Kiley Paints A Bright Picture
State and local factors keep construction sector in buoyancy
By Catherine Bezman, AGC Houston
In his annual economic outlook address to the Houston chapter members of the Society for Marketing Professional Services on January 14, 2020, Patrick Kiley, FMI
, delivered a positive economic picture for the city and Texas. In spite of being in an election year and one he described as fraught with VUCA (Volatility, Uncertainty, Complexity, Ambiguity), Kiley’s upbeat message was based on data and research gathered from various resources including FMI, the Greater Houston Partnership, The Perryman Group, and the Texas Medical Center, to name a few.
Historically, Texas has been the global leader in three key industries: cattle, cotton, and crude. Today, the greater Houston area still remains “the international capital of the energy business – what they call in economics, a true cluster,” he stated. An economic cluster is one in which anybody in the industry can find a job, Kiley explained.
“Almost every city in Texas, including down in the Valley, is on the national hot construction markets,” he stated. “We are the state where it’s happening and we, in Houston, are a significant player.”
Representing a nine-county economic region of 10,000 square miles, the greater Houston area can expect to gain 42,300 jobs in 2020. “We are approaching seven million people in Houston... and our construction companies collectively are important players in the city. As an industry, we rank seventh in terms of the jobs created and we rank fifth in the 10-year job gains. We rank fourth in wages, (contributed total wages); and we rank eighth in annual salary with an average of $73,000. Houston ranks seventh in terms of Gross Domestic Product,” said Kiley.
Among the numerous slides he presented, one that attendee’s took notice of pertained to the area’s construction market. Strong markets this year include Medical, K-12, Hospitality (5,500 rooms), and Mixed-Use projects. The Texas Medical Center is not only adding beds but the TMC3 expansion – a collaborative effort of the Medical Center, Baylor College of Medicine, Texas A&M University Health Science Center, University of Texas Health Science Center at Houston (UTHealth) and University of Texas MD Anderson Cancer Center – represents a massive undertaking to expand and diversify the city’s economy. The 1.4 million square-foot shared research facility has ignited other construction projects such as a 450-room hotel, more office space and the repurposing of older buildings, such as the Sears store on Main St.
The Single Family Housing, Religious and Higher Education sectors will also do well while Light Industrial is expected to slow down. (There are over 21 million square feet of these types of buildings under construction now.) Apartments too could get overbuilt soon; most Class A Projects are already offering incentives. The office market is not expected to provide many opportunities in 2020 as the amount of vacant space is now over 20 percent. This reflects the changing dynamics of the energy business. The industry is not only using less people at the wellhead; these companies need fewer people in their Houston offices as well. Only 60 percent of the Houston-based energy jobs lost in the last down turn have been restored. This year will also see the start of major new civil projects (non-building structures such as roadways and flood control) as a result of the approved flood control bonds.
As with most building industries, the skilled labor shortage still remains the most limiting factor to negatively impact growth and competition. A key factor that has resulted from this shortage is the growth of prefabrication of modular units for hotels, apartments and hospitals. The growing use of 3D printing and robotics in the construction industry are also forcing companies to embrace these trends.
With the onset of technology being used to collect data on the jobsite and to manage workforce, companies are focusing on growing a culture that embraces an investment in talent, mentoring, training and technology. Millennials currently make up 50 percent of the workforce and their technological aptitude is helping to drive change. Kiley affirmed that with their innovative thinking, collaboration and communication and interest in being sensitive to their environment, millennials can help drive businesses forward.
In closing, Kiley nodded to the current political landscape at the national front and reflected on how different construction industry leaders are. "We work collaboratively; we are proud and respectful of our building partners, and we attract people with character and guts. We do not fire by Tweet or Email in this business. We have men and women who can look people in the eye to discuss issues. We are the last bastion of really ethical behavior, and that is key.”