Evolving Expectations in the Industrial Sector
In the fast-paced world of industrial construction, every second counts—but delivering the highest quality product on time, on schedule, and on budget, has never been more challenging. Join industrial construction experts Jeff McKinnon, Senior Director of Corporate Development at Govan Brown, Eric Nay, Executive Vice President of Layton Construction’s National Building Group, Scott Frank, Project Executive at LF Driscoll, and Jason Quinn, Senior Vice President of Estimating at Pavarini McGovern as they discuss the evolving obstacles of building in the high-speed, high-tech industrial sector.
Jeff McKinnonSenior Director of Corporate Development, Govan Brown
Eric NayExecutive Vice President, National Building Group, Layton Construction
Scott FrankProject Executive, LF Driscoll
Jason QuinnSenior Vice President of Estimating, Pavarini McGovern
Welcome to Building Conversations, a construction podcast powered by the STO Building Group. On today’s episode, four industrial construction experts from across STO Building Group’s brands and markets came together to discuss the evolving challenges of building in the high-speed, high-tech industrial sector. Join Jeff McKinnon, Senior Director of Corporate Development at Govan Brown, Eric Nay, Executive Vice President of National Client Support at Layton Construction, Scott Frank, Project Director at LF Driscoll, and Jason Quinn, Senior Vice President of Estimating at Pavarini McGovern.
Jeff McKinnon (00:55):
Hello, everybody. Welcome to the industrial sector podcast with the STO Building Group. My name is Jeff McKinnon. I work with Govan Brown, the operating partner in the Canadian region, and I’m joined by a number of my colleagues from across North America.
Eric Nay (01:06):
Hi, I’m Eric Nay, I’m Executive Vice President of our national build group with Layton Construction based here in Salt Lake City. But we have operations in 34 states and in Canada, and I look forward to diving in and discussing a little bit of our industrial experience and what makes it unique and what makes it fun to be in?
Scott Frank (01:25):
Hi my name is Scott Frank, and I’m with LF Driscoll company. We primarily work in the Northeast. I’m a project director and I’ve been working on a couple of large industrial projects and looking forward to being part of this podcast as well.
Jason Quinn (01:37):
Hi, my name is Jason Quinn, senior vice president at Pavarini McGovern. We do the core and shell work in the New York City Metro area and the industrial experience, you know, over the last few years we’ve been seeing inroads into the New York City market, and we’ve been looking at multiple projects in mainly the outer boroughs here.
Jeff McKinnon (01:57):
So let’s dive in, you know, the industrial space is an evolving asset class and there’s a number of large occupiers dominating the market right now. But Eric, maybe I’ll tee you up for this one. You know, what makes the industrial sector unique and how are we seeing this asset class evolving?
Eric Nay (02:12):
Yeah, so, I believe we’ve had just a transformational adjustment to what we all define as industrial the last decade and even more in the last three or four years, predominantly because of the customers need to get packages and to get products in a very, very short timeframe. We were all discussing earlier that it was very normal for customers to get their packages 7-10 days. And now you wouldn’t go back to that company if they provided a 7-10 day window to get that product to you. We’re all built-in and programmed that 1-2, 1-3 days is a necessity. And there is one very large company with a smiley face that’s now providing it to you in one day. And if you order before 10:00am, you can get it that afternoon.
Eric Nay (02:57):
And so, what really makes this industry very unique is the speed to market. Not only speed to market for them to deliver to their customers, but also the speed to market in which they expect their general contractors to build a quality product with a predictable cost and schedule. And so, there’s a lot more partnerships going on throughout the country that we’ve seen a lot more negotiated partnerships where they have two or three, three or four general contractors in their corner working for them. And they find opportunities that best fit both their general contractor and the customer for locations throughout the country. So, it’s been, I think transition from a hard bid model where 80-90% of the work was hard bid to maybe 60-70% is negotiated or a fee GC model with a very quick burn to only 20-30% of the model now is a hard bid model. So, they really transitioned their process and their procurement methods in order to be more available and deliver more for their customers in these short timeframes. So, we have to establish that trust quickly, we have to be a flexible partner and we have to be able to travel and the STO Building Group, having offices throughout the United States and being able to provide predictability, whether it be throughout the country or in Canada, has really been a value proposition for a lot of our customers.
