Episode 6 | Aaron Johnson with Bateman Hall Inc.
Transcript
00:00:05 Greg Croft with Resin Architecture
Welcome to Vision Driven with Resin Architecture, the podcast where we dive deep into the world of architecture, development, and construction.
00:00:12 Greg Croft with Resin Architecture
I’m your Host, Greg Croft, and my Co-Host is Jamee Moulton, and we are thrilled to have you join us on this journey of learning, inspiration, and insight.
00:00:19 Micki Schwartz with Rudd & Co
When you talk about real estate, I would always recommend that you go into it with the exit in mind. 00:00:25 David Frew with Bank of Idaho
Advice I'd give somebody that's presenting their case, or pitching their loan to a bank, is just to be really well prepared.
00:00:32 Jamee Moulton with Resin Architecture
Whether you're dreaming of building a space for your business or simply curious about the fascinating world of architecture and development, join us on this exciting adventure as we unlock the secrets to successful projects and empower you to turn your vision into reality.
00:00:51 Greg Croft with Resin Architecture
OK. We're excited to be here today with Aaron Johnson with Bateman Hall. Aaron, if you wouldn’t mind, give us a little bit of your background and what brought you into the construction industry.
00:01:02 Aaron Johnson with Bateman Hall
Sure. Yeah. I kind of grew up in construction when I was a youngster on the farm. My dad did a lot of custom home building to make ends meet on the farm, and I learned a lot from him. Then, I pursued a degree in accounting at Utah State University and went for a brief time as a bank examiner. Then, I moved back to this area and had an opportunity to get involved in a construction entity named Bateman Hall and more from the accounting side. I'm the CFO of Bateman Hall, but really my primary responsibility now is Chief Development Officer for both Bateman Hall and we recently started another entity, a residential entity, called Caddis Builders. We're pursuing development work through Caddis Builders, so I'm really representing both companies (Bateman Hall and Caddis Builders) as a development officer.
00:01:56 Greg Croft with Resin Architecture
OK. How many years have you been with Bateman Hall? 00:02:00 Aaron Johnson with Bateman Hall
28 years.
00:02:06 Jamee Moulton with Resin Architecture That makes you a true expert.
00:02:09 Aaron Johnson with Bateman Hall
Well, I actually have coined a term. It's called the wisdom of an idiot, and it works quite well. We've learned and gotten a lot of wisdom from decisions that you know maybe didn't work out and now we know better.
00:02:24 Greg Croft with Resin Architecture
Yeah, there's definitely truth to that. You learn from your mistakes, right? 00:02:29 Jamee Moulton with Resin Architecture
We’re hoping to benefit from you sharing that information. 00:02:33 Aaron Johnson with Bateman Hall
Great. Yeah, I'd love to share whatever I've gained over these last 28 years.
00:02:39 Jamee Moulton with Resin Architecture
Tell us a little bit about how construction has changed over the course of your career. 00:02:46 Aaron Johnson with Bateman Hall
That's a great question. When I first started at Bateman Hall, we were doing a lot of commercial projects, big box projects (Walmart, Home Depot, Lowe's, Smiths, Kmart - those kind of companies). In that world, when we started, most of it was 100% designed, even permitted generally, and so they would send out a notice to bid, invite us to bid against three or four or five other general contractors.
00:03:20 Aaron Johnson with Bateman Hall
And literally within a couple of weeks, we would bid that project with our subcontractors contributions. If we were selected as the low contractor, within a week we'd be started on the project. So it was very, very fast. There was no development involved. If we were qualified to be on the bidders list, which was mostly a financial and experience qualification, then when they invited us to bid literally within a month's time we could be notified of the bid and actually working on the job.
00:03:44 Aaron Johnson with Bateman Hall
So it was very quick. That has all changed now. There is a little bit of that still, but most everything now is relationship development and construction management development, which means that we get on board even before design begins and we work along with the design team to develop the project and then ultimately either negotiate the project or it gets bid out, but mostly negotiated now even in the large corporate world that's happening. Walmart still is doing bidding process, but generally they’re bidding blocks of work and not just a specific project, meaning hey, we have 5 or 10 projects that we want you guys to propose on and we want you guys to help us develop these projects along with the design team.
