By Jennifer Hiller
San Antonio Express-News
Oil and gas production has attracted a slew of new hotels, truck traffic and RV parks to South Texas.
Will the boom bring any actual houses too?
While San Antonio-area developer Abrego Development Co. LP is one of the few developers working on a traditional neighborhood in the shale play, San Antonio-based Koontz McCombs is moving into South Texas with furnished, semipermanent homes.
The boom-and-bust nature of the oil business has made many developers and investors reluctant to pour foundations for homes and create new, more traditional single-family neighborhoods to serve the tens of thousands of oil field workers who have poured into the area.
“It’s a risk issue,” said developer Bart Koontz. “It’s all about handicapping the risk.”
So-called corporate “man camps” and mom-and-pop RV parks continue popping up across the shale play. Hotels have leased their rooms — all of them — for years at a time. And seminars for members of the Greater San Antonio Builders Association have encouraged local builders to ply their trade in the Eagle Ford Shale counties.
But even those investing in the play are hedging their bets.
“You’re concerned about the longevity of the oil play,” Koontz said. “Our idea was to take what we’ve learned from apartments but make them on the ground one at a time. We’re building small casitas the size of an apartment.”
In early June Koontz McCombs will open the first 25 units at its Sendero Ranch development in Pearsall, about 55 miles southwest of San Antonio. The first 50 units are already leased, and more than 100 are planned. The firm is working on a project in Dilley, as well.
If the boom suddenly busts, Koontz McCombs can move the one- and two-bedroom homes elsewhere. But for now, it can’t build quickly enough.
Demand is high, and it may sound like easy money, but it’s not, said Ernest Brown, managing director at the San Antonio office of Grubb & Ellis.
“I’m not going to try to run down there and make money. The guys that are going to make money are the ones who own the land the oil is in,” Brown said. “Everyone else runs the risk of doing something that’s not sustainable.”
A hotel can be paid for after three years of operating at capacity in the shale play, but Brown said that traditional neighborhoods can take years to build out.
“If it’s going to take seven or eight years, you’re reluctant because you don’t know what’s going to happen with the play,” Brown said. “Not until people feel like there’s going to be economy stability will there be home building.”
In Kenedy off of U.S. 181, Abrego Development Co. has 166 acres where it plans a mix of commercial, hotel and single-family homes.
It has an approved plat, completed engineering work and utilities and has been approached by various hotel and multifamily developers interested in buying its commercial land. But developer Kevin Brown said figuring out exactly how to approach the single-family homes been difficult.
“You have significant labor and material price increases,” Brown said. “We’re struggling to find the right mix of what we’re going to start building.”
James Gaines, research economist with the Real Estate Center at Texas A&M University, said it’s difficult to build a traditional neighborhood in comparison to a man camp.
“What do you build and where do you build it? You can’t find a bank or a lender that’s willing to back it financially,” Gaines said.
And although the play could continue for decades, Gaines said most developers will wait to find out how many workers will remain when the drilling is done to operate and maintain the wells and pipelines.
“What’s the headcount?” Gaines asked. “How many servicers and operators are really left?”
Still, Richard Dockery of Dockery and Associates in Three Rivers thinks many workers will want to buy homes soon — if they can find them. He said the bulk of the housing stock across South Texas communities was built during previous booms and is now 30 years old or older.
“We’re going to have another construction boom,” Dockery said. “It wasn’t financially feasible before. Nobody wanted to pay $100 a square foot for new construction because they didn’t have a job to pay that kind of mortgage. Now they are making real money.”