MEET THE EXPERTS:
Eric Krueger is executive vice president with Balfour Beatty Construction. He manages the two North Texas offices in Dallas and Fort Worth.
Scott Lowe is a partner at 5G Studio architectural design. The company has been around since 2005, and has roughly 75 employees. It has offices in Dallas, Atlanta, and Miami.
Paul Manno is a Principal at Gensler, whose primary focus is to run the design work that comes out of the Dallas office.
Walt Mountford is executive vice president with KDC. In his more-than 20 years with the company, he has helped develop over 7 million square feet of commercial projects valued at over $1.4 billion.
Dan Noble is president and CEO of HKS International, which has 24 offices worldwide and 1,400 employees, roughly 650 of whom are in Dallas.
Don Powell is on the founders of BOKA Powell architects, he’s been with the firm for 40 years. He has planned and designed more than 35 million square feet of architecture and interiors.
CHRISTINE PEREZ: Let’s start with introductions.
PAUL MANNO: I’m a principal with Gensler in Dallas. My focus is to lead the design work that comes out of the Dallas office, primarily interior architecture. I do a lot of work with change-management clients and am involved with large corporate projects.
WALT MOUNTFORD: I’m an executive vice president with KDC. We’re essentially a corporate custom home builder -- I’m a quintessential development person in that organization. I’m the development executive responsible for CityLine, which includes 1 million square feet from State Farm and some other uses, as well as Toyota North America headquarters up at Legacy West.
DAN NOBLE: I’m president and CEO of HKS, an international firm with 24 offices worldwide, about 1,400 employees, and about 650 here in Dallas.
DON POWELL: I’m one of the founders of BOKA Powell architects, and I’ve been with the firm for 40 years this summer. It’s been a fun run for me. I’m glad I moved to Dallas. It was a great choice, from the Midwest to Dallas.
ERIC KRUEGER: I’m executive vice president of Balfour Beatty Construction. I manage the two North Texas offices in Dallas and Fort Worth. I’ve been with the company 20 years. We’re about a $4 billion-a-year company in the U.S., $15 billion worldwide. We’re a little over a billion dollars here in Texas, and I’ve been blessed to have worked with everyone on the panel.
SCOTT LOWE: I’m one of the partners at 5G Studio architectural design studio here. I represent small business at the table: I’m the little guy. We’ve been around since 2005. We have about 75 employees scattered about, mostly here in Dallas, but we have offices in Atlanta and Miami. My primary focus lately really has been hospitality.
I like to start by getting the pulse of things in your industries and talk about how business is going—how 2016 worked out for you—better or worse, or about what you expected. And, for those who aren’t just focused on one particular sector of commercial real estate, talk a little bit about which sectors are hot for you right now. Scott [Lowe], I know you were talking about hospitality.
LOWE: This will be our best year financially. It’s one of these things where you go for growth or profit. It’s hard to have both, but this year we’ve focused more on profit than growth, and we’ve experienced both. As far as real estate, it’s fine. It’s better than fine: It’s a great cycle. Everyone up here is very, very busy doing great projects. What I’m focused on now is, how do you keep the ball moving, and what markets do you look at to diversify in those kinds of things? We’re filling in a pent-up demand curve in terms of product placement, especially this marketplace. I heard a stat the other day — and I don’t know if it’s true or not — but 1,500 people a day are moving to the Metroplex.
KRUEGER: A little bit on hospitality: For us, it’s good news. The other news is, the Houston marketplace slowed down. We don’t see it rebounding much before 2020, as far as oil prices over $70. The benefit of having those low energy prices is leisure; it’s hospitality. That’s a lot of what we have all seen — growth in hospitality. We’re just opening a 1,000-room Marriott Marquis convention hotel in Houston. That’s the next level up on amenities on those types of things. The next two years look very, very strong. It’s been a good year in our core market. There is tremendous pressure on fees and pressure on our people just being poached. It isn’t all great news. For us, we do a broad diversity of work. Health care has cycled up again in Houston. It goes in four- or five-year cycles. Here in North Texas, with Parkland, the Methodist System, and THR, it’s gone through a cycle. A lot of folks here do health care. We don’t know where that’s going because of Obamacare. We know wellness is going to be incredibly important. That’s the biggest question mark for us. Where does that market go?
POWELL: We expected 2016 to be our record year, and we’re over-performing. We have been building our staff steadily over the last 36 months. We also are the leading indicator in the construction industry, and we know six months ahead of the construction industry that the end is near. We haven’t seen any signs of the brakes being tapped in North Texas and in the regions we work in outside of Texas. Architects are one of the worst professions in terms of when the economy turns south; there is little we can do to stop that momentum. We have to be ahead of the curve and be cautious now that the office market we’re in has been one of our traditional strongholds, and is at its record peak. One of the things I love about the future is the [so-called] death of the office building: That myth has passed. Millennials love collaborative working — they want to socialize, and they want to be in the office as opposed to working from home. We want to do those office buildings in the next 20, 30 years, before it changes.
NOBLE: Ironically, our best year ever was 2008. We were hitting on all cylinders and all of our sectors, but we knew the end was right around the corner. It’s bittersweet, but this has been our second-best year ever. We are coming up to those numbers of 2008. We’re actually over the number in people, and we’re about right at the net revenue per employee. Our bellwether metric is the net revenue per employee. We’d like to be above $185,000 of revenue per employee. We’ll be above that this year. Our revenue is up about 20 percent this year from last year and was up 20 percent last year from the year before. Our profits are up over 25 percent. So like Scott [Lowe] was saying, I focus more on profit than revenue. When people say, ‘How do you want to grow?’ I say, ‘I don’t really care about growth.’ If we’re 1,200 people next year, we lose 200, but our profit and our revenue go up — to me that’s better growth. I believe our industry can “eat their young,” and compete against each other on a slow cycle downward in terms of fee. When somebody will do it for a couple of points cheaper, it just doesn’t do our profession any good, and we still see that downward pressure on fees. People are just looking at fees, they’re looking at you not as a service, but looking to you to give them the cheapest service in the quickest time. We put about 5 percent of the profits into research and development. We have a research group called Line — Laboratory for INtensive Exploration, and a consultancy business called Knox, HKS Knox. [Founder] Harwood K. Smith — his middle name is Knox. We do financial planning, strategic planning, and workplace strategies. Our best sector this year is health care, by far. Health care is a stellar performer this year, 35 percent profit. By the end of the year, it’ll probably be 40, and that’s on our biggest revenue. Behind that is sports. We’re doing the [Los Angeles] Rams and finished up the [Minnesota] Vikings. That’s been bringing in cash this year in a positive way. Then it’s commercial, workplace strategy, and hospitality.
