3 min read February 2024 — The next big opportunity for the construction business is housing, according to Paul Basaldua, president and CEO of VersaTerra Development. “Once we see interest rates come down over the next three quarters, and we can get to 6% or anything below it, you’re going to see our marketplace take off in a pretty big way,” he told Invest: in an interview.
What is the overall contribution or impact of VersaTerra Development in the San Antonio region?
My partner and I are both very engaged with the community. He serves on the leadership group for the Greater San Antonio Builders Association, while I’m on the executive committee of the North Chamber and the Real Estate Council of San Antonio, I also serve on the Board of Directors of VIA Metropolitan. We try to look at things altruistically as to how we can elevate this community because we know if we elevate the community, it will help our company grow too.
From the company’s perspective, we support the workforce and invest in the local economy. We develop construction projects, bringing suppliers and workers together. By investing in an area, installing infrastructure, and selling lots to home builders, we create job opportunities for various construction professionals. This approach benefits the community by providing employment opportunities and stimulating business activities. Currently, 90% of our projects are focused on the south side of San Antonio, where we actively contribute to the local economy’s growth and development.
What is your overview of the industry and what opportunities do expect as you move forward?
Property values across the board, whether it be commercial, industrial or residential, have skyrocketed during the good times over the past 10 years. But with money costing what it does right now, with interest rates being higher, we’re waiting for a reset in value. I believe that in the next few quarters we will begin to witness a correction in property values, aligning them with their appropriate pricing in the current market. This shift presents an opportunity for us to acquire additional properties and prepare for further development.
What impact does continued growth in the San Antonio region have on VersaTerra and the work that you do?
This growth is a great provider of opportunities as our economy is based on growth. As a community we will benefit from an influx of domestic migrants from other states where it’s a little bit more expensive to live. We have a pretty reasonable cost of living here compared to other major cities, even within Texas, and so we’re going to use that to our advantage. I feel like San Antonio is probably the easiest place to do business. All governmental entities have tried to find ways to streamline the processes for development. Obviously, as a developer who has bought land and is paying interest on that land, it’s of benefit to me to work with government agencies that are looking to find solutions, not trying to put up barriers. San Antonio, I feel, does that very well. I’ve worked in other places where that is not the mindset.
How have the changes in the market, like labor challenges and inflation, impacted your organization?
These issues have impacted us in a pretty significant way. Labor is the biggest challenge we’re going to have as a country for the next 10 to 15 years. From my understanding, there will be a delta of 450,000 jobs that are not filled this year by people coming into the workforce, against people who are retiring, and that that will happen every year for the next 10 years, with it peaking in eight years at around 1 million. So, in 15 years, we are sure to have a major shortage of labor.
In the long term, we will likely need to address the issue of construction inflation. It has already been observed over the past few years, and it persists even in a slowed down private marketplace due to the numerous public infrastructure projects going on in our region. As a result of this continuous demand from the public sector, we have not seen a decrease in pricing.
What projects that you have worked on would you say have meant the most to the growth of the company?
One project we’re developing that is worth mentioning is Lone Oak, a 1,000-lot subdivision on about 240 acres. It also has about 40 acres of commercial frontage and is located at the intersection of loop 1604 and I-37 south. That will be a hugely impactful project for our company when it is completed. And recently we signed a joint venture agreement on 1,900 acres in south San Antonio. That’s going to be a catalytic project for our company for the foreseeable future because we’ll have somewhere between 5,000 and 6,000 single family lots. And we will have 600-800 acres for a mix of non single family use including industrial, commercial, retail, schools, and multifamily. That’s the project that will push us to new heights.
What do you think is the next big opportunity in your sector?
There’s a housing crisis across all levels of housing – affordable housing, market-rate housing and high-end housing. Because home builders can’t sell at the same pace they did before, they are working a little bit slower. They’re still staying busy, but they’re just not as busy as they were a year and a half ago. But that’s a short-term impact caused by interest rates. Once we see interest rates come down over the next three quarters, and we can get to 6% or anything below it, you’re going to see our marketplace take off in a pretty big way.
What are the most urgent infrastructure needs for the region?
Streets and drains are always going to be at the top of my list because we’re horizontal developers. But I do think that public transportation infrastructure is going to be vital to moving people in and out. We’re a city of people. Unlike Houston, people in San Antonio don’t want to spend 45 minutes in their car driving to work. At VIA, we’re working on starting the Green Line, our Advanced Rapid Transit lines that are going to go north and south. We’re also working on finding funding from the federal government and our local governmental agencies to design and build the Silver Line which is our East – West Advanced Rapid Transit line. With these advanced rapid transit lines coming every 10 minutes, both east and west, and north and south, we’re going to be able to move people faster to their jobs, which will hopefully open up access to more workforce opportunities. Data shows that if it takes someone 45 minutes to get from their first bus stop to their employer, they only have access to 12% of the jobs. Therefore our goal is to utilize these lines to increase ride frequency. Once we see the investment from the federal government, and then the local governments match it, I think you’ll see a big interest from the private sector in investing along the routes.
What is your outlook for the near term?
We’re going to be in a pretty big growth mindset for the next five to six years. We’ve continued to invest in human resources, in land and in partnerships that support our community and support our industry. So, I think the next five to six years are going to be the biggest growth spurt in VersaTerra’s history as a company.
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