January, 2019 - Sachse Construction
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Month: January 2019

Construction Labor Shortages Are Impacting Student Housing Developers

by Sachse Team
 Student housing developers are trying to finish new projects on time no matter how much it costs to get enough workers on the building site.

“It’s better to incur the cost of hiring whatever additional labor can be found than to not finish the property on time,” says Carl Whitaker, manager of market analytics for RealPage, a provider of property management software and services.

Delays hurt student housing developers

In the fall of 2018, a total of nearly 9,000 beds were delayed in delivery at 21 properties, according to a count from research firm Axiometrics, a RealPage company. Locations of the delayed projects ranged from the University of South Carolina, with nearly 700 delayed beds, to the University of South Florida, with more than 500 beds.

“If projects aren’t ready for move-in at the start of the school semester… the damage done to a project’s reputation is severe,” says Whitaker. “That poor perception for a delayed property can carry over beyond just one school year.”

That’s because when students arrive for the start of the school year, they tend to be understandably upset if the community where they expected to live is not ready yet.

 “The consequences of later delivery can include having to put students up in hotels and shuttle them to campus… or even terminating leases,” says Frederick Pierce, president and CEO of Pierce Education Properties, a San Diego-based firm that investments, manages and develops student housing assets.

Of the 21 projects that were delayed for 2018, eight developments have been rescheduled—they will now open their 4,100 new student housing beds by the fall of 2019, according to RealPage. Once a student housing project is significantly delayed, it’s difficult to secure leases for the school year in which it was scheduled to open.

Developers get creative to find workers and stay on schedule

“The most experienced student housing developers are now starting projects earlier to allow more schedule contingency and also making the hard decision to delay the start of construction for delivery the following academic year, rather that risk a late delivery,” says Pierce.

To open their properties on time, developers are willing to also pay more to get enough workers. Wages per hour are rising significantly faster than inflation.

“With the current highly competitive landscape, there are less sub-contractors bidding jobs and we are seeing a high volume of pricing variability for the same trades,” says Todd Benson, managing director of development and asset management at PEBB Capital, a real estate and private equity investment firm.

Some builders are also paying workers to work overtime. “Developers are definitely getting creative and buying time in the schedule wherever they can, for example, working on Saturdays and extra manpower allowances,” says Benson.

Meanwhile, some development firms have created their own contracting arms. “Most of the major student housing developers are national in scope and many have critical crews—like framing—in-house and they can transport to their project locations,” says Pierce.

Student housing developers plan to open about 47,000 new beds for the fall 2019 school year, according to RealPage.

New York City Will Reform Construction Bid Process

by Sachse Team

After studies found that municipal building projects in New York City took far longer and were more costly than similar projects in the private sector, city officials will unveil a plan to reform the bidding process, Crain’s New York reported.

The revamped process is expected to produce a more streamlined process up front with fewer layers of approval and fewer design alterations midstream. Watchdog groups found that major project delays occur during the planning process, before construction begins.

One egregious example was a 400-square-foot park bathroom that cost $2 million and took eight years to build. The city hopes to implement the new rules by 2020.

One new feature would be the creation of a dedicated pot of funding for change orders. City officials hope that the reforms will increase competition and attract more bidders, including minority- and women-owned businesses.

New AGC Program Aims to Diversify Construction Workforce

by Sachse Team

The Associated General Contractors of America has announced a new program to recruit a more diversepool of workers to the construction industry.

The effort is focused on vocational training that targets women and minority high school students around the U.S. The program will help pay for high school career and technical training for minority high school students.

The construction industry must find an effective way to recruit, hire, and develop a more diverse workforce, AGC CEO Stephen Sandherr said in published news reports. Otherwise, the industry will not be able to keep up with demand for workers.

A New York AGC leader said the program could counteract “institutional resistance” to vocational training in high school education. Critics said they were wary that minority students could be shunted into non-college tracks before they were ready to make decisions about their future.

Denmark to Build Nine Industrial, Energy-Producing Islands Surrounded by a ‘Nature Belt’

by Sachse Team

Urban Power, an architecture firm based in Denmark, has recently unveiled a plan to build nine islands that will be used for fossil-free energy production, act as a flood barrier, and add a publicly accessible nature area.

The land reclamation project, dubbed Holmene, will consist of nine industrial islands, each one surrounded by a “nature belt” that will include areas for sports as well as more tranquil areas for relaxation. Also included will be several small islets and reefs to provide new nature areas for plants and animals to thrive in the water and on land. The new islands will provide approximately 3.08 million sm of new space and will be built and developed stepwise to limit any impression of an unfinished project as construction progresses.

