On Monday, November 20, the Young Leaders Group hosted its first Real Estate 101 discussion of the season, this focused on “Construction 101.” The event combined a strong theoretical foundation with real-world insight to give attendees a complete picture of the challenges and opportunities in constructing a building. The event, which sold out, brought together a dynamic mix of local real estate professionals.
First, Steve Teitelbaum from American University and WMATA sketched out four reoccurring themes in construction projects. First, collaboration is key. While the traditional design-bid-build process can introduce inefficient learning curves for new team members (e.g. the general contractor), the design-build process encourages (even requires) the design and construction teams to plan a building together and avoid any late-in-the-game confusion. Second, technology has a paradoxical presence in building construction. On the one hand, the rise of Building Information Modeling (BIM) has introduced remarkable specificity and consistency in building plans; on the other hand, buildings are still constructed in much the same way they were hundreds of years before (outdoors, with machines, using manual labor).
Teitelbaum’s third theme highlighted how the construction industry in particular has lost “person power” following the Great Recession. The amount of skilled construction labor is as low as it’s been in decades, largely because the field isn’t as attractive as it might have been before the Recession. The final theme focused on money: whoever controls the money “makes the rules.” In the case of construction, lenders in particular have powerful role in approving a whole host of construction details. And, while the type of lender is changing (i.e. some non-bank lenders are now active in construction finance), the lenders’ rules will have a significant influence on what is built and how.
Kevin Schaar (MRP Realty, the developer) and Steve Griffin (Paradigm, the general contractor) built on the theoretical foundation to discuss the apartment building Dock 79 on the Capital Riverfront. This 305-unit building opened in 2016 and features 19,000 square feet of ground-floor retail, a public plaza and riverfront promenade. Like every construction project, Dock 79 had its fair share of twists and turns. For example, while Paradigm typically constructs projects for its parent developer company, it was a 3rd party team member on the Dock 79 project; the Paradigm team had to learn about MRP’s expectations for its product type. Another example was the building site: As a former concrete plant, it was laden with obstructions that resulted from years dumping scrap pieces of concrete; the site work (hauling away dirt, removing obstructions, and building a foundation) took a full 12 months, almost twice as long as a typical job. Last, skilled labor was increasingly hard to find. As Steve said, “No one wants to be a craftsman anymore.” Therefore, the project team went through early procurement in order to get guaranteed prices and avoid labor shortages.
In the end, Kevin and Steve articulated three main lessons from the Dock 79 project: First, land is valuable, not just from a financial perspective, but from a logistical perspective too; a site as narrow and complex as Dock 79’s required lots of dances on where to stage construction vehicles and personnel. Second, it is crucial to have an owner’s representative with construction knowledge; while this seems basic, having that “on the ground” knowledge can save an owner/developer time and money in the future. Last, one is never 100% certain about the below-the-surface conditions of a new construction site. The dirt was far less contaminated than expected, but the aforementioned concrete scraps lead to months of extra work.