It’s tougher for us to squeeze a profit out of hospitality. I don’t know why that is yet, and I’m still trying to figure it out. It could be the hands-on relationship you have to have — there is so much effort. Our revenue is pretty good in hospitality, but margins just aren’t there.
We’re very happy about this year. We have a backlog of a year. I don’t see any abatement in the growth. Our next strategic plan is, how do you develop a soft landing? We know the downturn is going to come because it always does. All the indicators are that growth is great: people moving here, people moving to the United States, and 7.5 billion people in the world. It’s going to be 9 billion in about 20 years. The growth is there, but there’s always a cycle, so we’re preparing for that. When things go down, and our clients aren’t building, we’ll still be planning.
MOUNTFORD: Arguably, we’ve had a fantastic year. We’ve got a little over 5 million square feet under construction right now, a couple of additional million square feet under development and a focused business model. We have an organization that supports implementation — everything from accounting systems to project managers who have forgotten more about construction than I have and a great safety team to augment that, as well as a delivery model that is focused on what we do. We have the fortuitous opportunity to meet up with a positive economy. A lot of companies make the decision to move out of higher-cost areas and are coming down into Dallas. We’ve been sitting here with a catcher’s mitt on some of those and hoping that continues. If the economy continues, it’s easier for the board of directors to make decisions to move to these type of locations. If things start to go poorly, they tend to want to cut costs and then hunker down, as opposed to a forward-looking mode. That’s a concern we have, but it’s been fantastic. I have no complaints.
MANNO: This will be our second most profitable year. Last year was our most profitable year. We’re down about 6 percent from where we were last year. What we’re looking at is a couple of different things. We had a partners’ meeting in October, and I wish we would have talked about the viewpoint of the economy. For the first time in the firm’s history, we have two full-time economists on staff who work on the leadership of the firm. They try to understand what’s happening economically in the world and how that impacts what we do, and how we develop strategies. It’s interesting for a design firm to have economists on their staff who help map out a trail. That’s one way we’re trying to position ourselves to better understanding because you’re right: Architects and economy numbers don’t always mix very well. We’re looking for ways to address that.
The second thing is you’ve got to diversify. The Dallas office now has a sports group and is dealing with more hospitality. It’s dealing more with mixed-use. We’ve always had retail and automotive. We’ve learned that we have to diversify. We can’t have one focus, and that’s what’s happening here. Thirteen years ago, it was 23 people; now we’re 210. That growth has all come through diversification.
We’ve always been known for the workplace, and that’s been the bread and butter of the firm. As the economy gets down, people look for a workplace strategy. Part of our consulting is the workplace survey we do, and the different ways we study what organizations are looking like. Those are things that will be coming to the forefront as the economy makes its turn.
POWELL: If I may circle back on one issue, we have a different philosophy in our company. We have a personal relationship with everybody on our staff. One of the owners knows the family. While profit is always a key for us, we have forfeited profits many a time to keep people through downturns. For us, it’s about the intellectual capital that we build up in the down cycle. Give people assurance that it’s not a month-to-month wave on whether they’re going to be here or gone. And, I’m not criticizing anybody, because there are different philosophies and different motivations, but our ownership group has really erred on that side many times in keeping people in the downturn that we didn’t necessarily need at that moment.
Have you seen that pay out for you?
POWELL: Absolutely. I know Ralph Hawkins, your predecessor [at HKS] was criticized by some in the industry because he kept a lot of people in that three-to-five-year downturn — but when the economy picked up, everything I heard on the street was that you guys were cooking and running fast. You have to have that engine.
NOBLE: We’re Subchapter S, and if we retain profit, we have to pay tax on that. If we redistribute it, we have to pay tax again. When I became CEO, I asked our new CFO, ‘Is there a way we can get around this, legally?’ There has to be something we can do to soften the blow in a downturn with the money that we receive when things are good, otherwise you just distribute it all and it’s feast or famine for a lot of people. Now, for somebody at the top who can absorb that, it’s not that big of a deal, but somebody on the margins, that’s a big deal in the down time. What we’ve found is we can prepay pretty much all of our expenses. We can prepay all of our rent, we can buy all the machinery that we’re going to buy that year, and we can put it in a trust. If we have lawsuits, we can put that and the settlement in a trust, and do that without paying taxes on it. Last year, we put a large chunk of money into that. We prepaid 80 percent of our rent. This year, we’re going to prepay 100 percent of our rent. If we have a downturn — and I don’t think we’re going to have it in 2017 — but if we have it in 2018, the profits can be bad, and we’ll still have some money to distribute.
MOUNTFORD: One thing we do is to keep our base salaries very competitive and have bonuses — significant bonuses — when times are good. Others can’t necessarily poach our employees — or it’s difficult to do that — and in a downturn, you have a manageable overhead.
MANNO: Do you think that it’s changing a little bit? A lot of the younger staff who are looking for a position aren’t necessarily always interested in bonuses. They’re thinking, what money can I get right now? We’re re-evaluating the bonus structure. Having big bonuses is great, but if you get a bonus once a year, it doesn’t help you pay the rent the other 11 months.
MANNO: We’ve all poached people from other firms. Let’s be honest about it. Part of what drives that is people. They want the money up front because you get a little more salary — you can get a little better house, maybe a little better apartment. … I think if I’m a young professional starting out and I get a new car, getting a bonus doesn’t necessarily help me get to work the other 11 months. I think there’s going to be some change there. As people get more in tune to that, I think the whole bonus structure is going to take a hit, and people are going to want their money now.