 Surplus soil from the regions building projects, such as its subway, will be used to create the islands. This surplus soil will also be used to create a natural protective landscape along the existing coastline, making it more resilient toward future flooding and providing an improved bike route.

The largest of the nine islands is reserved for the development of green technologies. It will be home to the largest waste-to-energy plant in Northern Europe. This plant will handle waste from the region’s 1.5 million citizens and turn it into clean water, resources, and biogas. When this waste-to-energy plant is combined with the heat storage, wind mills, and other green technologies across Holmene, an annual reduction of at least 70,000 tons of CO2 and production of more than 300,000 MWh fossil free energy can be achieved. This is equivalent to the power consumption of 25% of the population of Copenhagen.

The project is expected to be completed in 2040.

Beauty Industry in a State of ‘Disruption’

by Sachse Team

Prestige beauty sales are booming even as the industry undergoes rapid change.

Prestige beauty industry sales in the U.S. hit $18.8 billion in 2018, up 6% over 2017, according to The NPD Group. The skincare category grew by 13% and contributed 60% of the industry’s total gains. Hair was the smallest yet fastest growing category, with a 25% increase in sales.

“If I had to use one word to characterize the state of the U.S. beauty industry today, it would be disruption,” said Larissa Jensen, executive director and beauty industry analyst, The NPD Group. “Whether we look at categories, brands, or retailers, there are sweeping changes taking place to the market landscape.”

New retail concepts and technologies are changing the way beauty products are created, marketed, purchased and used, according to Jensen.

“Brands and retailers must not only be cognizant of these transformations and act upon them, but identify new white space opportunities to captivate consumers and further differentiate themselves from the crowd,” she said.

Skincare sales were $5.6 billion for the year, and natural brands remain a top contributor to growth. Natural skincare accounted for $1.6 billion or more than one-quarter of annual sales, up 23% versus last year. The fastest-growing segments within facial skincare were lip treatments, toners/clarifyers, and all other face (which includes products like facial sprays and alphabet creams, among others). Skincare for the body grew, as well as sun products including sunscreen and self-tanners.

Makeup sales reached $8.1 billion in 2018, and though it experienced soft growth the category holds promise, as the number of consumers using makeup reached 67% in 2018 – an increase of six percentage points over two years ago. Among the fastest growing areas were makeup setting spray/powder and false eyelashes. Small remains a big opportunity in makeup, with travel size products growing faster than all others, up 29% versus last year.

Fragrance sales totaled $4.3 billion, driven by juices, which grew by 8%. Artisanal fragrance was the fastest growing aspect of the market. Growth in home scents slowed compared to last year, but diffusers were the fastest-growing in that market.

“Given the high adaptability of the beauty industry, I expect growth to continue in 2019, though it may be at a slower pace given the current economic uncertainties,” said Jensen. “I expect we’ll see an amplification of trends and themes that have already taken shape, including brand transparency, heightened importance of companies taking a stance on key social issues, as well as the evolution of experiential retail and pop-up concepts.”

Ten Retail Trends for 2019

by Sachse Team

Retail will get faster and smarter this year — particularly physical retail.

That’s according to a new study from Coresight Research, which outlines 10 ways retailers will leverage cutting-edge technology to reinvent themselves in changing times. The report, “10 Retail Trends for 2019: Get Ready for Retail Reinvention,” predicts a promising new start for the retail sector as a whole, but especially for physical stores. Coresight predicts that retailers will reshape brick-and-mortar retail, bringing fresh thinking to operations and reacting to changing consumer demands in new ways.

Here is a brief recap of the report’s 10 trends:

1. Cities will see more spectacular retail
Retailers will follow the example of Walmart and Target and offer refurbished environments and new in-store technology in a generation of urban flagships.

2. ‘Fast retail’ will have shorter leases, more shared spaces and more short-term stores
Brick-and-mortar and digital retailers alike will look for short-term physical touch-points and more flexibility as consumers demand newness.

3. Western retailers will borrow from ‘new retail’ with data-driven online-to-offline ventures
More Western retailers will follow the example of Amazon and use Alibaba’s “new retail” model for integrating online retail, offline retail and logistics across a single value chain powered by data and technology.

