Construction Law Update: Industry Outlook

Author: Luis Galindo and Dan Tobin

Part of the due diligence SettlePou’s Construction Law Section performs annually is to assess the outlook for the industry in the upcoming year in order to anticipate, and prepare for, the legal issues our construction clients are likely to encounter in the near future.

In considering what’s ahead in 2019, there are good reasons to be optimistic about the construction industry as is reflected in recent industry studies, including Deloitte Consulting’s 2019 Engineering and Construction Industry Outlook, Dodge Data & Analytics’ New Construction Starts in 2019 to Hold Steady with 2018 Amount, Texas A&M’s Real Estate Center’s November 2018 Data, which appear to point towards continued growth albeit at a slower rate.

But with the headwinds of labor shortages and material price volatility we wanted to get the impressions of local industry experts and community leaders to compliment the industry data.

Honorable Oscar Trevino is the Mayor of North Richland Hills and also the Owner and President of O. Trevino Construction, LLC (www.otconst.com) and he told SettlePou: “I see the future of the construction industry to be strong in both 2019 and in the foreseeable future. The need for continued maintenance and expansion in both the public and private sector will continue. The viability and attraction of the North Texas Area to other parts of the country will not be changing in the next few years and with this attraction, the need to build for those coming this way will continue.”

John Avila is the Chairman of Byrne Construction Services (www.tsbyrne.com) and he shared with SettlePou that he is also optimistic. “For 2019 construction starts will hold steady in the DFW market. Greater funding from state and local bond measures will provide work in the public sector. Corporate relocations and expansions in the private sector will provide opportunities. While healthcare projects waned a bit at the end of 2018, both public and non-profit hospital systems will recommence ancillary type medical projects to their campuses. While the overall US economy will not be as strong as 2018, it will remain steady. Construction in the commercial markets will grow by 3% over last year. All in all, 2019, should be a good year for construction companies.”

Jim LaCamp, Senior Vice-President with UBS Financial Services, Inc. (jim.lacamp@ubs.com), told SettlePou that the economic outlook for our region also supports this optimism. “Much has been made of the many concerns of investors, Wall Street and Main Street as well. There are concerns about the trade wars, the Government shutdown, the Federal Reserve and the policy wars in Washington. Sometimes it is hard in environments like these to ignore the headlines and go about your daily business. Here is what you need to know. We interviewed Dallas Federal Reserve Board President Robert Kaplan and he confirmed as we believe, that business here in Texas remains strong, inflation is low, interest rates on the 10 year Treasury Bond are now down to 2.744% and mortgage rates have come down as well. The unemployment rate is at multi decade lows. In other words, if you ignore the headlines, things aren't bad at all. The economy is decelerating to be sure, but from a very good level. 4th Quarter GDP is tracking at 2.7%, according to the Atlanta Fed. That may be slightly above consensus, but it's close, that’s not too bad! Once some of these uncertainties resolve themselves, and we think they will in the first half of this year, the economy could reaccelerate. The bottom line? Focus on what makes you, your business and your life successful and NOT sensational headlines!”

While there may be some cautionary winds blowing created by uncertainty in the labor and materials markets, the data and industry experts all agree that the strong demand for services and strength of the local economy should lead to another positive year in the construction industry in 2019.