00:04:39 Aaron Johnson with Bateman Hall
So that you have a budget at the beginning and you're more involved in the process instead of just getting handed a set of plans and bidding it and going to work. So many times we're involved in those projects for a year or more before the project actually goes [to construction] now. So most everything we do is negotiated which creates the need for us to have a business development department to pursue those projects, but then also be involved in the pre-construction work up until when we're ready to start the project, so it's changed a lot.
00:05:12 Greg Croft with Resin Architecture
I’m going to throw in some other questions here that are kind of off script, but I feel like a lot of people that we've worked with don't [actually know the role of a general contractor.] They might think that the general contractor is the one out there swinging the hammer. That does happen, but can you just give a brief overview of what a general contractor is? What is Bateman Hall from that perspective?
00:05:36 Aaron Johnson with Bateman Hall
I will say that in that sense 30 years ago, it was just general contractor now. Well, there's a new type of relationship there and that's called construction manager, which sometimes can be the general contractor and the construction manager. But oftentimes the construction manager could be even different than the general contractor. But the work that we do as a traditional general contractor would be managing the project from the budget standpoint and the n scheduling the subcontractors who are underneath the general contractor. And really we're just managing all these different entities to make sure the project is on track and on budget and make sure that any questions that come up or obstacles, confusion, issues that come up are handled to the owner’s benefit so that their project can continue.
00:06:34 Aaron Johnson with Bateman Hall
The owner is able to just rely on a single company to make sure the project gets done, and that is really the general contractor's role. We do some self-performing work. Most general contractors are probably doing less and less of that and becoming more of a construction manager.
00:06:52 Aaron Johnson with Bateman Hall
We let our subcontractors, who are the professionals in the scopes of work, do that work so we're not necessarily competing against them.
00:07:02 Aaron Johnson with Bateman Hall
Some people wonder why the general contractor is even involved at all. Why can't they just go out to the subcontractors?
00:07:09 Aaron Johnson with Bateman Hall
There's just a lot of moving parts and a lot of things going on [in a project], and subcontractors aren't necessarily looking at the best interest of the other subcontractors or the best interest of the schedule. We bring them all in and kind of create a harmony, an orchestra if you will, and make sure that everybody's operating in the best interest of the project. Time and budget generally are what we make sure that we're keeping [in check].
00:07:39 Greg Croft with Resin Architecture
And another question that kind of fell into my head when you were talking earlier was with things going more towards where you guys are working with the design team up front, that helps keep costs in line . A lot of times when we don't have - I can't say a lot of times - but frequently this happens where when we put a project out to bid after they award the bid then there's actually an exercise that we call value engineering and so we kind of go back to the design board. We've got an approved plan, but we kind of have to go through that cycle one more time because there's things that...
00:08:17 Greg Croft with Resin Architecture
It's really interesting. During COVID, we had this [time] where all of a sudden we couldn't get wood trusses at a reasonable price, and it was cheaper to go to steel. You guys are more in tune with that because you're dealing with that every day. And so working with the design team up front, that gives you [the opportunity to] not right-size the project, but right-price the project as we're going along. Are there any other points that you could add to that?
00:08:49 Aaron Johnson with Bateman Hall
Quite a few. I’ll try to be concise as I can, but going back to the prime example school district, you know they hire a design team to help them create a schematic design - not a full-blown design by any means - schematic design with a budget that then they can go to the patrons and create a bond amount that gets passed by the patrons, and then when the bond gets passed then they go through a full design process - 100% design.
00:09:23 Aaron Johnson with Bateman Hall
And then submit it out to general contractors to bid. Well during that process, everybody's somewhat crossing their fingers to hopefully they've got the right amount and the architect does as good a job as the information they have, which is generally statistical information on square foot pricing. Perhaps they have an independent estimator help them price the project.
00:09:47 Aaron Johnson with Bateman Hall
Which generally can be good in a stable environment. That has worked for many years, is the way it has been done for many years. But when you get an unstable environment or a complex project that maybe doesn't have a lot of reference as far as statistical data for pricing, it can be a little unnerving.
00:10:08 Aaron Johnson with Bateman Hall
And the school district has paid the architectural, the design team's, fee and done full design without having any contractors looking at it.
