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Feeling the Recession - East Texas builders welcome work

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While not as slow as other places in the country, Houston and East Texas contractors are seeing a decline in new private projects.

Llewelyn-Davies Sahni designed the Houston Community College Southwest College/Stafford Campus located near Beltway 8 and U.S. 59.
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“Construction activity in East Texas is pretty much a refl ection of what’s happening in the rest of the state,” says Raleigh Roussell, president and CEO of TEXO in
Dallas, which represents East Texas. “This area has been growing and had a nice spurt with the oil resurgence, but I think it has slowed like everything else.”

However, there are still projects to bid on, says Jerry Nevlud, president CEO of the Houston Chapter of the Associated General Contractors. But “there are a lot of projects on hold, waiting to be released,” he adds.
“It has to do with the credit market.”

Bill Scott, division president of Linbeck in Houston, calls Houston an interesting market.

“We now know we are not immune from national developments, but Houston is still significantly below national unemployment,” says Scott, cautioning that it will likely go up to 9%. “We are experiencing a greater swing than we anticipated earlier in the year. We are seeing fewer opportunities, and the major institutional entities that have put projects on hold are a little surprising.”

Scott says that the University of Texas M. D. Anderson Cancer Center is completing its current projects but has canceled requests for proposals associated with its $5-billion building campaign. In addition, St. Luke’s Episcopal has put its Texas Medical Center projects on hold to concentrate on less capital-intensive jobs at its community hospitals. And Baylor College of Medicine decided to let Linbeck finish the exterior of its new hospital but not the interior build-out and core.

“We have not seen any of the larger hospital [projects] come out,” adds Kamal Ariss, vice president of JE Dunn Construction South Central in Houston. “I think a lot of them are on hold until the economy turns around.”

Randy Sahni, president of Llewelyn-Davies Sahni, a Houston architecture and urban design firm, adds that health systems also have cut their capital plans as money dried up. The American Hospital Association indicates 82% of hospitals it surveyed have put capital projects on hold. Forty five percent of respondents said they postponed a project planned to start within six months, and 13% said they stopped capital projects already in process.

A matter of perspective

Contractors’ perspectives seem to depend on their areas of expertise. Pat Pinkerton, president and CEO of PRP Construction Co. in Tyler and a TEXO member, which focuses on school and church projects and selfperforms much of its work, says, “The East Texas area has not been hit by the economic downturn at this point,” although some private owners are waiting to start new projects.

RPR is currently working on the $14-million, 87,000-sq-ft Clarkston Elementary School in Tyler and recently completed the $5.5-million, 45,000-sq-ft gymnasium for the Eustace Independent School District in Eustace. On the private side, RPR is building a $3.5-million, 28,000-sq-ft athletic center for the Brook Hill School in Bullard. The company is constructing a $4.9-million, 25,568-sq-ft, four-story building for Christ Episcopal Church in Tyler.

TEXO member H.E. Wright & Co. of Texarkana had focused on private work, but as that market dried up, the company pursued government jobs, such as remodeling and upgrading facilities at the Red River Army Depot.

“Government is about the only growth industry in the United States,” says William Wright, vice president of H.E. Wright.

JE Dunn also is pursing government contracts. The company recently broke ground on the $58-million Fort Bend County Courthouse, scheduled for completion in April 2011. It expects to begin construction this year on the City of Houston’s $28-million fleet maintenance facility and to break ground in January on a fire station in Houston.

“Public work is progressing but is more competitive,” Russell Hamley, president of the Associated Builders & Contractors Greater Houston Chapter, says in an e-mail. “The quantity of bidders on public projects has drastically increased, and the list includes a lot of out-of-state contractors.”

Health care

JE Dunn is working on projects for St. Luke’s Episcopal Health System and Memorial Hermann Health System in Houston, including a $6.5-million addition and exterior renovation at St. Luke’s to house a linear accelerator.

More than $3.3 billion in construction projects are under way at the Texas Medical Center in Houston. McCarthy Building Cos. in Dallas is working on a $223-million,12-story vertical expansion at the University of Texas M. D. Anderson Cancer Center. Tellepsen Builders of Houston is building the Jan and Dan Duncan Neurological Research Institute at Texas Children’s Hospital, and W.S. Bellows Construction Corp. of Houston is constructing a maternity center at the pediatric facility.

Hensel Phelps Construction Co. of Houston expects to complete the $237-million Methodist Hospital System Outpatient Center in 2010, and D.E. Harvey Builders of Houston is building the $218-million Methodist Hospital Research Institute. Linbeck continues exterior work on the $230-million Baylor Clinic and Hospital for the Baylor College of Medicine.

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