Jeff McKinnon (04:13):
Awesome. Thanks Eric. So, a big hot button topic right now with a lot of our customers is procurement, is the supply chain challenges. How are we seeing each one of our markets from a supply chain perspective? And then what are the challenges and opportunities that you guys are identifying in the industrial sector?
Scott Frank (04:28):
I’m working on a project up in Rochester, New York, and we’ve run across supply chain issues in almost every aspect of the work, what we’ve been able to do once we recognize it, when we were starting structural steel and joist and deck is that we started reaching out way out – something we didn’t need for six months. And we kept a close eye on the market with those trades or those products to make sure we had availability. It didn’t always work out that way. So sometimes we were limited to going with one supplier across the country to provide the material we needed to make the schedule that we were required by the owner, for them to bring their building online
Jason Quinn (05:03):
We’re seeing the same thing. Steel, metal deck all being an issue. And then I think, especially with these buildings and the size of the roof on them, roofing is becoming an issue obviously on supply chain and inflationary.
Jeff McKinnon (05:15):
Perfect. Thanks, Jason. So, this question constantly comes up, how are we controlling costs and how can we ensure that the developer or the customer is getting a competitive buyout of the project, if we’re ahead of the stream and not an in a hard bid scenario from a procurement model perspective, how are we supporting our clientele to ensure they’re getting the best price?
Eric Nay (05:33):
Well, I think given this model is so fast paced and transactional, there’s a lot of real time data that our pre-construction teams have. If we’re bidding and building projects real time, we really have a good gauge of where critical mass is on concrete roofing, steel structures, site cast, structural, concrete roofing, and then site work. We have a really good idea of the pulse of the market and the industry, and being able to pull from that real data and then apply that to the subcontractor base when they provide bids to be vocally self-critical, vocally critical on the bids as well, and say, well, these are some of the numbers that we’re seeing and question that. I think it provides more predictability in pricing, and it helps provide more predictability to our customers.
Jeff McKinnon (06:18):
One of the experiences that we had delivering a large-scale industrial project here in Ontario is the constructability plan of going with a precast or a tilt wall system. From a supply chain perspective, if we’re going to be waiting 12 months for steel deck or steel joists, does that impact the constructability plans for how we’re actually going to be delivering these projects, whether we’re going to go tilt or precast, or how are we going to approach the overall planning? What are you seeing in your markets and how have you guys mitigated that?
Eric Nay (06:43):
I think being flexible and understanding really the timelines is a huge value add and proposition to our customers. We’ve seen in different markets a lot of variability. Out here in the west, we almost predominantly do site casts, structural concrete till with joist and deck. As a model, when we head into the Midwest, precast is the predominant method. It does have some challenges right now with execution on scheduled delivery. We’re seeing it out to 40-48 weeks where historically we’ve seen that in the 20-26 weeks range, and then pushing that out to the east coast where there’s opportunities for both. We’ve done site cast, tilt, and precast on opportunities throughout the Northeast and the Eastern Mid-Atlantic areas. So, we really sit down and understand what all the different methodologies are, how they affect the overall schedule, some ideas to improve schedule, some ideas to improve how we deliver the project.
Eric Nay (07:34):
And I think it just is a case-by-case basis in each market. We’re seeing customers order steel earlier and earlier, before we break ground on several operations, because it’s such a long lead time to get steel onsite. And instead of going at your exterior skeletal steel, and a lot of these projects, they’re looking at a concrete alternative to minimize the amount of steel they need on the project, not only for cost, but more importantly for schedule ramifications. So I guess the answer is we really look at every project and any site that we’re looking at differently and provide the customer all the different options so they can make an educated decision that best meets their needs.
Jeff McKinnon (08:10):
Thanks, Eric. So, with the industrial sector evolving, and this asset class becoming quite specialized with some of the built-to-suit projects we’re seeing in the market, whether it be material handling equipment, specialized utilizations multi-story, deliveries, how are we incorporating the owner supply vendors into our overall construction?
