Rising above inflation: Texas experts pave the way for construction success and innovation

Posted on by Mia Goulart

Inflationary pressures in the commercial real estate construction industry in Texas have presented significant challenges for contractors and developers. According to industry experts, the consequences of inflation and its far-reaching effects are becoming increasingly evident.

Project costs in Texas have surged by over 30% in the span of three years, accompanied by interest rate increases by the Federal Reserve, explained Tim Sommer, president of SPD Construction. This inflationary environment is expected to result in shrinking backlogs for private sector contractors well into 2024.

“Thankfully the population growth in Texas has given developers the confidence to continue pursuing projects despite the cost,” Sommer said.

John Atcheson, president of ARCO Design/Build, said his company’s cost-tracking history reveals the initial onset of inflation pricing came in late 2020, peaking in June 2022.

“We have seen tremendous pressure on the construction industry to keep up with the demand of the robust industrial distribution and warehouse market,” Atcheson said. “The outright demand for warehouse and distribution space, plus the inflationary market, created a perfect storm for cost increases and material supply issues.”

The uncertainty and volatility introduced by inflation have strained relationships among stakeholders in the CRE sector.

“The standard language in contracts that was typical for many years suddenly became scrutinized by all sides,” said Michael G. Scheurich, CEO of Arch-Con Construction.

Then, he added, financing projects became more arduous and time-consuming. Higher interest rates, construction costs, land expenses and equity requirements make it less likely for projects to advance to the construction phase, despite strong demand.

Although short-term trends suggest a slight decline in construction pricing on average, the industry still grapples with the consequences of inflation. While a return to pre-pandemic pricing levels may not be feasible, the short-term expectation is for construction pricing to continue decreasing if demand slows due to rising costs and the Federal Reserve’s persistent upward pressure on monetary policy.

There are positives to be found. Progress is being made in addressing supply chain challenges, which have plagued the construction industry for several years now.

“The lingering issues that the market is still experiencing are secluded to electrical components and concrete cement supply increased costs,” shared Atcheson.

Scheurich said delays with items such as doors and hardware, glass and glazing and appliances have seemingly been resolved. Like Atcheson, he is concerned about availability of gypcrete, cement and other gypsum products.

“Most other construction materials have returned to an about-normal timeline,” Sommer said.

Texas construction companies have been proactively managing the challenges they face by adopting effective strategies. Communication plays a vital role in mitigating project costs and timelines, experts told REDnews.

“Some projects are subjected to cost overruns and delays, but by communicating up and downstream, relationships can not only be salvaged, but reinforced,” shared Scheurich.

By establishing early and transparent communication channels with clients, companies can convey project constraints and explore alternative methods to minimize impacts.

“Our clients enlist our services very early on in the design process to make sure procurement issues are addressed,” said Sommer.

ARCO Design/Build emphasized the importance of agility, risk reduction and efficient project completion. Open lines of communication have been crucial in informing clients about evolving market conditions, including supply chain issues and inflationary pressures. Early and frequent communication allows for dialogue and proactive measures such as releasing materials ahead of time to ensure uninterrupted project timelines.

“We openly communicated cost implications on the front end of the project before a contract was signed, so everyone could understand the impact on the development. Once the contract was signed, we held our ground and kept our word,” said Atcheson. “One of our core values is ‘treat people fairly and do the right thing’ and that’s what we did.”

Maintaining strong relationships with clients and vendors is a key priority for companies like Arch-Con Construction as well.

“Adverse conditions like what we have encountered the past few years make great companies stand out, make good companies get better and make bad companies go away,” Scheurich said.

Some companies are looking to an innovative approach to address some of those issues: 3D printing.

CIVE, a leading company in the construction industry, is collaborating with PERI 3D Construction and HANNAH Architecture to create the first multi-story 3D-printed home in the United States. Over the course of two years, extensive lab testing was conducted to refine the concrete mix and perfect the home’s design.

“The objective of this project was to test the architectural limits of what 3D printing can do, gather data on the process, and use this information to scale 3D printing towards affordable multifamily housing in the commercial sector,” explained Leci Wood, marketing coordinator for CIVE, which is serving as the general contractor for the project.

The inspiration behind CIVE’s foray into 3D printing stems from the visionary mindset of its president and CEO, Hachem Domloj. With a deep interest in technology and innovative construction techniques, Domloj recognized the potential of 3D printing to revolutionize the industry.

“[It] allows faster, less expensive, stronger, weather-resistant solutions to some of the most common issues that the commercial sector faces,” Wood said, adding that 3D printing allows for architectural complexity without the need for costly cold form techniques.

