Suffolk CEO John Fish On Infrastructure, Construction Cost Inflation And How Predictability Is Key In CRE
The coronavirus pandemic has impacted almost every facet of commercial real estate, from the price of materials and labor to the country’s staggering infrastructure needs. In the midst of all of this, many CRE companies continued to build and work to bring value into their communities. Few people understand the importance of this type of work better than John Fish.
Fish is the chairman and CEO of Suffolk Construction Co., the largest building company in New England, and the chair-elect of The Real Estate Roundtable. He is also on the senior advisory board for the Boys & Girls Club of Boston, chairman of the board of trustees of Brigham and Women’s Hospital, an executive committee member at Mass General Brigham, a board member at the Feinstein Institutes for Medical Research at Northwell Health, and he is known for the charitable work he has done giving back to the people of Boston and beyond.
“The best asset class for us from a construction point of view is small, community-oriented projects, projects that may not be the biggest all around but have the biggest social impact,” Fish said on the most recent Walker Webcast. “We’ve built Boys & Girls Clubs around the country, food pantries around the country and recently built Boston Hope, a 1,000-bed hospital we built in six days for Covid patients and homeless individuals.”
On this week’s Walker Webcast, Fish spoke about the future of the industry and how things are changing in a post-pandemic world, from infrastructure needs to construction cost inflation to how predictability could be the key to keeping real estate on track.
Infrastructure: Social And Physical
Suffolk is headquartered in Massachusetts, a state that is known for being home to one of the largest infrastructure projects in recent memory. The Big Dig rerouted the central artery of Interstate 93 into the 1.5-mile tunnel named the Thomas P. O'Neill Jr. Tunnel, among other things.
The project was plagued with delays and budget issues, making it infamous throughout the country. According to Fish, however, the country can’t let the issues surrounding the Big Dig scare it away from other major infrastructure projects.
“Boston made an almost $19B investment with the federal government in the Big Dig, and we have received probably $100B in returns today so far,” Fish said.
He said investments in infrastructure create economic opportunities, and the real investments that need to be made are in people, with the most important type of infrastructure being social infrastructure.
“If we didn't make those investments in the Big Dig back in the 1990s, early 2000s, the city of Boston would not be growing the way that it is right now,” Fish said.
Predictability Is Key
Fish said that Suffolk has invested in virtual design, construction and artificial intelligence tools that are able to greatly enhance the predictability of a project — from project timelines to budgets to accurate predictions of what the final product will look like.
Fish said these tools can not only help projects run more successfully — like the $1B Boston Station Tower project Suffolk is currently working on, which involves building a 60-story tower on top of the city’s main transportation hub — but will also help CRE get back on track in a post-pandemic world.
“Markets in our industry don't like a lack of predictability,” Fish said. “We yearn for predictability, so from a technological point of view, we are exploring how to use technology and artificial intelligence to design a building and deliver a product much more predictively.”
Inflation In Construction Costs
While the costs of materials and labor have risen in recent months, Fish said he isn't panicking. He said those concerns are transitory.
“Let’s use lumber for example. They didn’t stop growing trees during the pandemic; they stopped cutting trees,” Fish said. “So what happened was once building ramped up again and people started to build new housing inventory, lumber skyrocketed. But once the mills around the world got back to work, that spike went down.”
He said instead of cost inflation, his biggest concerns are the things that impact construction cost inflation that we can’t control, including social, health, economic and political issues. Despite these concerns, he said now is a great time for developers to build, thanks to historically good interest rates, his belief that inflated building material prices will go down soon, and the fact that unemployment benefits are going to end and people will be returning to work, raising the demand for service-oriented spaces.
“It is by far the best time ever to put a shovel to the ground,” Fish said.
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This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content.
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