Eric Nay (08:28):
Yeah, absolutely. It has evolved into a very complex process. Before sort racks and transitional racking and equipment, vendor install equipment were somewhat rudimentary and it was more of a pick and pull method where now a lot of things are automated with a lot of artificial intelligence built into the systems. We built a building recently where they’re moving 90,000 packages an hour that go 42 miles an hour down a conveyor belt, and they’re measured in for size and weight all simultaneously. It moves 42 miles an hour through a laser x-ray system. It’s unbelievable the amount of technology that we’re seeing in these systems now. So, you cannot approach it how we probably approached it 10 to 15 years ago, where it was a more rudimentary handoff to the material handling vendors. Now they’re very much integrated into our process, integrated into our pull planning sessions, integrated into our overall strategic plan for the project and being able to coordinate with them on their needs for power upgrades, on their needs for sequencing of the building and phasing of the building, what parts of the building they might need first that are more complicated for the install and then the brains of the building, how we move them into the MDF rooms and any power upgrades to the building so that they’re integrated into those discussions early.
Eric Nay (09:40):
So, it’s successful for them and our goal and objective as a general contractor is to make sure that these projects are successful, not only for us, but for the MHE vendor, which in turn makes it a success for the customer. And then that turns into repeat business. I would throw that question over to Scott, who I know has a background in healthcare construction as well, which is a lot of the mentality we pulled from, right. In hospitals, you have a lot of the vendors pulling in specialized equipment for x-rays or for MRI equipment or in surgical centers. A lot of their equipment there there’s a lot of early integrations. We pulled a lot of that same methodology into industrial. And Scott, you’ve seen that in a lot of your projects. Maybe you could speak to it.
Scott Frank (10:20):
There’s a lot of similarities. So, things in healthcare are very regimented, very strict procedures. And as it relates to industrial, the project I just came off in Nashville where you just said earlier, Eric, these machines are moving this product in and out of that buildings at a very rapid pace that takes very specialized vendors to not only design and create this system of material handling as it is to bring it online and to operate it efficiently.
Jeff McKinnon (10:52):
Awesome. Thanks guys. And I think we can all agree that the sector is evolving in a lot of owner-supplied vendors with very large contracts are getting incorporated into the constructability plans that we own. BIM modeling has become pretty commonplace for most of the projects I’m working on. I know STO Building Group has a very extensive BIM department across each of our operating partners. Eric, maybe you can expand on that and how we’ve been able to work with the owner-supplied vendors and incorporating them into the BIM and provide that predictability outcome.
Eric Nay (11:16):
Absolutely. We got integrated with one customer who was accustomed to spending the last month after substantial completion reworking the project and spending millions of dollars updating and rehabilitating the project to match the needs of their equipment. And we turned that on its head and pulled it in and pulled the Revit models and integrated early the BIM modeling to find clashes, to find areas of opportunity within the building that we can tackle before it became a clash before it became a problem. And we think that in turn saved millions of dollars of rework and lost time. And that has been a major development with one of our customers, and we’ve done 26 projects with this customer. And we had a very robust plan in BIM coordination for all 26 projects. And that has really set the stage for how they deliver this product nationally with a lot of their other GC partners. Um, so we’re seeing a large effort to integrate as early as possible, your BIM technology to avoid rework. It’s all about providing predictability and schedule. And if there’s an opportunity for you to cut any wasted time at the end of a project, the customer’s all about it. And for a fairly minimal cost, if you really look at the cost for BIM, for advanced and comprehensive BIM coordination, it’s a hell of a lot better than what you’re going to spend on the back end and rework
Jeff McKinnon (12:32):
Got it. I think that leads into the next question. We as an organization operate 43 offices around the world, but pretty extensively across North America – Canada and in the US. When entering a new market that we might not have an established office in, and we’re working on behalf of a customer, I think that having that fully detailed BIM model does help us integrate with the local sub-trade market and define exactly what the working plan for each one of these build-outs is. Eric, I think you’ve got the most experience in different markets. Maybe you can expand on how we’ve been able to deliver in markets where we might not have boots on the ground or an office and come in and deliver these outcomes for our clients.
Eric Nay (13:08):
I’d say it really boils down to two to three areas of opportunity or three focuses. I’d say the first focus is making sure that you understand the product type. And oftentimes our customers are taking us and repeating a project or a similar project in a different market and expecting the same level of predictability and outcome. So really understanding the product type I would say is number one. And STO Building Group has a really good handle on what our customers are wanting and looking at it with a progressive mindset to see how we can help them be better and innovate to provide a better product at every turn. I’d say the second focus is really getting in early, rolling up your sleeves in preconstruction. If our customers ask us to go to a market that we might not have as much experience in, I’ll use the example of Scott in Rochester, New York right now.
