Geoff Golden is the president of Golden Construction LLC, a Birmingham general contractor that is swimming strong in the high tide of apartment construction in the major cities of the South.
Upscale apartment complexes in the “urban infill” areas of the South — meeting a clamoring demand by the millennial generation — are the hallmark of Golden Construction. And the company currently is putting the finishing touches on one of Alabama’s best examples of these downtown stars — Birmingham’s Venue at the Ballpark, with a pool and deck overlooking the city’s new Regions Field.
Golden gives us his view of the construction industry in general and the multifamily segment in particular. A graduate of Auburn University, he founded his company in 1997.
General contractors are getting really strong business. The subcontractor market is really hot, but experiencing what is probably unsustainable growth in some areas. So there’s a risk for a slowdown showing up in 2016. It may get slow for the general contractors as well. It’s very difficult to get the budgets to work on some of these projects.
There is what I call hidden inflation. Our material costs and processes are flat or down, because the global use is down. But we’re seeing wage inflation and market inflation created because of the demand outpacing the supply of capable companies. Consequently, you are getting some wild price escalation there.
The demand in the multifamily segment is up significantly, and hospitality as well. We’re hearing some rumblings of office buildings being built, and municipal work is coming back. Just looking around our neighboring cities — Atlanta, Nashville, Chattanooga, Baton Rouge, New Orleans, Jacksonville, Jackson — those cities all have multiple significant construction projects going on. All types.
In Alabama, our company has a large project in Huntsville, we’ve got several big ones in Birmingham and a good-sized project in Montgomery, and we’re working on a large project in Mobile that will hopefully start this summer. One of the big projects we have in Alabama currently is the Venue at the Ballpark. It’s a 250-unit, high-density, multifamily project right outside the outfield fence at Regions Field in Birmingham. They started turning over units in March and we’re getting close to the end of that one, working on the exterior skin. Preleasing activity is significant.
Going back to the beginning of my career and also to the beginnings of this company, we have always built multifamily products. It started with adaptive reuse in downtown Birmingham, then high-rises on the coast and in Birmingham and in 2008 we got involved in a groundbreaking project in downtown Birmingham, the Cityville project, a 260-unit, high density project that is just a culmination of all that experience. The downtown multifamily is one of the first sectors to come back quickly, and we have been building high-density apartment projects since then across the Southeast.
If you talk to economists who closely track the multifamily world, certainly the dislocation of the first-time homebuyer during those years right after the financial crisis created a significant supply of renters, especially for class A projects. But I think that combines with the millennial being significantly more mobile — wanting more than one job, not wanting to work for one company — that contributes to the growth in this sector.
To some extent, it’s all heavily privately financed, a private developer market, even the heavy medical projects. We are certainly seeing private equity funds investing in the sector we’re in, high-density multifamily, student housing and hospitality.
Hospitality is definitely more cyclical than other types. There was no product for so long and now there is demand out there. Plus the hospitality industry has changed to less full-service and upscale, to more limited service, and the old product type is being replaced by the new.
In senior housing, we are seeing a fair amount of activity, but it is slower than the others (types of multifamily). There is a little bit of a glut of elder care type housing. That market is nuanced because it is more heavily regulated, not as efficient of a market as other sectors.
We do try to keep an eye on the supply in the apartment segment and whether it is getting overbuilt. We are not as theoretically exposed as the owners are to lease-up, but we are wise to know where we are. One of the interesting aspects of what’s going on in cities like Nashville — not necessarily in Birmingham — is that there are so many jobs in Nashville and Atlanta there is no way to keep up the pace of bringing new units online to match the job creation.
Generally speaking our strategy is to prefab as much as we can in any of these buildings. There are a couple of different processes, depending on the type of building. The cost is neutral, but it increases the speed of the project by 25 to 30 percent.
We have a pretty bold mission at Golden Construction to revolutionize the construction process. My lifelong pursuit and my belief is that the construction industry in general in the next five years will be significantly disrupted by technology, and our goal is to be on the forefront of this technology. Our aim is to be the leader in all things related to the increase in efficiency and improvement in the lives of the people who work in construction. We think that in time we will be a significantly different company. An example of that is the widespread use of pre-manufactured products. Hospitality projects will be utilizing not only pre-manufactured bath units but also 14- by 75-foot modules. Those things are coming to the construction industry, and the people who embrace them will succeed.
It is a common reality in business that the companies making money doing it the traditional way will continue doing it that way, and the companies that embrace change and innovation will start to be more competitive. And that gets into the subject that the AEC industry [architecture, engineering and construction] has been resistant to change and innovation and is one of the largest industries out there that has not experienced any significant disruption at this point.
Chris McFadyen is the editorial director of Business Alabama.
Interview by Chris McFadyen