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As the economy goes, so too will the construction industry. It always helps to learn about economic trends and their likely impact on construction. Niladri Sannigrahi is the Senior Director of Product Management at Liberty Mutual Surety, and his passion is economics. He'll join The Huddle to talk about interest rates and their impact on developer-driven construction, the likely impact of the 2024 election on the construction economy, and many more topics to help you plan for what's ahead.

In this episode, we'll debunk myths around government contracting, navigate the challenges of transitioning from commercial to government work, and uncover hidden opportunities in this dynamic sector. The stories and insight provided by Eric Coffie, founder of Govcon Giants, promise a thought-provoking journey into the world of government contracts. Join us for an enlightening conversation that might reshape your business strategies!

For any business, cash is crucial to health and success. Employees and vendors must be paid, or the whole thing comes to a halt. Contractors, in particular those who must purchase materials for installation, face a high-risk environment dependent on their customers’ timely pay. Scott Peper from Mobilization Funding has a front-row seat to the unique cashflow challenges faced by contractors, and he joins The Morning Huddle to discuss the topic and share strategies for maintaining a healthy cash position.

$7M in baby boomer businesses will sell by 2030. Many of those will be building contractors. Whether you’re in the market to sell or potentially buy one of these firms, or you simply want to understand the changing ownership landscape of the construction industry, join us for this episode. We have Eric B. Pacifici, Partner with SMB Law with extensive experience with acquisitions joining us for the discussion. He is leading small to mid-sized businesses to get smart about buying and selling in this dynamic market.

Economic uncertainty has become normal for all of us. Contractors who are busy today are just waiting for the music to stop. While nobody can predict economic conditions with certainty, smart companies pay attention to the trends and plan accordingly. Nobody may be better at reading the tea leaves for the construction economy than our guest, Anirban Basu.

Anirban joins The Morning Huddle a second time for a fun and enlightening discussion about the latest economic trends impacting the construction industry.

Join The Morning Huddle for a timely discussion about laws governing how we hire and pay our construction workforce.

Workers are misclassified as 1099 when they should be legally W-2. Subcontractors are hiring labor subs to augment their workforce or, in some cases, to replace them altogether. These labor subs have a varying level of commitment to following the law, and now their prime subs and GCs are on the hook for their mismanagement.

Millions of dollars of penalties have been paid by contractors in the Metro DC region. Attorney General Karl Racine's office appears to be committed to pursuing more wage theft infractions in the city.

No matter where you live, take the time to hear from Hillary Ghent about how Davis Construction has reacted to the heightened focus on this issue and the recommendations they have for the entire subcontracting community to achieve compliance in a manageable way.

Topic: Economic Trends Impacting Construction in 2022

Transcript:

So it's morning huddle time. We'll give everybody a minute or so to. To get live with us. But, Anubon, you were just telling me you started your morning. You got in last night at what. 

S

Speaker 2

00:13

Time I got in last night? It's about 1am from Las Vegas via Detroit. But that means bed at 2am so that's. It's too much. I'm too old for this. I don't know if you remember those Lethal Weapon movies, but I think Danny Glover had a quote that he said repeatedly, I'm too old for that. And I. And I am. 

S

Speaker 1

00:40

Yeah, now I get it. I. For whatever it's worth, I'm too old for that too. And I don't think that's, you know, technically I shouldn't be able to say that, but I think I'm too old for that. I had a week a few weeks back where I was in, what was it, Houston and then Louisiana, and then New York, and then had to speak the next morning at 7:00am in Baltimore. And after I got home from New York and I thought I got home on that afternoon and just kind of cried. It was like, that's it. I can't do it. 

S

Speaker 2

01:15

I just want to be in my house. I wanna. I would like to tend to Marlon Humphrey's injuries if I could, if they would allow me to just fix him up for week 14 or 15 or something. But, you know, I have an economist. 

S

Speaker 1

01:27

Somebody's got to. 

S

Speaker 2

01:28

Somebody's gotta do that. Somebody's gotta fix that gentleman up. 