Eric Nay (13:55):
And he can speak a little bit to that, but we know the caliber of subcontractors we’re looking for. We throw a very large net through our building connected systems, and then we deploy our teams and our estimating managers and pre-con managers to those markets to meet with those folks in person and talk about the timelines, the hours required, the staff, the manpower needed to hit a project like this. Again, that’s taking from that first bucket and integrating in into that second bucket to really learn and educate as much as we possibly can, that local market of what our expectations are. And then finally, the execution of the project, bringing in team members who are accustomed to travel, are accustomed to working with subcontractors for the first time and willing and able to train them to tell them how they were successful in previous projects and help them be more successful.
Eric Nay (14:45):
I believe our goal after we finish a project and we might leave that region, is that we left that region with a higher level of understanding of how to build fast, how to build safe, and how to build high quality projects. So, I would say it really boils down to those three markets, know your product, really get deep in the pre-construction side to educate, train, and identify the right partners and finally, to execute and be willing to carry your subcontractors as much as you can to provide that predictability for your customer.
Jeff McKinnon (15:15):
Awesome. Our clients are asking us to build larger, more sophisticated projects in less time. Having the right subcontractor partner on the team is more important than ever now. What are some of the strategies that we bring to ensure that we do have the right team and the right labor on-site to deliver the outcome?
Scott Frank (15:30):
It all starts in preconstruction, and going into a market that’s never seen a project like this before, when you start soliciting your subcontractors, you need to take a very good look at what they’ve done in the past and what their current workload is. More importantly, they have to understand what they’re actually looking at in the project and what the requirements are, and the deliverables are. And that failure’s not an option. So, in doing so, we bring every trade in. We go through a thorough scope almost day by day, what they can expect month by month, where they have to be to make sure that they haven’t exhausted all resources that their company may be able to provide. When we went to Rochester, the area had never seen anything like this before, even closely. The subs that we met with, we had to make sure they understood not only the speed, but the quality that had to fall along with it to achieve our schedule. Hiring the wrong trade in a market like that could potentially put that company out of business because they’ve run out of resources and you have nowhere to go.
Scott Frank (16:26):
So, making people aware that it’s not just a project that’s 16-17 months long. It’s a marathon.
Jeff McKinnon (16:32):
Thanks, Scott. That’s great. I really appreciate the insights into the buyout and choosing the right partner. It kind of brings me back to the STO Building Group, it’s brand and team across the country. We have a tremendous amount of historical data and construction experience to bring to the table. Eric, what would you say is the biggest competitive advantage that STO Building Group has and how have we been able to support our partners?
Eric Nay (16:55):
Well, I believe we have a significant value proposition in as much that I think I underestimated it when we joined the group a few years ago. It has been tremendous to be able to bring a national platform where you have experience in multiple markets with customers and be able to pull national lessons learned and get as granular as you need to with personal relationships. We recently looked at a project in Northern New Jersey for a customer who we were able to pull national experiences and lessons learned and get as granular as possible with Structure Tone New Jersey, where they even knew the permitting officials on a first name basis. So, you’re getting the national experience, the national benefit, and getting granular where the rubber meets the road to get that benefit as well. You’re getting both sides of the sword.
Eric Nay (17:43):
And I think that the national platform, as far as personal relationships with subcontractors and markets throughout the country and throughout Canada, and being able to couple that with our ability to provide predictability, whether you’re in Florida or whether in Seattle, Washington, to Hawaii, to Maine – we’ve been able to provide predictability in the market. And that large shotgun approach coupled with that rifle approach of local relationships and knowledge has been huge. And I’ll throw that over to Jason because he and I’ve worked on projects where we’re bringing in some national data and he’s able to talk to with local relationships to get that as granular as we need.
Jason Quinn (18:18):
I think that’s definitely one thing about the STO Building Group as a whole is you have the national expertise, and to your point, Eric, we know the local subcontractor base and as Scott was even saying, having the right guys on the job and making sure that we know the job’s going to get built, that we have the manpower and the resources. That local ability – it’s untouchable, I think.