4. Technology will strip friction from brick-and-mortar retail
Retailers will seek to remove traditional pain points from the physical model with offerings such as automated, checkout-free stores.

5. AI will become retailers’ go-to technology
More retailers will turn to artificial intelligence (AI) to make better decisions on pricing and inventory, communicate more effectively with customers, and personalize offerings.

6. Startup partnerships will fuel new product development, digital improvements and operational efficiencies
Established retailers will turn to startups to provide digitalization expertise needed to compete with online-native rivals.

7. Supply chains will switch from lines to loops
Retailers in verticals such as apparel will work with technology vendors and product suppliers to shift from traditional linear, planned supply chains to digitalized, reactive feedback loops.

8. Consumers will look for environmentally and socially engaged brands and retailers
Consumers will shop more consciously, benefitting retailers who are ethical, sustainable and values-driven.

9. More consumers will expect ‘smart retail’ interactions
Shoppers’ growing familiarity with offerings such as chatbots, voice assistants and personalization will intensify demand for smart and anticipatory interactions across channels.

10. Shoppers will seek more inclusive offerings
Consumers will favor offerings that are inclusive and accessible, such as plus-sized fashions and casual styles, over goods that are exclusive or aspirational.

New Tech-Based Entertainment Concept Targets Malls, Other Locations

by Sachse Team

A concept that combines cutting-edge virtual and augmented reality technologies with the physical world is looking to enter the U.S. market.

Retail leasing specialist R.J. Brunelli & Co. announced that it has been selected by D. Legends Holdings Pte Ltd., the Singapore-based creator of indoor virtual reality theme parks, as exclusive nationwide real estate broker for Legend Heroes Park’s entry into the U.S. market. The concept features a wide range of rides, games, sports, entertainment, and other attractions employing virtual and augmented reality, holograms, motion tracking, projection mapping and 4D+ technologies.

Heroes Park can be adapted to a wide range of building sizes, with the space divided into a series of zones targeting different interests. These range from a junior zone that allows young children to learn and explore through virtual and physical spaces to a sports zone where people of all ages can learn, practice and hone their skills in football, baseball, archery, clay pigeon shooting and other sports. There is also an arcade zone with immersive and interactive arcade games.

For its U.S. entry, the company is seeking big-box locations in major metropolitan markets across the country, including New York, Atlanta, Orlando, Las Vegas, Los Angeles, San Francisco, Dallas/Ft. Worth, Houston, Chicago, Boston, Denver, San Diego, Virginia, Washington, D.C., and Philadelphia. Vacant anchor and sub-anchor spaces at regional malls, as well as freestanding or strip center big-boxes are primary targets.

Building requirements call for 30,000- to 40,000-sq.-ft. spaces with a minimum ceiling height of 16-ft. overall, with 40% of the space at least 32-ft. high for rides, noted Julie T. Fox, manager of new tenant representation, R.J. Brunelli. Preferred locations should have five million people within 30 miles, with a one-hour maximum driving distance.

Regional malls are the preferred venue, where the company can absorb vacant sub-anchors or single floors of subdivided department store buildings. Legends Holdings will also consider vacant big-box retail spaces on the periphery of regional malls or in high-profile power centers, strip centers or freestanding highway locations. Other potential venues include warehouse/flex buildings in close proximity to major malls or entertainment complexes.

“At a time when many mall operators are struggling to fill vacant department store spaces, Legend Heroes Park offers a unique entertainment destination use aimed at people of all ages,” said Fox. “In particular, the flexible concept presents a compelling alternative for properties desiring to present new options that can potentially bring back Millennials who have shied away from malls in recent years.”

9 Tech Trends to Track in 2019

by Sachse Team

Some economists predict that the U.S. economy is not going to plunge into a deep downturnthis year but global markets are expected to slow down some, leaving consumer mindsets in a state of trepidation. Watching the news doesn’t help: Trade wars with China; Brexit as a game of economic and political ping pong; and the shut-down of the U.S. Federal government have all made a volatile economic landscape only more volatile.

Yet, even with these political, economic and environmental stressors, consumers are masters of distraction: an image of Kylie Jenner’s baby’s hand was just nosed out as the most liked Instagram post of 2018 by an egg. That’s not a misprint. An egg. Yes, it’s a great time to be alive.

Through these monumental digital and social disruptions, we are seeing the more successful brands evolve and transform with consumers’ shifting mindsets, which is why we believe agility will be the key strategic focus of 2019, transforming the design industry.

