Jason: Welcome to the latest episode of the Construction Insiders podcast, where our host, Jessica Busch, talks with industry experts about new trends, best practices, and how to successfully deliver construction projects in today’s market. Whatever your role on a project, we think you’ll find these discussions interesting and worth your time.
Jessica: Ok, well thank you Jason once again. Today we are going to switch gears a bit and we are actually going to focus on a particular market that has seen significant changes this past year instead of a sector or building type. We decided we need to speak with Joe Saatkamp, the President of Nashville-based CapEX Cumming. And throughout his career in the construction industry, Joe has managed multi-million-dollar projects including your traditional new build, expansion projects and acquisitions, all throughout Nashville and his neighboring states and larger cities. We couldn’t think of anyone better, not to mention the fact that his team, his growing team I might add are team in Nashville is getting quite large, it’s great to see, is currently working on some of the city’s most anticipated projects including – if I can Joe – the well-publicized Nashville Yards development, May Hosiery, Nashville Warehouse Company, even the rebuilding of the historic East End United Methodist Church which is very interesting to watch that development go through its stages of redevelopment and rebuild, the Herman Street development, I could go on and on, the Graduate Nashville, the Virgin Hotel you guys just completed so there’s a bunch. I know that was quite the introduction but seriously, thank you for taking the time today to fill us in on all things Nashville. Welcome!
Joe: Alright, thank you. I appreciate it.
Jessica: Of course! Ok, jumping in here. We all know – you and I have personally talked about this before – but Nashville is a very resilient market. And before this crazy pandemic all started, the city was a thriving hub for hospitality and entertainment. And for those of us that don’t live there, how did it get there? What was enticing for a developer? Where did this boom come from? Why downtown? If you could just give us a quick background on how we got to where we are.
Joe: Sure. I can give you some. My experience in Nashville, I went to college at Vanderbilt in the 90’s. And that was really my introduction to Nashville. And at that time, it was a healthcare-based economy. And there was some tourism and some hospitality market but not very much. Most of the business in Nashville centered around healthcare. Major healthcare companies here and also major colleges here including Vanderbilt as well as five other major colleges. So if you really go back that far from the 90’s until now, I think the Nashville boom and really the Nashville development and really the comments of the “it” city happened coming out of the last recession of 2008-2009. The city really had the foresight to invest and they invested over half a billion dollars in a large convention center, Music City Center. And along with that the Omni Hotel was the first convention center hotel associated with Music City Center. So even during the recession and the mayor took a fair amount of grief for investing over half a billion dollars in the convention center, it really poised Nashville to just ride the wave coming out of the last recession and really positioned Nashville to do very well. So the result of that was a boom in hospitality so more conventions started coming to Nashville. Nashville also developed a reputation for tourism and leisure. It’s Music City, some would argue it’s still county music. But it is Music City. And Broadway really took off with the honky-tonks on Broadway. So it really became a destination, a tourism destination, a convention center destination, and all things kind of fed on each other. More recently it has been kind of the migration from New York and California and the east and west coast to businesses and corporate headquarters relocating or expanding their operations in Nashville. And that really raises all types. At one point in time there was data suggesting there was 100 people a day moving, and population increase to Nashville. It still is one of the largest and fastest-growing population centers. It went from kind of a – I don’t know if I’d call it a sleepy town – in the 90’s and 80’s with really just one market sector, to a very diverse with different market sectors, different businesses growing and a very large tourism and leisure component with it.
Jessica: Yeah it really seems like it all of a sudden was a spotlight. For those of us who don’t live there. All of a sudden everything was Nashville. It’s very interesting and so the history is great. Thank you for that. I guess, pre-COVID during this boom of hospitality and leisure that really played a big focus on downtown. So coming out of this, do you think that will remain a focus? Is downtown still going to be the main player? What do you see the future looking like in Nashville?