Jeff McKinnon (18:43):
Speaking more locally here in Toronto where I’m based, Govan Brown historically has been an interiors constructor. And over the past couple of years, we’ve been building out our core and shell development team, but to take on a 2.4 million square foot multi-story industrial project in our market before now – it was a daunting task. And bringing that experience of the traveling teams up here to not only train our internal teams here at Govan Brown how to build structures to this size and scale and speed, but bringing that level of experience to the local subtrade market is really – it’s evolved in the sector as a whole year and really pushed the limits of constructors here in Toronto. So, yeah, it’s a great story to bring to the market and we’re excited to continue to expand on it. So, the industrial sector is becoming quite specialized. I think we’ve talked about one of our clients in the e-commerce side of the business, but, you know, we’re also seeing it on some of our food service groups. Some large grocers are still trying to get into that mentality of same day delivery. Um, how are you seeing, uh, the industrial sector becoming specialized?
Eric Nay (19:43):
Yeah, I think this is center of the target for an organization like STO Building Group, where we build hospitals, we build data centers, we build complex defense operations, we build robotics centers, light manufacturing, and all the way to spec industrial and development. So there’s no project that is too complex for this organization to tackle. So, I think the fact that it’s getting more complex and more complicated is exactly the reason you need an organization like STO Building Group to tackle your project. That being said, we’re seeing speed to market be the single greatest change in this space. And being able to coordinate and have qualified subcontractors that the customer can count on their quality, can count on their schedule, is absolutely critical to the success of the project. You’re seeing in a lot of the food storage, as you had mentioned, the production and utilitarian focus on these projects has advanced to another level.
Eric Nay (20:36):
One in particular, we just were awarded a project and are in the middle of a design build for a food manufacturing project that’s a no-bake, organic product that is now going from three manufacturing lines, which they’ve had in the past to six lines in the same amount of square footage. So, we’re custom building, custom designing a facility that meets their needs that can provide up to 70 million units produced per year. That’s something that this company would never have dreamed of 10 years ago with their product, but their demand has far outreached their ability to manufacture. And so, they came to an organization like STO Building Group for them to say, how do we provide the output that our customers are needing us to do in a very predictable schedule? So, we’re able to build that project from start to finish, design to turnover in 13 months.
Eric Nay (21:27):
And that is really a tremendous value proposition for an organization like STO Building Group. It’s providing predictability for that customer. And we know that when that customer builds this project in two or three years, they’re going to need one on the west coast as well. That’s one example. In the cold storage facility, you are seeing products move a lot faster than historically has been seen in these facilities. You’re seeing portions of the building being driven towards deep cold, whether you’re 20 to 40 degrees and you need a glycol-treated slab, to some portions of the building being refrigerated goods only where they’re coming in for a short period of time and going out to either grocery store chains or to customers in the franchise businesses and across the Metro market. So, we’re able to take a lot of complex experience from our mission critical data center side, from our large robotic fulfillment side, and implement that into the cold storage. So, the name of the game is speed. The name of the game is providing that quality so that they can deliver on their customer needs.
Jason Quinn (22:46):
Yeah, here in New York City, in the five boroughs we’re seeing a lot more adaptive reuse buildings, which is actually to Eric’s point, bringing things a little bit quicker. The buildings are set up, they’re old. And some of the food cold storage we’ve been looking at Wegmans and Whole Foods have been setting up out in the boroughs and again, reusing existing buildings and modifying them for the specific use. But I think having the frame there, having the foundations there, you moved in a little bit quicker of a speed than a typical, out of the ground job.
Jeff McKinnon (23:34):
I think one thing to add, as lease rates for the industrial product go up and up and proximity to the end user and the customer becomes very important, we’re seeing quite a few malls in the Canadian market being repositioned for industrial use, for that last mile type utilization, and where cost per acre of industrial land is higher than it’s ever been – certainly my career. And we’re starting to see higher density, industrial product be contemplated, Just locally here in Toronto, there’s proposed multi-story industrial spaces that are going through the SBA process, which is really unheard of. Vancouver’s got the first multi-story industrial builds going up. It’s been under development for couple of years. Eric, Jason, Scott, are you guys seeing any multi-story utilization for multi-tenants or is it single occupancy with structural floors? We’re seeing that in some of the more specialized builds, but do you guys see that becoming commonplace?
Jason Quinn (24:27):
We don’t see many multi-tenanted type buildings yet, but you know, not to say that it’s not coming to the area.
