Built to Chill: Exploring Cold Storage Construction
What does it really take to build high-performance cold storage facilities in today’s market? Join Layton Construction’s National Building Group as Executive Vice President Eric Nay hosts a dynamic conversation with Thomas Gubbins, Director of Client Relations and Pre-Construction, Christopher Webb, Design Manager, Sean Doherty, Project Manager, and Mike George, Vice President of Operations on the booming world of cold storage construction. From refrigeration systems to convertibility, automation, and emerging trends, the team shares real-world insights and what sets Layton apart in this highly technical and fast-growing sector.
HOST
Eric Nay
Executive Vice PresidentNational Building Group
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GUEST
Mike George, LEED AP
Vice President, OperationsNational Building Group
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GUEST
Christopher Webb, AIA, NCARB
Design ManagerNational Building Group
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GUEST
Sean Doherty
Senior Project ManagerNational Building Group
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GUEST
Thomas Gubbins
DirectorNational Building Group
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Eric Nay (00:00)
Welcome to the Layton Construction Cold Storage podcast. I’m Eric Nay. I’m the executive vice president of Layton Construction’s National Building Group. And I’m excited to moderate today’s conversation. I’m going to spend some time introducing the topic and then introducing our panelists and then dive right into conversation. If you’re an owner, developer or operator of food, pharma or cold industrial, this podcast is for you. If you’re an industrial developer looking to jump into cold storage or one of our architects or engineering partners in the space or just a construction junkie like the rest of us. We hope you find a lot of value in this conversation as well. We’re going to have some fun today. Cold storage is one of the fastest growing sectors in the industrial vertical. It’s one of also the most technical and capital intensive in the industrial sector. Success requires experienced teams. It requires folks who’ve done this before and done this on scale.
At Layton Construction, we’ve recently completed or are currently building seven different cold storage facilities in seven different regions or climates in the United States for seven very different customers or product types of cold storage. As an example, we’re building for one of the largest fast-food chains in the world. We’re also building for one of the largest coffee companies in the world. We’re building for one of the largest pet food brands where we’re flash-flash freezing cans of cat food. We’re building for one of the largest grocers in America. We’re also building a large-scale food distribution facility with multiple cold zones. We’re doing a large national floral distribution center, just in time fresh food delivery company for consumers—directed consumers. And finally, one currently in conceptual design is for a pharmaceutical distribution company. The challenge and the beauty of cold storage is that no two projects are the same. And our Layton Construction National Building Group, which all of our team members here with that group today, have completed over 80 million square feet in the last five years. So why did we jump into cold storage? We made that intentional decision five years ago because we believe in this vertical. We believe it requires sophisticated partners, sophisticated builders.
Eric Nay (02:26)
And we believe we bring a creative solution to that vertical. So without delaying any further with me is this outstanding panel of experts, my colleagues and my friends at Layton Construction. I’m going let them introduce themselves and jump right in. First, I’ll start with Thomas.
Thomas Gubbins (02:43)
Yeah, good morning, Eric. Thanks for pulling this all together. Excited to be here for a few reasons. One is we’re in town; we have a groundbreaking tomorrow for a cold building here in town, which is really exciting. But also to talk more about this growth in this sector. I’m Thomas Gubbins. I’m a director for Client Relations and Pre-Construction. And really my job is to kind of go out to the marketplace, find the consumers and the customers that buy what Layton sells, qualify us, and then make sure that our team is giving them exactly what they need from the start of that first budget all the way through the final turnover. So I’m really excited to be here and talk about the growth that we’ve had and kind of where our team is kind of continuing to push.
Eric Nay (03:28)
Christopher.
Christopher Webb (03:30)
Hey, thank you for allowing me to be here. This is a topic that’s near and dear to my heart. I’m an architect by trade. And what I do for Layton Construction is manage the design efforts for their design build cold storage projects. You know, love it. And I love the team that I’m working with, you know, such a fast-growing sector, such an exciting sector, because there’s so many facets to it. And so thank you for allowing me.
Sean Doherty (4:00)
Yeah, it’s Sean Doherty. I’m on the project management side of the Cold Storage Group as well as an NBG. I’ve been doing this for 12 years now, 10 years was at Cisco Foods. So I had to do a lot of ground up as well as a lot of production and then two years were on the developer side. So I always get asked, it’s like, why did you go back to construction? Because I love what I do and love building buildings.
Eric Nay (4:23)
Mike?
Mike George (4:24)
I’m Mike George. Operations Vice President. That means that I’m doing my very best to keep track of our 150, 160 operations professionals between superintendents, project managers, project engineers and the like, trying to deliver predictable outcomes. And I’m glad to welcome Sean back to the good side of the table, getting them onto the contracting side again. And yeah, we love cold. We love the precision, we love the details, we love everything there is to every facet of it.
Christopher Webb (5:04)
You’re herding the cats.
Eric Nay (05:09)
Well, thank you all for being here. They’re all humble folks, but this is a powerful powerhouse team and we’re grateful to have you on team Layton and to really grow in this vertical for us. Let’s start at the 30,000-foot view. Cold storage is moving fast and a growing sector. Give me a few words to describe this cold storage sector from each of you that kind of jump out at you that really describe, you know, the energy around cold storage currently.
Thomas Gubbins (05:36)
Yeah, I would say customization is a huge thing that comes up often with our customers and different prospective clients as we engage with them.
Christopher Webb (05:46)
I think that’s key is like convertibility is huge in the market today. You know, one of the things that we see is a growing privatization of cold storage, a lot of developers getting into the game. And so being able to offer a product that is convertible plus cooperative. Cooperative is another great word for the market because a lot of these facilities don’t market just to one client. They’re able to store anyone’s product for last mile fresh delivery.