LOWE: I find this conversation fascinating because this is something we grapple with in our company. It’s really why our company even exists. When we talk about compensation — growth structure, retention — we examine this idea. As an 11-year-old company, we’ve made it through what we call a crucible, but we’re still in adolescence. We started to look at different models out there, and the idea of compensation, retention — those kinds of things — we left the place we were initially, because we saw a path that excelled. But the path was so long, so far. We looked at different business models. We looked at franchise models. We adopted the idea of a franchise, and now we have five other partners outside the collaborative umbrella at which those primary partners set the board of directors. We promote from within, primarily. They’re now each a franchise.
NOBLE: Does every employee own a piece of that?
LOWE: We’re talking about that. We haven’t evolved it to that level. Right now, it’s a separate LLC with the primary partnership sitting as a board of directors and the directorship, and we have another group which is set up as a managing partner. They make the decisions every year, and I’m happy to say now we have the entertainment sector — a very talented entertainment group. We have an interior group that’s now separate. We also have regional diversity, which is our only international office of construction in Atlanta. We’ve diversified around those regions. Those are now franchises. There’s no real methodology for how you’re supposed to set these things up, but they’re all in the black now. Last month was the first month that happened. We set this model up, I believe, two years ago in June.
NOBLE: And Paul, you guys are in ESOP [employee stock ownership plan] aren’t you?
KRUEGER: I think the ESOP model is fascinating, especially for service companies.
MANNO: It is. They [younger staff] understand better what a 401(k) is. A lot of these programs are great. The first question is: How do you determine the value of the share?
Let’s talk about the office sector. It seems to be evolving where office users must have more in the way of amenities and tenant finish out. I was recently talking to Bill Cawley [of Cawley Partners] about tenant finish out going up 14 percent a year, 7 percent every six months. How has this affected your work as, or with, developers and landlords and users?
POWELL: From the standpoint of the amenity package that goes into a speculative office building, it is very different today. Over the past three or four years, the hospitality influence in office buildings has grown dramatically. Walking into a corporate living room where employees can work from any place in the building is a critical point today. There’s a lot of money being invested. From an architect’s perspective, one of the biggest challenges is: ‘We’re doing a conventional lobby in the building, but we’re also throwing in a corporate living room, some lounge space, and fitness.’ All of those components somehow get dialed into our core and shell budget. We’re fighting an uphill battle on how to mitigate that cost because the amenity package can be 2 to 3 percent of the overall square footage of the building, and tenants will pay a higher add-on factor if the amenities are baked into their lease. You have to have unique things. We talk about this a lot. It makes no sense to provide a conference room the size of the one the tenants already have in their space. If you’re going to provide a conference facility, it has to be different from those in a 3,000-square-foot lease space. Training rooms, that’s another thing we provide. We have to look at what gets used. And, if they’re going to pay for their rent and their add-on factor, it has to be meaningful to them. It’s been very interesting to see how hospitality has invaded the office world.
KRUEGER: To your point, someone mentioned earlier the millennials, the collaborations. The whole collaboration space is [about] having the break-out area, especially if you’re on an open-space-plan type of format. You’ve got to have those areas. We also are seeing exterior terraces, and those types of things, which to Don’s [Powell] point, drives up that cost, even though it isn’t necessarily giving you extra space. For us, I don’t know whether it was a great strategy or just fortuitous. A few years back, we saw a great opportunity in the tenant finish sector. There was a lot of market share by very few, so we made a focus into this area. That’s been a huge market and a huge win for us for the last couple of years. Eight years ago we hardly had an interiors presence, and ENR (Engineering News-Record) just named us the No. 1 interior contractor in Texas. It’s been a great opportunity for us.
NOBLE: What we’re seeing is variety. I think the key is to have a variety of spaces for people to collaborate. If you read the research on how the mind works in its best creative state, it goes from collaboration and openness to a more focused perspective. My son went to UT, graduated, got a job at Cisco, and moved out to San Jose. Cisco in San Jose has 40,000 employees, and they’re all in buildings that are ‘80s vintage. I was shocked when I walked into his cubicle. There are 6-foot partitions. ‘You know, we’re revamping all of these,’ he said. Let me take you to a building we’re revamping.’ We went to another building, and it was all open — people were facing each other, no partitions. They had more people per floor than they had in the other building, but they also had private spaces to be alone — private spaces that were comfortable for two, eight, or 16. Like Eric [Krueger] was saying about outdoor terraces, they had a cappuccino machine, and a ping-pong table, of course. But, with the densification of where they worked, it allowed this other variety. And, ironically, they got more people in that floor plan.
MANNO: Diversity is probably the big word. I think that’s what we’re seeing right now. So a couple of things: When you talk about amenities, you have to talk about it two ways. You have to talk about the amenities that the building provides and you have to talk about the amenities within the workplace. Some of the things that you talk about, as far as meeting centers and things like that are great. I think most industries are looking for ways to provide amenities that allow [companies] to have a higher impact on their employees. Those are the amenities that we’re seeing. We’re seeing things creeping into the workplace. I’m doing my third navigation bar. We’re taking the juice bar concept, and instead of calling somebody, you go to a space where there’s a series of IT guys. There’s a nav bar set up with computer equipment, and they actually can change your software there. They can fix your cell phone. This whole idea of service is really what’s happening to amenities. I think we’re going to start seeing these interesting retail concepts. The things people are looking for are beyond that. The last thing is, you can’t underestimate the value of food. How do you really improve the quality of food? We’re doing a project right now where we have no serving at all. What we have are just a series of items, and every item is basically a culture or ethnically-based food. You have to recognize there is an amazing amount of diversity. It’s the first time in the last few years that we recognized the fact that we have to deal with [these] cultural and ethnic issues in the workplace, but also deal with gender issues. Those things are impacting how we think about amenities. I think mothers’ rooms were great. We’re doing more things such as prayer rooms. We’re doing more things that are gender neutral. And those are just as much an amenity as the great food or great meeting spaces we provide.
LOWE: Well, thank God for the millennial. I’m probably the only one ever to say that. There’s a movement about — and it’s been about for awhile, in office, just like health care went through it several years ago. We’ve got a little under 4 million square foot of office in design, currently. And I think what the millennial has forced everyone to think about are authenticity and experience. What they really care about is how they spend their time. And they care about quality. I’ve got employees who would save up and do a tailor-made suit rather than going and getting one off the rack, just because it fits better. It’s a ‘better’ thing; it’s a quality-type thing.
