COVID-19 Impacts on The Construction Industry

The COVID-19 pandemic has the spotlight of construction industry news across the county right now. Rightfully so, as it has been extremely disruptive to developers, contractors, and suppliers alike. While there is great debate on how to address the spread of the disease, all of us in the AEC industry are trying to determine what we should be paying attention to. For those involved in a large construction project presently, no matter what role, it is suggested to think about a few things:

Safety Measures - By now, most of us are familiar with the term "Social Distancing" and the importance of handwashing, but there is more than that. OSHA has devoted a separate webpage for the standards from 29 CFR that apply to this outbreak and reminded us that this is a recordable event. Do not count on anyone to provide these measurements for you or your associates;...

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Active Adult Senior Communities

As I talk with both senior living and multi-family developers, there is a big focus and many questions relating to “active adult” or “age-restricted’ apartments.  It makes sense for many reasons, but the average age of entry stands out the most.  Today the average age at which a person moves into traditional senior housing is 85, with an average length of stay just over six years.

The move-in age for active adult communities is in the low to mid-70's.  The oldest members of the baby boomer generation, those born in 1946, are just now turning 74.  This creates a true opportunity to capture a younger senior demographic ten years earlier than traditional senior living facilities.

Boomers considering active adult communities prefer renting over owning to provide them with economic and logistical flexibility.  They are attracted by a sense of community and are healthy enough to not need traditional care-based senior housing.  At...

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A Developer’s Contractor

Last week I was sitting in a presentation with an experienced developer for a project we will be starting soon.  This same developer is currently building a facility in Columbus, Ohio, with an institutional contractor, which is not going well.

Over and over, he said, "how much of a pleasure it is to be working with a developer's contractor." We are one, but sometimes I forget what it means.  In this case, the client's architects and engineers completed the drawings and added all kinds of things that were nice, but didn't add value to the project or its future residents.  With our experience in senior living, we are able to control cost by weeding out what was not required, and we have the technical expertise to communicate effectively with the design professionals with minimal involvement from the client.  But there are other things we do, such as keeping up a...

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What Should Senior Living Construction Really Cost?

After years of attending the NIC and ASHA conferences, I feel a need to shout out about the construction costs that one of our competitors supply to them for senior living.  Frankly, I don’t know how anyone could make the numbers work for a project with the costs that they promote.  First of all, construction costs per square foot are probably the wrong numbers to be considering when developing proformas.  Cost per unit or cost per bed is what matters because revenue is based on cost per unit and cost per bed.  Cost per square foot can be an extreme variable depending on space usage.  As you can imagine, as an individual room increases in size, the cost per added square foot isn’t much.  So larger units cost less than smaller units on a cost per square foot basis, but the incremental cost per unit is not that much different. ...

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Rising Development Costs

There was a recent article in Senior Housing News that discussed the rising development costs in senior housing being to the tune of a 6.4% increase last year according to a report created by CBRE.  During the same period, which was 2019, the average number of units per project decreased to 106 from 128. 

As you can imagine, two primary drivers of this were a robust construction market and the increasing labor expenses.  This isn’t necessarily new as the article also confirmed that overall U.S. construction activity has mostly increased over the last ten years, which thanks to the laws of supply and demand drive up material costs regularly. 

It was interesting to note that site acquisition expenses represented 10.1% of development costs and that the average site area decreased 15% as demand for good sites increased significantly in metropolitan areas. 

So this trend is not just about senior housing exclusively as the...

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Mid-Market Musing

I learned early in my career how little I know.  Though we have built more senior living than anyone I know and have been exposed to very successful senior living developers and operators, they all operate differently.  Someone recently said to me, “An expert is someone who knows more and more about less and less until eventually, he knows everything about nothing.” But I don’t think that is the case in my situation.  It’s just that there are a lot of ways to be successful if you know what your Hedgehog Concept is, as Jim Collins would say.

Mid-market became a newer thing a couple of years ago.  They often say what is old is new, and this might be one of those situations.  We, in conjunction with a number of clients, are working on several mid-market concepts.  They hearken back to the eighties when this industry was starting, and people’s...

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The Stepping Stone for Baby Boomers

The “Silver Tsunami” of Baby Boomers is not knocking on the door of assisted living communities just yet and still has several years to go before they are.  So how are senior living developers going to entice these folks to leave their homes?

A recent article in Senior Housing News noted that in a survey of 120 senior housing professionals, 87% of them responded that they are currently pursuing active adult apartment projects.  They see the need for a stepping stone so to speak; getting seniors to leave their homes that are nowhere near ready to move into an Independent Living community much less an Assisted Living community.  Seniors in this segment are still looking for active, vibrant lives and are not ready to see what the future looks like by living in communities where they would see just that. 