Thomas Gubbins (06:25)
Customization and convertibility kind of seem like they’re opposites, but really in this space, designing these very intricate complex buildings, you still need the customization, but then to be able to later on down the road offer that flexibility for developers to kind of pivot if somebody moves out or things like that. It’s kind of both.
Sean Doherty (06:48)
Just the longevity of the buildings to market it that way. I would say also build to see kind of, I mean a lot of deals, especially on the developer side, they’re trying to get thousands of deals trying to pencil. When they finally get one, the building has to be able to work for them. That’s one of the biggest parts. Then depending on who the tenant is, mean, you have a TI or complete ground up that could be completely different from what they originally thought the project was going to be for.
Mike George (07:16)
But one thing that’s common among all of them that I love about Cold Storage is just the passion that the user has. I’ve yet to walk a Cold Storage facility with an end user where they don’t care deeply about the details, knowing, you know, I mean, everything has got to be exactly correct for them to operate and function at their maximum efficiency. And it’s contagious. I mean, you talk to them and they get excited about it and that kind of spreads throughout the team. That’s one of the things I love about cold.
Eric Nay (07:49)
Thomas, you lead much of our front-end national work with clients across the country well before our shovel hits the dirt. Any thoughts on the national landscape and insights from some of our customers nationally that are currently in this space?
Thomas Gubbins (08:04)
Overall, it’s like a really exciting industry to be in. There’s a lot of potential growth both on the developer and end user side. We’re seeing a lot of end users taking control of their own supply chain after COVID. They really want to own from when they buy that piece of chicken until it gets into their stores. And then with developers too, they’re extremely bullish on building these ground up facilities, providing these customized solutions for these different kinds of tenants that maybe don’t have that capex expenditure to build these really expensive facilities and providing those solutions for them. So it’s overall just a really exciting time to be helping with a lot of these deals, getting them off the ground and then getting these folks into their facilities. Yeah, it’s been fun.
Sean Doherty (09:00)
Right, seeing as a lot of the developers are really jumping into it and they’re allowing a lot of these Fortune 100 companies to be able to concentrate on the business and not have to dump a bunch of money into that and depreciate it every year and putting it into a rental schedule that works for the client.
Thomas Gubbins (09:17)
It is, it’s just a different beast. It’s, you know, Christopher once, it really kind of broke my mind free into understanding it a little bit better on racking space. It’s almost like hotel rooms, right? And you want heads and beds, and you want pallets and pallet positions. And so, you’re able to give them the chance to really focus on their business. And I think on the dry side, not to, you know, downplay the dry side—it’s a little simpler to understand just how many racks high can we go and how many power positions can I get on the cold side? You know the complexity of, okay, how many forklifts we have running, how often are the speed doors opening and closing? How do we keep the humidity correct? How do we keep the temperature right? You know, how, does our cold doc need to be to run everything? There’s just a lot more that if you don’t know and haven’t done it, like Christopher and Sean and Mike, it just, I think it’s a big undertaking and so leaving it to like professionals.
Christopher Webb (10:21)
Well, there’s a myriad of factors to Thomas as far as like, you start, it’s not just storage, but it’s preparation of food to be stored, right? Whether it’s blast freezing, you know, whatever it is, you have to understand your product, your product type, how it needs to be frozen, you know, or chilled, you know, it’s stuff coming in from a field, you know, taking off field heat, there’s all kinds of factors that go into how you, how you store and how you, you know, how you chill that that product that you know, really impacts design.
Eric Nay (10:52)
One question that dives into that is, are you seeing a rise in speculative cold storage or is it always customized for one tenant, one purpose?
Sean Doherty (11:04)
I would say it’s a mix. You see a lot of speculative because what will end up happening is you’ll have an end user that’ll run out of freezer space or run out of cooler space and need that instant need to be able to go to a 3PL or to another storage to just have an offsite storage because they don’t have enough storage on site. So, you’ll see a lot of that in different cities. Like in Dallas, a couple years back, I was building a building for a produce production. The had a need for freezer, we had to go find somewhere to store all that extra product. And then on the other side of it is a lot of the build to suit and making sure that they’re obviously forecasting usually about seven years out from when they’re building the building originally. Two years for construction, then five years of growth and funding.
Christopher Webb (11:53)
I think, you know, we were talking a little bit earlier today about this where, you know, the market’s really seeing an increase in developers jumping in the game. Since 2019, you know, the average rent for cold storage has gone up 96%. And that’s due to the fact of lack of modern product. You know, if you look at the, since 2020, the average cold storage facility is 40 years old.
Christopher Webb (12:26)
which is crazy to think about because of new technologies that have happened since then. And over half of them are 30 years old. And so, developers are starting to get in the game, understanding that a lot of these companies, especially smaller companies that are coming out of the ground right now, the food kit companies, they don’t necessarily have all the money in the world to be playing with. And so, developers are adding to the game.
Christopher Web (12:49.73)
by building facilities that can allow them to deliver their product as fresh as possible, especially in that last mile. If you think about it, it’s one thing to talk about keeping and maintaining product in a large warehouse that’s insulated, but keeping and maintaining product on a truck that’s not so insulated. The markets realized that the closer you get that product to the end of its know, route. That’s where warehouses are being built. You know, smaller hubs.
Eric Nay (13:27)
Yeah. When to build on that momentum, you know, we’ve seen a lot of the average facilities are 40 years old. That’s amazing. I didn’t know that. But in the last couple of years, what has really been the momentum that you’ve seen, Sean, you know, that’s taken over the market. And where do you anticipate that to go the next few years?