Eric Nay (24:33):
I think for a lot of the large customers, it’s dominating the market where they’re taking a space down and we’ve seen customers take down recently in a 680,000 square foot building. The customer only needed 400,000, but they leased up the entire building for future growth. Understanding their demand is rocket ship up towards the full utility of that building, but you’re seeing industrial developers build for the future. If they build it, they will come mentality. And in most cases, those bets are paying off. We recently just built three, 250,000 square foot design-build facilities on a campus. And before we had even poured foundations, two of the buildings had leased up. So, it’s just an amazing amount of demand right now, outpacing the supply. And so industrial developers are trying to provide product to their customers as quick as they can and customize it as much as they can.
Jeff McKinnon (25:23):
Thanks guys. So, with land values going up and leasing rates going up, what would be important to an industrial developer that’s looking to enter that kind of cross dock last mile, close to the city type of product line? That’s pretty important for most of our metropolitan areas. Speaking from Toronto and Vancouver, two of our major markets where cost per acre for industrial zoned land is getting up toward over 10 million bucks. How do we maximize the density on that acre?
Eric Nay (25:50):
I recently looked at several projects in major metro areas. You go through a K-Mart who filed bankruptcy, and most of their buildings were between 84,000 and 120,000 square feet. If a tenant decided to go into a set building and make some modifications structurally and add a mezzanine, they could get anywhere between 150 to 250,000 square feet of usable space industrial within that building and have the parking necessary for their employees who were being involved in the package, handling duties of that building and be successful. So, we’ve looked at two particular projects to retrofit those and to turn them into last mile facilities for a customer. And I think there’s going to be a lot more use of those facilities. You hit it right on the head, Jeff with the cost per square foot, in a lot of these industrial areas, just at levels that we’ve never seen before. And it doesn’t seem to slow down. They’re going to be a little more innovative in the areas that they’re looking at. And specifically, in these retail customers who aren’t as healthy and who are looking at selling a lot of their asset class to these small micro distribution centers. But I’ll throw that over to Jason, maybe speak about what he’s seen in more Metro areas.
Jason Quinn (26:56):
Obviously, Manhattan land is way too expensive, but what we’ve been seeing is over in Queens and Long Island City, and then up in the Southern Bronx, land is a little bit cheaper. Access to the highways is right there, and there’s a lot of empty warehouse buildings. We don’t obviously have Kmart’s or any big box retail per se in the surrounding boroughs that are getting reused or anything. I couldn’t really speak much for Jersey. To Jeff’s point, a lot of malls, those anchor tenants are kind of gone at this point. So, any adaptive reuse would be definitely something interesting to happen in the New Jersey market, but New York, I think it’s mainly the outer boroughs. And like I said earlier, most of the buildings we’re looking at are adaptive reuse of existing, old industrial buildings. They’ve got the right loading, pounds per square foot, column spacing is generally pretty good. And they’re pretty sturdy buildings.
Jeff McKinnon (27:57):
What’s become pretty top of mind for a lot of our clients, and I think I’ll speak for the group here, sustainability and the ESG initiatives for all of our clients is something that is constantly getting asked of us. How can we support our partners on both fronts, whether it’s on the procurement side of things or on the sustainability front? Eric, I know you guys are working pretty extensively with a lot of our industrial groups across the platform on the sustainability front. What are you seeing from there? And how have we been able to support our clients?
Eric Nay (28:24):
You’re exactly right. There are some goals to their customers to be net carbon zero by 2040, there’s other customers who are just making this a focus of their organization going forward in construction. So, we really are being the tip of the spear on this platform nationally. Two projects in particular I want to highlight, we’re really taking a focus in embodied carbon, understanding the fruit wood, which is closest to the bottom of the tree and making sure that we’re capturing all the abilities that we can during the construction process to minimize the overall embodied carbon on a project. And Scott is our senior project manager CM on a project we’re doing in New York where we’re really taking a concerted effort towards carbon cure technologies and embodied carbon reduction. I throw that over to Scott to speak briefly to our abilities to target that for our customer.