Joe: I wouldn’t isolate the development and growth of Nashville to just downtown. There is significant critical mass in downtown and that’s due to the convention center coming out of the last recession. Also major sports, actually in the 90’s when I was in school here the move of the Houston Oilers to Nashville and became the Titans, they built the Bridgestone Arena and have the Predators and all that is located downtown. There’s also the performing arts and other things that are located downtown. So downtown has this critical mass. It’s also where Broadway is, where a lot of the tourism and leisure is. However, over the last 5 years, there has been major developments in the surrounding neighborhoods around downtown. Wedgewood Houston is a neighborhood that has seen a lot of growth, and still is seeing a lot of growth. Germantown, East Nashville, 12th South, these are all neighborhoods that are abutting downtown. And they’re all seeing a fair amount of growth as well – Midtown, kind of between Vanderbilt and downtown as well. So those will all continue to grow with downtown. I think the – and I expect that to continue. I don’t think that will change. It is all dependent on when we get past the implications of COVID. So I think that will reboot. And I think Nashville is poised to do very well in downtown. I also see developments outside of downtown. Tech has taken a fairly big interest in Nashville recently over the last few years. Google built a data center in Clarksville which is a town outside of Nashville. Cool Springs, there are major developments in Cool Springs, large mixed-use developments in Cool Springs which is south in Williamson County. Mt. Juliet and other areas, I guess you’d call them the suburbs of Nashville. Data centers, Facebook, Google are all moving in and Amazon is obviously taking a very big interest in Nashville with their new office buildings as well as distribution centers and sorting centers. I think you have to look at Nashville as a metropolitan area. The density of Nashville itself will continue to thrive but it will also expands into these outlying suburbs and outlying areas.
Jessica: When you talk about neighborhoods and you also mentioned sectors as a result like data centers, are there other sectors that you see will be an area of growth opportunity? Multi-family, other things outside of tech? What do you see taking shape?
Joe: I’ll kind of combine this with COVID question earlier.
Joe: COVID has affected market sectors differently and COVID has affected all of us. Where Nashville and COVID effects on Nashville and the market sectors – we are a tourism and convention town. That’s where a lot of the growth has come in the last 4 – 5 years. And the relocation of corporate headquarters here as well. COVID’s effect on travel, leisure, tourism, hospitality, restaurants has impacted Nashville greatly. What I’m seeing right now that is continuing to go on is multi-family and residential in and around the downtown area. Now if evictions start happening and lease payments start not coming in that may change as well. But currently I still see a strong multifamily market in Nashville. There’s higher education, healthcare as well are still doing fairly well. And there’s the projects that are ongoing. You look around Nashville right now and there are tower cranes everywhere. To my knowledge, no project has stopped. All of our projects that were ongoing are continuing ongoing. There’s a lot of construction happening in Nashville right now. Where you see the slowdown is in new starts. You see slowdown in hospitality and office buildings and mixed-use projects that have those components in them. It’s when will that come back. The hospitality market sector is where we’ve made the majority of our business. It’s what we’re known for is mixed-use and hospitality developments. We also do many other things, but I believe Nashville and the market sectors in Nashville – hospitality specifically – will come back on the leisure side with a vengeance.
Jessica: And that’s what I was going to ask you. Do you see this as a blip on the radar? How do you see that being so entrenched in the hospitality and entertainment industry in Nashville.
Joe: I don’t think you can call what’s it been – 7 months, 8 months – a blip. I wouldn’t call it a blip just for the duration of how long it’s going. It doesn’t look like it’s going to come back until some time in 2021. There’s different estimates of when that will come back. If you can call a year a blip, then I’d call it a blip. Because Nashville is poised to do very well on the other side of this. I mentioned the investment in the convention center in the last recession. The investment in this and the foresight is with the airport authority and the leadership in Nashville – they’re investing over a billion dollars in the Nashville airport as we speak. Instead of slowing that down they’re actually accelerating it because there are less flights coming in and less conflict with passengers and what-not so there’s an opportunity and they’re actually accelerating that development. I think that is huge and will be huge coming out on the other side of this. More international flights are coming into Nashville and I think there’s a pent-up demand – I know there is for me personally – of wanting to get out and do things.
Jessica: Yes, the list of vacation spots is growing the longer this goes on for everyone.
Joe: I think that tourism and leisure travel to Nashville and the honky-tonks on Broadway, the boutique hotels that focus on the leisure are poised to do really well coming out of this as well as entertainment and other things that Nashville is known for. The areas I still have concern about – and everybody’s talking about this – a year is a long time. And that’s a roundabout estimate of what our projections are on how long this is going to last. Does that fundamentally change business?
Jessica: I was going to ask if there is a domino effect of all this long term.