Sean Doherty (13:45)
What we’ve been seeing is there’s usually there’s a lot of regional distribution centers, and then they will distribute out to let’s say, market hubs kind of Christopher was talking about. So, they’ll take their product, bring it to a main warehouse, and they’ll ship it out to the local warehouses, which allow us to get closer to the customers. So, we’re seeing a lot of that. Then as well as Christopher was elaborating on was, we’re seeing the developers coming in and helping these smaller businesses by giving them the I to say giving them by putting the funds into long-term leases that allow them to get to the facility allow them to do there I mean Get their product and then be able to really have an end good that they’re being able to distribute. So then on top of that, we do have the larger companies that are kind of in the, I don’t want to say like a weird zone, but they’re looking at doing rentals because they want to put the money back into their business or they are looking at buying the land and building new build suits for replacing those 40 year old facilities because as we all know, renovations cost a lot of money going in and trying to find the bad things that have been going on for 40 years. A lot of those buildings are at end of life and now they’re trying to get into new areas and trying to do emerging markets and stuff like that.
Christopher Webb (15:02)
We’re building one here in Salt Lake that really is the epitome of this discussion for a large fast-food restaurant. And they’ve realized that they took control of their distribution because they realized that they needed to be closer to each of their stores. Each of these distribution centers services about forty of their stores, where each of those stores gets one to two deliveries a day from that facility. And so, it’s making it easier for them to make sure that the product that they deliver to each of their stores is fresh as possible.
Eric Nay (15:41)
So, Christopher, you’ve been designing cold storage facilities or food processing facilities for close to 30 years. What have you seen has been the biggest change in design to make these more convertible, to make these more utilitarian for the customers today versus, you know, the 10 or 20 years ago? What’s hot and fresh today?
Christopher Webb (16:00)
You know, it’s an understanding of details. It’s an understanding of refrigerant. You know, what refrigerant allows you to be as flexible as possible, you know, for a space. You know, each refrigerant has its pluses and minuses, and each system has its pluses and minuses. And so right now we see a rise of, you know, systems that are prepackaged that come to site, deliver to site that make it easier to really focus refrigeration on smaller spaces, which allows a developer to really convert those spaces to different temperatures, which is huge. In the past, you’ve seen a lot of ammonia type-based systems, which are great and efficient for really large spaces, not so much for small spaces. We have different refrigeration’s coming on for that.
Christopher Webb (16:58)
Another thing that’s really made a big impact in the industry is the rise of rack-supported ASRS type facilities. If you think about this, you mentioned it, or Thomas, maybe you mentioned it, the whole idea of hoteling for product. We have a rack-supported building that is 110 ft tall, that’s all automated, and makes it so much easier to store products, not for just one client, but for many clients.
Thomas Gubbins (17:28)
Yeah. Well, and I’ve heard from a lot of our customers, you know, working in a, you know, zero-degree windowless freezer is a tough job. There’s a lot of turnovers, you know, a lot of turnovers. So, you know, to keep the people, you know, in a warm office, you know, running, running those systems rather than running forklifts and having to go, you know, fetch frozen goods all day. It’s cutting down on that turnover.
Christopher Webb (17:58)
Well, you’re from the Midwest. Got to love that negative 10, right?
Thomas Gubbins (18:04)
Yeah, yeah. I moved to Dallas—not so much.
Eric Nay (18:08)
Brought to you by Wisconsin. Building on that a little bit more, know, our design build in-house, I get asked all the time, do you have architects in-house that stamp your drawings and the certifi—you know, the process? My answer is quickly, we have architects and engineers in-house, but we intentionally manage that as design build and our architect and engineering partners are outside of Layton. Can you explain that a little bit more about how we approach that?
Christopher Webb (18:32)
Yeah, so, and I’ve been on both sides of the table. You know, I have been the stamping architect or an architect that has been doing the drawings in-house for other companies. I love the way Layton does this because it allows us the flexibility of finding local groups that understand markets for one. You know, it allows us to go and find architects and design groups that understand the product 100% and are interested in maintaining an understanding of forthcoming technologies. How to better detail the space, you know, and that’s what we’re really looking for in design groups. We, you know, we have several really good teams that we do have, you know, that we have partnered with. We’re looking and continue to look for, you know, teams to partner with in different markets. You know, right now, one of the biggest things for cold storage is really understanding how that building is built. Sean and I were talking about this just the other day where you have for us a preference of doing a building out of insulated metal panel because it allows for instant, you know, tying a vapor barrier at the roof, you know, and at the sub slab on the exterior of the building. Here in our market, we see a large majority and throughout the nation, it’s changing because developers are getting into the game.
Sean Doherty (20:08)
It’s the convertibility factor.
Christopher Webb (20:09)
It is. It is. It’s that and it’s the investment. When a developer builds a building, they want a bulletproof exterior, which means tilt to them. You know, it’s easier to finance tilt from what I’ve heard as well, you know. And so, when you have a tilt building that’s uninsulated on the exterior wall, those details at the roof and at the sub slab become even more critical to tie in the vapor barrier and make sure you maintain, you know, a very tight system.
Sean Doherty (20:41)
It’s all about those partnerships and being able to find the right sub, the right team to be able to identify those potential fail points early and then really call out who has what.
Thomas Gubbins (20:53)
I give these three a lot of credit back to your original kind of question on, you know, having the right designers. These three have gone out, listened to our customers. Christopher has brought in past relationships. And I think we have a really, really strong stable of specialized architects now that are regional, that have cold focus. We have a partner that only does cold TIs, food production. So, talk about being super specialized. We’re still looking for more partners as we continue to ramp up, but you guys have done a really great job of finding the right folks that can service our needs.
Christopher Webb (21:33)
You know, one of the bigger challenges is not even ground up. But if you look at how much of cold storage is being implemented in existing buildings that weren’t built for cold storage, that’s when everything gets super tricky. How do you handle those details? How do you make sure that you’re remodeling in a way that they understand that they’re able to maintain their vapor barrier? You know, it’s huge. We’re doing that in the city of industry right now. Those exercises box in a box, you know, having to rip out, you know, the slabs.
Sean Doherty (22:04)
Yeah.
Sean Doherty (22:12)
The more complicated, the better.