S

Speaker 1

01:33

All right, let's. Let's jump in. So. Good morning. Welcome to the morning huddle. I'm Chad Brinky alongside my co host and friend, Stacy Holzinger. Stacy, how you doing this morning? 

S

Speaker 3

01:44

Good. I'm doing great. 

S

Speaker 1

01:45

Awesome. Glad to hear it. Stacy, what's something good that's going on in your world this week? 

S

Speaker 3

01:50

We have all our holiday parties in the next couple weeks, so that'll be fun. 

S

Speaker 1

01:54

Have you gone to any this week? 

S

Speaker 3

01:56

No. Tonight as W. Yeah. 

S

Speaker 1

02:01

Nice. That's awesome. So you said American Subcontractors association of Washington, D.C. Correct. Wonderful. All right, good. I won't be at that one. I want to be at that one. But, you know, we all have our limits. I'll be around next week, though. Good deal. So I want to introduce our guest, Anibon Basu. Aniban is the CEO of Sage Policy Group, an economic advisory firm in Baltimore that helps clients around the country. Anibon is the chief economist of the Associated Builders and Contractors, along with several other associations and is extremely well versed in the building industry and looked to as an authority in the industry, certainly by me and many others. He is a storyteller extraordinaire and has a knack for really making complex economic concepts attainable for the likes of me. 

S

Speaker 1

02:57

And therefore, I hope you I'm pleased to share with our audience as well that Sage Policy Group works in partnership with my firm, well Built Construction Consulting, as we collaborate to help one another's clients to build their strategic business plans, making data backed decisions for how and where and when to invest in growth. So with that as kind of the intro with so much to discuss and so little time, let's get to it. Anibon, thanks so much for joining us. 

S

Speaker 2

03:28

Oh, my pleasure. Absolutely, Chad, this is great. 

S

Speaker 1

03:31

So let's get right down to it. You know the question that's on everyone's mind anytime that they talk to you, which is what can we expect, you know, as we look ahead and you know, when we look into 2022, what do you see coming for the building industry? And let's focus first on the hottest and coldest market segments, you know, the sectors of the economy that we expect to be, you know, hotter and less hot when it comes to the building industry. 

S

Speaker 2

04:02

Well, I think the obvious answer in this case because we just passed this major infrastructure package, this Infrastructure Investment and Jobs Act, $550 billion of new monies on top of what had already been authorized to be spent, is that it's public segments that will lead the way going forward. We'll start seeing some of that activity next year, perhaps more of it during the second half of the year than the first half of the year. But segments like roads and highways, water and sewer, I think school construction, some of these segments are going to be red hot. Another couple of segments, but more private sector and orientation that will be hot. Data centers and fulfillment centers that also is obviously backbones of the e commerce economy. 

S

Speaker 2

04:42

And then finally, I think one of the dark horse candidates for a really strong segment next year in terms of construction is multifamily. And I would not have expected that. The pandemic has cost us today 3.9 million jobs, shrunk our labor force. So one would think that the apartment market would be in pretty bad shape, especially after all those units we constructed during the previous decade. But I am seeing pretty significant interest right now in apartment construction. So I think that'll be one of the segments that'll be pretty strong too. 

S

Speaker 1

05:11

So infrastructure, multi, residential the multifamily space. Why is it surprising to you that has demand? Why is that, you know. Yeah. Why is that a shock? 

S

Speaker 2

05:30

Oh, it's a shock to me because the fuel for leasing activity is job creation and we've lost jobs during the pandemic. And as I say, we built a lot of apartment units, very nice ones, by the way, high end units. You can see them in downtown Baltimore, but elsewhere during the previous decade. So one would think that market would be pretty well saturated. And also during the early stages of the pandemic, rents collapsed in many communities. Less in Baltimore than, let's say in Washington or New York. But it is still the case that rents were under some pressure. But right now there's so much liquidity working its way through the economy. So many people looking for yield in the context of a 10 year treasury that closed yesterday, a little bit above 1.4%. 

