Trendmaker Homes’ President Will Holder interviewed by Houston Business Journal
How Falling Oil Prices Will Affect Houston Construction Boom
Houston developers are casting a wary eye toward falling oil prices and its potential impact on construction projects.
Over the past six months, crude oil prices have plummeted from more than $100 a barrel to less than $60 a barrel. The tumbling oil prices are causing energy companies to scale back on costs, curbing new hires and cutting employees.
However, if oil prices continue to plummet or remain low, energy-related construction projects could be delayed or cut, according to CBRE Group Inc. (NYSE: CBG).
At Houston law firm BoyarMiller’s annual forum on real estate, industry experts shared their insights on how oil prices could affect residential and commerical development in town.
The energy sector has fueled the population boom in Houston. The strong job market has attracted thousands of new residents to town — 450,000 people between 2011 and 2014 — increasing demand for homes and apartments.
While energy companies will likely add fewer jobs to the local economy, Houston’s diverse economy and latent housing demand will carry housing through the next couple of years, said Will Holder, president of Houston-based Trendmaker Homes.
“We have enough steam built up to push us through the oil dip,” he said.
While commercial projects in west Houston may take a hit amid falling oil prices, there are new opportunities for growth in east Houston, said Welcome Wilson Jr., a principal with the Welcome Group LLC, a Houston-based industrial owner and development firm.
While high oil prices are a boon to west Houston’s upstream petroleum sector, low oil prices benefit east Houston’s midstream and downstream sectors, Wilson said.
As the oil cycle changes, more commercial, industrial and petrochemical projects may be built on the east side of Houston, he said.
“Fortunately in Houston, we have a counter balance,” Wilson said. “Maybe we’ll have some people building office buildings on the east side of town in the next few years.”
As energy companies scale back their budgets, they will likely consolidate their operations and look for smaller offices. Others may look at mergers and acquisitions.
Jonathan Brinsden, CEO of Houston-based Midway Cos., predicts an uptick in renegotiated office leases. And if oil prices fail to climb up soon, office projects — both underway and proposed — could be mothballed.
There are 16 projects planned for the fast-growing Energy Corridor, representing 8 million square feet of office space.
“That’s the big question,” Brinsden said. “Which, if any, are going to get built?”