Beyond their pioneering 3D-printed home project, CIVE has a robust pipeline of more than 1000 multifamily units under design, permitting and construction. The company envisions transformative 3D-printing developments that have the potential to revolutionize the construction industry and challenge conventional building practices.

“CIVE strives for excellence and beyond. We add value to every project we take part in and we believe in achieving higher than industry standards,” said Wood. “We’re looking to lead the design/build industry into the future not just with 3D printing, but by designing new and innovative ways to approach all the sectors: multifamily, retail, mixed-use, entertainment, hospitality, medical office, industrial, etcetera.”

Despite the significant challenges posed by inflationary pressures in the commercial real estate construction industry in Texas, companies have demonstrated resilience and adaptability. Contractors and developers have navigated rising project costs, supply chain issues and strained stakeholder relationships through effective strategies and open communication. With their experience, strategies and forward-thinking mindset, these Texas experts are well-positioned for success in the coming years, building our future.

Office experts added to JLL’s Value and Risk Advisory platform

Posted on by Mia Goulart

JLL’s Value and Risk Advisory platform has hired Nick Askew as a director in Dallas, Texas, and Tom Jeffries as an executive director in Denver, Colorado. The duo will focus on office and mixed-use value and risk advisory assignments in their respective markets as part of the group’s U.S. office sector team led by Senior Managing Director Adam Dembowitz.

  • Nick Askew
  • Tom Jeffries

Askew joins JLL from BBG, Inc. where he worked in a similar capacity performing valuations across a wide range of commercial real estate both locally in Dallas and nationally. He is an active member of The Real Estate Council Young Guns and Appraisal Institute. Askew graduated from the University of Massachusetts Amherst.

Jeffries has more than 18 years of experience in commercial real estate spanning a variety of underwriting, mortgage banking, consulting and valuation services. He spent over six years managing the Rocky Mountain region for Duff & Phelps Real Estate Advisory group servicing major institutional clients. Jeffries is a designated member of the Appraisal Institute, an accredited senior appraiser for the American Society of Appraisers and is active in the National Council of Real Estate Investment Fiduciaries (NCREIF). He holds a Master of Urban and Regional Planning degree from the University of Colorado at Denver.

Class A multi-housing asset in Dallas trades

Posted on by Mia Goulart

JLL Capital Markets has closed the sale and arranged the acquisition financing for AMLI Design District, a 314-unit, Class A, mixed-use, high-rise multi-housing asset located in Dallas.

JLL represented the seller, AMLI Residential, and procured an international real estate investor as buyer, HASTA Capital. JLL worked on behalf of the new owner to secure acquisition financing through Freddie Mac Multifamily. The loan will be serviced by JLL Real Estate Capital, LLC., a Freddie Mac Optigo℠ lender.

The JLL Capital Markets Investment Sales and Advisory team was led by Senior Managing Director Roberto Casas. The JLL Capital Markets Debt Advisory team was led by Senior Managing Directors Melissa Quinn and Lee Weaver, Vice President Rob Rothaug and Analyst Cristian Sieman, with an assist from the local Dallas Debt Advisory team, including Director Lauren Dow and Associate Chris Grievous.

Originally built in 2013, AMLI Design District consists of 312,806 square feet of residential space, 26,830 square feet of ground-floor retail and an expansive covered parking garage with 664 spaces. The property features studio, one- and two-bedroom units with gourmet kitchens, stainless-steel appliances, spa-style bathrooms, walk-in closets, full-size washers and dryers, quartz countertops, floor-to-ceiling windows and hardwood-style vinyl floors. Community amenities include an infinity-edge pool, a pool deck with private cabanas, premium outdoor grilling stations, a coffee bar and skyline lounge, complimentary bike rentals and personal bike storage, a pet spa, indoor and outdoor pet parks, a state-of-the-art fitness center, an executive conference room and more.

Situated at 1400 Hi Line Dr., the property sits within the Dallas’s popular Design District, which is a part of the greater Intown submarket and is best known for high-end retail shops, luxury showrooms and eclectic dining experiences. AMLI Design District is conveniently located directly off of I-35E, allowing visibility to approximately 250,000 vehicles per day and providing residents an eight-minute drive to the employment hub of downtown Dallas. Additional proximate demand drivers include Victory Park, Uptown, the Dallas Medical District and Downtown Dallas, Harwood district, the Northend redevelopment, Klyde Warren Park and Deep Ellum. The property also is just a 20-minute drive to Dallas Fort Worth International Airport.

