Labor shortages is a hot topic right now. In the construction industry alone, there are approximately 400,000 job openings. Currently, 67% of construction companies are experiencing skilled labor shortages across the globe. Couple this with an increase in material cost (we’re talking nearly quadruple the cost of plywood wholesale prices from $400 to $1500 per thousand square feet that we saw during the first year of COVID-19) and you have a minor reason to panic.
According to our Chief Operating Officer, Brennan Reichenbach, the cost of construction has doubled – and in some cases nearly tripled – in the last approximate five years alone. The substantially cheaper costs of a fit out vs. ground up construction are all the more reason for a developer to consider adaptive reuse projects over new construction – especially in the current climate.
As the icing on the cake, mix these two factors together with the dwindling amount of available development space in metropolitan areas, the current housing market and the nation’s housing shortage, and you get the perfect recipe for a high demand in multi-family housing. Despite all of the stressors currently weighing on the millions of people who touch the construction industry in some capacity, when looking at the current climate through the eyes of a developer, it may just be the perfect cocktail for opportunity. Read on to find out how:
The Housing Inventory Issue Coupled with Available Development Space:
Inventory of houses is an issue across the nation right now. It’s no secret that the prices of reselling a home is at an all-time high, and that is due in part to the fact that new construction is expensive thanks to all the hurdles that need to be jumped in order to reach the finish line of complete construction. A rather stubborn supply chain has been no help in driving down the cost of housing either.
Berks County has been a Seller’s Market since September of 2021, with homes in the county selling for 10.3% more than they would have a year ago. The number of homes for sale in Berks County this year is the highest it has been in the last 15 years. For comparison, in May of this year there were 759 homes on the market throughout the county compared to just 530 the month before. This is an increase of 43.2%.
Gallup’s annual Economy and Personal Finance Poll, conducted in April and published in early May, revealed that 69% of respondents believed it is a bad time to buy a house. This is the first time that a majority of Americans have felt this way in the poll’s 44-year history. The factors likely contributing to this majority statement include rising interest rates and the inability for new housing construction to have a significant impact on the demand for housing.
A recent interview on Keller Williams Realtor Brad Weisman’s podcast Real Estate and You featured Kevin Timochenko, Founder and Owner of Metropolitan Companies, who handles development, building, and management. D&B is currently building a number of multi-family apartments (like The Reserve at Iroquois) for the company, who is also scheduled to build between 200 and 300 single-family homes from Pittsburgh to Delaware within the next year.
Timochenko discusses how developing in Berks County is a different story than the other areas his company typically deals with. Although land is available, it is harder for developers such as Kevin Timochenko to make money on this investment since land and improvement costs are so high in this area, thus making it difficult to build. The amount of preserved land in the area also can complicate things – especially when land is being preserved in the middle of commercial corridors that would better serve the community if developed. To add insult to injury, Berks County is one of the most preserved counties throughout the state of Pennsylvania with over 75,000 acres of preserved farmland.
If you trade the farmland of more rural areas for the concrete of larger cities, you’ll still find the same overarching issue of a lack of available square footage for new development – just in a different setting.
So How Do All These Negatives Make A Positive?
The solution may just be repurposing the commercial square footage already available. Currently, society as a whole is seeing more and more real estate developers buying office buildings so they can convert them to residential use. A recent high-profile example was announced in Washington D.C. with plans to convert two older office buildings – Universal North and Universal South – near DuPont Circle on Connecticut Avenue. The buildings, which total 700,000+ square feet, marks Philadelphia-based real estate firm, Post Brothers, debut into the metro Washington D.C. area.
The firm may be onto something, as they found success in redeveloping a former warehouse in Northern Philadelphia into The Poplar, which includes 285 apartments and high-end amenities including a world-class fitness sanctuary rooftop dog parks, and three infinity-edge saltwater pools.
Time will tell how this transition fares, but it looks like many metropolitan areas throughout the country – with our nation’s capital as the main experiment – will be serving as case studies for converting former commercial space into residential housing or even mixed-use development. In an article in the Washingtonian, Senior Editor Marisa M. Kashino was told by John Falcicchio, Washington D.C.’s Deputy Mayor for Planning and Development, that adaptive reuse is needed to “save downtown.” In the metro D.C. area alone, approximately 325,000 units need to be added before the end of the decade in order to keep up with the demand. Many have their eyes on the recently estimated 157.9 million square feet of rentable office space in the D.C. area as a potential solution for this issue.
The Push for Office-to-Residential Conversions
Many other metropolitan areas aside from Washington D.C. are seeing a strong push for adaptive reuse projects focused on converting office space to residential multi-family living – so much so that legislators are even passing laws to assist with this trend. The latest budget for California included a call to action to spend $400 million “as an incentive to developers to convert commercial and office buildings into affordable housing in the budget years 2022-23 and 2023-24.” In early June New York Governor Kathy Hochul signed a bill that made it easier to convert underused hotels into permanent housing. Just last week, city officials in Chicago announced that they would provide tens of millions of dollars to developers willing to convert aging office towers into residential buildings.