S

Speaker 2

06:09

And one of the segments that's been identified by investors is that multifamily segment, a segment that generates income. People are looking for income. And so that's, among other things, is translating into more apartment construction. 

S

Speaker 1

06:21

Got it. So more of a. This is a really good place to put your money to continue to get a return in comparison to other options in the market. Is, is what may be fueling the continued multifamily investment. Is that what I'm gathering? 

S

Speaker 2

06:39

Yes, that's right, Chad, but it could be a bad bet. In other words, when you look at a lot of these investments, these investors are scooping up apartment buildings at extraordinarily low cap rate. So they're paying a lot for the income that's being generated by these apartment units. And then in many cases, investors are also financing the construction of new apartment units. And one of the reasons this has worked out so far is the economy has come back in large measure. Also, home prices are so expensive that many younger families can't find homes that they can afford in their various communities. And so they're leasing up apartments, often very high end apartments, because they're trying to mimic the lifestyle of home ownership. So a number of factors here, but I suspect that we're going to ultimately get to an overbuilt multifamily market. 

S

Speaker 2

07:25

But again, I've been surprised with the strength thus far and the way that occupancy rates have held up in the face of job loss. 

S

Speaker 1

07:32

So a couple of follow on questions. One, I want to talk about affordable housing. To what extent. This is something I've been reading a lot about that seems to Me, like, as much as we've done to keep up with or maybe even, you know, overbuild a demand for apartments, we still haven't gotten up to the point where there are enough affordable homes available in areas of all types, but particularly in urban areas. Is that, is that the same thing you're hearing? Is that, you know, what do you anticipate for the affordable housing sector? 

S

Speaker 2

08:17

Yeah, that's what I'm hearing. It's what I'm seeing. There is not enough affordable housing in this country. So what that means is that many American households spend well over 30% of their incomes on housing and in many cases over 50%. And there's a structural issue here. Policymakers don't want to necessarily do what's necessary to create the opportunity for affordable housing. Now the, you know, Department of Housing and Urban Development, you know, helps subsidize developers often to site affordable units, but it's never enough. I mean, there's almost an infinite amount of demand for affordable units in many communities. In other words, if a developer successfully cites affordable housing, a community, it will almost immediately be leased up. And I think that's going to persist because there just isn't enough interest from the private sector and providing affordable units. After all, where's the margin? 

S

Speaker 2

09:04

It's the most high end units and there's lots of zoning restrictions and other restrictions on density, for instance, that make it impossible to really create more affordable units. 

S

Speaker 1

09:14

That HUD money is absolutely necessary to fuel that type of development, otherwise it just simply doesn't happen. Politically, do you think there is the will to make those types of investments over the year ahead, in the few. 

S

Speaker 2

09:31

Years ahead, there is the will to stop those types of investments. So many communities are really restrictive in terms of development. In fact, even single family home builders building three bedroom or four bedroom homes with two and a half baths, that kind of thing, they meet resistance from communities. You know, people say, we don't want any more growth. We didn't come to this community for, you know, a suburban lifestyle. We want it to maintain its rural character. All those things. I'm not saying those considerations are not valid. This is democracy. People are entitled to their opinion, but often the approach is we made it to Howard county, now let's lift up the ladder because we're the last ones in. Or we made it to Queen Anne's county or we made it to Talbot county and that's it, no more development. 

S

Speaker 2

10:12

And, and policymakers are elected. They hear that kind of, of expression and so they institute policies that keep, you know, keep there from being more development, including of highly dense units. 

S

Speaker 1

10:26

Wow. And this is the term we hear, nimbyism, right? The not in my backyard thing. 

S

Speaker 2

10:33

Yeah, yeah. Not in my backyard. Now they moved into somebody else's backyard often, but now that they have that backyard, they don't want anyone to move into theirs. And so it's really deeply unfair because what it does is that it's one of the factors that keeps America very disparate in terms of income and wealth inequality because the first movers end up having all the gains. I mean, think about all of the housing equity created during this pandemic. Home prices have shot higher. Who benefits from that? Homeowners. Who's the loser? People who would want to aspire to homeownership. And so that's one of the factors that's further widened the socioeconomic disparities. 