00:10:19 Aaron Johnson with Bateman Hall
And when those bids come in and they know they have a specific bond amount that's been passed, it's very difficult for them to change the amount of money they have because they have a certain amount of money.
00:10:31 Aaron Johnson with Bateman Hall
And we're going through the bidding process. If those bids are coming in quite a bit higher and even lower can create a problem too, but quite a bit higher than what their bond amount is. It can be very unnerving and disappointing to have spent that money and the amount of time they have already to get to that point and then find out that they are way over budget.
00:10:52 Aaron Johnson with Bateman Hall
And then after they've spent that money to go back to the design team and say, hey, we have an issue here. We're way over budget. We're going to have to redesign or value engineer.
00:11:05 Aaron Johnson with Bateman Hall
Add to that another expense and the amount of time that takes to do that and in the meantime, prices are probably maybe still escalating. It can put the school districts or any other public entity or private entity into a tough situation where they're behind time already. They're over budget.
00:11:22 Aaron Johnson with Bateman Hall
They've got to pay more design fees to have that done. So the construction management approach, which even in public works now has become an accepted approach in Idaho. I think 8 years ago was when that was allowed.
00:11:39 Aaron Johnson with Bateman Hall
That allows the contractor and the design team to work in harmony at the very beginning, before real money has been spent and before the bonds have been passed to get an attractive package [with] an assured price there through reiterations.
00:11:58 Aaron Johnson with Bateman Hall
The construction manager can check a bit the design as it progresses and say hey, we're maybe getting a little bit further out of intent of where we're going to have to be based on what the budget is and the design team can make those adjustments in the back and forth. So that when the design is completed the contractor is very, very aware of the design and has weighed in.
00:12:23 Aaron Johnson with Bateman Hall
Then the budget is hopefully more accurate and the schedule is more accurate. So when they do go out to bond, they have a much more confident price there that they can deliver the project as designed for the bond when it's passed. And that's true for any other public project or private project too.
00:12:43 Aaron Johnson with Bateman Hall
So it's eliminating a lot of those crossing your fingers moments where you're waiting for bids to come in, and the general contractor has a lot of great statistical information and an estimator on staff that can do that. But quite frankly, the ability for us to reach out to our subcontractors and say, hey, here's what's being proposed.
00:13:05 Aaron Johnson with Bateman Hall
What do you think? Is there a better way? Is there a different material that's a cheaper material but still the same quality and benefit?
00:13:11 Aaron Johnson with Bateman Hall
We get a lot of that great input from subcontractors during that process. So that when the money is spent for design, it is you know where everybody's pretty sure that a good project that can be done on that budget. So it's helped, it's helped out a lot.
00:13:29 Jamee Moulton with Resin Architecture
Can you tell us when the right time to contact a general contractor would be within the scope of a project?
00:13:36 Aaron Johnson with Bateman Hall
Yeah. So again, I always like to say when we're talking about a general contractor in the traditional sense, we're generally talking about the, the person that delivers the construction.
00:13:47 Aaron Johnson with Bateman Hall
But now we're in the pre-development stage or the pre-construction stage which we referred that via the construction manager who can also be the general contractor many times is the general contractor.
00:13:58 Aaron Johnson with Bateman Hall
But in terms of what I'm explaining, I'd rather use the term construction manager. 00:14:05 Aaron Johnson with Bateman Hall
And the right time to hire the construction manager would be the same time that you hire the design team. I think they need to be hired at the same time.
00:14:12 Aaron Johnson with Bateman Hall
One doesn't work for the other. It's what I would call the three -legged stool. You have the owner's entity. You have the design entity and you have the construction entity and they work in harmony with each other to develop the proper project to meet the needs of the owner again on the budget and on the time frame they need it delivered.
00:14:30 Aaron Johnson with Bateman Hall
But I would really suggest the time to do that is before you buy your land or before you buy your building or whatever project you're pursuing.
00:14:39 Aaron Johnson with Bateman Hall
Because there's so many things that come in to bear to whether that land is going to be workable or that building is going to be usable that a lot of preliminary stuff should be done before they actually make that purchase, so they're not disappointed when the city or the public entity says no, you can't do what you were thinking of doing there or the price is just not going to work.
