What’s on the Drawing Boards for 2022?

Ralph Bivins of Realty News Report: The latest edition of The Ralph Bivins Project podcast, with Ralph Bivins, features an interview with Michael Scheurich of Arch-Con Corp., a Houston-based commercial general contractor that builds multifamily, industrial, office, hotels, retail, medical properties and other properties. Arch-Con recently opened a regional office in Denver.

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RALPH BIVINS: Michael, you’re on the leading edge of what’s being planned and built. What is getting ready to happen?

MICHAEL SCHEURICH: Thank you, Ralph for all you’ve done to keep the people informed about the real estate market and putting Houston’s best foot forward. I grew up in Beaumont, but I settled in Houston in 1995 after a few years in Dallas. Houston is my home and I’m interested not only in where the city is headed, but also the future of the state of Texas.

As to the future, I am always trying to read the tea leaves. Today, those tea leaves are hard to decipher because there are so many things moving in different directions, economically, in the local, state and federal markets. Right now, the real estate market is a bit bifurcated. We operate a commercial construction company in several states, cross-country. We are a company built on the backbone of eight product types, so we are very much in tune with the industrial, multi-family and hospitality sectors, among those eight types.

RALPH BIVINS: What about the market? There are some hot spots and cold spots.

MICHAEL SCHEURICH: I say the market is a little bifurcated because some of these sectors are rising off the charts, like we’ve never seen before. Look at the industrial market. The growth is staggering. Look at the warehouse absorption numbers – Dallas, close to 40 million feet in a year; Houston, close to 26 million feet. These are incredible. What’s next?

The demand is so great, because of e-commerce and because of people who resisted e-commerce in the beginning because of the pandemic. They now find that they have to use it, or projects won’t get done. At Arch-Con, we used to be a company in Houston that was doing a lot of manufacturing types of industrial buildings, crane-served. The users had big oil field support services to provide equipment for.

Now, the market has changed. Buildings are now very, very smart. Industrial buildings used to be big, dumb boxes. Now, the guts inside them are a lot more expansive than ever before. We are now creating dark buildings. You can’t walk inside of them; it’s hazardous because of all the machines.

I think the industrial market is one of the most interesting real estate places now. That’s why everyone is jumping into it. Go across the board and you can see all the people investing in industrial real estate right now. It’s phenomenal. This is a true shift in how we are functioning as a society.

RALPH BIVINS: Industrial real estate is hot. What else?

MICHAEL SCHEURICH: Number 2, multifamily. This sector is a rocket ship, the demand is so great, so high. And then, on the other end are offices. This segment is in a very weird place. And there’s work-from-home, another paradigm shift. There are assets out there that had been struggling, but who are now reallystruggling to try and identify what they are going to be.

RALPH BIVINS: Arch-Con has built its share of retail centers. But that sector took a wallop in the Covid era.

MICHAEL SCHEURICH: Our company used to construct $90 to $100 million worth of projects a year, and the business had dropped to $30 million. That happened overnight. We were building 2 or 3 big box developments a year, and that dropped to one. We feel that this segment has seen the worst of its days. Retail opportunities are beginning to climb.

Believe it or not, I’m a little bullish on brick-and-mortar development in retail.

Bio of Michael Scheurich

His passion for construction originated with a love of architecture and how buildings are designed. He entered the College of Architecture at Texas A&M University with a vision to become an architect, quickly realizing he preferred to build. This led him to obtain his bachelor’s degree in construction science from Texas A&M. His construction career began in Dallas and continued in Houston, where he served for three of the world’s top 20 general contractors. He established Arch-Con Corp. in 2000 as a resource for the local commercial real estate community in the areas of office and industrial design-build construction. Today, the company has offices in Houston, Dallas, Austin and a new office in Denver. The company has more than 200 employees and an annual volume of more than $500 million.