I agree with Don [Powell] very much. I think in the sense of community and the sense of getting together and working together, that it’s here to stay. It’s the working from home and those kinds of things that are not true. There are going to be office buildings that foster that type of relationship. It’s what’s inside, the guts of the building, and how that’s designed, that is playing out. I attribute that to hospitality. I also attribute it to pop culture. Shows like Boston Legal totally transformed the way we think about the office and those environments. Where we spend the most of our time — where the millennials, especially, spend most of their time — that goes directly to recruiting. If all things are the same, they’ll even take a little less money for a cooler environment.
MANNO: I think it comes down to people recognizing that work is not a place, work is activity. Work is a verb, right? All these days that you’re going to work, it’s not a ‘place’ you’re going to. I think that mindset is completely gone. What you have to recognize is the activity and how it gets done, and then provide the right environment to do that, whether it’s building a community or social spaces. We call it activity-based design. We go in without assuming everybody needs an office, or everybody needs a workstation. We go in and say, ‘What’s the activity that you’re doing?’ We need to design around that activity. If it means you get an office, great. You’d be absolutely amazed at the solutions we give them. Things like how you deal with storage, and how you deal with acoustics, lighting, privacy, and all the good stuff that goes with it. You [may] say, I go to work each day, but it’s not a place, it’s an activity. I think once you understand that, and you get people to communicate that to you, we’re going to start seeing another evolution in how we think about the workplace.
MOUNTFORD: From our perspective, our clients want to attract and retain the best people to become an employer’s choice. Clearly, they’re looking at all the things we’ve talked about. As it pertains necessarily to cost, we’re not seeing a price sensitivity. We certainly see a price acceptance, so anything that it takes to create a place that will attract this target millennial for the next 20 years — allow them to compete against the competitors of that industry for work function, not necessarily insurance company to insurance company, but insurance company to financial company, right? They’re both financial companies, both seeking that same type of employee. They’re trying to create that interesting environment where all those experiences mesh. One of the things we’re seeing is clearly a transition from a real estate executive running the show to an HR executive running the show. There is no real estate cost that can’t be overcome with an HR rationale, which I think is exciting. The other thing I’ll mention is to talk about the inside of the building: We’re seeing companies that need to be in an environment and are making the commitment to be there. That means structured parking and a fairly advanced configuration. We’re doing more coding on buildings than we’ve ever done. There are a lot of advantages to coding on buildings, but density is critical to walkability. Clearly, a trend that we’re seeing is people wanting to be close to outside amenities. Amenities are supported by the private sector — hotels, restaurants, and retail — those type of things.
PEREZ: CityLine pioneered that here on a scale.
MOUNTFORD: Absolutely. And if you go back in time, State Farm was the most progressive client we had in that regard. Something that a lot of folks don’t understand about CityLine — and may not acknowledge if they have — State Farm has 2.1 million square feet, and they have zero food service in that space. Not a single ounce of food service, because they want to drive their employees down to the plaza, out to the restaurants. They want the work to continue at other places, and they want to provide that chance meeting with someone at a restaurant. If you look at some other clients, they’re still tethered to the cafeteria concept. I think that will evolve over time. It’s a confidence that you can get the right restaurateurs to invest in your concept because you have various price points and food types, along with services and levels of variety.
POWELL: I think everything you said is spot-on, Walt [Mountford]. I’m concerned about adaptive reuse of some of these big office spaces with extraordinarily big lease debts. Yes, we’ve increased the ceiling high enough to let daylight in, but these buildings, by and large, will not attract multi-tenants. You’re looking for that needle in a haystack when you need a million-square-foot tenant to replace the million-square-foot tenant that just moved out. One of the strategies we’ve seen many times is to build the building around a mixture of tenant sizes. But I’m concerned that when a building is occupied today with a credit-worthy tenant, its developer will flip that building into the marketplace, and the capital market now owns it. And 15 years from now, when it becomes a multi-tenant building out of necessity, I just don’t know how well they’re going to perform. Exit strategy has been put on the back burner in favor of employee attraction and retention.
POWELL: It is cyclical, and I hope we find ourselves on the other side of this world we’re in today with buildings that don’t sit empty because they’re dinosaurs at 15 years of age.
KRUEGER: We have a few of those around the DFW area.
POWELL: Yes, we do. Look at J.C. Penney. J.C. Penney trying to subdivide their building is very difficult.
MOUNTFORD: That’s an extreme example of what we’re talking about, because of the interconnectivity, and the time and space and variety. That was truly a build-to-suit as opposed to any vertical delineation of space, and clearly what you said is absolutely correct. HR is driving it. Attraction/retention is the key — and residual reuse after 20 years, there is no consideration.
NOBLE: When you talk about HR driving it, I’m like Scott [Lowe]. I’m a fan of millennials, and I’ve been one since we started talking about them. I hear my partners talk about the millennials and try to categorize them with a particular broad brush. What you’re saying about the millennial is what your dad said about you, and what his dad said about him. And every generation is confronted with the new generation trying to push them out. That’s good, and I love that, and I was one of those. We weren’t called millennials, but we were the same thing. So I like them, I like the energy they provide. Paul [Manno] said work is an activity; it’s not a place. And we have found that they do like to work at home, or they do like to work at a Starbucks sometimes. If you hire the right person with the right fire in their belly, they’ll get their work done. They’ll work 60 hours a week. You do have to come to work, and come to a place together and collaborate. I’m not hung up on the 40-hour week. I mean, how many hours a week do you guys work and where do you work?
LOWE: About 30.
PEREZ: Yeah, right.
POWELL: Every two days.
NOBLE: Probably around 70, but you’re at home. It’s when you’re traveling. You’re never away, and millennials are like that too. Years ago we had a group of real smart young guys that were on blogs at night. And they were solving problems with people around the world, things with Rhino and Grasshopper, and how do you make this work? A couple of them got poached from a firm in Seattle that was deep into technology. My perspective is — back to the HR issue — it’s not that you want to control people, it’s that you want to understand them and understand what they want, and then make your environment a place where they want to come.
Let’s talk a little bit about health and wellness, and how an increased focus on that is impacting both design and construction. What do you guys think?
NOBLE: We can start with construction.