00:15:04 Aaron Johnson with Bateman Hall
Or there's perhaps a better option for you somewhere else, or a different building or what have you. So I would highly suggest that before you do any kind of land purchase that you do those that due diligence and find a design team and a construction team that can help you with that. That process is relatively inexpensive to do. It's not an expensive venture. There's certainly no guarantees that the project’s actually even going to go forward.
00:15:32 Aaron Johnson with Bateman Hall
But it's money well spent before you buy an expensive piece of property. 00:15:37 Jamee Moulton with Resin Architecture
I know some of our clients have considered the cost of the land. They've considered construction costs. Sometimes design fees aren't the line item on their budget. I would assume that some of them haven't considered the cost of the construction manager. Is it a percentage of the project or how should someone budget for that?
00:16:00 Aaron Johnson with Bateman Hall
The construction manager again is generally a percentage. It can be a negotiated flat fee. But really we like to think of it as not just a fee for the construction manager.
00:16:13 Aaron Johnson with Bateman Hall
It would be the fee for the entire project package. Construction is the biggest part of that for us. I mean, probably 85-90% of the fee would be the construction portion.
00:16:26 Aaron Johnson with Bateman Hall
We can't charge a client a large amount of money on the pre-0construction and then have the project not go forward.
00:16:34 Aaron Johnson with Bateman Hall
We need to have - we're somewhat at risk in that process, meaning our desire is the same desire they have, which is to make the project go forward. So our money is made when the project actually is built. Our fee upfront is somewhat minimal compared to the total construction fee.
00:16:55 Aaron Johnson with Bateman Hall
Because you know, if the consumer or the client doesn't actually finish the project, that would be a lot of money out of their pocket. On the flip side of that, the design team, a big portion of their fee is obviously the pre-construction of the design and a smaller portion of their fee is in the construction phase. But having both entities on board at the beginning. And again, the preliminary schematic design and budget that we're talking about before you buy your piece of land for both parties is a relatively inexpensive charge that I think is a big a great investment before they, you know, they actually spend some real money in buying the property and starting the design.
00:17:42 Aaron Johnson with Bateman Hall
I think it's well worth that. Our fee is generally a percentage fee, but the pre-construction part of that when we're working with the design team could be a flat fee. It could be a monthly rate, whatever the client desires and quite frankly, many times it's a pretty small fee because we know the client doesn't have a lot of money to spend in that world, but yet it is a really useful amount, so we don't want to dissuade them from hiring a construction manager up front by charging, more than they're able to manage when they don't know for sure if they even have a project to do.
00:18:18 Greg Croft with Resin Architecture
I think we do something similar. We do a feasibility study and it's kind of at a - we're not at a loss on it, but we're not really making money. We're just trying to get you to know if this is a good project for you.
00:18:35 Greg Croft with Resin Architecture
I think there's a lot of conversations that are taking place. It's like, well, don't buy this land if you can't even park your building here. And, you know, there's some pretty simple studies that we can do up front and it's probably very similar to how your pre-construction side ends up being on that end.
00:18:55 Aaron Johnson with Bateman Hall
Right. Sometimes we use the word as pre-financing side. Before you pursue bank financing before you pursue the project get an idea whether it's feasible, what the budget might be - a very rough budget. For very little cost, which sometimes we would even do that in on an hourly rate for very little cost and time quite frankly we can really give the owner some insight as to whether that project is feasible or not, so I I would highly recommend that they invest that small amount of money and time to make sure that's going to work before they start spending some real money.
00:19:37 Greg Croft with Resin Architecture
One question that we have is regarding the... A general contractor - and I'm going to speak specific to general contractor on this one - what would you say that the difference is between a general contractor who's doing commercial work and a general contractor who's doing residential work?
00:19:57 Aaron Johnson with Bateman Hall
Well, not to disparage any one side or the other, because there is a bit of healthy skepticism on both sides, or some maybe sometimes unhealthy skepticism on both sides about what a residential general contractor is versus a commercial general contractor. I will say that most of the reputable contractors in both entities are very competent. How they go about the process is generally the same.
00:20:29 Aaron Johnson with Bateman Hall
The commercial process generally is more time to get to the project start.
00:20:36 Aaron Johnson with Bateman Hall
Generally because there's more requirements from the municipality, more entities involved, more moving parts.
