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May 11, 2018
Specialty: General contracting and design-build for projects across the commercial, corporate, healthcare, life sciences, civic and education sectors
Management: Bart Ricketts, CEO; Jeff Cleator, Seattle president; Berger Dodge, CFO
2017 revenues: $658 million
Projected 2018 revenues: $720 million
Projects: 300,000-square-foot UW Population Health Facility; 58-story building with offices, apartments and retail alongside Rainier Tower for Wright Runstad & Co.; Seattle Children’s/Building Cure, a 13-story laboratory in the Denny Triangle
Jeff Cleator, Lease Crutcher Lewis Seattle president, answered questions from the DJC about his company and trends and issues in the industry.
Q: What are the important issues in your industry?
A: We are fortunate to be enjoying a robust market, yet a number of factors could limit continued growth. Traditionally, businesses can reasonably forecast cost adjustments due to predictable supply and demand factors and make their investment decisions accordingly.
Costs due to policy decisions, however, are more difficult to predict. For example, delivery costs have increased due to traffic congestion, material costs are volatile due to fears of tariffs and a trade war, and regulatory costs continue to increase in unpredictable ways.
At some point these cumulative costs could stifle continued economic growth. Additionally, it is becoming increasingly challenging to find qualified labor to support the strong local construction market, particularly in the trades. We need to do a better job recruiting young people into these rewarding, living-wage jobs.
Q: How are rising land costs in Seattle affecting what gets built?
A: It is a little bit hard to predict. We are seeing some mixed messages. On the one hand, some of our developer customers have said it’s too expensive to develop in Seattle and have begun looking for opportunities in other markets. At the same time, there still seems to be plenty of capital flooding into the Seattle market from national and international investors.
Some of the recent programs that allow developers to build more square footage on a site in exchange for providing public benefits feels like a win-win solution that may allow some marginal projects to move forward.
Q: What’s an interesting trend, and how does it affect your firm?
A: We continue to be quite interested in all forms of integrated project delivery. The Population Health progressive design-build project we are undertaking with the University of Washington has allowed us to deliver value to the owner that would not be achievable in a traditional project delivery format.
Building information modeling is another area that will benefit from more collaboration between project participants. By integrating design-build trade partners earlier in the process, we are working to eliminate traditional shop drawings and embed that level of detail within the model itself.
We also continue to experiment with augmented reality, virtual reality, drones and other technologies in search of opportunities to improve safety, schedule duration, cost and quality for our clients.
Q: Which sectors are growing and which are slowing locally?
A: All our traditional market sectors continue to be strong, but perhaps a couple areas are beginning to show signs of slowing.
The failure of some recent school bond levies will limit the pipeline of K-12 school projects. In the commercial market, increasing taxes, regulatory costs and land costs have caused many of our developer clients to adopt a more conservative approach or look for investments outside the Seattle area.
The corporate market sector continues to be one of our stronger markets. We are blessed to be working for great customers such as Boeing, Amazon, Microsoft, Tableau, Starbucks, Oracle and others. Our medical and life sciences business units are seeing steady growth as well.
Q: What’s a recent value engineering success you’ve had?
A: In our mind, value engineering is only successful if integrated into the initial design effort. Too often, a design gets documented then priced. If it exceeds the owner’s budget, “value engineering” ensues to cut scope, change details or revise material selections to get the design to fit within the budget. This is an immense effort that adds no value for the owner and causes the designers to repeat work.
Alternatively, we prefer understanding the owner’s budget goals from the outset, and working side-by-side with the architect and their consultants to deliver a great design within budget, the first time. Population Health has been a great example where we set budget targets for each component of the project: structure, enclosure, interiors, mechanical, etc. We then created cross-disciplinary “project work teams” to design to budget. Thus far we have been extremely successful, allowing us to reinvest design contingency back into the project.
Q: Have you gotten into new project types recently, or do you plan to?
A: We have found ourselves with a fair amount of civic work currently including the Washington State Convention Center and the Seattle Opera. We appreciate our involvement with these projects and plan to stay present in the civic market sector moving forward. In addition to being challenging and interesting projects, contributing to the betterment of our community is something that feels good to our employee-owners.