Eric Nay (22:17)
Well, let’s get into the specifics of refrigerant systems and really customizing that aspect of the business. Sean, I’d like to go to you. Can you break down the most common refrigeration systems and then where they typically be installed? What are the pros and cons? Oftentimes some of our audience is going to be industrial developers who haven’t got into this space but really want to break into this space. So, the first question is, OK, I’m in Phoenix or I’m in Vegas or I’m in Reno or I’m in Cali. What system should we use? What are the pros and cons of those? Could you kind of give an undertone of that, please?
Sean Doherty (22:50)
Yeah, not a problem. I would say there’s a big three. So, you have ammonia, which obviously has a lot of pros and cons. You CO2 and then synthetics. With synthetics, we’re kind of in a weird environmental kind of phasing out of the traditional R22 Freon. Right now, as of this year, we’re not allowed to install new R22 units, but, of course, everyone’s going to adapt and come up with a new synthetic refrigerant. And that’s what we’re seeing across the market. So, everyone’s pivoting very quickly to get away from it to be able to install all these new units. With, I’ll just start with the synthetics. The positives are that they’re great in small spaces. So, when you see a lot of package units in a lot of small rooms, say 20,000sqft and less, you can put a package unit and be able to really optimize that space with a smaller unit, smaller power demand and a lot of different items like that. You can also, I mean, there’s also, we have a lot of great partners that do just synthetics. And then as we move into the CO2s and the ammonias, they’re a lot larger. CO2, it’s a natural occurring, they’re great in cold climates. It loses a little bit of energy efficiency as you move further south into the warmer climates. It is a high-pressure unit, so it is operating at a higher pressure, which can lead to more potential leaks. Granted, it’s not a toxicity item; it’s just more of a leak and then a higher component cost.
Christopher Webb (24:32)
A couple things too with that. I think a lot of people think CO2 is a new refrigerant. CO2 is actually the oldest refrigerant that has been used. A lot of it, CO2 was used in groceries to chill all their cold boxes for ice cream and milk and such. What we see now is being able to take CO2 into much larger spaces. Upfront, maybe a little bit more expensive, but operationally less expensive, you know, over time.
Thomas Gibbins (25:10)
And in some of the guess we’ll call it earthier markets, California, Oregon, Washington, Denver. There seems to be a little less pushback when it comes to CO2 units. Getting those permitted.
Christopher Webb (25:30)
I actually had a project for one of the largest cold storage groups in the country in California. And that’s the reason it got denied. They had an existing facility. They wanted to increase the facility. And the township didn’t want it. There are issues with that you don’t have with Freon or CO2.
Eric Nay (25:53)
So, the quick takeaway is that we have CO2, ammonia, and synthetics and depending on the region and the AHJ and the preference of the tenant, we can be customizable and convert that to whatever system best fits their tenant.
Christopher Webb (26:05)
Well, it also comes down to maintenance too, especially for developers. If you’re a developer, you build a building and you have several tenants in there, you have to figure out who’s going to operate it, who’s going to operate that system, in times that it might go down, who’s responsible? And you want your hands as free as you can from that. And so, it really comes down to maintenance.
Sean Doherty (26:31)
Right. And then, for example, for ammonia systems, you have to have a PSM program. You have to have operators that are trained for a certain amount of time and have a certain level of skills as well as a cost. It’s a very expensive person.
Thomas Gibbins (26:50.22)
Yeah, not all systems are like your thermostat. There are those options, but not all of them.
Sean Doherty (26:51)
Exactly.
Mike George (26:58)
But it sounds like for a developer, if you want to maximize flexibility, if you want to have hands off as far as maintenance, the synthetics are kind of the way to go. But there is a generally higher price, per square foot, because I’m sure that once you get to really big systems, all of sudden, ammonia and CO2 probably starts looking more appealing. Right.
Sean Doherty (27:17)
That was one of the big things back in the day was ammonia was the most cost effective, especially up front. And I mean, they last forever. I mean, that’s what we’re seeing in a lot of the facilities that are 40 and 30 years old. They’re all ammonia systems. It also takes up a large footprint and that’s rentable space to a developer. So, I mean, they’re looking for packaging that you can either put up on the roof or take up the least amount of space.
Christopher Webb (27:42)
Or on site.
Eric Nay (27:46)
One comment you made earlier was convertibility. I was at the NAOP ICON West conference in Long Beach, and we went to look at one of the first speculative cold storage projects ever built. It was a lineage facility at the Port of Long Beach and the ability to refrigerate different zones, you know, have a deep freeze zone, have a moderately 20 to 30 degree-zone and then have grocery zone. Can you kind of speak about the different cold zones in a building and then how do we design for that convertibility in future use?
Christopher Webb (28:17)
Yeah, you know it really comes down to first and foremost your vapor barrier if you’re talking about convertibility and you want to be able to manage temperature ranges that stem, you know all the way down to negative 20 for like an ice cream storage on up to cold storage for stuff like vegetables, you know and other products that don’t need to be frozen But are right there at that at that threshold—you know you need to understand. First and foremost, that vapor barrier needs to be in place. If you ever think that it’s going to be in any way, or form frozen, you need to address the sub-slab thermal assembly, meaning insulation, glycol, under-slab, to avoid any kind of heaving from freezing the ground. You need to address those same kinds of details up at the roof level. Is it a box in a box? Which a lot of people go to with convertibility because it’s the easiest. You know, that also poses challenges though, because a lot of people want to get as much clear height out of a space as possible. And so when you talk about box in a box, you’re talking about adding cost to a building because you have to make your building taller in order to reach some of these, you know, and that threshold of, you know, clear space is getting taller and taller every year.
Thomas Gibbins (29:44)
What do you think you lose on clear height when you go to a box to box? Is it two feet, four feet?
Christopher Webb (29:49)
It’s about seven feet.