New York City’s push for such conversions is also apparent with the $1.5 billion transformation of the former home of Irving Trust Bank at One Wall Street in lower Manhattan, marking itself as the largest office-to-residential conversion in the city’s history. Take a detour west to Salt Lake City, and you’ll find Houston-based developer Hines, an international real estate firm, acquired a 24-story office building – South Temple Tower – which they plan to convert into a 255-unit luxury apartment complex starting in early 2023. Similar projects are also in the works in major cities such as Atlanta and Dallas.
A Look At The Local Forecast
Given the strong trend of these conversions in larger cities, it is inevitably just a matter of time before we see this start to take hold in more sub-suburban areas.
Patrick Zerbe, Commercial Real Estate Agent for NAI Keystone, has been watching this trend start to take hold since the pandemic. “The pandemic fast-tracked transitions in different trends. The largest transition we are seeing in the commercial real estate world are businesses providing remote and hybrid work. With less people in the office, companies and organizations have determined to decrease their footprint, which in contrast has given an influx of vacant office space. We have primarily seen this in larger cities, but this trend is slowly making its way to subsidiary markets,” he explains.
Recent data from Co-Star, a global leader in commercial real estate intel, provides a good example of what Patrick discusses. Reading, PA has a 6.3% vacancy rate for the nearly 13.5 million square feet of office space available in the city. In comparison, of the 323 million square feet of office space in Philadelphia, 10.3% (or 33 million square feet) is currently vacant. This is an increase from the historical average of 9.5%.
“A lot of companies no longer want to worry about sharing common space, and more people want direct access and direct walk-in space to their offices. A multi-story office building in the center of a city hosts a lot of common areas,” he reflects.
As a commercial real-estate agent, Patrick sees many redevelopment opportunities in the multi-family market. “With the prices of land and material, building anything ground-up is incredibly expensive right now. Any chance a developer may have to look at a re-development project to substitute some of these costs is a winning combination,” he states.
Aside from the obvious solution of breathing new life into corporate complexes as an adaptive reuse project, Patrick predicts that large retail centers and institutions such as old schools may be a great opportunity for development into multi-family housing to aid the housing crisis.
Let us know what areas you think would serve as the perfect adaptive reuse project for multi-family living in the comments below!
D&B Construction’s partnership with Earth Engineering Incorporated dates back eight years to 2014. They have completed over 12 projects with D&B Construction since becoming our Trade Partner. These projects range from large multi-family projects on 50 acres of land to large healthcare projects for clients like Tower Health and Children’s Hospital of Philadelphia.
EEI performed numerous services on these projects including compaction testing, concrete testing, geotechnical consulting, sinkhole remediation, structural steel inspection, geotechnical investigations, clean fill assessment, and design services. Paul J. Creneti, P.G., Director of the Lehigh Valley division of Earth Engineering Incorporated, has been part of the industry for 26 years now. “Working on these projects with D&B Construction was fulfilling, as they were a collaborative effort with the construction and design team,” he reflects.
Paul has worked with many members of Team D&B over the years, including our Chief Operating Officer Brennan Reichenbach, Vice President of Pre-Construction Mark Keever, Project Manager Scott Weaver, and Vice President of Construction for Reading and Central PA, Tom Rinaldo. His favorite part of working on a D&B project? “Being part of a project team that has trust with all parties involved.” Paul can count on the fact that “quality would never be an issue” whenever he works with Team D&B. “If problems arose during development, the team handled these problems quickly and most appropriately to ensure that sites were being developed properly.”
According to our VP of Construction Tom Rinaldo, who has worked with Paul and EEI for the last 15 years on various projects, “they bring undeniable value and knowledge to D&B projects as a valued Trade Partner.” Tom most enjoys how knowledgeable their geologists are. “We utilize them to do proctors for us. They help out in a variety of ways, from testing and analysis of soil on job sites to concrete testing. When we completed work for 999 Berkshire Blvd. we had to excavate and remove 10,000 SF of soil and excavated around the entire exterior of the building to remediate soils. Their team’s analysis of the unsuitable soil and assistance in finding suitable soil was imperative to the success of this project.”
This full service geotechnical / environmental engineering consulting firm was founded in 1990 in Blue Bell, Pennsylvania. By 2003, EEI outgrew this facility and established their Corporate Headquarters in East Norriton, Pennsylvania. Today they have approximately 125 employees and other regional offices in West Berlin, New Jersey, the Lehigh Valley and Central Pennsylvania that allow them to service projects from New York to Maryland.