JLL delivers multi-housing investors a full range of solutions through one diverse, integrated platform. The division employs approximately 400 professionals who provide comprehensive investment sales and disposition services with access to thousands of domestic and foreign investors. JLL is also one of the nation’s largest affordable and conventional multi-housing and seniors housing lenders with comprehensive loan underwriting, asset management and loan servicing capabilities. Agency/GSE lending and loan servicing are performed by JLL Real Estate Capital, LLC, a wholly owned indirect subsidiary of Jones Lang LaSalle Incorporated. Loans made or arranged in California are pursuant to a California Financing Law license.

Highly specialized industrial real estate professional joins Stream Realty Partners’ Houston team

Posted on by Mia Goulart

Stream Realty Partners has recruited industrial real estate professional Thomas (Tommy) Erwin to help accommodate users with heavy manufacturing needs throughout the Houston region. 

Erwin joins Stream, a national commercial real estate firm offering an integrated platform of services, as a vice president in its Houston office, responsible for industrial tenant representation, transaction management, and new client and business pursuits. His background in mineral acquisition and divestiture lends him a unique perspective and skillset in seeking out opportunities of maximum value for clients. Erwin will work closely with Managing Director Tyler Maner to expand the company’s industrial services platform across the Houston metro market, specifically in the port sector.

Erwin comes to Stream from Moody Rambin, where he spent the last four-plus years as a member of their industrial and investment services team, focused on tenant representation, landlord representation, and investment services. While there, he focused on the heavy industrial manufacturing sector covering port cities throughout the Gulf Coast. This specialization encompasses a wide array of services, including facilitating acquisition and disposition of properties on behalf of Fortune 500 companies, locally owned operations, and high net worth family offices. Throughout his career, he has utilized his expertise to provide dedicated solutions across the expansive landscape of Texas’s industrial marketplace.

Erwin was a recipient of NAIOP Houston’s Rising Star award in 2021, which recognizes real estate professionals within the Houston community that exemplify the most outstanding qualities in the commercial real estate industry, including transactional standout, client service, community involvement, and mentoring young professionals. As a seventh generation Houstonian, Erwin is deeply entrenched in the local community, serving as a member of JH Outback Texas’s Executive Committee. 

Two newly built, adjacent retail properties in suburban Austin secure acquisition financing

Posted on by Mia Goulart

JLL Capital Markets has arranged the acquisition financing for two, newly built, adjacent retail properties located in the Kyle Crossing mixed-use development within the Austin suburb of Kyle, Texas.

JLL worked on behalf of the borrower, Door Capital Partners.

The Kyle Crossing mixed-use development provides space for a variety of businesses, including retail, health and wellness, restaurants and entertainment. The two retail buildings are a part of the Kyle Crossing Phase II development and are 100% occupied on a triple-net-lease basis. The 7,254-square-foot building is anchored by Chipotle and is also leased to Crumbl Cookies and Heartland Dental. The second building is 6,913 square feet and is anchored by Black Rock Coffee. Additional tenants include Spoon & Fork and Every Nails Bar.

Located at Marketplace Avenue and Kyle Parkway, Kyle Crossing Phase II is 20 miles from Austin. The buildings are walkable to 1,100 multi-housing apartments and are within proximity to a Target, Kohl’s, Petco, Ross and HEB. The Village at Kyle is across I-35 to the east and includes the 300,000-square-foot Seton Hospital with up to 600 employees and approximately 150 beds, 100,000 square feet of medical office space, a Wal-Mart Supercenter and Lowe’s. Within a five-mile radius is a population of 200,000 and an average household income of $100,000.

The JLL Capital Markets Debt Advisory team representing the borrower was led by Senior Director CW Sheehan and Analysts Kaitlin Kane and Hunt Wood.

The Austin JLL Retail Brokerage team represented the seller.

CBRE arranges sale of Expo Center, a 28,119-square-foot shopping center in Rowlett

Posted on by Mia Goulart

CBRE announced the sale of Expo Center, a 28,119-square-foot shopping center in Rowlett, Texas. The property is located at 3801 Lakeview Parkway and sits on 3.35 acres. A local Dallas private investment group purchased the property from Standridge Companies.

Jared Aubrey and Michael Austry represented the seller in the marketing and sale of the property.

Located along Lakeview Parkway just one mile east of Lake Ray Hubbard, the center is 100% leased to nine retail tenants, including Fresenius Medical Care, Golden Pot Chinese and Opa! Greek Taverna. The property gardened significant investor interest due to its replaceable in-place rents and limited competition as this is one of the few properties in the surrounding area that has full-service restaurant options.