S

Speaker 1

11:12

Awesome. I mean, I see that you've helped to make it more clear and I appreciate that. So the second thing that I want to get into related to multifamily is the, you know, remodeling of existing spaces. I would imagine that with all the new construction that has occurred, that there's got to be a lot of pressure on existing units to become more competitive. Right. Existing properties to make investments to become more competitive. Otherwise it's going to be, you know, this massive gap between the new place around the corner and our 20 year old apartment complex that is paling in comparison when it comes to amenities and things like that. We're not going to be able to, you know, get the kind of rates that we need. Are you seeing, do you have any input on that sort of remodeling market? 

S

Speaker 2

12:10

Yeah, I mean, the remodeling market is hot during periods like this. And you're right, there are those competitive pressures. So if there's a new building, for instance, at 414 Light street at downtown Baltimore, an owner of a competing property might feel the need to try to upgrade their units. But here, Chad, it's not so obvious what's happening because this, there's price differential. So, you know, I may not be competing for the same kinds of tenants that you might get at, you know, at Anthem or 414 Light street or some of these higher end, newer developments. I might be trying to attract a more income fixed or income constrained crowd. In other words, if I put too much money into my units, I'm going to have to raise rent to make money. 

S

Speaker 2

12:53

And it may be that I'm trying to attract a group of renters who don't have that much money. And so my point is that this is part of the bifurcation of the country. You see it in the quality of the housing stock as well. You've got these shiny brand new units, beautiful with views of the water. And then you've got these other units where the H VAC systems don't work very well. There might be a rodent issue, so on and so forth, but that's where you get your affordable housing often is through that lack of investment. So it's a real problem. And again, to the extent that our socioeconomic disparities are widening in this country, you'd see that in the housing stock too, wouldn't you? And in fact, that's exactly what we observe. 

S

Speaker 1

13:32

Makes total sense. Yep, got it. Let's. I want to push pause here real quick. I didn't do a good job in my haste to get rolling. I didn't do a good job reminding our audience to please fire in your questions through the chat. We are going to take the Last minute, last 10 minutes or so of our time this morning together to get your specific questions answered. And Stacy is there to field and organize and, you know, prepare your questions for us in that last 10 minutes. So please, just an encouragement to get those typed right into the chat and we will get to addressing those throughout the course of the conversation. I'm going to shift gears with you on Iban to the underperforming market sectors. What do we, what do you know? 

S

Speaker 1

14:15

If, if were gonna, you know, try to, if I was heavy in these markets, I'd be diversifying in 22. What are some of those market sectors from your perspective, that are going to be kind of slow? 

S

Speaker 2

14:30

Yeah, I think there's three that come to mind. First, we had a wave of retail bankruptcies and store closures during the pandemic. Of course, you know, the likes of True Religion, Pier 1 Imports, Neiman Marcus, JCPenney, Brooks Brothers, Lord and Taylor all went bankrupt. Francesca's Guitar Center. So we have this wave of vacated retail space. I think that's one of the more challenging segments, therefore. And of course, under constant pressure from Amazon and other e commerce giants, Amazon continues to scoop up market share. Best performer during the pandemic thus far in terms of retail sales. Worth has been the Internet. And so that's one segment that's problematic in my mind. Second office. And what is the reason for this? Well, we've lost jobs as part of it. But the more important factor is the way in which people choose to work. 

S

Speaker 2

15:17

So one of the things that we've learned during the pandemic is that many people are as productive or more productive working from home than in the office. But who cares about productivity? Employers. But who has negotiating power? Right now it's employees. We only have about 75 unemployed people for every 100 job openings in this country. So it's really the employees who got the negotiating leverage. And many of them are saying, we prefer to work from home. We don't want to go into the office, we don't want to commute, we don't want to see our colleagues. We don't like our colleagues. In fact, we don't even like our job. But at least it's tolerable if we're at home with our cat and a computer, of course. And so that's not good for the office segment. 