Here are a few more trends to keep an eye on as we kick off a new year:

1. Biometrics: Invasive or inevitable? A little bit of both

Photographic identification first appeared in the U.S. in 1876 but didn’t become widely used until the 20th century. Now, we are much closer to the once-futuristic world of Minority Reportwhere retail stores use biometric scanning, which analyzes and measures characteristics of the human body, to identify consumers and personalize advertisements, driverless cars are the norm and voice activation controls run our homes and workplace. From wellness devices to biometric security at airports, this type of technology is gaining momentum. According to Technavio, the global biometrics market will grow to $24.26 billion through 2023, double the predicted growth of small drones, and transform nearly every industry. Marriott Hotels, for example, have already begun testing a face-scanning check-in process at their hotels; and a “biometric path” at the Dubai International Airport allows passengers to check in, complete immigration formalities and enter the Emirates Lounge. Government regulations will try to balance consumer privacy with security. But, ultimately, our demands for more security bring with it technology asking for more of our personal information.

2. Cognitive Neuroscience: Taking the fun out of guessing

People only tell you what they think they think – not what they actually think. Consumers spend time passively consuming information, and we are often overwhelmed by the amount of data and choices presented to us. Our highly saturated digital ecosystem has become exhausting and overwhelming. Scarcity is the new exclusivity and people are trying to live more minimally, demanding that technology do most of the work for them. For example, if you search “black shirt” on Google, there are about 6,210,000,000 results. While artificial intelligence helps to narrow those results by using things like previous purchase behavior and search history (maybe even listening in to our conversations without our knowledge or tracking our eye movements), these activities are limited to data gathered by conscious thoughts. Cognitive neuroscience is a way to get deeper knowledge about the subconscious, allowing us to absorb stronger memories and, ultimately, influence conversion rates. Like an episode of Black Mirror, cognitive neuroscience is a way to tap the untapped and filter out the noise to provide consumers what they actually need, not what they think they need.

3. Social currency, brands & trust: The power of the consumer

There are growing mainstream demands among consumers for brands to have a social and ethical compass – and consumers are more engaged than ever. We live in a ”always on” state where a crisis is amplified so quickly that brands have little time to contain the damage. We’ve seen a rise in social currency movements around the world for consumers to boycott certain retailers who are found to have acted inappropriately or have given money to a cause, or candidate, that consumers are against. Brands like Nike and Gillette have released controversial advertisements taking a stand on hotly debated social issues – however, for Nike, this calculated gambit paid off, with sales rising 31% after the release of the ad.
We know that our personal data is being collected from the devices that keep us so well-connected. In turn, brands are more knowledgeable and calculated in their messaging and business decisions. While many of the industry’s leaders have tried to strike a balance between gathering data to improve aspects of our lives and protecting consumers personal information, it is unclear if they’re succeeding. Facebook made millions by selling user data to companies like Google – but where do consumers fit in? If we’re giving up our personal information (sometimes unknowingly), what do we get in return? Consumers expect brands to align with their values, protect their data and use the data they collect to their benefit…or they will simply tighten their wallets or log off.

4. Tech companies & real estate: Strange bedfellows

The concept of “staying in your lane” will continue to be tested as high-tech and social media companies disrupt and infiltrate as many industries as they can, including real estate. Sidewalk Labs, an urban innovation subsidiary of Google, is creating a smart city in Toronto. Robots deliver mail and trash via underground tunnels; and sensors throughout the 12-acre development measure things like air quality, traffic and building occupancy. WeWork, which started off as a coworking company but has since become the largest private office tenant in Manhattan, launched into building management and workplace optimization strategy, disrupted the multifamily housing industry with WeLive, opened a school called WeGrow, and recently moved into wellness by opening Rise by We gyms and investing in a Superfood start-up. Whew. No wonder why they are rebranding into We Company. And Amazon, which started off selling books online, well, they can really sell you almost anything now. So far beyond their original concepts, these tech companies don’t look at an idea in singular terms—they evolve their brands as consumers change and continually make variations to their strategies and business plans.

