How A Top Chicago Construction CEO Is Laying Out A Path To The Future
The commercial real estate industry is breathing a collective sigh of relief at the prospect of a coronavirus vaccine, but general contractors are still holding their breath.
Demand for construction typically lags the overall economy by 18 months or more, and some construction companies are girding themselves for lean years ahead as the impact of the pandemic ripples through the market.
To understand more about how contractors are bidding on new projects and adjusting their internal practices in the face of the pandemic, Bisnow spoke with Mike Leopardo, CEO of Leopardo Cos., which, since its founding in 1977, has grown into one of the nation’s largest contractors, with nearly half a billion dollars in yearly revenues across numerous asset classes.
In the face of uncertainty, Leopardo stressed not only the importance of strong external deal-making but also of investing internally in the future of one’s own company.
Bisnow: How are you choosing projects going forward? Are you altering your bidding process at all?
Leopardo: Several years ago, we established a well-thought-out go/no-go process for bidding on projects and qualifying work that relies on key metrics that predict the viability of a project as well as defining our chances of winning. Two of the major components are Leopardo’s track record in the particular building type and our relationships with the key decision-makers.
Post-COVID, we’re going to be looking even more closely at projects’ financial viability: whether they pencil out and whether they are going to get financed. Those hard financials are going to matter more than soft measures like whether we have experience with the owner. The resources we expend on bidding and pre-construction are just too valuable to be working on projects that aren’t going to get financed or built.
Bisnow: Where do you think the construction industry stands going into the next few years?
Leopardo: 2021 is in solid shape. We, along with many other contractors, came into 2020 with a fairly sizable backlog of projects. 2022 is going to be a real challenge for the industry, especially for the Chicago market. There are going to be some great markets with opportunity and some dead markets, and contractors who can’t control their pipelines, project mix and pre-construction timelines are going to suffer. A lot will be riding on having the right customers and the right projects.
Bisnow: Are there any asset classes you’re particularly excited about going forward?
Leopardo: We’re expanding our focus on health care, senior housing and affordable housing going forward. Senior housing is being buoyed by national demographics, and affordable housing is a newer market for us that has taken off here in Chicago and many of the other cities where we work around the country. We are also working across the country in our federal market with the VA (U.S. Department of Veterans Affairs) and gaining traction with our energy group. We will still compete hard in our other core markets like tenant improvements, education, commercial office, retail, municipal as well as high-end and market-rate residential. Some of these markets will not be quite as active as in the past.
Bisnow: One area you didn’t mention is hospitality. Are you cooler on hotels?
Leopardo: We were very hot on hospitality before COVID, and we’re still putting the finishing touches on [226 West Jackson Blvd.] a historic hotel renovation across the street from the Willis Tower. We’re still looking at a couple of hotel projects in Chicago and out of state that we’re excited about, but hospitality got hit hard. It’s going to take a few years for that industry to fully recover. So yes, we’re not as bullish on it as we once were, but there are still opportunities with the right customers that can get deals done.
Bisnow: How have you been dealing with the uncertainty of what’s to come?
Leopardo: We have done a tremendous amount of strategic planning during the pandemic. All our market segments have made their assessments and put their plans together. Because it’s such a unique year, we’ve been doing scenario planning to prepare us to navigate the post-COVID business environment. We laid out a dozen different possible scenarios with multiple trigger points, including the election, the virus and fluctuating demand for construction. For each of those scenarios, we built a financial model and laid out a strategic plan for each of our practice areas.
As the months have worn on, we’ve been able to narrow down and refine our scenarios, but it’s given us real peace of mind to have worked through the financials and understand how we can survive any obstacle that comes our way.
Bisnow: How has the labor market been for construction talent? Have you made any strategic hires?
Leopardo: There is a lot of great talent on the market now, but some of the talent lies in the industries that got hit the hardest, like tenant improvements and aviation. We redeployed quite a few people we had on staff already into markets that have become more active for us, like health care and federal. We’ve also made new strategic hires to invest in areas where we see growth. We’ve also made hires in talent development, talent acquisition, as well as diversity and inclusion.
Bisnow: It’s interesting you mention D&I and talent development hires right alongside the construction professionals in that list.
Leopardo: One of my biggest responsibilities as a CEO is succession planning and making sure that I leave the company in the best hands possible. Identifying the next generation of talent and investing in our employees’ growth and development is without question a priority for us.
We’ve historically been a diverse company, but there’s always room to improve, and I can’t wait to make Leopardo an even stronger, more empowering company. We’ve always been a family business with an emphasis on ethics and a strong culture, and I want to preserve that long after I hand over the reins to someone else.
This feature was produced in collaboration between the Bisnow Branded Content Studio and Leopardo. Bisnow news staff was not involved in the production of this content.