S

Speaker 2

15:52

In fact, a survey came out recently indicating that 68% of Americans would prefer to work remotely. Third, the hotel sector. Now I'm not talking about high end resorts. The rich got richer during this pandemic. And so high end resources will be fine. But those hotels that address the commercial or business market, where there's a lot of space for meetings, for instance, business gatherings, you know, business increasingly is conducted by Zoom and GoToWebinar. And here we are on LinkedIn, so on and so forth. And so one's got to think that's a weak segment. In fact, if you look at the 16 major categories of non residential construction, the one that suffered the most in terms of new construction investment has been the lodging segment. Again, new hotel room construction. 

S

Speaker 1

16:35

So retail office hotels, if you're heavy in those markets, you might be thinking about creative ways to, you know, diversify in the year and in years ahead. Let's talk about geographical winners and losers. We have, you know, our audience comes from all over the place. Yes, you and I are both based here in the mid Atlantic, but our audience is all over the country. So. So who are some of the geographic winners and losers and why? 

S

Speaker 2

17:04

This is South. The south wins. It's Florida, it's Georgia, it's Texas, it's Arizona. These are some of the states that are performing the best during the pandemic, but they also have the most favorable long term demographics. Baby boomers are on the move. Of course, many of them have retired. Many of them retired early during the pandemic. As it turns out, about one and a half million of them. And there's another wave of baby boomers set to Retire. And let's face it, a lot of people like warmer weather. It's good for the joints. And so when you look at states like Florida, Georgia, cities like Nashville, Austin, Charlotte, Tampa. Tampa is booming. It's blowing up the, you know, that Tampa, Orlando corridor. It's fantastic economically. 

S

Speaker 2

17:44

If you like growth, if you like growth, if you like stagnation, you know, if you like stagnation, then there's probably some markets in the Northeast that can probably satisfy your desire for a lack of activity, and you can just watch the grass grow. But if we're talking about geographic advantage in terms of growth, it's the American South. 

S

Speaker 1

18:00

Wow. Yeah. So I. And. And I do know several companies in. In this market and also in other markets across the country that I work with that are making investments and into pushing south because they're seeing an unmet need. 

S

Speaker 2

18:17

So. 

S

Speaker 1

18:18

So that's. That's happening. No question. All right, shifting gears another time here. Between the two of us. Let's. Let's talk about materials prices. What the hell's going on? 

S

Speaker 2

18:31

Unbalanced global economy. So we, you know, shut down the economy, of course, globally. In America, it begins in March and April. That's shut down. And so what happened is, Chad, that a lot of firms, sensing that this could be a very lengthy episode in American economic history, shut down their capacity. So they laid off tons of workers. Some of those workers, by the way, asked to be laid off so they could collect more generous unemployment insurance benefits, set that aside. But they might have mothballed ships, they might have shuttered factories, including sawmills, whatever it happens to be. And then all of a sudden, after we lose all those jobs In March and April, 22 million of them nationally, we reopen the economy and fits and starting in May of 2020, the economy comes roaring back. Demand comes roaring back. 

S

Speaker 2

19:16

With all the stimulus, the supply is not there. So what do you get? You get shortages of goods, shortages of inputs, and much higher prices, you know, across the board, including with respect to materials prices, whether it's natural gas or other forms of fuel, whether it's steel or aluminum or copper. And, of course, softwood lumber has attracted much of the attention during the pandemic for various reasons. And so now software lumber prices have come back down a bit, but they remain well above what they were pre pandemic. So it's the reopening of the economy, it's the stimulation of the economy, and it's the fact that the supply chain has not been able to rise up to meet that challenge in Part because the labor market is supplying fewer workers right now. Our labor market has shrunk over the course of the pandemic. 

S

Speaker 2

19:54

For instance, in the US we have a shortage of 80,000 truck drivers in this country. So all kinds of factors at work, but that's what's happening. 