If seniors can stay in place longer in these communities with the...

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Exoskeletons in Construction

When you hear the word exoskeleton you probably start thinking of something out of a sci-fi movie like Alien or Avatar, but they are starting to make a presence in construction. Exoskeletons or exosuits are a wearable technology typically made from metal and other fabrics that attach to the body. They are aimed to help lessen the strain on workers' body allowing them to work quickly and safely while reducing injuries. With the potential to reduce required muscle force by as much as 60%, it’s easy to see what kind of an impact this technology could have on workers by easing the physical demands that come with the job. Currently, there are two (2) main types powered and mechanical (passive), and over five (5) main categories for these power suits: power gloves, arm/shoulder support, back support, standing/crouching support. As this technology continues to evolve it will be interesting to see...

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Bright Future for Senior Housing

One thing was clear at the National Investment Center for Senior Housing (NIC) fall conference that was held recently in Chicago.  The interest in senior housing continues to grow.  With more than 3,300 attendees at NIC, it was a whirlwind of activity meeting with developers, operators, equity providers and lenders, all who are optimistic about the future for new development in senior housing.

There seems to be no limit to the private equity that is available to experienced developers who along with their operating partners have a solid track record.  Private equity funds that target the senior housing sector raised more money in 2018 than at any time before, with more than $15 Billion raised.  This is up from the previous record of $10.8 Billion raised in 2015.

This high level of interest in senior housing can be supported by the fact that the number of Americans age 65 and above is...

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What’s really happening with mid-market senior living?

The Douglas Company has done a lot of work on developing Mid-market senior living prototypes that are cost-effective, functional and durable.  Though we have expertise in senior living construction, we are not experts in the operations of these communities.   So while we can attack the cost of the physical plan, which is really is only 10% of revenue, it's a small part of the solution.

At the NIC Conference, people talking about how to serve the mid-market, but only one had a prototype.  It was intriguing and thoughtful and we are studying it further, but there was limited other focus on this market from what I saw.  NIC had a session specifically devoted to this, and there were a number of statistics I wouldn’t normally consider impacting current and future demand for this product, such as the changing demographics related to marital status, location relative to children, changing health-related factors, and...

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The Forgotten Middle

A lot of solid data has come out in recent months from NIC regarding the senior middle-income population that will not be able to afford private-pay senior housing and care options, nor will they qualify for Medicaid.  It is concerning because that is such a large percentage of the country’s population.  Per the NIC report, the number of middle-income seniors will nearly double to 14.4 million by 2029.  It is predicted that over half of them will not have the financial resources for senior housing and healthcare as it is priced today.

There was a great session at the NIC conference in Chicago recently discussing this topic.  It is a private sector issue to tackle in regards to developing more affordable housing communities.  It is a public sector issue to tackle by developing tax incentives targeted to the middle market and possibly expanding Medicare coverage as well as subsidy programs to...

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High Performance

The key that is often overlooked as to why certain construction company’s projects succeed more frequently and sustain long term success, is the proper alignment of each project team on a daily basis.

To help with team alignment, at The Douglas Company internal daily huddles are conducted throughout all levels of the organization to help foster shared goals, a common purpose, facilitate clear communication, resolve conflicts, and align behaviors.

These daily huddles ultimately enhance performance, get everyone working together, and playing from the same playbook of contributing to each team’s success. It’s what keeps the business running and employees productive and empowered. Holding a daily huddle is perhaps the most important tactic a business can employ to help their company leaders and associates stay focused.  

Each morning at The Douglas Company our huddles confirm and give updates on daily projects and priorities. This meeting rhythm makes us accountable to each other, to...

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Robotics in Construction

With a continued labor shortage across the country and no signs of change in the near future, some firms are looking to/have implemented robots into their workforce to help combat this issue. Robots in their present capacity are being used to perform repetitive tasks like laying brick, tying rebar, hanging drywall, etc. They are also performing demolition, 3-D printing, and assisting with lifting activities. In 2018 the construction robotics industry was roughly a $23 million market, however, this market is being forecasted to grow to nearly $226 million by 2025 according to the article by Tractica. Some of the benefits being reported by those utilizing robots are increased speed and efficiency, higher levels of safety, and the ability to integrate with design software such as BIM. As one who has never had robotics performing labor on a construction project, I am looking forward to experiencing it and to what impact...

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The Productivity Problem

Construction is an industry obsessed with productivity - And for good reasons. The more productive our field operations, design teams, and management work is, the faster and less expensive the projects are. Unfortunately, construction has suffered from losses in productivity over the last decade, particularly at the field level. Major trades like framing, drywall, and concrete are slipping several percentage points.