Scott Frank (29:11):
Sure. Thank you, Eric. So, we have a client that wants to go zero carbon emissions by 2040. And what we do on a daily basis is we capture all the commuting miles, the fuel usage for all equipment on-site, the delivery miles, the fuel consumption used. We log those into our Green Badger system that tracks all of that for the life of the project. But in addition to that, we’re also tracking the embodied carbon in all the materials that we bring to the site. So, what we do is we collect EPDs, which are environmental product declarations. These are declarations and studies that have been done for things that go into a product – let’s just say dry wall – where, what it took to mine that material, the ingredients to make that piece of drywall, to the extraction, and then the assembly of that drywall and the manufacturing of it.
Scott Frank (29:53):
And then we also track the fuel consumption for it to get to our site. So, it’s not just everything on our site, but it’s also tracking all the embodied carbons that it took to make that piece of material. One of the things I want to comment on here would be on recycling and recycling is pretty common in most areas. It’s pretty much standard operating procedure, but in this particular area that we’re working on, there hasn’t been a demand for recycling clients for about five years now. So, there’s no local waste management company that can actually do this without a cost to our owner. So, we’re actually developing an off-site recycling yard specific for our project. So, the owner can maintain their goals of achieving the sustainability that their corporation has committed to not only the environment, but to the rest of the world.
Eric Nay (30:37):
STO Building Group does have a director of sustainability that is involved at every turn, through our preconstruction process. We tie sustainability a lot too, if you were asked to go cut down a tree and you had an hour to do it, you’d spend 30 minutes sharpening the blade rather than an hour hacking at the tree. And that’s a lot of similarities to sustainability. You can make the most influence on your outcomes in preconstruction. And so, we’re integrating our director of sustainability early on in these projects to make the most impact for our customers. It’s important to STO Building Group, it’s important to our customers, and we’re glad that the industry is moving towards a more sustainable approach to these projects.
Jeff McKinnon (31:18):
I think we can all agree the industrial asset class is evolving and all the suppliers and the vendors that have worked in this sector for some time are getting forced to adapt to the changing environment. Now, what’s next? Where do we see the industrial sector going and continuing to evolve over the next couple years?
Jason Quinn (31:34):
For us in the New York City Metro area, Jersey’s got a lot of industrial, but we’re starting to see, again, more and more coming into the city, especially with the last mile delivery model. So, I think for us, it’s going to definitely be a growing sector for our business here. And then again, Jersey is continuously growing. So hopefully, as the STO Building Group and Structured Tone and the Driscoll groups down in the Southern Jersey and north Jersey, get more into the industrial sector and start picking up some of this work – I don’t see it slowing down, not with e-commerce and everything. I think it just going to be a continuously growing business.
Scott Frank (32:18):
What I would say being primarily around the Philadelphia area, that we don’t have a lot of multi-story industrial warehouses. We are starting to see a few of them, maybe two stories. It really kind of depends on if the customer is looking for space and the building loading for multiple stories isn’t as important to them, they’re more apt to repurpose a building, but if it’s a multi-story customer who needs to move product up and down, then they’re going to look at building a new structure because of the capacity on the foundations.
Eric Nay (32:47):
We’re also looking at a lot more micro distribution centers going more vertical. Right now, we’re building five robotics centers across the country that are over 90 feet tall with four or five levels. With the increase in industrial real estate across North America, we’re seeing the need to go more vertical, which has happened in Europe for quite some time. And by doing that, you’re having to look at different building products, different forms of sequencing in the process and how you help your customers be successful. And last but not least just speed continues to be a focus of our customers. And the use of more advanced and sophisticated general contractors will continue to be a focus of our customers as well. What worked in the past of being fast and cheap is kind of yesteryear with the challenges with commodity pricing and the complexity of these buildings growing and growing, they need a more sophisticated builder. And that’s why we really believe that STO Building Group provides a great solution for our customers across the networks and across the platform in North America.
Jeff McKinnon (33:45):
And I certainly think that our platform and that speed to market, Eric, is giving our customers a competitive advantage on the leasing front. With industrial vacancy sitting below 2% in most of our markets right now, how fast can we build it and get their tenants in and occupying is really the name of the game. That concludes the industrial sector podcast with the STO Building Group, hopefully everybody learned a little bit more about how we approach this space and these types of projects. I want to thank Eric, Scott, and Jason for joining me today. It was a very healthy conversation, and hopefully we can keep the conversation going. Thanks everybody.
Thanks for listening to Building Conversations for more episodes like this, you can find our podcast on Spotify, Apple Podcasts, Google Podcasts, or the Structure Tone website.