S

Speaker 1

20:00

To what extent does consolidation of providers in the global supply chain contribute to an opportunity for a relative few competitors to control the market? 

S

Speaker 2

20:16

Oh, yes, absolutely. Another factor, which is market concentration. So, you know, for instance, back in 2017, a group of global shippers came together to form a consortium. And even though there were only like 10 or 12 of them major shippers at that time, they further consolidated the market effectively. You know, we know that we have OPEC and OPEC plus, we have a limited number of oil producers. So we've got real concentration in certain markets. You know, you look at the American airline industry, for instance, four major airlines. It's much more concentrated than it used to be. And almost every segment, you see private equity and others trying to roll up firms and consolidate and create market power. You've seen this massive mergers and acquisitions market for years. 

S

Speaker 2

20:57

And so we have really gigantic businesses, and they have market power, and that usually causes prices to remain higher than they otherwise would be. So that's part of this inflation story. 

S

Speaker 1

21:08

Yeah, yeah. I don't think you or I are going to get to the bottom of it, but I wonder if there are some really fascinating discussions that happened, you know, six months ago, eight months ago, nine months ago that really helped to fuel a massive price increase that time that the market has had to absorb. So, you know, we're already there with 10 minutes left, and I can't believe it. But I do want to open up the conversation for questions from the audience, so I am going to pull up. Stacey, Stacy, if you could help us to organize the discussion here. Questions that are coming in from the audience and audience, please keep firing those in. We'll do our best to get to as many of them as we can in the next 10 minutes. Stacy, what do we got? 

S

Speaker 3

22:00

Sure, we have one question here. Supply chain issues are currently the single biggest impediment to maintaining construction schedules. When might you predict the supply chain pressures will ease? That's a tough one. 

S

Speaker 2

22:13

That's a tough one. It's speculative, but I think some point later next year, you'll start to see some semblance of normalcy. Now, you know, we've got this Omicron variant now floating around. It's highly transmissible, and so it would happen sooner, but for that. But I think sometime later next year and there probably will be some interruptions in supply chaining disruptions into 2023. So I'm not completely naive, but you know, we economists like to say that the cure for high prices is high prices. And so with prices so high and demand so high, producers have an incentive to expand capacity, add shifts, make investments in equipment, which in fact they are doing in large numbers. I'll give you an example here, Chad. Globally, we had more container cargo ship orders this year in 2021 than in any other year in history. 

S

Speaker 2

23:03

So suppliers are trying to bulk up their capacity and that should provide some benefits to consumers of various goods sometime next year. 

S

Speaker 1

23:13

Awesome. That's extremely interesting to hear. Stacy, what else we got? 

S

Speaker 3

23:20

What do you think about the term the great resignation? Can you comment on that and how people, the unemployment, like when are people expected to get back to work, that kind of thing? 

S

Speaker 2

23:33

I have no idea. You know, when the pandemic began, labor force participation in this country was 63.3%. And I thought that people were pretty happy. Not with the politics necessarily, they just, you know, but they were happy with the economy and some people were happy with the politics, I suppose. But the point is now no one seems to like their job. No one seems to want to come to work. I hear so much complaining, so much resignation among educators and construction workers and many others. The so called quits rate hit a record of 3% during the most recent month, which we have data. 4.4 million Americans quit their jobs in one month, many of them leaving small businesses behind. Any restaurateur you talk to says, where are my workers? I can't get them back. 

S

Speaker 2

24:14

And it's very hard to hire help wanted signs everywhere. So, you know, my thinking is that there's a semi permanence to this. People have rethought what's important to them. And one of the ways to deal with this is through stepped up legal immigration. You know, I'm a big fan of legal immigration. I mean, look at this. What I got going on here, it's no secret. And so I'd love to see America step up and bring some of that fresher blood in that motivated blood back. Because I think that's when America is at her best, is when you've got those really hardworking immigrants working alongside Americans who have been here creating a really dynamic marketplace. But we just don't seem to have that dynamism in the labor market right now. 