00:20:46 Aaron Johnson with Bateman Hall
The subcontractor workforce generally doesn't work in both areas. There are subcontractors that do and very good ones. Generally your mechanical/electrical contractors may be in both in both realms.
Framers and the concrete subcontractors generally will either remain in the residential side or the commercial side with rare exceptions.
00:21:11 Aaron Johnson with Bateman Hall
Multi-family housing is one of those exceptions where it's kind of a hybrid between residential and commercial because it's somewhat of a complex project for multifamily, but single-family homes versus a commercial project generally are going to have different subcontractors.
00:21:27 Aaron Johnson with Bateman Hall
The regulatory environment may be a little higher. Liability may be a little higher on the commercial side. The expectations when I say, I mean the homeowner expects a great project too, there's no doubt about that but the acceptability on the commercial side as we've always been drummed into our minds by the big box clients, like the Walmarts, that is built it per plans and specs. It's 100% design. There is no deviation. If there is a deviation, request it or something it has to be permitted and approved by the client and the design team.
00:22:07 Aaron Johnson with Bateman Hall
So we really focus on the design side. The plans are much more expensive. Every detail is laid out. 00:22:14 Aaron Johnson with Bateman Hall
We literally are building a road from a road map. On the residential side, that is generally not the case. The plans are generally a floor plan.
00:22:22 Aaron Johnson with Bateman Hall
There's a lot of dialogue between the client and the designer and the contractor. 00:22:30 Aaron Johnson with Bateman Hall
Meaning that there's not a lot of information, a lot of detail is not in the plan, so it's generally discussed on regular visits and walk throughs and such there that can create a little more risk for confusion, a little more risk for incomplete building, or maybe the owner's expectations haven't been met because there's been some things that were done that maybe they thought were going to be done differently.
00:23:02 Aaron Johnson with Bateman Hall
So I would say actually in the commercial world the communication is very, very structured. You know we have a certain protocol for our communication. In the residential world, it can get a little bit loose, but I recommend in the in the residential world that we approach it the same way which is a very formal communication plan.
00:23:21 Aaron Johnson with Bateman Hall
So that you don't have misinformation and misunderstandings and end up having the client not get what they thought they were going to get. So actually a little more responsibility on the residential side because of that versus the commercial side where everything is really laid out in protocol where in residential side is not.
00:23:43 Jamee Moulton with Resin Architecture
It does sound like though, that there could be some risks if a business owner hires a typical residential contractor to build a commercial project, that it's just a different world and there might be some changes in how things are done.
00:23:59 Aaron Johnson with Bateman Hall
Yes, it is a very, vastly different world. The regulatory again not to say that residential world isn't concerned with safety and environmental and those kind of things; they are. But maybe the stakes are a little higher on the commercial side.
00:24:17 Aaron Johnson with Bateman Hall
There's more visibility. The regulatory - our auditors and regulators are much more attuned to the commercial side than they are on the residential side.
00:24:27 Aaron Johnson with Bateman Hall
Although residential is experiencing that where things that maybe were OK to do in the past are not OK anymore to do which is actually good. Safety has ramped up and those things are good.
00:24:43 Aaron Johnson with Bateman Hall
But on the on the commercial side, I guess the way I would state that is if we make a mistake that mistake is going to get fixed.
00:24:53 Aaron Johnson with Bateman Hall
It's going to get torn out. It's going to get redone, and that can be very expensive. 00:24:58 Aaron Johnson with Bateman Hall
On the residential side, sometimes there's concessions that can be made. Hey, we'll give you a credit. 00:25:02 Aaron Johnson with Bateman Hall
Or hey, you know, this is just gonna be too expensive to fix. How about we go this direction? So sometimes we call that build design, which is we're kind of building it and then you'd figure out if that was going to be what your intent was or not.
00:25:16 Aaron Johnson with Bateman Hall
And so maybe a little more acceptance, which isn't necessarily great for the homeowner, but sometimes there's a concession of, hey, this is actually going to improve what we were designing because there is no formal plan there. Therefore they're kind of making those choices as they go. On the commercial side generally the plans are very detailed.