EEI provides their clients with geotechnical engineering and environmental consulting services. Such services allow them to contribute to the successful development of a wide variety of projects for their clients, as issues such as cost-effectiveness and site development issues are evaluated by their team. This analysis allows EEI to provide clients with the best recommendations on how to proceed with their project.
The predominance of their geotechnical and environmental work is in the private commercial and residential sectors, with a portion of their geo-structural design work in the public sector. EEI takes on approximately 1,200 new projects within a year.
Q: What’s the best piece of advice you would give to others looking to get into the industry?
A: “Listen to your client’s needs while at the same time keeping the project within or below budget. You can accomplish this through quality engineering and quick decisions.”
Q: What makes a good leader?
A: “Being true to your corporate values and goals and holding a high standard for others to follow.”
Q: What do you love most about your job and why?
A: “Being part of a project team that leads to the successful completion of projects despite countless variables along the way. It’s rewarding.”
Q: What about a D&B project stands out in comparison to other General Contractors you work with on other job sites?
A: “Quality with a strong focus on the client’s needs.”
EEI’s Geotechnical Engineer, Dan, was just on site last week to check the compaction rating of the soil on this jobsite. View some recent drone footage here.
Paramount Contracting, Inc., a commercial wall and ceiling contractor, is based out of Lancaster, PA and serves the Pennsylvania, New Jersey, Delaware, West Virginia, Virginia, and Maryland areas. The company was established as a premier wall and ceiling contracting company by Jeff Mylin in 2005. “The emphasis was always on customer service and building a great team,” says a reflective Mylin 16 years later. “We focused on the needs of the customer and providing an end product that our team would be proud of.” As a result of this, Paramount has “experienced organic growth as opportunities presented themselves over the years.” Today, the company has nearly 100 employees, completes in excess of 300 jobs per year, and specializes in Metal Studs, Drywall, Insulation, EIFS and Acoustical Ceilings, as well as select Carpentry and Specialty items.
D&B is proud to have been partnering with a company that reciprocates our core values of being a company that cares about everything from the customer to the finished product. Since Paramount became a Trade Partner of D&B Construction’s nearly five years ago in 2017 they have worked on more than 10 projects with us, completing everything from insulation, drywall, and exterior sheathings to rough blocking, acoustical ceilings and clouds, and FRP.
Some of the current active projects Paramount is working on with D&B include this mixed-use design-build project in Kennett Square, PA, D&B’s new corporate headquarters, and Kreitz Gallen-Schutt Attorney’s office fit out, which is just starting up. Other projects worth highlighting from this year include Tower Health’s newest satellite office in Womelsdorf and Grove Dental Pediatrics.
Perhaps the most impressive job that Paramount is working on D&B with is the 80,000 SF adaptive reuse building currently being renovated in the heart of Wyomissing. This five-story building will be the future home of Stratix Systems’ headquarters.
Our Project Manager, Andrew, plays an active role in the daily management of what is occurring at the jobsite. This is what he had to say about his experience working with their team on this job: “Paramount has been an integral Trade Partner on our project at 200 N. Park Road in Wyomissing. Their Project Managers and Site Foreman have brought knowledge from previous projects on nearby, similar style buildings that have aided our project in design, constructability and schedule. Their crews have been more than accommodating with a stubborn building that has required much coordination and numerous details from the Architect.”
Andrew also had the pleasure of working with Paramount on three other projects, including his first job with D&B nearly one year ago, Kingsview Partners. He looks forward to “continuing our strong relationship with such a great Trade Partner” as we head into completing more jobs with them in the New Year.
Oh, and did we mention the Paramount team has some pretty great cooks, too?! This past October, Paramount was kind enough to host a home-cooked BBQ luncheon at Stratix Systems’ future new headquarters for all D&B employees, ownership, the project architect, RHJ Associates, and even invited us to invite other Trade Partners on the job. It was a great day of camaraderie onsite as we all learned about the intricate details of this detailed project. “Their BBQ was the launching point for one of our company’s on-site safety training sessions, and attendance was most definitely enhanced as a result of the promise of good food. We were and still are grateful for their efforts,” reflect Andrew.
Q: Paramount Contracting has completed 4,100 jobs since its inception. What project are you most proud of to date and why?
A: “It is hard to choose just one, but the Ann B. Barshinger Cancer Institute in Lancaster, PA would be near the top. It is a respected facility in our home town and architecturally impressive building.”
Q: What’s the best piece of advice you would give to others looking to get into the industry?
A: “You have to have a love for the industry. Construction is a tough business with demanding schedules, tight budgets and currently material and labor shortages. Yes, there are many challenges but it also can be very rewarding when seeing the job come to completion. Those of us in this line of work understand how it feels to drive by a finished project and feel a sense of pride that ‘we helped build that.’”