Joe: Yeah, working from home. Is office space going to be fundamentally different? Will companies fundamentally look at what office space they need. Do they need as much office space? Are they going to be re-negotiating leases over the next 3 – 5 years? And how does that affect that market sector in Nashville? I think we are poised better and are positioned better than other cities out there because we have the migration. That may in turn help Nashville. The migration of people not being tethered to an office or wanting to live where they want to live. Nashville is a very attractive city to live in and want to raise a family in. It may attract companies here. Their office space may not be as big as they had planned on but it may attract that migration from other cities to Nashville more so. So I think that we will see play out over the next 3 – 5 years. The hospitality side is the other one I’m a little bit concerned about. Because you do something for a year and it becomes a habit. So what will the convention center business look like? In hospitality you have 2 groups: leisure and group business. Group business is all associated with large conventions. And you have the large box hotels that have a significant amount of convention space and that’s for a reason. They host large conventions and it’s tied to a convention center. Is that business going to come back as strong? Will it look the same as it did prior to COVID? That’s one of the areas I do have concerns about.
Jessica: Gotcha. In speaking of concerns in times like this, and talking about our projects we have going on locally, and as a construction professional in general, how do you support projects during times like this? Have your responsibilities changed? Has your team’s responsibilities changed? What does that all look like trying to navigate this?
Joe: Fundamentally our responsibilities have not changed. We’re an essential business so all of our projects have continued to go on if they were under construction. There are some that have paused if they were in pre-construction before they broke ground but everything that was under construction continues. One of the fundamental things we do is we’re owner advisors and we manage risks and the risks just went all over the place. This is a new thing. How do we adapt? How do we continue to produce? How do we continue to meet our budget and schedule requirements? So fundamentally our responsibilities, our day-to-day hasn’t changed. It’s just increased. Because every day there’s new challenge associated with COVID. Some subcontractors or employees may test positive in a certain area. You shut down that area, you clean it, and isolate the employees and isolate the people who have been around them. Yet you try to navigate and work with your team to keep the project moving and still meet your end date. I think our responsibilities fundamentally have not changed but it’s become more complicated and a lot more things to think about and deal with on a day-to-day basis. And challenges whenever they arise, you have to work with the team to solve them. So protecting the ownership groups or working with the ownership groups and the entire team to navigate these waters and these challenges is where we’ve been focusing and maybe added workload to what we were doing prior to COVID.
Jessica: In talking about these challenges, whether that’s supply chain or workers testing positive, locally are there some examples where the creativity of you and the team has come to shine? I’m sure there’s quite a few things to navigate on some of these projects going on.
Joe: There’s a couple projects that we’re working on right now that are probably good to talk about. One is the Embassy Suites / One Hotel project that is a convention center hotel directly opposite the convention center on Demonbreun. We’re in the midst of construction, we’re getting close to top out and our skin system, the curtain wall system that provides the exterior of the hotel is being manufactured out of China. That was scheduled to be manufactured and delivered right when COVID hit. So we had a supply chain issue on that, meaning our curtain wall was late. They shut down the factories, then opened them up at 50%. And our project had impacts on the skin for the hotel. And step one is figuring out what those impacts are. You’re not going to be able to start the curtain wall when you anticipated and built into the schedule. When will we get it? And then what mitigating factors or mitigating means and methods can we apply to the project to keep the critical path and keep our end date the same. That’s one and we’ve been working through that issue. And we’ve restructured how we’re utilizing the tower frames to install the curtain wall system. We’re going to a monorail system which will install it quicker and we don’t have to use the tower frames as much. So it’s really working with your teams to overcome these challenges. The other that I mentioned before – it’s really happening on just about every project – the closer you get to the end of these projects the more it impacts you. But it is every week or every month there is an instance. All the contractors are monitoring their personnel and subcontractors are monitoring their personal for COVID. Inevitably there’s someone who tests positive so we’re isolating those people and isolating workers who have been around them. And in some cases, it is shutting down areas of the project and cleaning it and then opening that area back up to continue on work. And managing that impact on the projects and does it affect critical path, are there ways to work around it where it doesn’t affect critical path…that’s a lot of what we’ve been doing and working with teams to try to mitigate impacts of COVID. The last one I’ll speak to is vertical transportation. A lot of our projects are high-rise projects. And due to social distancing and 6-foot separation, the amount of people you can transport up and down a project on a daily basis – the need is massive – to get workers up and get workers down. You either have a buck hoist or elevators and there’s a limited amount of capacity. You can’t just pack them full. So staggering work hours and staggering arrivals and departures of workers in the building. Once they’re in the building there is a fair amount of space. But you get compressed in the vertical transportation and working around that has been a challenge, but it’s somewhat easily solved when you’re working with your team to do so.
Jessica: And that’s interesting that all these big cities across the country that we’re talking about transportation continues to be a topic and is a struggle.