00:25:39 Aaron Johnson with Bateman Hall
And when mistakes are made, those mistakes get fixed and at the subcontractor's expense, so they can be very expensive to a subcontractor who's not used to that. You know, they can't necessarily say, hey well it'll still work. Let's just accept it now. It can't be accepted even if it's functional and it looks good. If that wasn't the owner's intent, it's going to get replaced, and that can be very expensive to a subcontractor. The liability they take on the commercial is much higher, I believe, than on the residential side.
00:26:12 Jamee Moulton with Resin Architecture
Speaking of mistakes, what are some mistakes that you've seen? Business owners who are building a building for the first time, what kinds of mistakes do they make and how can they avoid some of those mistakes?
00:26:27 Aaron Johnson with Bateman Hall
You're talking about the client, the client that wants to build that. Well, I think the first mistake is buying land before they have vetted that out with the competent design team and a construction team. And that's a big mistake because there are lots of clients who have a piece of land that they're trying to sell because it's not going to work for what they're doing, which delays costs - I mean it increases their cost. And most importantly, delays in getting their project done.
00:26:58 Aaron Johnson with Bateman Hall
The other mistake I think would be either - this is kind of a mistake on both sides. 00:27:05 Aaron Johnson with Bateman Hall
For instance, you have a lawyer or a doctor whose primary source of income is doing their practice. 00:27:15 Aaron Johnson with Bateman Hall
If they're overly concerned about their project and distracted, they're losing money. They're potentially losing customers because they're so focused on the construction when they're already paying a fee for a competent contractor to be doing that work.
00:27:33 Aaron Johnson with Bateman Hall
And then on the flip side, if they are not interested enough and they're completely oblivious to what's going on in the construction site, things can get done that they aren't intending and they can be unhappy with the outcome of that project. So I think there is somewhat of a middle there where they're allowing competent professionals to build their project, but they're also aware of what's going on. And so again, that comes back to communication. In most businesses, but especially in contracting, communication is the key.
00:28:10 Aaron Johnson with Bateman Hall
There's a lot of great contractors. There's not just one contractor that can do a great job. Many contractors do a great job. Where they set ourselves apart, which where we hopefully we set ourselves apart, is the communication.
00:28:21 Aaron Johnson with Bateman Hall
Because that really is the key and to have great communication, you gotta have a great structure , protocol, how things get done.
00:28:27 Aaron Johnson with Bateman Hall
Every day our main job is to eliminate misunderstandings. It really is. To get clear information to the right person from the right person is really our job on a daily basis.
00:28:45 Greg Croft with Resin Architecture
I would definitely agree on that communication piece. It seems like every issue that we've ever looked at, it's like, oh, where did communication breakdown? And that's really the root of any real issue. And I think that even, you know kind of looking at that to the dynamics that you were talking about with either too involved or not involved both during the design phase and then later on during the construction phase.
00:29:16 Greg Croft with Resin Architecture
We do a weekly or biweekly meeting with the client and frequently if it's a design build type project that's the client and the contractor or CM (construction manager) that's involved in those meetings. And then once it transitions from hey, the design’s over that transitions to every two weeks. Typically the architect and the general contractor/construction manager is on-site with the owner available to look through the entire project.
00:29:48 Greg Croft with Resin Architecture
And that's generally I think that's been enough when those clients are showing up to those meetings that it's run pretty smoothly. With your 28 years of experience, maybe you can speak a little bit more to that if that's not the case.
00:30:07 Aaron Johnson with Bateman Hall
Yeah, I agree completely. I think that's what's made the contracting world improve from when I first started, and the communication is the key. You know, again it used to be we'd hard bid a project that was fully designed.
00:30:25 Aaron Johnson with Bateman Hall
We would go to work and many times we wouldn't even see the design team or the owner during that whole process.
00:30:33 Aaron Johnson with Bateman Hall
And an owner walks through the building that they haven't even seen for the 10 months [of construction] and says, "This isn't what I was looking at. There's some mistakes made here. I'm very unhappy.” It's a very poor time to find that out after most of the work has been done. Yes, very expensive.
00:30:52 Aaron Johnson with Bateman Hall
Regular communication is very key to make sure that the intent is on track. Even the most fully designed project. Again, I use an example of Walmart because those plans are the most detailed that you'll ever see. Even with that literally the day we start work changes are being made.
