By Taylor Williams
New development within the Houston industrial market is increasingly skewing toward data centers and advanced manufacturing projects, creating new hurdles for architectural, engineering and contracting (AEC) teams to overcome in terms of labor and timing.
At the annual InterFace Houston Industrial conference that took place in late August at The Briar Club and was attended by more than 200 industry professionals, Jason Cooper, president at Houston-based general contractor Arch-Con Corp., immediately cited both of these issues when asked about the biggest challenges the industry faces today. Braylie Manson, business development associate in the Houston office of Texas-based engineering firm Dunaway, moderated the conference’s design and construction panel.
“The most difficult thing of the past year, excluding the past month or so, has been getting highly qualified subcontractors on board that can keep the schedules that are expected,” said Cooper. “Schedules keep accelerating; we have to turn these projects over faster and faster, so [as general contractors], we have to be very selective about which subcontractors we use to avoid delays.”
Editor’s note: InterFace Conference Group, a division of France Media Inc., produces networking and educational conferences for commercial real estate executives. To sign up for email announcements about specific events, visit www.interfaceconferencegroup.com/subscribe.
At the heart of the issue(s) is the fact that data centers and advanced manufacturing facilities, which could credibly be described as the next generation of industrial projects, tend to have technologically complex utility systems. Houston’s status as an energy hub ensures that the city always attracts and develops a healthy pipeline of engineering talent, but according to local professionals, some of these jobs are beyond the scope of many tradespeople.
“When you do a high-end, advanced manufacturing project or data center, there’s only a handful of electrical subcontractors in this city who can do that work,” said Cooper. “So even before they look for a general contractor, construction managers are courting those electricians, plumbers, HVAC technicians and fire sprinkler experts that can actually do that work. As those projects grow, it will become tougher to find the quality [of labor] to perform the remainder of the work — and to find them in numbers unless they’re brought in from out of state.”
Stephanie Anderson, president and CEO of Houston-based civil engineering firm Gradient Group, also identified timing-based issues as challenges to be regularly navigated in the current market.
“We’re seeing that the paces of owners and developers don’t match those of the permitting agencies, and in general, the ability of the jurisdictions to keep up with demand is really what’s driving delays,” Anderson said. “We can move as fast as we can, but there’s only so much that we have control over, so trying to set those expectations and understanding [for clients] of how permitting processes will go has been huge.”
No matter the labor and timing issues surrounding the individual projects, as a subcategory of industrial real estate, data centers already come with plenty of baggage. Big land footprints, tremendous power requirements and modest-at-best levels of new job growth are among the most common gripes, and the panel did not shy away from acknowledging the concerns that these projects present to their surrounding communities.
Panelist Michael Autenreith, vice president at 6E Construction, speculated that a decent percentage of data centers that have been proposed in greater Houston would ultimately not come to fruition. That said, Autenreith conceded that because of the amount of capital flowing into the data center space, those projects could very well exacerbate the shortage of highly skilled and qualified labor within the Houston’s industrial AEC pool.
“The challenge is going to be [figuring out] how we work with the subcontractors and trade schools — we may have to convince kids to skip college and become electricians,” he said with a touch of humor.
Steve Williams, partner and head of design services at Houston-based design-build firm CIVE, said that the cost of procuring subcontractors is “ever increasing,” adding that his company is focused on offsetting those costs by finding new efficiencies within sites. He gave some examples of methods and practices that AEC teams can use to help developers increase the gross leasable areas (GLAs) of their projects to combat rising development costs.
Panelist Anderson then brought the discussion back to timelines, noting that many attractive industrial sites in the greater Houston area are proximate to municipal utility districts (MUDs) and could be annexed in or tapped into for out-of-district fees. But Anderson also noted that many of those MUDs are 20 to 30 years old and are essentially maxed out on their capacities.
“A lot of those MUDs are having to expand in their plants from water and wastewater, so capacity on existing lines is used to check in advance and is even being annexed in, and that takes time,” Anderson explained. “And time is money. If that MUD doesn’t have capacity and is expanding its plants, that’s not a short time frame and could take years depending on where [that MUD] is in the [expansion] process.”
Anderson also said that the greater Houston area possesses attractive industrial development sites for which roads and access are inadequate — another potential source of delay and predevelopment cost increases.
The panel concurred that troubleshooting these types of issues as far in advance as possible is of critical importance in maintaining development schedules and budgets and cautioned that even the most attractive sites likely have a few blemishes or problems lurking beneath the surface.
“You see a nice piece of dirt, but it doesn’t necessarily mean anything until you talk to these [AEC] groups and figure out what that adds to the deal,” concluded Cooper.