Is The Building Boom In Texas For Real? You Can Bet Your Boots On It JD April 4, 2015 entrepreneurship 178 The questions revolving around the construction boom in Texas are basic. What is causing the current boom? Is it a sign of solid job growth or is it just part of a spending bubble that will soon burst? Statistics around the country show that the industry as a whole is on the rebound after taking a pummeling during the so-called Great Recession. The reason construction took a beating was simple: it was the home building boom that had turned into an economic bubble that, when it burst, started the recession in the first place. Unto itself, a bubble in the housing market should not affect anyone outside of home buyers, real estate agents or construction firms. But the building boom was supported by millions of subprime home loans that proved to be too risky and, when the subprime lending market collapsed, the financial industry was stricken. Banks, which help keep the economy lubricated, could not maintain their dangerous lending pace and most of the greater economy took a hit when lending froze. But construction and banks bore the brunt of the damage. Month after month after month, construction jobs evaporated. By the time the dust had settled, the industry had lost a total of 2,203,000, down from a peak of 7,726,000 jobs, which came about in April 2006. To put it into perspective, construction industry losses averaged 49,000 per month from December 2007 through September 2008. But those losses only accelerated to an average of 115,000 per month from September 2008 through June 2009. In total, 19.8 percent of the jobs in the industry were gone, which was the largest percentage of job loss in any industry outside of farming. But now, the comeback, which began in 2012, appears to be stable, although it is a long way from returning the industry to its glory days of 2006, when there were 3.5 million jobs in home construction alone. All told, according to the U.S. Labor Department, construction added 44,000 jobs in December 2014 and 39,000 in the following month. In the 12 months prior to that point, construction added a robust 308,000, a pace that would require six years for the industry to get back to its pre-recession numbers. That said, the new jobs are sprouting up in four specific areas: Texas, Florida, Nevada and North Dakota and this tells us quite a bit about the comeback. First, you can’t have a construction comeback without some return to normal lending patterns. That’s a given. Second, construction is booming in North Dakota due to a natural gas mining boom brought on by the advent of fracking. This has some showy percentages, but even twice the normal amount of construction jobs in North Dakota is not saying much: The entire population of the state is still under 1 million people. That said, the 2014 US Census pegged the population of North Dakota at 739,482, a 9.95 percent gain from 2010, making it the fastest growing state in the union. By contrast, there were 25.26 million people living in Texas in 2010 and 26.96 million in 2014, a 6.73 percent increase, which isn’t as dramatic a climb as North Dakota’s. In the aggregate, however, there is a huge difference. In Texas, 1.7 million people were added to the state’s population over those four years, a gain more than twice the entire population of North Dakota. That gain means construction jobs. Those 1.7 million people demand a certain amount of new or renovated living space and a set amount of jobs with the necessary commercial space to accommodate those jobs. In the urban areas, offices, apartments, retail and service oriented space is needed. In the suburbs, non-industrial commercial space and residential housing projects came around. Metal buildings in Texas associated with expanded storage and distribution centers were now on order. In April 2014, the NewsMax reported that 60 companies had left California alone just to relocate in Texas. It was no coincidence, the report said, that in January 2014, California lost 31,000 jobs, while Texas in the same month gained 30,000. The Internet also accounts for some of the shifting demands in construction. Jobs prior to the recession in retail required shopping malls and other similar retail spaces. By the end of the recession, the Internet had proved its worth as a retail venue, which meant more distribution centers and fewer stores were required for commerce to keep operating. Population growth matters, but even if the population was stable, the demographics are pushing demand in a new direction. Baby boomers are moving in their retirement years, meaning there will be a greater call for healthcare and for retirement living accommodations in southern communities. In some communities, this might also trickle into a demand for retail stores, and for leisure activity accommodations, such as golf courses and tennis courts. In Texas, the new emphasis in healthcare has also become readily apparent. KERA News reported recently (in February 2015) that there was so much new construction in the medical district of Dallas that the area could now claim to have a skyline of its own. UT Southwestern had just opened the state-of-the-art William P. Clements Jr. University Hospital and and Parkland was set to follow suit with a $1.3 billion facility. And these were big projects, weighing in at 1.3 million and 2 million square feet respectively. Officials expect 30,000 patients each day will use the Parkland facilities, which has 862 beds and parking for 2,000 vehicles and for two medical helicopters. A report complied at the Maguire Energy Institute at Southern Methodist University said that even rural Texas was enjoying a “significant” boom, thanks to the new Gulf Coast Pipeline. The Cushing, Oklahoma, to Port Arthur, Texas, leg of the Keystone Pipeline, which is complete, has brought with it $3.6 billion in new economy to 17 counties in Texas, the report said, including $1 billion in wages for area workers. “Business owners in Texas and Oklahoma reported large increases in volume due to the construction of the pipeline,” the report said. “TransCanada spent approximately $6 million a month directly with local businesses during construction. Wood County located in East Texas received the biggest infusion with $290 million in new economic activity,” according to the U.S. Chamber of Commerce.