00:31:10 Aaron Johnson with Bateman Hall
You can spend unlimited amount of money and limited amount of time and you will not get exactly what your intent is. You never will until you start building. There's always either something on the design schedule was not correct, or the intent was not clear, or there's an outside issue that's come up, a regulatory issue where a code has changed and now he design will no longer work with that specific code, so changes are starting immediately.
00:31:42 Aaron Johnson with Bateman Hall
And an owner needs to be aware of what is going on, not on a daily basis. I mean, but on a regular basis. So having started regular, we call them OAC's (owner, owner, architect, contractor) meetings has really improved that process where before things get too far along that are maybe it going in an unsatisfactory direction they can get corrected without undue expense and time given up on that.
00:32:11 Aaron Johnson with Bateman Hall
But the owner still should have the expectation that that design professionals and the construction professionals can take care of the day-to-day work and make sure that the intent which should be clearly defined as being met, and then that gets checked on a regular basis through construction reports, design reports, and those biweekly or weekly meetings. We started doing that at least biweekly on every job we do, even the smallest jobs we do. It could just be a check-in call. Sometimes we don't need to even have a conversation, but we set aside a time regularly for everybody to be involved and we expect even the owner to be involved in that. The owner is a very key part of that. We don't want an absentee owner.
00:32:58 Aaron Johnson with Bateman Hall
We want somebody who's aware of what's going on so that we don't have dissatisfaction down the line when we want a happy client.
00:33:11 Greg Croft with Resin Architecture
What would you say from your from your standpoint what do you feel like the state of commercial construction is in here in southeast Idaho.
00:33:24 Aaron Johnson with Bateman Hall
Well, I can't speak for the entire segment because we're a small part of that segment. But I would say that Batman hall has been reaping some very successful projects these last few years.
00:33:42 Aaron Johnson with Bateman Hall
We have a good, robust workload of good projects and work on hand. We're always looking at work on hand and backlog.
00:33:51 Aaron Johnson with Bateman Hall
And there's the saying in the construction industry that we're always putting ourselves out of work, meaning we're completing work and we need more work. And so it's always nice to have a good robust backlog and it's a balance. It's very, very difficult. It's either too much or too little. It's very hard to balance.
00:34:11 Aaron Johnson with Bateman Hall
You want just the exact amount, it just doesn't work that way. The timing, it just doesn't work out that way, but I would say in eastern Idaho as a whole, commercial construction is probably as good as anywhere and maybe even better than a lot of places.
00:34:26 Aaron Johnson with Bateman Hall
I think you know, INL has a lot to do with that. Our I think our commercial sector here is still strong, big box market retail market I think is still strong and right now and manufacturing is as strong as ever and I would think that right now probably warehousing and industrial.
00:34:47 Aaron Johnson with Bateman Hall
And multifamily, of course. But warehouse and industrial has been a big boon here. The just-in-time inventory system where you have trucks delivering goods to your front door every morning I think it's broken. I don't know that it's ever going to be like it was in the 80s and 90s.
00:35:04 Aaron Johnson with Bateman Hall
So warehousing, storage capabilities, local manufacturing - those needs have arisen because of the distribution obstacles that we face now with our highway systems and regulatory and staffing and drivers.
00:35:21 Aaron Johnson with Bateman Hall
That we're going to maybe a little more micro manufacturing, local manufacturing and local distribution. 00:35:27 Aaron Johnson with Bateman Hall
That has that's been going good for the last several years and that will continue I think will dominate the market as well as multifamily, which is still dominating the market given even though the construction costs are still rising somewhat, maybe not as much as they had in the past five or six years but still rising. I think we still have a labor shortage and I don't know if that's ever going to be corrected in my future.
00:35:55 Aaron Johnson with Bateman Hall
And the interest rates are really impactful, but there's still a need for housing. So multifamily housing is still strong not like it was last year and years before, but it's still being pursued. But yeah, manufacturing/industrial is probably the biggest segment right now that are still going really, really well.
00:36:15 Jamee Moulton with Resin Architecture
Those same factors that you've just listed that impact the state of construction are those some of the same hurdles that a contractor faces, the labor shortage? What are some of the other hurdles then?