Thomas Gibbins (29:451)
That’s pretty substantial, especially in a 32-foot clear building.
Sean Doherty (29:55)
Realistically your stack height’s probably about twenty-two.
Christopher Webb (30:00)
You know, it’s not just the ceiling, but then there’s a ceiling and you have to have a certain distance from top of product to your reverse. It impacts a ton.
Eric Nay (30:11)
Something to be a part of and have a design team that can help look at what is your ultimate goal? It’s like often a lot of our industrial buildings We’re just building the walls and skin around the MHE they have inside of these facilities that are so complex and sophisticated, similar to cold storage. I mean you mentioned we’re building projects that are swinging 60 degrees; ice cream at negative 20; vegetables at 45; that’s a tremendous swing and so to have a project and that you can convert and customize is so important. Shifting over to operations and project delivery, you know, this is obviously a niche product and we’re always asked for cold storage experience teams. And as I mentioned earlier, you know, we made a concerted effort in being very intentional on hiring and building out our design build teams, building out our expertise in cold storage, because it takes a unique individual. know, Mike is the VP of operations. You know, why is real field experience so important in cold storage?
Mike George (31:06)
I mean, just knowing the end from the beginning, you know, having somebody that’s done the repetitions, if they’ve been there, if they’ve gone through the process, start to finish, then they’re able to lead, they’re able to provide that leadership from the very beginning, talk to the right people at the right time in the process, and then make sure that those people are implementing the or developing the project in the right order and developing a QA/QC program to inspect what they’ve actually done. If you’ve already walked that path, you’re miles ahead of anybody that has never not walked that path, you know. There’s just no replacement for it.
Eric Nay (31:54)
And what makes a bad cold storage project go wrong? Right? I mean, there’s always something. We hear horror stories from our customers all the time that say, but we hear all the time from our customers, hey, if this GC would have only done this and it would have avoided all these other problems, what are kind some of those examples? And contrarily, what are the one or two things we do or we strive to do at Layton to keep that from happening?
Mike George (32:22)
Well, I said at the beginning, it’s exciting to work with cold storage clients because they’re so passionate. They know exactly what they want. It gets really complicated when they don’t know what they want, when they’re not setting an expectation. So, in order to really kind of flesh that out and give your team the best chance of success, you’ve got to spend meaningful time with that owner. You’ve got to spend meaningful time with them, you know, where you’re talking about whether their priority is flexibility or maybe they know exactly what they need so that you can develop a plan that you can execute. I always tell everybody that it all starts with understanding what the scope is and then understanding what the schedule is because everything springs off of that.
Christopher Webb (33:14)
You know, the other thing too, you know, regarding ops is making sure that the team that you have understands, you know, not only from the design side, but from the operation side, the speed at which design build projects have to move, you know, and you can’t be coaching people necessarily, especially through the design process at that speed. They have to know what they’re doing. They have to know how to approach the client, ask the right questions. So they understand what you know, the needs are for that individual cold or frozen space.
Sean Doherty (33:48)
Right. I would elaborate on that by saying, I mean, from personal experience, I have a very obviously different path to where I am now. Being on the owner’s side, being able to pull some of those different operational practices and something that we do very well here is we sit down, like Mike was saying, with the end tenant and kind of talk through, let’s go through a day in the life. Let’s figure out how you’re going to run your facility. And that way we can help them get to that end goal. And without that, you end up with a lot of the fail points or a lot of the lingering design problems that you can have because like you said, if they don’t know, they don’t know. And that’s where we kind of step in to help them figure out how they want to get to that end goal.
Mike George (34:41)
Yeah, I think if you can look at that end goal, go walk an existing facility with them. Hopefully this isn’t their first one and they’ve got others, but if it is their first one, then find a finally like product that we have access to and walk that facility. Really do everything that you can to help visualize what the end product is going to be. I mean, that’s where I feel like Layton really outshines most of the other general contractors is we have an incredible visualization department that’s all in-house. We create incredible 3D renderings that show exactly how assemblies need to go together. And then we’re flying our sites every single day with a drone. And we’re making that footage available so that in the OAC meetings, every single week, you’re talking about what the progress looks like on site. Talking about, here’s that list of critical details that we wanted to review. And in the next three weeks, the next six weeks, these are those topics that are coming online in the construction process. And so it just, I mean, we always talk about communication, but having more visibility, more visual aid to see what’s actually happening, I feel like is, I mean, you can be successful without it, but it sure makes the road a lot less bumpy when you’ve got access to that kind of stuff.
Eric Nay (36:01)
We roll our sleeves up, try to get to know the product type, try to really get to know the owner and what they want in their facility, and then are transparent and a practical partner at the same side of the table trying to achieve their goals. So I appreciate all that feedback. How is safety showing up in this work? And particularly given the demanding environments?
Mike George (36:21)
Well, I mean, you always hear people say safety first. I like to think of safety more like, it permeates through everything that we do. Understanding what the plan is so that you can customize your safety plan around the construction. It needs to permeate every aspect from the new laborer walking onto the site and understanding, what does ready and fit for duty look like to the 30-year vet?
Mike George (36:43)
That has been there so many times and he’s heard the same song and dance so many times that he could probably repeat it, getting him engaged, you know, it all has to do with that planning aspect. And I view that safety is exactly like I view the production. You’ve got to know what your plan is and then you’ve got to develop that plan and then you’ve got to implement that plan.
Eric Nay (37:07)
Layton went from 0.77 EMR, I think like five or so years ago to 0.68, 0.63, 0.58, and now I believe we’re 0.55. It’s a tremendous direction that the company is heading and we’re really proud of it, but we’re not there yet. You’re on our National Leadership Council and really driving that forward. What’s driving that improvement if you had to kind of put your finger on it?