S

Speaker 1

24:55

I think that's 100% right. And I'll toss another. In addition to increased legal immigration. Another. Another thing that feels particularly relevant to me is that in. In an effort, I think, to help people, Really. I think in an effort to help people, policymakers have a desire to expand the social safety net. But I feel like every time the social safety net exp. It reduces the responsibility of the economy, the American corporation, the. The, you know, small businesses, the large businesses to, you know, incentivize people to, you know, move into the labor force. So it's kind of like, you know, the more social safety net we're providing, the more problems, like, we perpetrate, perpetuate. I mean, on accident. What's your response to that? I know I'm crazy, but what's your response to that? 

S

Speaker 2

25:53

You're straight up nuts, Chad. But what you've said is correct, I think, which is that I think that some of our work ethic has been dulled, in fact, during the pandemic. So people got lots of checks. 68%, for instance. 68% of workers who lost their jobs earlier in the pandemic were making more on unemployment, thanks to those federal subsidies, than they were prior to the pandemic, I mean, at their previous job. And so when you pay people to not work, then they get used to it, and they want that. They prefer it, you know, and my guess is that the Chinese government loves it when we pay Americans to not work. We need to get back to work. 

S

Speaker 2

26:30

And work is one of the ways that we contribute to this country, that we grow our gdp, we grow our tax base, we contribute to each other effectively. We help finance our national security, our homeland security, our, you know, our infrastructure, all that, you know, investment in education or human capital formation generally. I mean, and we just do not have that right now. And so, you know, it's often said that millennials strive for work, life, balance. That's code in my mind, for not much work, much life, you know, And I want to have. I don't. You know, I would like to not work so hard and have more life, too. But to have my life that I have, I've got to work. In fact, I've got to work really hard. And that's. That kind of motivation is good for America generally, I think. 

S

Speaker 2

27:14

You know, larger economy, more powerful economy, more influence globally. But there are a lot of folks out there who are not pulling the rope. 

S

Speaker 1

27:22

Thank you, Stacy. We probably have time for two more quick ones. 

S

Speaker 3

27:26

Okay. The pandemic has forced change across the board. What do you think the growth will be in the Prefabrication, volumetric modular construction and manufacturing practices in the construction process over the next year. 

S

Speaker 2

27:43

Yeah, I think the pandemic has been an accelerant to modular construction and prefabrication. Again, a lot of this relates to the workforce dynamic. So it's just hard to find construction workers these days. Many people don't want to work outdoors. They prefer to work in a controlled indoor setting. And modular construction offers that and therefore offers greater opportunity for flex time and other kinds of things, just more comfortable. And the workforce seems to be really concerned about comfort these days. And so I've been surprised that module construction has not gained even more market share in recent years than we have observed. But I think that you'll see significant market share gains going forward. And the pandemic is part of the reason for that. 

S

Speaker 1

28:22

Yeah, I would just echo that. You know, I hope that the industry and that the audience watching doesn't look at large scale events like the collapse of Katera as an example, that modular and your volumetric building isn't going to happen. It is, it's happening right now. And in fact, I would, you know, posit that there are thousands of amazingly qualified people who worked for Katera who are going to be doing some incredible things in that world, you know, more on a localized, regionalized, in small business way. So I definitely see that trend continuing and stay very plugged into it myself. All right, one more. Stacy, what do we got? 

S

Speaker 3

29:03

Okay, this one's from Brewster. Do you see any technology disruptors ahead of the construction industry? 

S

Speaker 2

29:10

Oh, many of them. I mean, you know, construction is famous for not generating meaningful productivity improvements over the course of decades. So we've seen utter transformation of financial services and retail trade and of course logistics, so on and so forth. Just have not seen that in construction. The typical construction job site probably looks a lot like it might have looked like several decades ago. And so lots of technologies, 3D printing and drones. And obviously on the design side, we've seen the effects of BIM and other emerging technologies. But yeah, the revolution is yet to occur. We just talked about modular construction, for instance. But you know, robotics, you know, robots that can lay brick, for instance, they're coming, driverless vehicles to drive materials to job sites, all those kinds of things. And so yes, the revolution is coming. 

