The State of Industrial Development

On Feb. 15, AP Vice President of Preconstruction and Estimating Granger Hassmann participated in the State of Industrial Development and Investment panel at the 2023 North Texas Industrial Summit presented by REDnews. Here are some key takeaways from the construction side of the discussion.

There is some good news on the horizon after three years of price escalation, Granger said. A normal year of rising supply costs is about 4 to 5%. In 2021, that ballooned to 20 to 25% higher than 2020 material expenses. Last year averaged about 12 to 15% higher.

Fortunately, 2023 looks like it should relax a bit back to that standard 4 to 5% price increase. So, it’s trending in the right direction. Costs aren’t going down necessarily, but they’re not spiking like they were, he said. In some cases, you may even see some price reductions as trade partner margins are dropping due to a backlog of uncertainty. The supply chain still remains one of the most challenging aspects of the construction industry.

Concrete and steel continue to be in demand, making procurement management processes critical. Many feel the natural economic curve points to those prices starting to come down. The last two years have been shocking from a price standpoint. Simply said, it will be happier times when it is not a seller’s market and there is more control regarding buying supplies.

Regardless of the well-known supply chain issues, general contractors are still accountable for contractual completion dates even if they are having a hard time getting what they need to finish a project. But those challenges may have made AP better. To fend off scheduling problems, we had to get ahead of the game, especially when it came to structural steel, roofing, dock equipment, glass, mechanical equipment, electrical gear and generators.

It requires creative scheduling and finding suitable substitute materials. AP has done a lot of this, and it has worked out well. There is an urgency on scheduling material deliveries further in advance and being in front of issues before they occur. This often meant a bigger spike in material costs early on in a project, but it also meant fewer – or no – slowdowns because a project is waiting on high-demand materials.

The construction industry is no different from many others when it comes to missing workers. Labor issues continue to be constant. It is still a mystery to figure out where the construction workforce went. However, good construction companies will manage and make sure a project is done right. We have overcome these challenges, mainly through creating and leveraging strong trade-partner relationships. This is done by constantly communicating with our trade partners to make sure they are in alignment with our opportunities from a resource standpoint. In addition, we often right-size the scope of work to help spread the work out among the available trade partners that are interested in the project.

In the construction world, it is a supply and demand issue with workers often following the work. There are certainly more opportunities in particular sectors. The little town of Sherman, Texas, has landed two big projects in the past year including two multibillion-dollar projects for GlobalWafers and Texas Instruments, he said.

Then, you have Tesla-like projects in Austin and all of its suppliers that are going to follow it and will need warehouses.

One notable project the AP Central Texas office is working on currently is the Sunrise Commerce Center in Round Rock, Texas. AP was awarded the contract for IDI Logistics’ Sunrise Commerce Center, a Class A industrial project consisting of five speculative buildings at 2380 Oakmont Rd.

The project is IDI’s newest development on the I-35 corridor and offers numerous amenities for prospective tenants including varying clear heights, trailer parking, and excellent ingress and egress to serve the greater Round Rock and Austin areas.

AP will develop the 36-acre industrial tract and perform the tenant finishes. Construction will take place in two phases. Phase One started in September 2022 and includes three buildings totaling 310,693 square feet. It is slated to be delivered in mid-2023. Phase Two will encompass 154,967 square feet across two buildings, which will be immediately available for build-to-suit projects. The project is being built to LEED certification standards.

AP is scheduled to start work on the building foundations in March 2023.

Location matters. It’s good to be in Texas where demand is still strong. While many parts of the U.S. will experience a downturn and slowing on new industrial projects, AP is still bullish on Texas. Plus, AP has a reputation as a values-driven company, and it’s more than just a mission statement. AP is known for safety, its strong partner-based relationships, and operating with integrity.

AP is also getting more active in budgeting from the start of developments, especially with design-build projects, which are becoming more popular in our region. It is very competitive in the industrial construction world, and AP is pleased to be on a list of general contractors known for producing very good work.