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Blog/December 4, 2017

Houston’s Uniqueness – Pass It On

↓ Monthly Metrics

The city of Houston received very favorable national profiling in the immediate aftermath of Harvey. The nation watched as diverse citizens melded together to become one force— humanitarian Houstonians, “their brother’s keeper.” Everyone dealt with each other with elevated appreciation, respect and pride, which fueled the Astros’ baseball team to their World Series win.

Harvey catalyzed and focused this spirit for a few special weeks, but these qualities of appreciation, respect and pride have underpinned the commercial construction industry in Houston for well over 100 years. Houston contractors, both general and specialty, along with the supplier and service firms, have preferred to do business with one another as they have built the support facilities for Houston’s four dynamic industries – energy, medical, NASA and the port of Houston. The local industry participants have developed the capacity to build any type project. They have been perpetual learning organizations, so they can continue to build innovative structures demanded by the global organizations based in Houston. Owners and developers recognize they get world-class competitive value. Rarely has it been necessary to go outside Houston’s deep and competent pool.

Consequently, these local parties work with each other frequently, and, over the years, people have built deep relationships, many of them true friendships. This has created a defined and palpable culture among the parties to the construction process in the Houston area. FMI defines culture as, “who we are and how we behave.” The Houston commercial building community would respond, “We are a group of industry participants who play our roles with world-class competencies. We behave with candor, courtesy and civility.” Every firm has pride in its people, its processes and the projects. It also has pride in its building partners. This mutual pride promotes highly ethical standards; people treat each other as respectful partners and friends.

The validation of this respectful culture is best seen in examples of companies, headquartered in other cities, that open offices here. If they honor this local culture and play by the “rules of the local game,” they thrive and prosper. There are many examples. Conversely, there are firms that came in with arrogant and superior attitudes, treating local firms as subservient and stupid, dealing with people rudely and demeaning them. Most, gratefully, have been one-job wonders. They have been sent packing with wounded hubris and lighter wallets.

This culture gives Houston a uniqueness, a positive differentiator. This construction market appears to be an oasis of civility, of character-based behavior among participants. It provides optimism and hope in the sea of pettiness visible everywhere. The key now is to preserve it as baby boomers who model It retire and a new generation takes the leadership oars. Leaders, who will pass the baton, need to make certain their successors have a demonstrated history of honoring this local code and a commitment to maintain and strengthen it moving forward. It is the best legacy they can leave!


Houston’s Monthly Metrics

While the worst still appears to be behind us, resulting in possibly the mildest recession Houston has ever experienced, the bathtub-shaped recovery that Patrick Jankowski, vice president of research at the Greater Houston Partnership, outlined a year ago continues to hold true. Jankowski characterized it as a wide bottom followed by a quick recovery. And the wide bottom persists.

Economist Dr. Bill Gilmer, who currently heads the Institute for Regional Forecasting at the University of Houston, recently presented his forecast for Houston’s economic future, and it echoes Jankowski’s sentiments that this long, slow recovery will continue, and the recovery timeline, according to Dr. Gilmer, will be heavily contingent on the future price of oil. Providing headwinds to Houston’s recovery are that most of the economic drivers that propped up our city for the past few years are now waning. The east Houston petrochemical boom has peaked and begun to decline. Oil and gas employment continues to flatline, and the market segments playing catch-up to our fast growth in the first half of the decade have now caught up. The only driver that remains is the U.S. economy’s strength.

So when can we expect oil prices to recover? Both Jankowski and Dr. Gilmer agree that $60 oil appears to be the “sweet spot” to get the economic engine humming again. And both agree that oil prices bottomed out last year and aren’t expected to drop back into the $20s again.

As for 2018, Gilmer gave three scenarios for job growth in Houston, each dependent on when oil prices were to rise. Those scenarios range from 20,000 jobs to nearly 70,000, with the most heavily weighted scenario seeing Houston add approximately 41,000 jobs next year, still below Houston’s long-term average, which Dr. Gilmer attributes, in part, to net migration numbers, which are lower as fewer people move to Houston for work. Drilling activity will dictate which scenario will play out, but all three scenarios show growth, which should be a confidence booster for Houstonians. Houston is recovering, but at a continued slow pace.

The construction industry lags the economy, suggesting another lean year or two for contractors while Houston finds its footing. The Super Bowl, Hurricane Harvey and the World Series all provided temporary boosts to our economy this year. Looking to 2018, the residential market should see some growth as developers have rerouted their efforts to the entry-level home, where a large amount of pent-up demand exists. Public work will continue to dominate the commercial projects. Voters recently approved over $2 billion in school bonds in the greater Houston area, giving districts the funds for much needed upgrades and repairs. Rumors surrounding medical work in 2018 are also being relayed.

November 2017 Approved School Bonds

Spring Branch ISD$898.4M
Katy ISD$609.2M
Lamar CISD$445.4M
Tomball ISD$275M
Stafford ISD$62M

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