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Speaker 2

29:56

And I suspect that the strongest technology companies, or I should say the strongest construction firms, will be the strongest technology companies as well. And by the way, technology can be expensive and training people on technology can be expensive. So that's another one of the factors that will drive more industry consolidation going forward. So if you see, if you think you've seen a lot of industry consolidation in the last few years, I don't think you've seen anything yet. 

S

Speaker 1

30:17

In our conversations on iban, one of the things that really sticks out is I remember talking about just this topic and I said, you know, if you were a construction company today making a strategic plan for five years from now, would you be planning to get bigger? And you said something that I thought was, you know, exactly what I felt and told my clients, which is, only if you plan to be in business. Right. Only if you plan to be in business. In other words, if you're. If you. It's totally reasonable and acceptable to look at the current market circumstances and say, you know what, now is actually a pretty good time to exit. Things are about to get. It's a. The revolution wave. It is coming. There are a lot of major investments that I'm going to need to make. 

S

Speaker 1

31:02

And if I'm not prepared to make major investments in my company to buy those, buy that equipment and expand my presence and all these things that I'm going to have to invest in, getting out is a reasonable option. But if I'm not getting out, I should be making a plan to grow. 

S

Speaker 2

31:19

Yeah, it is a good time to get out. I think it's a good time to sell business. Business valuations are generally quite high. Again, people are paying a lot for net income. But, you know, there's a sort of notion, go big or go home. And I think basically that defines construction during the years ahead. Go big or go home. Because again, technology is expensive and recruitment is very difficult. How do you induce the greatest talent to work for one's firm? While often a lot of people are looking for that financial stability that comes with a large established firm. And so go big or go home. I think that's part of the mantra going forward for the US construction industry. 

S

Speaker 1

31:57

This has been the fastest 30 minutes that I've spent all month. Anibon, thank you so much for being here. I hope you don't have something right on the back of this. I hope you get a chance to relax. I'm sorry to pull you in so early, but I'm really glad that you were able to do it and I think provided a ton of value to the audience here today. And so thank you for being here. 

S

Speaker 2

32:20

Thank you very much, Chad. 

S

Speaker 1

32:21

Yeah, so I'm gonna just briefly intro next week. We have. Please join us on December 14th. We have Steve Yelland and Bruce Jones, two very good friends of mine. The first time that we're gonna have two guests at once, they're gonna be on talking about a successful acquisition that occurred. Steve's business bought Bruce's business about four years ago. That provided a bunch of lessons learned that we're going to talk about. When it comes to exiting your construction business, I think this is relevant for the people who want to exit. This is relevant for the people who are thinking about getting out. This is relevant for people who are a part of a business that was just rolled up and also just going to be generally a lot of fun discussion about merging cultures and, you know, being successful post acquisition. 

S

Speaker 1

33:11

So we'll look forward to talking about that. Stacy, anything that you want to say before we part ways today? 

S

Speaker 3

33:19

Well, I look forward to seeing a lot of you this evening and we'll get this awesome episode up on YouTube in the next, like 30 to 40 minutes. So if you need to rewatch it or send it to somebody, I'll send a link. I'll post it on LinkedIn so you guys can find it. It was great discussion. 

S

Speaker 1

33:38

Thanks so much. Yeah, spread the word, guys. Please spread the word. If you know anybody that wants to speak, if you know it right. That would love to join us that you. If you know somebody that should join us, please pass their information along. We'll reach out to them. And, you know, if you want to make sure that you're on our email list, send me a private message with your email. I'll get you added to our email list, which goes out every week with a YouTube link to the previous week with a registration for the upcoming week. And we're going to keep on doing this through the end of this year into next and look forward to seeing you guys next week. Thanks so much. Have a great week. Thanks, Stacey. See you.