KRUEGER: We’ve talked a little bit about the wellness, the desks that go up and down, and the sunlight. But when we look at health and wellness, for us, it’s around safety. It’s around zero harm. That’s something we’ve been very fortunate to have a strong focus on. It’s been recognized by some of our clients, the level of attention that we pay to that. For example, having Monday morning meetings with the entire staff to get their heads out of the weekend, back into the workforce out on the job site, so they know what they’re doing. It’s the number one thing for us. Nothing else matters if we don’t have a good zero-harm program.
The other thing that goes along with that — and it’ll blend into a couple of other questions here with millennials — is we’ve got to have a lot more plug-and-play type of stuff out in the field. The folks just don’t have the specialized crafts nature that they had in the past. We look at a lot of prefab, which helps in our quality. It also helps in our safety program and around labor, which is a whole issue. A lot of things around safety manifest in a number of different ways.
MANNO: The point about HR is a much more overall way of thinking about it. For example, you should be connected with the food you serve as a part of a health and wellness program. Most organizations give their staff a discount for a healthy choice versus a non-healthy choice. I think you have to tie it into what fitness means. If you go to the wellness center a certain number of days per week, you get a reduction in your insurance, which is a great idea, but we have a responsibility to think about it, as well. I think about, where is the best place to put the stairs so they get the most use? We have a responsibility to design spaces that encourage movement, depending on how you lay out the space. If you laid out the space in a way that encourages people to move from one side to the other because they have to, you’re starting to create that basic health and wellness. We have to recognize that everybody is different. Tying it all together is a much more strategic idea, as opposed to just thinking about creating a wellness center with some great showers and thinking it’s going to make everybody healthy. There’s got to be a stronger attitude about it.
MOUNTFORD: Our clients, generally, from an HR perspective, are fully bought into the whole wellness thing. There are a variety of reasons. It promotes a connection with your employees. They care about you outside of the work function, and there are a lot of benefits to that. There are companies out there … that are focused on teaming with large clients and providing services — going right into the space and offering immunizations or flu shots and those kinds of things. It helps integrate that service-providing right in the space.
NOBLE: At our firm, we offer meditation, yoga, Pilates, and boot camp — almost every day we have something for our employees. We had a [space] that we turned into a gym. In the past, we looked at things like a direct relationship. For example, people worked eight hours, and they had to be at their desk eight hours. They had to get the work done, but we weren’t really looking at productivity, and we weren’t really looking at quality. Now we’re looking at what can we offer people to enrich their lives, enrich their experience. I’m not saying that to sound hokey, but to say that [even] if you’re just looking at it from a business perspective, it still makes sense. People do better work, they’re more attentive, more focused, and make fewer errors. There’s a lot of research on it, and I believe it. We can affect people’s lives in a big way. It’s being mindful of materials, putting into the spec the right materials that have been tested to be environmentally better.
LOWE: I agree with everything that’s been said. When I think of health and wellness, I think of removing the stress out of any situation or environment. Those are pieces that play into part of everything that’s been said: What’s the lighting like in this space? Do you get to see the sun? Do you get to see daylight? The color that’s in the room, those kinds of things. You get health care, you talk about evidence-based design, getting hospitality — certainly a lot of it is about high-end hospitality. It’s a lot about providing a place that reduces stress. When I think about it from an employee’s perspective, I try to give them the most flexibility possible to do their job. I love what Dan [Noble] said: I don’t care where you do the work, it’s more deadline/product driven than it is process driven. I don’t care how they got there, just as long as that they [do] get there. The fundamental idea is, we’re a 24/7 operation, and we have a mandatory close two days out of the year, Good Friday and Christmas. Other than that, you can do your work however and whenever you want. If that takes you 35 hours or 40 hours a week, good for you, because it’s going to be evident that you either did your work or you didn’t. If that takes you 70 hours to do it, take some breaks here and there. If you want to take the graveyard shift, go ahead, if you’re into that. A lot of people are. [It’s about creating an] office space environment that fosters communication, right? That’s where it’s at. I have to communicate what I did when I was with you and when I was away.
NOBLE: Communication is still key.
We talked about some of the office design trends that came up in another question. I’m not sure if we addressed the open office versus the private office. Have you seen where that is?
POWELL: In our industry, the architectural profession, we always frowned upon people having headsets on in the studio. How can you be paying attention to what’s going on around you if you have a headset on? Today, that culture has shifted to it being an acceptable behavior because people can focus when they don’t have a lot of audio interruptions. And we’re not providing partitions between work spaces. We’re letting people focus on their work. It does require you to walk up and tap someone on the shoulder sometimes and say, ‘Hey, I’d like to visit with you for a moment.’ But, it’s no longer taboo to have earbuds in the studio. A lot of our partners — old school people, people over 50 — resented that at first. I think today we all accept the fact it’s a productivity issue, and it goes back to the stress issue, too. Generally, [when] people control their environment a little bit more, their stress reduces and they’re more productive. We’ve accepted the fact that we’re not going to give everybody visual privacy, but we can give them the option for audio separation.
KRUEGER: Maybe it’s traditional industry that takes longer to change, but we see law firms and energy companies, and they still love the individual office. Beyond that, you get into the open plan, and then you go into hoteling and a lot of flexibility with that.
MANNO: I’d like to turn the question back around to you guys. I had an interesting conversation yesterday, and it was about the impact the internet has on our client. How many of you guys have gotten an image from a client or an article from a client, such as ‘Why does Google suck?’ or ‘Why do they hate their open offices?’ In the last ten years our clients now have access to all of this data that we typically have to ourselves. We’re the ones who did the research. You can Google anything right now. You can Google ‘modern open office,’ and you’ll get a hundred different ways to do an office. They’ve gotten so much more educated than they were before about the good and the bad. Unfortunately, with the open office concept right now there’s a trend about talking about the bad. They’re talking about the bad for a couple of reasons: One is, a lot of spaces were done by early adopters of the open plan. They didn’t understand that you’ve got to provide other spaces for people to go. It was all about rapid prototype. It was about getting the work done, hiring as many people as possible, and getting it done as quickly as you can. It wasn’t about longevity because they’re going back, changing it, and doing it the right way. Unfortunately, a lot of the older, early ‘dot com’ way of doing things is still sitting out there in the workplace, and it’s giving everybody a bad name. Our clients now have access to all that information. When you hear Google’s work space sucks, you think, ‘Wait, why are we doing an open plan? Google thinks it’s horrible.’ We have to do a much better job of actually getting the information out there. We used to be the guys who told them what it’s going to look like. We were the ones who set the tone and the metaphors for the projects. How many of you guys have that communication with your clients? We never had that before.