5. Regeneration & resiliency: More us, less stuff

If you haven’t yet seen the climate change reports published the United Nations Intergovernmental Panel on Climate Change, you have about 12 years to get your emergency preparedness plan together. We’ve seen many countries fall behind in environmental leadership and aspirations, so businesses are now taking charge of climate change. Along with aggressive initiatives to improve the resiliency of cities, we can expect zoning changes to make waves in 2019. As the cost of living continues to rise, the global affordable housing gap is projected to affect one in three urban dwellers, or about 1.6 billion people. In aggressive plans to tackle the housing crisis, Governor of California Gavin Newsome has proposed withholding transportation funds from local governments that fail to meet new housing production targets. San Francisco Mayor London Breed has proposed a $300 million bond to pay for affordable housing. Major technology companies, like Microsoft, are starting to understand their impact on local communities are pledging money to tackle the affordable housing crisis. Companies and governments that recognize these resource insecurities and build more resilient cities are going to be at the forefront of innovation and these changes will have a positive impact on future economic growth.

6. Voice recognition: Universal communication and commands

Voice technology is currently having a moment – and we expect it will penetrate even more industries in 2019. As the cost of the technology decreases, access and use will skyrocket. Deloitte Global predicts that the industry for smart speakers will be worth US$7 billion in 2019. Simultaneous language translations, innovations for the hearing impaired and universal voice recognition software will make voice technology more inclusive and part of more than our smart home devices. Expect Alexa for Business to shape the workplace, in-room voice commands in our hotels, and car dashboards that verbally confirm purchases.

7. Supersonic travel: Marking business move faster

Boom Technology’s supersonic plane dubbed the “Son of Concorde” is set to take off later this year. Once the plane is in commercial service, routes from New York to London, Paris to Montreal and Madrid to Boston will take less than four hours – half the time of conventional jets. Uber has partnered with Boeing to take its car-sharing service above ground. In an effort to take travel out of this world, Virgin Galactic made history last year when they launched SpaceShipTwo. With the expected rise in smart airports with added biometric security features, hopefully these innovations will make the entire travel process less stressful and more streamlined. Fingers crossed. There are efforts to move people more quickly but also products. We’re seeing disruptions in the logistics industry with autonomous trucks and ships and drone deliveries, getting things to us more efficiently. There will continue to be this convergence of people, places and processes and automation – get your bags packed and buckle in.

8. Rise of genetics: Hyper-personalization

In the past, mass customization was almost impossible. Sizes, treatments and formulas were standard. 3D printing and augmented reality have helped get us closer to mass customization for apparel and products, like earbuds. However, this type of mass customization only skims the surface. The rise of genetic testing is the future of healthcare and skincare research – and with it, more personalized and tailored products for consumers. As consumer awareness of the potential for early diagnoses of genetic diseases and more personalized consumer products continues to grow, the global direct-to-consumer genetic testing market is expected to reach $2.5 billion by 2024. Genetics also brings the concept of prevention as a strategy for tackling the rising cost of healthcare. We know that people may be predisposed to certain medical diseases, however, lifestyle changes can play a major factor if they will develop that disease later in life. Which is why it’s so important to have this data about our bodies early on so that we can work on customized prevention plans. Wearables, at-home kits and online tests also allow for consumers to deal with embarrassing health issues in the comfort of their own homes, manage their diseases more efficiently, get personalized vitamins based on deficiency tests and a custom skincare routine that best fits the individual’s cellular profile.

9. Haptics: The untapped virtual sensory experience

Global ecommerce sales are on the rise; however, most consumers prefer shopping in-store. One of the main ingredients lacking in the online shopping experience is that consumers are unable to touch and feel the product before they make a purchase. Does the shirt feel comfortable against their skin, is it durable enough? There has been a glaring gap in this sensory experience – that is, until the rise of haptics technology, which relies on sensors, pressure and signals to replicate the signals in the human nervous system when we touch something. Recently revealed at the CES 2019 show, the Teslasuit is a full-body haptic suit that enhances virtual and augmented reality experience through the synergy of haptics, motion tracking and biometry. To push this technology even further into mass adoption, Google recently invested in haptic technology to develop new consumer products. Merging the physical with the digital experience is becoming more important for an authentic, sensory experience.

These technological innovations are making us more efficient, mobile and resourceful. However, while automation is replacing some jobs, technology will never completely replace humans. Artificial intelligence is unable to perform certain tasks like creative thinking, understanding context and providing customer service. Robots can check you into a hotel; however, they aren’t able to discern human needs and feelings. A humanistic approach will continue to create stronger brand touchpoints. As businesses make large investments in digital transformations to stay competitive, it’s important to find a balance between technology and human intelligence. Training, continued education and providing a creative space to brainstorm and strategize are ways for companies to invest in empowering their people while making complementary digital improvements. There is a future where we can peacefully co-exist.