Q&A: Ryan exec weighs in on supply issues, key sectors (Finance and Commerce)
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Big leadership changes are coming at Ryan Cos. US Inc.
On the heels of a busy construction season, Ryan recently announced that company President Jeff Smith is retiring, and that several of its longtime leaders will transition into new roles starting in 2022.
Among those with new duties is Mike Ryan, who was promoted to preside over the construction and development company’s Northern Division and oversee its expansion into the Denver-based Rocky Mountain Region.
Ryan, a fourth-generation leader, has been with the company for 11 years. In his new role, Ryan will take charge of a geographic area that includes Minneapolis, Chicago, Kansas City, Cedar Rapids and Des Moines.
Others with new responsibilities at the company include Rick Collins, Collin Barr, Chuck Carefoot and Tony Barranco.
Barranco steps into Ryan’s old job as leader of the North Region, which includes Minneapolis and the Dakotas. Separately, Ryan announced the hiring of Peter Fitzgerald, formerly of Cushman & Wakefield, as vice president of real estate development for the North Region.
In the following interview, Mike Ryan talks about his new duties with the company, which expects to deliver 146 projects with a combined 28 million square feet of new construction this year. He also reads the tea leaves for the office and industrial sectors, and touches on topics such as the supply chain challenge and rent control.
The interview has been edited for length and clarity.
Q: Talk about your new role with the company. In the past four years, you led Ryan’s North Region, correct?
A: Yes. The North Region would be pretty much anything in Minnesota, the Dakotas. Now Tony Barranco will have direct responsibility for that geography.
Minneapolis is our historic headquarters. It is also our operational headquarters. We got about 800 team members in Minnesota. It’s a big responsibility and it was just a total privilege. I love that job and I’m melancholy leaving it, but I’m leaving it in great hands.
Q: What can you tell me about Peter Fitzgerald, a newcomer with the company?
A: He has been with us for about two weeks. And he is going to really fill in the gap of being our office expert, and also partner with Dan Mueller and help deliver on all of our industrial assets. Those two worlds are ironically blending more and more together than they seem like they should be. That created the spot and a need for us, and Peter’s a perfect match in our eyes.
Q: You mentioned office and industrial, which have really been affected by the pandemic. What’s your outlook for those sectors?
A: A tale of different worlds. First of all, on the office side, we anticipate a slow growth, kind of steady eddy, and actually a potentially turbulent market. We really believe many of the biggest users of office space are going to use less space. There’s going to be a huge influx of new space to the market when people are shedding their kind of older, less relevant space. What happens to that is a huge opportunity and question mark. That’s going to create big headwinds for office.
But the positive side is recruitment/retention is so strong, and such a dire need that many of the big users are still going to build new office space and seek new office space that they can be more competitive and more productive as a team. So it’s actually going to pull at both ends and in different directions, one negative and one somewhat positive. Peter will have his hands full figuring that out.
The industrial world’s very different. The industrial world is being dominated by new space by big users — the Amazons, Target, Kroger’s — all the big logistics and distribution users. They’re growing. We don’t see that slowing down.
In addition, you’ve got this whole supply chain conundrum, where people are recognizing for the first time, hey, it’s not the best solution to have just-in-time purchasing for everything that we own. We probably should store some backlog.
So industrial is going to get a pickup from that and already is seeing that. And then you’re seeing just the e-commerce business begets in general, more industrial space, more storage space, more direct-to-consumer space. And a lot of the lab-like space and creative office looks a lot like industrial to me and lives in industrial park. So we’re working on a few facilities, one for Kindeva [Drug Delivery] out in Woodbury. And that’s in an industrial business park. But it’s anything but industrial, it’s high-tech lab space.
I think most people are predicting industrial will continue to go strong. And office will be turbulent and you know, full of kind of pockety opportunities, but not a white-hot market.
Q: You mentioned supply chain issues. How do you deal with that from a construction or development standpoint?
A: Most of the answer is you slog through it. So much of it is out of the control of all of us. What you hope it is, is a traffic jam moment that’s about to clear, not a traffic jam that we’re just getting into. And I don’t know that any of us really know the depths of that.
But then obviously, what you’re seeing on a lot of our projects right now is we are accelerating the purchase time and commitment time on many, many materials. So when you used to take maybe six months to design a project, then you buy it all out and start construction the next day, we are doing a much different approach where we’re doing a month of design and then we are beginning to commit and lock in; steel is going to be done so we can take that to market and now the mechanical is going to be done so we can take that to the market. You’re seeing a lot more piecemealing of projects in that way, which actually serves our approach to the industry pretty well.
Q: Overall, how has the pandemic affected your business? It looks like you’ve been staying busy with projects here in 2021.
A: We’ve grown through the last year, which is incredibly stressful at the same time. Some of your customers come to you and say, “Our business is just not working right now we have to hit the brakes.” And others have come to us and said, the grocery stores for instance, “We just got put on the front lines of everything, we need to accelerate what we’re capable of, and we need your help.”
And so that push-pull has resulted in more people asking us for more help on their real estate platforms, portfolios, and our own development doing the same, than it has resulted in the other side of that, which is a slowdown.
Q: Talk about some of your current projects, such as Highland Bridge, which will eventually bring 4,000 new housing units and other uses to the old Ford plant site. That seems to be moving along quickly.
A: Highland Bridge is really fun. I don’t think there’s a project that the team currently is more proud of getting to work on. Forty-two city blocks. Most of the roads, sidewalks are in; several of the parks are nearly complete, there’s ton of trees planted. You can walk the central water feature. We’ve got the first several buildings under construction and a few more starting soon.
All in all, exciting. But it’s 42 blocks. We’ve got a lot of work ahead of us. The rent-control measure is something that really feels like the only bogey out there that could really slow us down that we’re worried about, quite honestly.
Q: Can you expand on the rent-control concern a little bit?
A: From our perspective, new projects are much harder to bring to the market when you’ve got that constraint of a rent-control policy. So what happens is, it’s going to slow down the delivery of new [construction], it’s going to raise the rents of the new construction at launch, because they’re going to be controlled going forward. And all of that is an effort where you have an intentional policy to control rent and keep it down. And it actually, in my opinion, based on our professional position has the inverse relationship. It actually raises rents. As a macro, that’s the result.
I’m a much larger advocate for what we have at the Ford site. The tax base for all the new multifamily that’s market-rate pays for the affordable and helps subsidize the affordable. You still pay rent in an affordable housing project. But you have to have subsidized construction. And so it subsidizes that construction. So we’re able to deliver both in a symbiotic way and accelerate the delivery of the units. The more supply we bring to the market, the better the long-term rent is; the more you constrain it, the worse it is, even with the rent-control measure.
It’s an important issue. No one denies that affordability right now is harder than it has been in a long time. Some call it a crisis and it’s hard to argue that. But that policy specifically is not something that I endorse.