We live in what sometimes seems like a state of constant chaos. New challenges appear daily, only to be replaced almost immediately by obstacles that can seem even more pressing. At times the development world can feel like a non-stop game of whack-a-mole.
With so many challenges and distractions, developers might be tempted to veer from their course. But veterans generally agree that regardless, the most effective strategy is to stick to your plan and develop the best project you can.
Over Related’s 40-year history, we’ve learned to build in contingencies. While this kind of extensive preemptive planning requires considerable time and resources, it is this due diligence that helps companies anticipate critical industry shifts, including slowing condo sales, the emergence of new markets and changes in consumer behaviors.
Yet no matter how well you plan, some scenarios are harder to anticipate than others. Prime examples are the current trade war, the ongoing labor shortage and the never-ending advances in technology.
The on-again, off-again nature of the Chinese tariffs has caught everyone’s attention, sending ripples throughout subcontractors’ supply chains. And while many construction companies are looking for alternative suppliers, the fact remains the tariffs are just one in a multitude of factors that have led to stark construction-cost increases over recent years. In fact, the Bureau of Labor Statistics reports a 20 percent-increase in the price of raw materials since 2008, citing numerous influences, from growing labor costs to natural disasters.
The construction sector has most definitely felt an additional strain since the start of the trade war. But after countless hours of market research and conversations with our vendors and partners, we’ve found the trade war’s impact on construction and development efforts may be overstated. This sentiment is echoed by the latest Contractor’s Confidence Index study conducted by the Associated Builders and Contractors (ABC), which shows a majority of construction companies continue to view the near future optimistically.
As we prepare for our next generation of buildings, we’re working with our suppliers to lock in prices for steel, concrete and other materials literally years in advance. It’s not always easy, but long-standing industry relationships definitely help.
The uncertainty also extends to technology, although in a more positive sense. Due to the rapid changes and evolution, we’ve begun to hold off on any tech-related purchases until the last minute. This approach does carry added costs, but it allows us to ensure we’re buying the latest professional tools and software, smart home features and other innovative touches every time.
While less dramatic than the tariffs, the ongoing shortage of talent is another factor on which we’re keeping a close eye. And while at first glance this variable can be viewed purely as a negative, the truth is much more nuanced.
To attract and retain promising developers and other key executives, we’re focusing on two key tactics:
- Doubling down on entrepreneurial culture: Our team members have always been encouraged to view the company as their own. Divisions function essentially as independent companies, each with its own strategies and goals. Our associates participate financially in their projects and are responsible for key development decisions. This results in accountability and pressure, but it also allows freedom and creates a sense of ownership. In our experience, new talent values these qualities — which not only attracts top professionals but also minimizes turnover.
Bolstering mentorship opportunities: We’ve always welcomed young, assertive developers looking to absorb knowledge from some of the industry’s top leaders. Now, we’re taking a more formal approach to mentorship. A key component of this new effort is standing monthly training meetings led by top executives from each division that cover all projects currently in lease-up, active construction or in the pipeline. By mixing condos, rentals and affordable jobs, the team can discuss how to best approach any major issues, learn from successful tactics and more. From there, vice presidents hold smaller, more focused sessions delving into individual projects, which allows younger team members to ask additional questions and apply lessons learned to specific jobs. This approach has already shown great results, creating a constant learning opportunity and more holistic understanding of the business, which in turn encourages employee buy-in and participation.
Uncertainty may be unavoidable, but development firms that regularly engage in pre-emptive planning find their businesses are more resilient to all types of unforeseeable trials.
Jon Paul Perez is vice president of The Related Group, which has developed more than 100,000 luxury condominium, market-rate rental and affordable housing units since its 1979 founding.
This opinion piece was written for the Business Monday section of the Miami Herald. The views expressed are not necessarily those of the Miami Herald.