Q: You are completing a number of projects with D&B right now. What has your experience been like working with our team?
A: “D&B projects are clean, organized, and safe projects to work on. They communicate clearly with all of the trade teams, which leads to successful projects. We have made a significant investment into bidding to D&B and we feel that has not gone unnoticed. Subcontractor loyalty is obvious, which increases effective teambuilding.”
Q: What do you enjoy most about working on a D&B project and why?
A: D&B Superintendents, Project Managers, Engineers, and support/admin staff are always accessible and willing to help. Coordination and scheduling are always well thought out and communicated from planning to completion. The jobs are often local, and our employees enjoy investing in the buildings in their community.”
At D&B Construction we like to think of our trade partners as an extension of our team. We are proud to call Paramount Contracting an extension of the D&B family. Every project we have collaborated with them on results in a final product that both teams can be proud of and that our customers can look forward to.
Technology is ever-evolving, and part of this evolution includes the construction industry. In response to COVID-19 and technological advancements, the construction industry has begun to innovate more than ever before. One of the most fascinating practices that is growing in popularity is modular or off-site construction.
Modular or offsite construction is the process in which a building is constructed off-site under controlled conditions using the same materials and built to the same standards as conventionally built facilities. The only difference? It can be built in nearly half the time. Buildings are constructed in modules that can be put together to form the original design, all while still resembling the work of the most sophisticated site-built facility. Why do companies use modular construction? The answer is simple. Modular construction is greener, faster, and safer.
Since modular construction is a factory-controlled process it generates less waste and creates a site that is less likely to evoke disturbances. A modular construction site also promotes more flexibility and re-use. Modular projects can be disassembled and relocated or refurbished for new use. This reduces the demand for materials and limits the amount of energy used to create a building that meets the new needs. Additionally, a modular site produces less material waste since the building is constructed in a factory and waste is eliminated by recycling material, controlling inventory, and protecting building materials.
Modular construction is also faster than traditional building methods. Construction of modular buildings occur while site and foundation work are both being done. The Modular Building Institute reports that this can reduce construction times by 30%-50%. This can also be credited to the elimination of weather delays. Sixty to ninety percent of construction is completed inside of a factory, leaving no need to worry about inclement weather delaying a project.
One of the most important benefits of modular construction is safety. As we know, safety is always a priority in construction, and modular building makes it easier than ever to be safe. A report by McGraw-Hill Construction found that over 1/3 of their respondents (34%) who are currently using modular construction have seen site safety improve. This may be credited to the fact that it is free from weather elements like rain or snow that can cause slips and falls. It also reduces the risk of a worker falling from great heights, which OSHA reports as the cause of 33.5% of construction worker fatalities. Learn more about OSHA and their dedication to safety by reading this article on D&B Construction’s blog.
Modular building is done mostly on the ground level, but if working from height is required permanent scaffolding is used. This permanent scaffolding is different (and safer) from the scaffolding normally used on a traditional job site. Because it is not constantly being moved and reassembled, there is less likelihood for error and accidents.
Modular construction is growing in popularity. According to Fortune Business Insights, the global modular construction market is going to be valued at $114.78 billion USD by 2028. The market was valued at $72.11 Billion USD in 2020. Here are some examples of just how much you can do with modular construction:
The Star Apartments in Los Angeles were built in 2014 on top of a previously existing single-story commercial building. A concrete superstructure was poured over the existing structure. Next, five stories of modules that were built off-site were added on top of the single-story commercial building. The modules were stucco-finished on site. These modules provide 102 apartments and have pre-installed bathrooms, appliances, cabinets, and surface finishes.
An iconic example of modular construction is Habitat 67. Built in 1967, architect Moshe Sadfie’s unique cuboid block of 158 apartments caught the eyes of many. The way Sadfie designed Habitat 67 allowed for 15 different kinds of housing, gardens and terraces to fill the voids in between. The complex stack of concrete houses was connected by high-tension rods, steel cables, and welding. Even though it was built in 1967, Habitat 67 shows the true possibilities of modular construction.
This 14-story tower was the world’s first example of permanent modular construction. The building has 140 self-contained, prefabricated concrete capsules that each measure 2.3m x 3.8m x 2.1 m. The capsules were each connected to the shaft of the building with just four high-tension bolts, allowing each unit to be replaceable if needed. These capsules were delivered to the site already fitted out with a small bathroom. Owners used the capsules as small living or office spaces, and the interior space of each module can even be extended by connecting to other capsules.
These are three unique examples of modular construction because of their structure. While these extravagant and unique designs are made easier with modular construction, you can also make very basic structures that look identical to buildings that are constructed on-site. The possibilities with modular construction are seemingly endless thanks to its ability to make construction greener, faster, and safer. We look forward to seeing just how far modular construction will go.