NOBLE: That dynamic is maybe 30 percent pain in the butt and 70 percent good. And the reason I think it’s 70 percent good is any time you can have a conversation — dig a little deeper and do design solution with your client — it’s better. If we held all the information and just presented it, then it’s a one-way dialogue. I grew up doing a lot of health care, and a lot of times it wasn’t a one-way dialogue. We knew what we were doing. We came in and showed them what we thought; we presented it to them, and we had very little feedback. They walked in and said, ‘Oh, this isn’t what I thought we had.’ We talked about this quite a bit, but their head wasn’t really in it. When they do that prep work, when they get their head in it, it’s always better. It might take a little longer, and you might go a little bit in a circle.
MANNO: The problem is everybody wants to know what everybody else is doing. If you can see what somebody’s corporate headquarters looks like, and if you’re a competitor, you know exactly what you need to do when you build your corporate headquarters. I think it comes down to the idea that everybody wants to know what everybody else is doing because we’re constantly benchmarking each other.
POWELL: It’s not up to me as an architect to convince a law firm or an oil-gas company that they need to be an open concept space. They have cultural and business reasons. We’re still holding onto some of those things. Things about attracting and retaining the employees they want to have for their own reasons. We can share with them all these alternatives — putting glass and partition, allowing daylight to move through the office in different ways, it’s far superior to old dry wall partitions. The HR person in the law firms is the one telling us they want private offices. It’s not like they have a disconnect between HR and their groups and everyone else. I think we have to, as architects, always shine a light on productivity and better work environments — cleaner air, better environment.
MANNO: You have to really understand [your client] because I’m doing things right now that are 100 percent open plan. If you provide the right tools, you provide the right work space, and you provide the right amenities; it can all work if you understand what happens within that energy. Not only do they not all have the same historical backgrounds, they’re not all culturally the same. You have to understand what they are doing to bring some of that out. I do think law firms will go to the open plan eventually. We’re doing interior offices for lawyers now. We’re doing two people per office. It’s not going to happen tomorrow, but eventually they’re going to realize the real estate costs and exactly what they’re doing in those 15-by-15 offices, as opposed to what you can do in an 8-by-8 work space.
POWELL: There’s still a status issue in some corporate cultures related to those private offices, and that’s part of the HR model, as well.
PEREZ: I think it may have something to do with confidentially, too. With an attorney, they’re always representing — they’ve got to protect the interest of that person. It’s interesting what you were saying about Cisco. Newsrooms have been doing [the open space plan] for decades, but the partitions are just high enough that you can’t quite see someone.
NOBLE: They have no partitions at all.
KRUEGER: A little bit of a different lens on all this. This is an obvious statement: The internet’s changed how we all do business because there’s so much information out there. In the construction industry, statistics have shown that our clients choose how they want to procure their construction. Over 70 percent know how they’re going to procure construction before they ever talk to their contractor. A lot of us used to get hired based on our reputation. What we have found is, we’ve got to go in there and understand as much as we can about our client and their business : How can we help them achieve their business goals? And eventually, we’ll get around to construction. If we can get aligned with their business goals and what’s important to them, then [construction] comes out of it. If I’m just trying to sell the construction, I’m just a commodity along the way.
MOUNTFORD: Those are the partnerships we’re looking at having.
LOWE: It’s interesting what I hear around the table. It’s an incredibly complex process to get a space built. Our job, initially, is to be good listeners and gather as much data, as fast and efficiently as possible. I’m on the opposite side of that. If a client wants to send me a thousand images, that sucks to have to go through, but I’m going to have to go through it and discern what’s important out of those images and [then] couple that with the listening and learning.
MANNO: Don’t you think those thousand images gave you a thousand better points of light about your client? I would love to get a thousand images. What’s their vision for this project? What were they aspiring this to be? [Clients] have a hard time getting it into words. Any time you can get an image from a client, you’re farther ahead because they can sit all day and tell you they want crisp white walls. Well, what the heck does that mean?
KRUEGER: We agree on this issue. We have to learn as much as we can, and that’s just one way of gathering information.
MANNO: I agree it’s not the only way, but it’s nice that the data is available. It means they’re engaged.
NOBLE: That’s what I was going to say earlier.
MANNO: They’re engaged in the process. They care about the end results. They took their weekend and pulled images. They will travel somewhere and see a really cool thing — a great piece of furniture they saw in the lobby. The fact that they took the time out of their day means that they’re totally engaged.
NOBLE: It makes your job easier.
MANNO: In the end, when you get done with it, you feel good about it because you really gave them exactly what they wanted.
MOUNTFORD: Sounds like you guys should have been designing my house.
There are two more questions I want to get through. One is talking about innovation. What innovative things do you see out there within your business and your industry that has you excited about the future?
POWELL: Virtual reality. It’s affordable, it’s transportable, and I think we’re just upping the expectation of our clients. The sketch-out model can be used through a whole lens for a tremendous walk-through experience. That’s something that we’re embracing. The other is 3D modeling. We have a number of 3D modeling stations in our office. The size and scales of those models and facilities are changing dramatically. There’s a company that now produces a printer that’s the size of a British telephone booth that can produce a 6-foot-tall model with relatively small equipment. Those things are transforming.
NOBLE: I like the idea of not being a commodity, about offering something different. We put quite a bit of effort into research. We’re working with UTA and Tex-Fab on developing prefabricated panels that can go direct from schematic design — skip design development and skip construction documents — and work [directly] with the fabricator. We’ll bring the fabricator on board early and work with them to be more efficient in the process and have a better product that’s less expensive and, we think, better for all. Then using the computer not to create funky shapes — although you can do that now — but to create predictive spaces that will perform how you thought they would. We now can do virtual reality. I’d like not just to let somebody see how the space looks, but to understand how that space will perform. For us, this idea is taking the construction industry and re-imagining it. It’s not a designer thinking of something and giving it to a contractor who tells you how you can and can’t build it. You have this confluence of disagreements and agreements through the process, and then you end up with a building. This is an idea of design-build with a collaborative spirit under one contract. We’ve talked about that for about a decade now, but with fabricators. We can be much more efficient. We can spend more time on design — not just aesthetics. I’m talking about a qualitative, predictive performance of design: How can we help our clients do their job better? How can we be an ally in their business?
