Suffolk Construction, like many general contractors with a national footprint, saw the uneven impacts of COVID-19 as it hit different regions of the country firsthand.
In its hometown of Boston, where former Mayor Marty Walsh shut down all jobsites quickly at the onset of the pandemic, it had to actively look for ways to keep its crews engaged. But in other areas of the country, like Florida, business boomed.
Here, Construction Dive talks with Ralph Esposito, Suffolk's president of the Northeast and Mid-Atlantic region, to talk about the road to recovery, how material costs are impacting business and even that dramatic near miss on a jobsite at Boston University. Esposito joined the company last year after 25 years with Lendlease.
CONSTRUCTION DIVE: How are you being impacted as the country emerges from the COVID-19 pandemic?
ESPOSITO: We have 10 offices across the United States, so every region has a little bit of a different challenge.
Florida has been full steam ahead. People have been moving there from all parts of the U.S., so they've been very busy with housing and all the social infrastructure that comes with housing, like schools, hospitals, firehouses and baseball fields.
But in Boston, they had a prolonged shutdown. That business is a lot of institutional work, so at the colleges that were well capitalized, the things that got put on hold are starting again. They're also seeing a very strong market around health care, medical research and biotech.
Where I am in New York, nobody really knows what to build here yet. We know that the office environment will be very different than it was. We're seeing a significant decline in rents in existing inventory, so we don't think office will come back for some time.
Same for hospitality. During the pandemic a lot of the hospitality properties had single-digit occupancy, and struggled to service their loans. I think a significant amount of them will fail. Some of them may also get converted into affordable housing, which is much needed in the city.
So when we take office and we take hospitality out of our market mix, we're really kind of left with the institutional work and health care. So, those are the places that we see activity. Hospitals are trying to reposition existing assets so that they can respond successfully in the event of another outbreak, or asking what does a new hospital need to look like in terms of its research focus.
How are cost increases impacting you in this environment?
So the hard part is to explain to somebody that while we're in a recession, particularly in New York, that things actually cost more now than they did before. That's the struggle. The only saving grace that's keeping costs somewhat manageable is that subcontractors didn't book a lot of work for a prolonged period of time. So if they worked on a 10% margin before, maybe they'll pick up work at a 3%-5% margin now, to keep the doors open and their team employed.
It seems like we’re in the middle of a long waiting period until the recovery truly gets started. What exactly are developers and contractors waiting for?
What goes up, must come down. That's the big bogey out there. People are waiting to see if the price of curtain walls, steel, lumber, oil — all the things that go into the mix of a building — go back to normal, so they can know if their deal pencils out.
But we've already seen a lot more activity in the last 30 days than we saw in the 300 days prior to that. We're seeing architects get busy. We're seeing people hiring again. I think that the only thing that really kind of keeps this thing from breaking open is some of the costs associated with materials.
You recently had a close call on a jobsite at Boston University, where video showed steel beams falling like dominoes while tradespeople were working at height. Is everyone OK?
Thank God, everybody's back and safe. We got really lucky.
Construction's a dangerous job. When something like that happens on site, how do you figure out what caused it, and learn from it?
My experience has been that when something like this happens, and somebody tells you what happened, 24 hours later, after you learn more, it's different. So we don't want to really jump to conclusions.
Right now, we're doing a deep analysis, working in collaboration with OSHA to make sure that we're seeing the same thing that they're seeing.
In a case like the episode that we had in Boston, you work backwards. You go through a "Why Tree" analysis, where you keep asking why. Why did this fail? What caused that? You keep working backwards until you get to the root cause of what went wrong.
And you do that to figure out if there is a way to ameliorate something similar from happening on a going-forward basis. You want to get it right. And then we make sure that every office and every person that's involved with those kinds of activities is aware of it. And they understand, you know, what to look for the next time.