobs became fewer and farther between, the Kansas City, Missouri-based company was happy to have a presence in the military construction field, where demand continues to grow for qualified contractors.

“We are fortunate for our military work this year,” says David Pinson, president of the Dallas division of Walton Construction Company.

However, Pinson says, the firm was apprehensive in the beginning about making the move to military construction.

“We were leery at first about getting into the military sector, but it has made us better contractors,” Pinson says. “We have had to be more disciplined and pay more attention to safety [for our military work], which has carried over into the commercial realm.”

The private sector requires its contractors to jump a number of hurdles in order to win a bid, from having a safety program to a small business plan, not to mention a proven track record of successful military projects. Now, with more than 5 years of military work under its proverbial belt, Walton is able to compete — and win — bids for military construction projects when the competition is tighter than ever.

“Bidding on a project against 21 other general contractors makes competition tough, in general,” he says. “Within the military sector, it’s even tougher because it’s not necessarily the cost, but the overall value, that wins you the bid.”

Walton currently is working on five military projects, and with three brigades coming to Fort Bliss in El Paso, Texas, over the next several years — meaning 47,000 military personnel and their families — the need for military construction will not diminish any time soon.

Walton Construction is handling the renovation of all public spaces at the Sheraton in downtown Dallas.

Though retail, office and industrial development has dropped off exponentially, there are a few commercial sectors that continue to see construction demand in Texas. Hospitality is one.

“In the hospitality sector, people are taking the opportunity to refresh their hotels, so by the time the competition comes around and is breaking ground on new product, their hotels will have a brand new feel for much less cost,” Pinson says.

Sheraton is doing just that with its recently re-branded hotel in downtown Dallas (formerly the old Southland Life office building and then later an Adam’s Mark Hotel). Walton’s Dallas office is handling the renovation of all of the public spaces at the hotel.

Arch-Con Corporation is building its new 21,000-square-foot, Class A headquarters inside the Loop in Houston.

In Houston, the hospitality sector is stable, and there is new construction sprinkled throughout the metropolitan area. Locally based Arch-Con Corporation is starting a new hospitality project, a 105-suite Marriott Springhill Suites, this month in Baytown, approximately 22 miles east of Houston.

Besides hospitality, Arch-Con is seeing most of its work in healthcare or tenant improvement jobs. The firm is active in all sectors, but with spec building becoming nearly non-existant, its work in retail, office and industrial has fallen by the wayside for the time being.

“The biggest change within the retail, office and industrial sectors is that there is no spec building, whereas during the previous 5 years, there was a tremendous amount,” says Michael Scheurich, president of Arch-Con Corporation. “There is still some build-to-suit for office and industrial, but with retail, there’s nothing.”

One office build-to-suit Arch-Con is building is its own Class A headquarters at West Gray and Waugh Drive in Houston. Located inside the Loop, the 21,000-square-foot, three-story project is currently under construction.

Arch-Con Corporation is building the 105-suite Marriott Springhill Suites in Baytown, Texas.

Bob Moore Construction, an Arlington, Texas-based commercial construction firm, also has seen a big switch in its workload from developer-driven projects to direct build-to-suits for the end user.

“We’ve had to rethink how we do things and what we’re after,” says Larry Knox, vice president of Bob Moore Construction.

Luckily, Bob Moore has formed a solid relationship with an end user with pretty big needs. Rooms To Go, has selected the firm to build various retail showrooms and distribution centers throughout the state, the largest of which is a 1 million-square-foot project under way just west of  Houston.

Bob Moore Construction is building its second build-to-suit distribution center for Rooms To Go just west of Houston. The 1 million-square-foot facility is scheduled for completion next March.

Located on the south side of Interstate 10 in between the cities of Katy and Brookshire, the project will include a 988,000-square-foot main building and a 12,000-square-foot stand-alone trailer maintenance building. Completion is scheduled for next March. The Houston center marks the second distribution center Bob Moore Construction has built for Rooms To Go; the first was an 851,000-square-foot facility in Arlington that was completed in 2004.

While the slowdown in development certainly has left its mark on the construction industry, these contractors do see a some silver lining.

According to Pinson, these slow times provide the perfect opportunity to search for new talent.

“There is a lot of talent out there,” he says. “You can make the connection now and get them on file, so you’ll be ready when it’s time to hire again.”

Scheurich agrees.

“There is an availability of labor, both for management positions and in the field, that hasn’t been seen in a very long time,” he adds.

Also, it’s a great time to strengthen business relationships with architects and subcontractors, which can aid in winning job bids.

“It’s important to nurture your relationship with your subcontractors so you can get a competitive sub-bid,” Knox says.

As for what’s to come for the rest of the year and into 2010, it’s a wait-and-see game for the construction industry, as it is for everyone else.

“Are we at the bottom? I don’t know. How long til the market comes back? I don’t know,” Pinson says. “I do know that if you had asked me a year ago if I thought Texas would have been hit the way it has, I wouldn’t have predicted it.”

Scheurich sees some tough times ahead as well, but is optimistic that the good will survive.

“The next 2 years will be a challenging time for design and construction companies,” Scheurich says. “It may result in some changes in their overall representation in Texas. It’s a time when many may pull back; but, for the good companies, we see an opportunity to increase market share. There’s no room for mistakes, and those not doing the job right will be eliminated.”

©2009 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.