This phenomenon is attributable to many factors, but several key ones include:

  • Changes in Scope and/or Project Expansion - No matter how well you plan a project, changes happen - And they slow things down. The Independent Project Analysis Group has estimated by a study that more than 35 percent of all construction projects will incur a major change. They've also concluded that any change puts the project at a 1 in 4 risk of schedule slippage by 20% and a 1 in 4 risk...

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Senior Living Renovation is an Investment, Not an Expense.

With the number of new senior living communities recently opened or currently under construction, there is a growing need to update and refresh existing facilities to help improve their viability in the marketplace. 

As new senior housing communities, with all of the latest amenities and design trends, are coming online, older facilities need to position themselves as the better local option. The appearance and freshness of a community can have a significant impact on many aspects of a business. Having an attractive, appealing, and comfortable community can improve resident’s happiness and well-being, increase staff morale, and create a more positive public opinion, all which lead to increased occupancy and better financial performance of the community.

Investing in a renovation project can be a challenging process that can seem overwhelming and complicated.  The Douglas Company team has experience in planning and executing renovation projects.  We know and understand the unique requirements that skilled...

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The Great Depression’s Impact on Senior Living Occupancy

All of us in the senior living industry understand that inventory growth has exceeded demand, causing vacancies to rise.  I was at a recent symposium and one of the speakers said that the decline in demand was caused by the great depression, an intriguing concept.  Research indicates that from 1927 to 1933 that birth rates decreased by more than 425,000, over 15%.  This would certainly impact demand, it seems.

The speaker then said that this reversed in the 4th quarter of 2017 and that demand was picking up.  A study of US census information shows that it started picking up in 1937, escalating significantly through the start of world war two.  1937 was 82 years ago.  The average age for entry to senior living communities is 84 according to most of our clients.  This would mean there may be a little more time to wait for a resurgence of demand, unfortunately.'

Peter...

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Success!

The key for every company to continue to be successful is to constantly raise your company standards. Truly great companies understand the difference in what should never change, and what should be open for change.

Every high achiever who wants to be successful wakes up early, works late nights, weekends, and even holidays, but hard work by itself will not provide sustainable success. Success can be defined in thirteen (13) words “do all the crap you do not feel like doing on a daily basis”. By doing this consistently, success will be much more attainable.

Customers love consistency. It provides the true foundation of trust and that comes from having the discipline to follow processes and to constantly work at improving those processes that are being followed.

Brian McCarthy
Executive Vice President, Midwest Construction Operations
The Douglas Company

...

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5 Trends to Look for in Commercial Construction in 2019

In what has been a historically slow adapting industry, we are beginning to see some evolving trends to traditional construction. Below is a list of trends to keep an eye out for in 2019 and beyond:

  1. Modular Construction: The modular construction market is projected to grow at a compound annual growth rate of 6.9% from $112.4 Billion today to $157 Billion in 2023. This large growth is being driven by the reduced skilled labor force.
  2. Technology assisting human workers: There are subcontractor’s that are beginning to utilize robotics in assisting and working alongside their human workforce, whether it be tying lifting items, increasing productivity, etc. Those utilizing robotics believe they are reducing the physical strain on workers allowing them to prolong their working careers, as well as, reducing the repetitiveness/redundancy allowing workers to do more meaningful work.
  3. Design-Build’s Growing Popularity: FMI is predicting spending on design-build to increase around 18% in the...

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Punch Lists and Technology

A lot has changed with the rise of Construction Technology (“Con-Tech”), but one thing is still the same: The end of any job is the hardest part. There’s a lot of details to manage and stakeholders to keep communication with, all while working towards a smooth transition from our construction phase to our client’s activation and lease-up phase. A huge component of this that will forever remain a part of our industry is the punch list process. Thanks to Con-Tech, we have experienced a significant increase in efficiencies in this area. Some of these include:
  • Use of cloud-based platforms that allow continual sharing and updating of information between team and contractors.
  • With the use of new features, punch items can be added on-the-fly from any smartphone or tablet, making punch lists a continuous process throughout the job, instead of one big list at the end.
  • Bar codes and phone scanners...

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Not Your Father’s Senior Living Community

As the baby boomer generation begins turning 70, senior living providers will have tremendous opportunities.  At the same time, they will face the challenge of reinventing their business and providing innovative solutions to meet the needs and demands of this new generation. Today’s seniors are looking for options that deliver the comforts and amenities of home.  This trend is changing the design and construction of senior living communities.  Designers are incorporating more residential design elements and finishes into new buildings, resulting in vibrant and comfortable spaces that are very inviting for residents.  The buildings being designed and constructed today are not your father’s senior living facility. By involving a general contractor very early in the planning process, working collaboratively with the design team, an owner can understand costs, lead times and constructability of various design components, and have the ability to make timely decisions.  The general contractor can also provide potential alternative options...

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