MANNO: It’s somewhat reverse innovation with the whole maker movement. Architects are known to have the idea of what craft is about. I’m interested in us getting back to the idea that we’re using the maker to build more than we built before. The idea that things like furniture can have more of an integrative craft, as opposed to just things that we drop into the space. We have a maker lab where a lot of people have 3D printers and [tools], but we’re on the verge of using that maker lab to build parts of a project we intend to give to our clients in a really meaningful way. I’m excited about the idea of bringing the craft back. I’m all for the renderings and all that goes along with it, but there’s something about being able to show a client a part of a project or a piece of a project that they can hold in their hand. This is where I’m hoping we go from an innovation standpoint.
LOWE: Without a doubt, the most exciting thing is the visualization. I hate surprises in the design process. I want to know exactly what it’s going to look like, what it’s going to be like, to experience it. [What’s] new is how we’re integrating it into our practice. You can go up in a 40-story building, look out, and know what you’re going to see, know what it’s going to look like — that’s valuable. Visualization tools are a tremendous asset to our practice because it’s real.
POWELL: And it’s cost-effective. We’re not spending a lot of extra money to deliver that service.
LOWE: Shame on us as a profession. When the computer first came out, we had a lot of really monumentally-scaled buildings [because] the computer went into this 2D space. We’d start doing a section, and when we’d get on the job, it was a lot larger than we thought it would be. What it’s allowed us to do is bring the scale back to a more human scale — more of a mid-century modern movement — which is really what modernism should be about. Shame on the people that tried to do it in 1983 and gave modernism a really bad name. The qualities we’re looking for are the more human, the more hand-crafted. Everything in the space has been touched and looked at — crafted and designed. Those are the spaces you remember, right? Those are the spaces that you want to be in longer, and I think we’re getting to that. We’re definitely getting back to that.
POWELL: I caution you, the cycle after modernism was post modernism, and we know how successful [that was].
LOWE: That’s what I’m saying.
KRUEGER: I had told everyone here we had VR. We talked about prefab and pre-assembly, and all of these are great ideas. We’re doing a top-down method where we’re literally going up with a building at the same time that we’re excavating and building down, which is pretty innovative. It’s been done in Chicago and other places. It’s also a part of your next question: The challenge [is] listening. There are a lot of people talking, not a lot of people listening. One of the most innovative things we do is … understanding the behaviors. We use a tools called StrengthsFinder — understanding what each individual’s strengths are. It’s amazing. We’re usually one of the last ones brought to the party, the project already has a design architect, an architect of record, there may be an interiors architect, other consultants, and there’s an owner. We sit down, and we work to understand: What are your strengths? What are your goals? It gets us aligned so we can create an environment for a high-performing team. That’s when innovation happens. For us, one of the biggest successes we’ve had is coming in and helping to create that environment. Many times, like I said, we’re the last ones in the party, and we see the owner and the architect. We have to sit back [and listen] because they’re now rediscovering each other and getting aligned.
MOUNTFORD: Those are extremely valuable sessions.
KRUEGER: We did it on Liberty Mutual.
PEREZ: We did it here. It was 85 percent ideation, and we figured out, ‘Oh, there’s no one to do it after the idea. People come up with the ideas.’
PEREZ: We needed some execution, people.
Can I ask you a quick question? We were over at the WeWork [coworking office space] site yesterday, and it’s not as open as you’d think. There are a ton of offices in that space, and I’d like to hear your take on that trend.
POWELL: You need both. You need a touch-down space to work; you need a collaborative space. Sometimes there’s two people, four people, however many people. For every chair that we have an employee, we have another seat in the conference room, a collaborative space or something else. So there are twice as many chairs and office space as there are people.
NOBLE: It becomes a choice, if you do it in variety.
Let’s end by talking about both challenges and opportunities as we look forward to 2017.
LOWE: I think it’s going to be a great year. We don’t see it slowing down at all. I’m proud of our little city here. We’ve gone through quite a renaissance, and it’s very exciting to see. I think the recession was a very good thing, although incredibly painful to go and move through. The deals that are getting done now are much smarter and more quality-intensive. I think it will be interesting to see what the financial markets continue to do. There’s been a bit of tightening in lending for some sectors, hospitality being one of those, residential multifamily being another. I do think [the election] is going to have an affect. We talked about parameters and those kinds of things. How is that going to be affected? That’s still a huge question mark, but I think there’s tremendous opportunity out there for everyone at the table. Dallas is a very rich market for architecture and construction. It has a wealth of savvy and wise developers at its disposal. The city is going to continue to become greater and greater, still. I’m excited to be here at this time.
KRUEGER: We are blessed to be here. Whatever challenges exist are far outweighed by the opportunity and environment we have here. In some cases, we, as contractors have to reset expectations [for project completion] with our clients. We’re used to saying we can get an interior space done in eight weeks, no problem. And quite frankly, there’s been a failure in a lot of those areas. You have upset owners. It comes down to the labor shortage. It isn’t that anyone has any ill intent, they just can’t deliver. In the same regard, that provides opportunity. When you have that, you start looking towards innovation … what I just discussed about alternatives: How can we collaborate to make this happen? That forces you to look into prefab and preassembly. Any time you have that challenge, it’ll create an opportunity for us. As a company the next two years feel very strong. It’s a great opportunity for us to continue to focus on operational excellence and execute at the highest level we can.
POWELL: In our business, it’s attracting and maintaining employees over the next year or two. Our HR personnel have a much stronger voice in how we manage our company. We have focused on health care benefits for our employees. I think we have one of the most — if not the most — generous health care plans in the city. Our employees have a maximum exposure of $1,500 per family. We’ve helped them overcome the challenges we face in the rising cost of health care, and that’s becoming an even more important factor as people look at employment opportunities. Another thing we’re doing is providing killer technology and support. We want people to be able to work from anywhere — that means portability with their desktop, laptop —any time. Lastly, we [explored] how to make our summers better. We started having four-day holidays for Memorial Day, Fourth of July, and Labor Day. Those days off don’t count against [employees’] vacation days. But having three four-day weekends: All of our developer clients are gone on those days so we said, ‘Let’s do this.’ And we’ve done it for the past 10 or 12 years.