Jessica: In talking about some of those struggle sand challenges, I assume in the building itself there are changes to these projects that are still in construction or that are in the planning phases that are being made to see us out of this pandemic for the future, are there some of those changes you can mention? What is going on locally in Nashville?
Joe: The fundamental changes or exploring changes to projects are happening on the ones that have not started yet. There may be have been projects that planned to start in 2020 that the developer or the ownership group for multiple different reasons has decided to pause on. On those projects, in some cases they are relooking at how they’re phasing the project or how they’re programming the project as well. Mixed-use projects are probably a good example of that. If there was phase one, meaning they’re going to do that first, if there a large office building and hotel, they may want to rethink that. Just those markets have been affected more adversely than others. Whereas a residential component may still go forward or move to phase one. Or you may look at the programming itself and want to do a smaller office component, smaller hospitality, maybe larger residential, and retail is somewhere in the mix as well. A lot of those components are being relooked at and reanalyzed right now on projects that haven’t started. We engage with the ownership groups to do that, to cost and explore different options and figure out what is best for the project for the environment we’re in and looking at coming out of that environment. For the projects that are ongoing and under construction, it’s really more of a logistical check and double check your supply chain and then try to get ahead of things and try to look forward instead of reacting all the time. But when you do have to react and you look forward and have to react it’s working with the team to overcome any obstacles that the environment may present to scope, schedule, and budget and have a successful project at the end of the day.
Jessica: Just try to get it done on time and on budget, try to keep people happy.
Joe: That’s right. As always
Jessica: Right? More than ever. From all of this, what are your general take-aways. I can only imagine what you expect to see a year from now in Nashville, 5 years down the road. How are you feeling about all this? What do you expect to see?
Joe: Can we have a do-over for 2020? That’s my general take away.
Jessica: You and everyone else
Joe: In all seriousness, I mentioned leadership in Nashville has really been ingenious in some ways and willing to take a fair amount of risks. The investment in the convention center during the last downturn and the investment in the airport this downtown, I really think shows the vision of the leadership in Nashville of what Nashville can be and what Nashville is doing and how it’s growing. So my big general take away from all of this is we don’t know when, but this will end. And it may end slowly, but it will eventually end. And Nashville is positioning itself to do extremely well once it does. I think I mentioned before the pent up wanting to get out, we’re a touring, we’re an entertainment, we’re a convention city. We have corporate headquarters moving here. We have people moving here. I really think we’re poised to do extremely well coming out of this. I’m a transplant from Texas and I have always related Nashville to Austin, TX. There are so many similarities I can’t begin to speak about them. I think Nashville has some things going forward it that Austin doesn’t. If you’re familiar with Austin it’s just grown. The growth in Austin has been tremendous through the last recession over the last 10 – 15 years. I would encourage anyone interested in Nashville to make that comparison and look at Austin, look at the challenges Austin has had, and where they’ve been successful and apply that to Nashville. I really think we are – here in Nashville – when we come out of this, sitting very well even compared to most of the rest of the cities in the United States. I really believe Nashville is one of those cities that is still the “it” city. It’s just dealing with COVID right now, as we all are. The challenges I think the city needs to address has to do with transportation and infrastructure. We already saw some of that prior to COVID. And it’s just going to continue. There will continue to be growth across all sectors. Nashville will continue to grow. It’s really poised to do very well. But we, in Nashville, really need to look at our infrastructure to support that growth. That’s where Austin ran into challenges and I think that’s where we will run into challenges as well. A year from I think we will be coming out of this. I see the leisure coming back first. And then 3 – 5 years from now I think we’re right back where we were if not ahead of it with the investments in the airport and other things in Nashville to support the growth and to support the development here.
Jessica: It seems like the page to take out of the playbook by investing during a downturn and slow times is diversifying and really try to prep for the future. Other cities should be taking a look it sounds like at what is going on in Nashville. Wonderful, thank you so much for taking the time today. I know we’ve been talking for quite some time about doing a deep dive on Nashville and what is going on because it really is such a unique city down there. Thank you! I hope everyone learned a little bit. And we can see what the future holds.
Joe: Thank you.
Jason: If you enjoyed this episode of Construction Insiders, we encourage you to check out our website at www.ccorpusa.com, that’s ccorpusa.com. Where you can find our full knowledge library under the Insights tab. It’s all great stuff, we’re really passionate about it, and we hope you’ll check it out. Thanks for listening.