6 owners moving ahead in construction’s hardest-hit sectors : Although hospitality, office and retail saw deep pullbacks in 2020, some clients are taking the long view and keeping their construction jobs in play.
Without a doubt, some nonresidential building sectors have been hit harder than others by the COVID-19 pandemic.
While the demand for warehouses and data centers, spurred by the surge in e-commerce, has been a bright spot for construction since last February, other sectors such as hotels, office and retail have struggled mightily.
Just consider the hospitality sector. With business travel cratering and leisure travel still well below its norms despite the holiday surge in the U.S., construction spending for hotels has been absolutely abysmal. In fact, it was down 50% through November 2020, according to Dodge Data & Analytics.
“The single hardest-hit segment of the industry is lodging,” said Anirban Basu, chief economist for Associated Builders and Contractors, in a recent news release. “While leisure travel is likely to rebound as more Americans are vaccinated, business travel may take years to recover. This bodes poorly for the construction of hotels with elaborate meeting spaces located in central business districts or close to airports.”
In the retail segment, the top 10 chains reduced construction starts 15% to $1.876 billion, and the overall sector was down 28% through November, according to Dodge. Office construction starts similarly took a 27% hit, as companies large and small – including major construction firms – reevaluated how much office space they really need after learning how to manage a stay-at-home workforce.
Despite the challenges, however, some projects have continued on at a pre-pandemic clip, propelled by owners and developers that are taking the long view of their sectors. Here’s a rundown of some of the more notable jobs in these hard-hit sectors that have moved forward.
citizenM
In the midst of the coronavirus pandemic, Dutch hotel chain citizenM has taken a bullish approach to U.S. projects. Its citizenM Los Angeles project is nearing completion, following openings in Washington, D.C., and Seattle last year. The company is currently building hotels in Boston and a second one in Washington, D.C.
The firm, which operates 20 hotels on three continents, wants to expand to 36 hotels in the next three years, and it hasn’t pulled back those plans due to COVID-19.
“We typically take a 100-year view, and try to develop for as long as an investment horizon as possible,” said Ernest Lee, citizenM’s managing director, development for North America. “So like any development company, when COVID hit, we did a very quick critical analysis of our pipeline, and then we asked ourselves, Is there a secular change to our business? And we said, No, people will return to traveling. It’s a matter of when, not if.”
Besides having deep pockets from being backed by the the sovereign wealth fund of Singapore, citizenM has been able to take advantage of a much hungrier construction market in 2020.
“There is much more competition in the market, which is just a function of sheer supply and demand,” Lee said. “There are far fewer commercial projects being tendered. People need work and therefore they will bid a little bit of a different perspective.”
IHG Hotels & Resorts’ Atwell Suites
In November, IHG Hotels & Resorts announced that its first Atwell Suites hotel was under construction in Miami. Expected to open this summer, the 90-unit property is located in Miami’s booming Brickell district. The hotel is part of a new high-rise, mixed-use property which also includes a new 140-room Hotel Indigo Miami Brickell.
Despite the COVID-19 pandemic, Miami is among a handful of markets where development has largely continued unabated.
Introduced in 2019, Atwell Suites has 20 properties now under planning and development across the U.S. including in Austin, Texas; Charlotte, North Carolina; Denver; and Phoenix, the company said in a statement. Construction is expected to begin on additional Atwell Suites properties in the coming months.
“The all-suites segment is fast growing and remains very resilient with strong owner interest throughout 2020,” said Karen Gilbride, vice president, avid hotels and Atwell Suites at IHG in the statement. “We’re excited to continue the momentum of this brand and look forward to welcoming our first guests next year.”
Catalyst office building
The Catalyst building, a five-story, 159,000-square-foot office building constructed from 4,000 cubic meters of locally sourced mass timber opened in September in Spokane, Washington, according to a news release. Its use of mass timber reduced the need for steel and concrete and helped collectively offset approximately 5,000 metric tons of carbon, equating to taking 1,100 cars off the road for a year.
The building is the result of a partnership between offsite construction firm Katerra, design-build firm McKinstry, energy firm Avista, Michael Green Architecture and Eastern Washington University. Along with the adjacent Scott Morris Center for Energy Innovation, the office building is part of Spokane’s South Landing Eco-District, and EWU is its anchor tenant.
“This project is really special for MGA because it brings together a lot of the thought and ambition we have around how we can start to change both the environmental performance and the affordability of buildings,” said Michael Green, principal of Michael Green Architecture, in the statement. “It is the beginning of what we think will be the transformation of the construction industry, moving away from the more carbon-intensive materials like concrete and steel, and toward mass timber as the best choice when making a carbon-neutral building.”
CoverMyMeds
The first building of the new $240 million, 418,000-square-foot office campus for healthcare software company CoverMyMeds is slated to open in spring on the 15-acre site in Columbus, Ohio.
Built by Turner Construction, the project has largely stayed on track during the pandemic, with the owner making a point to press on despite COVID-19.
“This is essential and we’re not going to pause on progress if we have the capability to honor our commitment to our growing staff and the community,” said Michael Bukach, senior manager of employee engagement at CoverMyMeds in a blog about the project.
The finished product will also include some features that will highlight what a post-pandemic return to office could look like. The company said its HVAC system utilizes air quality sensors and scrubber technology — similar to those found on the space shuttle and submarines — to significantly reduce pollutants, and lower humidity levels which makes it more difficult for pathogens to survive.
The facility also has the ability to scale density of workers on site. For example, monument stairs will reduce reliance on elevators, while a robust grid of utilities — including power and data ports — enables the reconfiguration of the space to various layouts.
“We’re also installing a variety of touchless systems to reduce shared surfaces and using smooth, hard finishes which are easier to sanitize,” said Lars Johansson, director of campus operations for CoverMyMeds.
Lendlease Americas Residential Partnership
In the face of the pullback in spending on retail construction, Australian construction and development giant Lendlease is forging ahead with a new $600 million mixed-use development on a 3.5-acre site in Los Angeles that will include 250,000 square feet of office and retail space.
The Los Angeles project is part of the Lendlease Americas Residential Partnership (LARP) between Lendlease and Aware Super, which has a $2.5 billion portfolio of projects in U.S. cities with Lendlease acting as development, construction and investment manager. In addition to the new parcel in Los Angeles, the LARP recently has acquired a site in New York City and has completed projects in Boston and Chicago.
The Lendlease strategy in regard to gateway cities in the U.S. and around the world is to position itself to take advantage of their population growth, employment opportunities, ability to draw global investment and resiliency through the ups and downs of economic and property cycles.
Restoration Hardware
The home furnishings brand Restoration Hardware announced it made a $105 million equity investment into Aspen, Colorado, real estate to build out a first-of-its-kind ecosystem of properties. The project will feature retail locations, hospitality concepts, restaurants, residential developments and workforce housing projects, according to the company.
It will open its Guesthouse concept in Aspen’s Crystal Palace, which will also host the company’s first bathhouse and spa. RH is also building out its Residences, which will include up to five four-bedroom homes at the Boomerang Lodge in addition to a six-bedroom home on Red Mountain. And Aspen, according to Telsey Advisory Group Senior Managing Director Joseph Feldman, serves as an ideal location to showcase the brand’s products and services to its affluent customer base.
“We believe Aspen represents a singular opportunity to elevate the RH brand by exposing the world of RH to the world’s most affluent and discerning customers in a single, walkable market,” CEO Gary Friedman said in a statement. “Additionally, we believe the education RH will gain from a real estate development and ownership perspective will be immeasurable as the brand builds its global ecosystem of products, places, services, and spaces.”
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