OKLAHOMA CITY | Devon Headquarters | 850 FT / 259 M | 54 FLOORS | U/C

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Devon has already started site prep work on the property. And as world construction prices go down, the likelihood of Devon Tower being built goes up. Devon has already had the cash set aside for the project, and now it looks like it will cost less than they have planned for.

Scrapped skyscrapers benefit Devon
Construction Costs for tower may drop
BY STEVE LACKMEYER
Published: April 3, 2009

Planned skyscraper projects are being scrapped around the world, leaving Devon Energy looking at significant potential cost savings as it proceeds with construction of its 54-story world headquarters.

Klay Kimker, Devon’s corporate services manager, is aware that some local residents worry the economic downturn will claim its tower, as well. But both Kimker and Chief Executive Officer Larry Nichols say the project is still on track.

"We were very hopeful when we started the project that costs might go down,” Kimker said. "There were some indications that some of the pricing was high historically. And obviously any reduction in cost is of benefit to Devon and to the project.”

Devon estimated the tower’s cost at $750 million when project designs were unveiled in August. Kimker said any cost savings won’t be known until after a contractor is hired. Interviews with the top two finalists are ongoing and a choice is expected within weeks.

John Wood, project manager with Hines, the tower developer, thinks speculative skyscraper construction will be a lot less common in the future.

Two years ago, as Devon was preparing to make public its plans for a tower, skyscrapers were being announced across the country in what was a "go-go economy,” Wood said. Lenders, he said, were fueling the construction with aggressive interest rates and terms.

"There has been a fundamental shift in how real estate projects are capitalized,” Wood said. "And there are definitely a lot of people out there who think it’s a permanent shift.”

Wood, however, thinks towers — like the one to be built for Devon Energy — will continue to be built as companies look to modernize their workspaces.

Competition heats up
Just a year ago, Oklahoma contractors were worried about labor shortages and some public works jobs had to be readvertised because of a lack of bids.

That may be changing. Douglas Tapp, executive director of the Oklahoma Association of General Contractors, is already seeing out-of-state companies bidding for local jobs.

"Obviously, there’s not as much work as there was eight months to a year ago,” Tapp said. "We’re still doing OK. Most are feeling fairly comfortable through this year. The problem they (Oklahoma contractors) are running into is there isn’t enough work coming out on the bid board now that will carry them into next year.”

Tapp said the industry is waiting to see how much of the Devon tower project employs local labor. The project, he said, might be timed perfectly with the expected drop in jobs.

"We’re pretty comfortable there will be some of our state players involved,” Tapp said. "I’m not privy to how they’re going to split it up. You would hope that once the big tower gets going and started, it might trigger some other entities to start their work.”