I inadvertently clicked on on this blog and instantly time warped! Officially the Covid19 pandemic has entered the third year as it was first spotted here in Seattle in January 2020. Looking back in the blog archives I must have had a pretty good dose of naivety or was feeling rather resilient at the time! The good news is most of us are still here, and our household (at least up until this writing) has not had any infections that have hindered nor hospitalized us. Looking back at the April 2020 blog post I realize now that we were in only the first month of what turned out to be six to eight months of closures for the majority of our Commercial Real Estate clients.
After experiencing the effects of the Housing Crash in 2008, I set out to make damn sure I as diversifying revenue streams and storing them in separate baskets, so to speak. One of the Founding Principles of this business has been to be "recession proof" and to avoid over leveraging, that was what did in every developer I was working for in 2008. While the demand for construction trades was (is, and will remain to be) strong I am weary to rely only on swinging hammers and trowels. I've researched and reached out to any and everyone I can see fit looking for those other revenue streams. As we learn early in economics is vertical integration and lateral integration. I quickly separated Residential and Commercial Construction, competitive analysis showed the medium to large firms stuck to one or the other but as a recession proofing mechanism I chose both. They're different animals and have different building techniques, codes, and even job sites. I am still actively working to establish the Historic Preservation and Planning branches as well but these come with time.
To diversify this tranche of services I reached out the various lenders looking for financing so that we can do our own builds. I hope to document a little bit more of what I plan to do with that. One thing I have noticed in this building boom cycle is that when you have very low interest rates and a strong economy, people want really big houses and builders want to build lots of really big houses. The quality of some of this construction has absolutely plummeted in recent years. As a Historic Architect I have studied and worked on buildings from antiquity to today. Skipping forward to the last century we have seen the advent of new materials from asbestos siding, vinyl siding, to asphalt siding like "Insulbrick". Today I am watching houses built with Oriented Strand Board (OSB) and Hardi Panels. (As Winter is here and people are working from home more I hope to do a video and blog post on Insulation Minimums). With minimum building codes and rapid construction these new houses are flimsy at best. I plan on designing and building smaller homes, with high efficiency, out of quality materials and will look to build enough of a brand to attract investors. (That's a teaser of which way the next blog posts are trending by the way)
As we are still in this process I can share, vaguely, what that implies. As residential construction has been on an absolute rocket ship we tend to chase that trend. Still having that burnt and charred taste of 2008 in my nostrils makes me a wee bit hesitant. (In only the past two years of the pandemic, construction costs have risen 6% in Seattle.) Even before the lumber shortages and price spikes of 2021 we were looking at producing our own lumber. With the majority of 2020 contracts cancelled we immediately went into survivor mode, the trending word of these times is "pivot", but to be honest pivoting was built into the recession proof plan. The portable lumber mill and excavator purchase was put on hold.
One of the silver linings of the construction slowdown has been the expansion and focus on professional services. We are looking at partnerships in the fields of Brownfield Remediation Planning and some other regional opportunities. We have also reached out to financial institutions to provide Construction Progress Documentation and Construction Draw Request Inspection services. After researching potential funding services for our own development I quickly realized I could also offer these "boots on the ground" services This has been advantageous as I am getting more and more entrenched into the financial services side of Residential and Commercial Construction. This should give us some additional connections in future financing opportunities.