Mike George (37:35)
Well, we’ve got kind of a buzzword inside Layton called our leading indicators, right? And all that is simply, we want to look retrospectively. We want to look back and learn from past mistakes. But more importantly, we want to be looking forward and identifying things that could be a problem. And so you’re right, that EMR rating, I most companies as their hours go up, their EMR kind of just follows that. As our hours have gone up, we’ve seen less recordables, less lost time incidents. And we attribute that, I mean, it’s good leadership, but it’s also that leading indicator component, you know, getting out there and making it mean something to the professional that’s installing the product. And I attribute it mostly to that, just that pre-planning aspect.
Thomas Gibbins (38:27)
Yeah, and I’ll give Eric and Kurt Thomas and myself a little credit on the pre-con side too, which you don’t think about a lot of times with safety, but Eric and I have been fortunate to find a lot of owners that care about safety, which is huge. And that trickles down to Kurt Thomas, who’s our VP of pre-con. He oversees about 15 of our really, really talented estimators.
Thomas Gibbins (38:48)
They will only engage with certain subs that have certain safety records as well. So right off the bat, foundationally, you’re getting hopefully a good sub partner that’s bought in to safety, good owner that’s bought into safety, and then that translates into the field where you all care about safety of time. So it’s really, really helped culturally drive that number down for sure.
Mike George (39:11)
Yeah, there’s no surprises to a subcontractor. By the time we get to the actual mobilization date, there’s no surprises on what the safety culture is going to be. That is a lot. I mean, I don’t like to give you all the credit, but you know, credit where credit’s due, that is because pre-construction business development starts those conversations early. And so there are no surprises when it comes time for execution.
Christopher Webb (39:41)
It’s actually finding good subs to and good trade partners to work with, you know in each market, which I think NBG is really good at. You know, we have a really broad, you know footprint and understand markets outside of Utah, mostly outside of Utah being NBG, you know, and I think that’s been critical to our success.
Eric Nay (40:02)
The most important objective on any construction project, whether you’re building a hospital or a data center, cold storage or your family kitchen at home is: are you on time and are you on budget? We personally were like 50 % over target so I don’t even know what I’m talking about. What are the keys to hitting schedule and budget on a cold storage job? Because these design build projects, not everyone does those. When I said that we had done 80 million square feet,
we intentionally jumped into cold storage because there’s a lot of contractors who can build a plain vanilla box. And it gets a lot smaller pool of qualified, sophisticated builders when you’re building a multi-zone, refrigerated, 60-degree swings, complex, customized cold storage facility. And so how do we make sure we hit schedule and budget once we hand, you know, you and Sean, a project to go execute on? What are your keys to success?
Mike George (41:03)
I’m going to make a little sports analogy here. I’m not a big sports guy.
Thomas Gibbins (41:07)
I can’t wait to hear it.
Mike George (41:11)
So, I mean, you don’t want your team touching the ball for the first time in the playoffs, right? I mean, they need to have a lot of practice, a lot of games under their belt before they ever get to the playoffs. And I view our key to success, you know, or touching the ball or the repetitions as interim milestones. Little small milestones that aren’t—they’re not just meaningless. They mean something, but they’re less important than maybe the substantial completion or the drawdown phase. They give you the opportunity to allow that team to have some experience where there’s a little bit of stress, a little bit of pressure, to achieve success, but they’re doing it in somewhat of a controlled environment. And so I really value those interim milestones deciding, hey, what are the string of events that are really important to our job? So that if you do have a weather delay, you know, on one of our jobs, just recently we had a huge impact and the soil on site struggles a little bit, to put it lightly. But everybody on that team knows that in order to recover from that rain event, we have to be doing something by June 23rd. And they all know exactly what that is.
And if we can hit that date, then we’ve substantially recovered that weather impact that we had. And everybody’s pulling together because they know that that’s the line in the sand for recovery. If you don’t have that and you’re testing your team’s resolve to hit a milestone on the most important, the very last milestone, it’s like sending a practice team into your playoff game. And to me, it doesn’t make any sense.
Eric Nay (42:57)
I love the example. Sean?
Sean Doherty (43:02)
I would agree with that sports analogy. I would say in addition, it’s really identifying the different areas that are potential fail zones and having those meetings up front, especially with your key design partners, as well as your subs. So, I mean, it’s getting everyone involved in a room talking about whose ownership it is and then really planning that out. I mean, it’s not just I mean pre-test plan, but you’re also having all your pre-mobilization meetings and everything like that before everyone’s on site. Let’s get it figured out before you’re actually doing a day of. So the last thing you need is to be up on a forklift or scissor lift and then trying to figure it out while you’re up there.
Thomas Gibbins (43:47)
You guys do a great job at all the planning and the complexity of cold and why you need a sophisticated contractor. You have that added, you know, longer lead items like with refrigeration equipment, you know. I was talking with Eric at ALSA the other day. He’s like, there’s only a certain amount of cranes in North America that can that we really use to put our units on top of our facilities. And so I need to know where those are at all times to make sure when it’s time to put the units on, they’re going to be on your site on the exact day. It’s just another layer of coordination and just being super dialed in and you know the schedule down to the final day for the full 12 months and it’s just super critical on these jobs.
Christopher Webb (44:30)
Well, I think there’s also something to be said for adding value to a project because let’s face it we’ve all had budgets and you those budgets are based on certain key factors that impact design, you know you look at clients that that have to go through FM process or you look at clients that are looking to shoot for some kind of lead certification and as understanding how to get them there. For the most value in that project and understanding how to design and necessarily looking at it from the most cheapest route to go, but what’s going to be the best for the client at the time.
Sean Doherty (45:23)
Communication.
Eric Nay (45:26)
So Thomas, you’re currently working on the front end of four or five different cold storage projects right now that are in pre-construction. What’s setting apart, know, Layton in the cold storage space right now? And how can we even provide more value for our customers?
