...wind-farm construction will resume. I think there will also be more transmission lines built.” Clower says it’s a great time to proceed for owners with the resources to move forward.
“There are some good deals for people in a position to begin construction projects,” he says. “Construction companies are hungry. In some cases, even larger firms are doing deals where they will shave as much as they can because they want cash flow. They want to keep crews in place.”
And what has stalled Simonson says office, warehouse and hotel markets will remain weak in Texas, but he thinks there is some hope for retail.
Private development will not move forward until the credit markets loosen up.
“Now you have absolute craziness in the market,” and even companies with well-performing loans are having a hard time refinancing, Clower says.
But he says that local and regional banks have started making loans.
“Regional banks are important players in helping to promote what activity is out there,” Clower says. “But they lack the capacity to supplant what would have been done by the major banks.”
In addition, high commercial vacancyrates and a substantial inventory will deter developers from starting new projects, Clower and Meiners say.
“There’s an awful lot of unallocated office space, and it will take time to clear the inventory and for people to feel confident to put money in,” Meiners adds.
Cushman & Wakefield of Texas reports an office vacancy rate of 27.1% in Dallas and 12.8% in Houston in the second quarter of 2009. The rate in both markets declined slightly from the first quarter of 2009.
Meanwhile, residential construction may present an area of opportunity.
“Housing starts will begin to build some momentum but will not approach previous peaks,” Perryman says. “Texas did not overbuild as much as other areas and stopped major development early in the cycle. Thus, we are already absorbing inventory. Prices have held up reasonably well, and foreclosure rates have remained steady in the state.”
Clower expects home construction to pick up in the second half of 2010. He anticipates mortgage rates will remain low and reports that major builders have pulled back, so their inventories are down. Meiners reports residential sales have picked up, but a large stock of unsold homes remain.
“Until the backlog is cleared, we will not see a rapid increase in residential construction,” he says. In addition, migration to the state has slowed as jobs dried up.
Caution prevails While most experts project slow growth in 2010, there are no guarantees. Clower cautioned that the country could experience a double-dip recession. He adds that employment must improve before the economy truly recovers.
Meiners adds that growth could increase to 1% to 1.5%.
“That’s piddly,” he says. “It will take a lot of years at that growth rate to dig out of a hole.”