00:36:33 Aaron Johnson with Bateman Hall
Distribution is definitely a big hurdle, time, timeliness of delivery. 00:36:38 Aaron Johnson with Bateman Hall
You know when when I first started Batman Hall generally not, you know, not always, but generally materials that were ordered you could generally assume that you're going to have delivery within the amount of time that was expected, whether it be two weeks for windows or six weeks for doors or what have you. And those were very stable. You knew that if you needed rebar next Friday you can get rebar next Friday.
00:37:07 Aaron Johnson with Bateman Hall
COVID been a big part of that breaking that whole expectation. But even before that the delivery system has and the availability of goods has become fragmented.
00:37:23 Aaron Johnson with Bateman Hall
Such that that's probably our next biggest obstacle behind communication to make sure that we have the long lead items that change all the time. We knew when we were doing Walmart 25 years ago, we knew we had to order the joists and deck six months before delivery. Now it could be a year before. You don't really know. It changes all the time.
00:37:50 Aaron Johnson with Bateman Hall
One thing that was very expected and very reliable next month could be completely unreliable, so the dynamics of making sure our materials arrive on the expected date is probably the second biggest challenge we have now.
00:38:07 Aaron Johnson with Bateman Hall
And the labor challenge has been here for a long time, and it's always a challenge. Even though you think if construction is slowing down, there'd be more labor available. And that's not necessarily the case.
00:38:17 Aaron Johnson with Bateman Hall
The companies still need more work to function, but even if they're pursuing work to stay in business, they're still having issues with staffing.
00:38:33 Aaron Johnson with Bateman Hall
There's just not enough - even when we're slowing down - there's still just not enough competent construction professionals and a lot of them have gone out of the market and pursued more, maybe more stable positions and careers and it has been difficult to attract individuals into the construction environment, which is very volatile and unsure. It's difficult to say I'm going to go into construction and have a great lengthy career. We hope we do, but the nature is so volatile where we got too much or too little. It's very difficult to raise a family with that uncertainty. Some people don't like that uncertainty.
00:39:18 Greg Croft with Resin Architecture
Based on your experience, what would you say that the number one thing like if you were to make a recommendation to a client that's considering a building, what would that recommendation be?
Building a building.
00:39:35 Aaron Johnson with Bateman Hall
Well, again, I think the number one recommendation is to find a qualified competent design professional.
00:39:43 Aaron Johnson with Bateman Hall
And a qualified, confident construction manager and engage them on a preliminary basis. Again, you're not. You don't have to commit to the entire project.
00:39:52 Aaron Johnson with Bateman Hall
But get those two entities involved to do the preliminary discovery to make sure that you have a viable project before you buy land. How to vet that design professional and the construction professional?
00:40:09 Aaron Johnson with Bateman Hall
I think their reputation is a big part of that and their experience in the market that you're in I think is a big part of that, but I think most importantly is getting all three together and getting a feel for how the communication could work and the harmony.
00:40:31 Aaron Johnson with Bateman Hall
Just makes sure there's no barriers there between the entities. 00:40:38 Aaron Johnson with Bateman Hall
And I think just making sure their reputation is probably the biggest part of it, interviewing previous clients or others that have worked with those entities. Most design professionals and construction professionals are capable of building pretty much anything that you're looking for. So it's not necessarily their experience in your exact sector that you're looking at. It's more of their experience and their history.
00:41:11 Aaron Johnson with Bateman Hall
How have they completed their projects? Have they left dissatisfied clients? Because there are going to be issues on your project. That's why you're hiring a general contractor. But most importantly is how have they, how they completed that work. So when there's tough things that happened or issues have happened, whether it's delays or cost overruns, how have they handled those things? I think that is as important as what their experience is. We don't want somebody who's going to walk away and maybe leave you hanging.
00:41:45 Greg Croft with Resin Architecture
If you enjoyed this episode, please consider subscribing to Vision Driven on your favorite podcast platform so you never miss an episode. And don't forget to leave us a review. Your feedback helps us grow and improve our content, and it also helps others discover the podcast.
00:41:58 Jamee Moulton with Resin Architecture
Remember, at Resin Architecture we are dedicated to teaching and learning and are committed to helping business owners like you navigate the exciting journey of building. Stay tuned for more episodes where we'll continue to bring you engaging conversations, expert insights, and actionable advice to fuel your real estate aspirations.