Thomas Gibbins (45:41)
Yeah, it feels like four or 500. Yeah, I know it’s probably a cliche answer, but I truly believe in our people. know, I could sell construction anywhere and I’ve kind of really found my home at Layton and MBG because of the people that we work with across the table out in the field right now. You know, in the cubicles, you know, pulling together budgets, our people do really, really care. They want to build long-term relationships with customers. You know, being in the national building group, our goal is to be a solution for you across the entire country. We’re not just, you know, a one-off project, you know, here in Salt Lake where if we mess up, well, you know, we got our fee and good luck as you go build in LA. No, we need to take lessons, learn places. We need to deliver on the first one so we can go build for you in Dallas, in Atlanta, in North Carolina, up in New York. And so, we’ve created a great culture of people who care and understand that our goal is to do multiple projects with customers.
Eric Nay (46:57)
So Sean, are you seeing some emerging tech? I know a big question around podcasts and when we go to conferences in construction industry or the AGC, we talk about the automation. We talk about advanced systems and computer systems within our building automation. And then we talk about AI and logistics. How is that starting to impact in construction now and what’s coming next?
Sean Doherty (47:22)
We’re definitely seeing the building types start to change. We’re seeing a lot more ASRS, so the automated systems, and we’re seeing the building heights get taller, as well as sometimes the building footprints shrinking, just land availability. So all of sudden you’re driving down the road and you see a building that’s 110 feet up, but obviously it’s not being man-picked anymore. have the automated systems basically flying up to that height, pulling the specialized product and then bringing it back down to palletize. We also are seeing a lot more of the narrow aisle racking systems. Once again, you’re being able to get a lot more pallet positions in a smaller footprint because you’re not having to have drive aisles anymore. So you’re not having to worry about two forklifts passing each other. It’s a single forklift, single direction, but also going up.
Thomas Gibbins (48:11)
We just did one of those in in Arkansas for a pet food company and I walked in and I was like, the racking? And they kind of explain and walk through it all. It really helps optimize.
Sean Doherty (48:27)
Yeah, so it’s more specialized. It’s going to the robotics and it’s all about how do I maximize the number of pallet positions? And I mean realistically that’s where these companies are making money.
Christopher Webb (48:38)
Return on investment, you know? It really is.
Eric Nay (48:41)
Utilize as much space as you can in each of your facilities. So pulling that back to design, you know, given the specialized nature, what are coming to the most common challenges or pitfalls we’re seeing in design of a cold storage facility. We understand the modern need for convertibility, customizing the facility, being more driven towards e-commerce, so quick exchange of goods. How are we looking at that differently in design to avoid those pitfalls that maybe we ran into in the past?
Christopher Webb (49:12)
You know, it’s good question. You know, I think a lot of it comes down to understanding, especially with, you know, delivering spec space. You have to understand when you’re building a spec building, you know, it comes down to structure. We talked about narrow aisles. We talked about, you know, we’re going from 11’6 down to, you know, eight, sometimes, you know, seven, six, you know, in some facilities, and even narrower if they have moles. And so understanding structure in the bays and, you know, how you’re building that, you know, in a way that’s the most flexible for the MHE teams when they come in, they have to rack a space.
It’s huge, you know, and trying to dial that in at times when you don’t know.
Sean Doherty (50:00)
Yeah, it’s hard to the crystal ball.
Christopher Webb (50:01)
It is, you know, and how do you address that? You know, and really, it’s understanding what the coming trends are, you know.
Eric Nay (50:11)
How do you factor in long-term operational costs into the design? Obviously, a developer that might, you we work with one developer who’s got, you know, eight or $900 million fund, built just for cold storage facilities. They want to hold these for 20 or 30 years. It’s much different than a tenant that’s leasing space for 10 to 12. And so how are you, you know, how’s Layton Construction building in these operational factors into a tour design?
Christopher Webb (50:37)
Again, it’s operational efficiency comes first and foremost, I think down to refrigeration. You look at the different systems and the different ways of refrigerating spaces. We talked about Freon. Freon doesn’t use water. It’s a water-free system, which is huge. And you look at how that saves money. Even though you look at artificial refrigerants as a way of impacting maybe global warming, we’re looking at more efficient artificial refrigerants. But if you look at the impact it has on not using local water, it’s huge. That’s just one.
Sean Doherty (51:23)
Yeah, then I mean, with the ammonia system, you’re having they’re using water for cooling. So you’re having your water, I mean your water bills going through the roof as well as your like electricity.
Christopher Webb (51:31)
Yeah, CO2 uses a little water, you know, and so, you know, it starts to become, you look at the effectiveness, you know, and the implications of that, you know, how much energy does it take to refrigerate, which is huge.
Sean Doherty (51:46)
What we’re seeing is a lot of, I mean, these spec buildings. There is typically a higher upfront cost for when they’re putting in the synthetic refrigerants. For example, we’re seeing a lot of developers put in ALTA units. ALTA units are great. You can get the convertibility, but you also, they have a great maintenance plan. Once it’s in, they don’t really have to touch it. And they’re able to just call them, hey, go do the regular maintenance. And that’s it. As a developer, I mean, that’s a huge win for them because you’re not having to have a guy on staff or on your property management team that’s going out there and doing the maintenance all the time.
Christopher Webb (52:27)
It even gets down to the fact that they can, from Atlanta, you know, maintain your temperatures. You know, you’re not even having to do that.
Thomas Gibbins (52:35)
Yeah, I toured their facility.
Sean Doherty (52:36)
It’s impressive.
Thomas Gibbins (52:41)
It’s really cool what they have going on.
Eric Nay (52:43)
No pun intended. All right, as we kind of wrap up, I’m going to hit each of you with a question and a quick answer. know, Sean, if you could solve one challenge in cold storage construction, what would it be?
Sean Doherty (52:57)
I would probably say vapor details. If I could have a solve all for that or some product that I could magically put up there and solve all of the vapor problems, be a rich man. That would be the one thing that I would see is if there’s something that can instantly solve vapor issues
Christopher Webb (53:09)
I think one thing I’ve thought about a lot is how to develop a concrete that’s self-insulating. You know, mean, you really look at it, you can drive on insulation, right? I mean, we’re getting to that point where, you know, that insulation is holding that pressure. So why can’t we do that with concrete? You know, where is that development happening?
Sean Doherty (53:33)
Without having to do like a thermal mass panel.
Christopher Webb (53:34)
Exactly, exactly.
Eric Nay (53:36)
Love it. Thomas, we’re actively doing pre-construction for cold storage projects, I think in seven different states right now. What’s the goal of our cold storage team moving forward?
Thomas Gibbins (53:48)
Yeah, you know, this time next year, I hope we’re building in14 states in cold, you know, hoping these seven different projects that we’re building, we’re on to our next one, you know, with them. And we’re already looking at new projects with some of these, with these end users and developers. So yeah, I mean, the goal is to keep growing. But the goal is to keep growing strategically with you and me going out and finding owners that buy what Layton is selling, which is a quality team number, schedule, design product that we can take across the country with them. So not just doing cold to just do it, but to do it intentionally and be a part of our business unit. Had a customer told us when we got brought on board, I said, thank you so much for this opportunity. We appreciate it greatly. And he said to me, like, you know, we appreciate you. You guys have a choice in who you get to build for. And I never really thought of it, I’ve never had a customer say that to me, but it is true. We do have a choice of who we do business with. And so, you know, I just see us adding to our already awesome group of customers and just keep growing our footprint, you know, intentionally.
Eric Nay (55:12)
Thank you. Mike George, with materials and, you know, costs and supply every time we hear a new tweet from the White House, we get little nervous on tariffs. Exactly how much is this going to cost now? How do you manage budget stability, you know, from conceptual design to a GMP? Obviously, there’s things we can’t control, but the things that we can, and we can be intentional about it, you know, how can we hold that budget stability from conceptual to GMP? What are some key ways we can do that?
Mike George (55:43)
I mean, it’s always the same story. We want fast buyout. If the faster we can buy a job out, get released to actually lock product in. It doesn’t necessarily guarantee that you’re going to that there’s not going to be a tariff or something that takes effect there. And there might be a little bit of a challenge with the sub to hold the price. But what that buyout does do is it releases them to get an actual PO in place. And the earlier you can get that first PO in place, then if there ever is an escalation, you can ask for the updated PO and compare the two and put it, you know, not to not to say, we put the onus on the sub. But in reality, if they’re asking for the additional funds, they need to provide some element of proof, right? It can’t just be the White House tweet. They need to they need to be able to show, hey, this was the original PO. This is the current PO. And kind of justify that. So being able to get those funds released and getting contracts in place is critical.
Christopher Webb (56:46)
Well, and that goes to design, though, too, and the pre-con effort and understanding what you might need to procure early. And design that in a way, design that project in a way that you can meet that, especially now in the market we’re in. Steel packages, stuff like that, where if we understand exactly what we’re dealing with and get that designed as quick as possible, we can get it to Mike and his teams in order to procure that and get the PO’s out.
Eric Nay (57:16)
All about that goal that we have of predictability and reliability to our customers. What do you enjoy most about designing and building cold storage? I want to finish with this question to each of you. What is your favorite thing about building cold storage and why do you do it? Mike?
Mike George (57:36)
Taking an empty site that is meaningless to the community, to the industry, and turning it into something that is high efficiency, turning our communities into what we want them to be. I love being able to drive by a job that we’ve built, take pride in what it is, go visit it years after. One of my jobs had an earthquake and the epicenter was right underneath the building. And it was cool to just drive to be able to go into that facility, evaluate, how did our structural design hold up and hold our heads high when it did what it was supposed to do. So I love construction and cold storage just adds another layer of complexity and precision that I can’t get enough of.
Eric Nay (58:20)
Sean?
Sean Doherty (58:17)
I’d have to agree in the driving past the facilities whether or not your kids are interested when you pointed out to me like hey, I built that building if they ever look up for their iPad or say cool dad let’s move on to the next one. But I would say it’s the complexity, it’s the partnerships with a lot of the trade partners and going in and working through a lot of the hard problems and really putting, wrapping your mind around it and taking that challenge head on. mean, that was why I got in construction, be able to do those challenges and then really have something tangible at the end of the day. That’s the biggest thing for me.
Christopher Webb (58:57)
And I actually going to, you know, take it a little different route. And one of the things that really got me into it and really held my interest is feeding the world. You know, we’re growing at such a fast pace as far as population and we have to maintain, you know, a global chain to feed the world. And we’re part of that. That’s huge. I mean, that’s really cool to think about.
Eric Nay (59:22)
Absolutely.
Mike George (59:23)
Jeez Christopher, my response was selfish!
Thomas Gibbins (59:32)
Mine won’t be as profound as that either, but I like to think that we’re kind leading a lot of the construction out west. I’ve found a lot of owners are looking for good contractors that can build these complex buildings out west because a lot of that fraternity is down there. But I do really love getting to know the Vince Friese’s of the world, the Eric’s at ALTA, the Brett Weddings at Fricks, and having a great relationship with our trade partners. And also, they all just know the owners as well. And it’s a great way to hold everybody accountable. It creates a more inclusive design process, pre-con process. It’s my favorite part of being in that world.
Sean (1:00)
It’s huge industry. It also feels very small.
Eric Nay (1:00:19)
Well, I think we’ll wrap it up there. Thank you again to all of our listeners and to our incredible panel. Cold Storage is a very dynamic and complex vertical within industrial. It’s a high stakes game and it’s a game where Layton Construction is here to stay and here to play in. Thank you for listening and have a great week.