NOBLE: I agree with that. It’s playing off of the idea of unlimited vacation, unlimited time off. You can take as much time off as you want, but you’ve got to get your work done. Places that are doing this are finding people don’t take more time off. One issue I’m concerned about is talent. We’ve hired about 250 people this year. I think it’s the best talent we’ve ever had at entry level and strategic positions. It takes a while to get the team and momentum going. I believe we have all of that now. But the things that keep me up at night are things we can’t control [such as] the economy. That’s our fuel, that’s our engine. If the economy drops, all bets are off. I’m excited about the ideas and things we have in the works, and I’d hate to see them abandoned. The geopolitical situation, what if there’s crazy terrorist activity in Western Europe, and what ramification will that have on the EU and the economy? What if a little bit of this isolationism goes even farther? Twenty percent of our work is outside of the United States, and that concerns me. I’ll take two percent [growth] a year, every year for the next decade, and have something that we could bank on; we could build around. It might drop a point next year, or it might not, you just don’t know. That’s my biggest worry, the things you can’t control.
KRUEGER: That’s interesting, it’s just the opposite for me: Am I doing the right things for the employees? Am I doing everything I can? Things that are out of my control, I give that up to God. I sleep like a baby.
NOBLE: I’m confident we’re doing the right things for our employees. I can control that, so we’re good there.
MOUNTFORD: You really can’t control the economy, per se. You’re hoping it’s going to turn out great, and clearly, we have the framework here in North Texas to continue our success. We’ve laid the groundwork, and I think we’re creating the right environments in a lot of different locations. There are a lot of great opportunities. I’m most concerned about banking, about the lending. ... There are things putting pressure on reduced loan value, and I think it will ultimately affect us in a negative way. I also believe with this framework for success which includes low taxes and cost of living, that we’re going to be somewhat insulated. We’re not going to go as deep if the economy turns. In that regard, I’m hopeful that the lending will still be available when the good projects come along. Another thing I’m concerned about, and I think the construction industry has dealt with fairly well, is that we’ve done projects as a four-legged stool. We have quality, schedule, budget, and safety. Safety is a real issue because there’s a shortage of workers. You have guys coming to the job site, [people] who’ve never been on a job site, yet alone performed a function. It’s a critical thing for the construction and development community to maintain great safety practices because we don’t want to lose anybody.
KRUEGER: That’s a great point. We deal with people who are stepping on a complex job site for the first time. You have to make sure you’re separating man from machine; you have to put all of those [safety points] in place.
MANNO: The global perspective that’s happening right now hasn’t concerned me, yet. We do have a large percentage of our work overseas. It’ll definitely have an impact on our business … I’m doing a project in Beijing, and I go there once a month for a week. Every time I go there I’m amazed how much they know about what’s happening in the United States. Again, crazy internet thing, right? Whether you believe it or not, their perspective is very much framed by some of the things that they hear. Whether it’s true or not, it does have an impact. I worry that a lot of the great talent is still not in this part of the country. The great talent, as far as finding great people, pretty much happens on the East and West Coasts. That’s where people want to work — in Los Angeles and New York. We’ve always had a bit of a challenge in driving people to this part of the country to get great talent, whether it’s architectural talent or corporations moving here. What I’m excited about? There’s this interesting evolution happening with projects. I was fortunate to work on The Star in Frisco. Those projects where you put a hotel, a training facility, an office building, retail, parking, and a football plaza — when you put all that together into one big development, to me, it’s cool. Once you start finding great ways to reinvent what mixed-use means, reinvent what the hotel experience is, reinvent the idea of what an office building is … That model, and the vision that I have for that project, which is a lot of people’s visions, is really interesting in the sense of the dynamic that was created. I’m excited about doing more projects like that. I really like the idea that it’s not just about a corporate campus over here. It’s a corporate campus that’s connected to a university, and they all work together. There will be more of these interesting dynamic master plans or building configurations that are not just the ‘normal’ way of doing things. The whole idea of hackable buildings — how we take these older buildings and do something different with them: Those are the things that get me excited … coming up with ideas for creating these new environments and new experiences for people.
So what do you tell people about why they should come to Dallas instead of the coast, and why are you here?
NOBLE: This is an easy place to live. It’s exciting, and it’s got a lot of opportunity. It’s the fourth largest metropolitan area in the United States — 7 million people living between here, Fort Worth, and north and south. Every great concert comes here, every professional football team, and we have great arts. I live in Lakewood, and I can get to a Mavericks basketball game and home in 15 minutes. If you lived in Chicago, it would take you an hour. When people ask, why, since I didn’t grow up here, am I in Dallas? I’m four hours away from anywhere in the United States with the airport, and it’s a very easy, comfortable, enriched place to live.
MANNO: I think number one — and we always talk about it — is the cost of living. You can’t compare. Talk to somebody who rents a $6,000 apartment in San Francisco.
NOBLE: And the pay structures are different. We pay an entry level architect about the same in San Francisco, maybe $5,000 more, but not nearly enough to cover [the cost of living].
KRUEGER: All of those things, everything they said: The thing I’ve been the most pleased with is how they’ve redone Love Field, and how you can get around. Linda [McMahon] is in the room, and I was blessed to be a part of the Deck Park and what that has done for downtown — The Real Estate Council’s leadership and how we’re now redeveloping downtown. It was a ghost town 20 years ago. What’s happening now is exciting. Millennials are picking up on that, and it gives me a lot of hope for the future in Dallas.
LOWE: I think those are some of the reasons I came to Dallas in ’97 — I had a few choices. I was going to go to Barcelona; I was going to go to Philadelphia, or Denver, or Dallas.
LOWE: Full disclosure, I’m a Texan. I grew up in the Texas panhandle, so I love Texas. I came here for the quality of life: I could rent a house here. I came right out of college. I could live a good life, I could have a car, and I could make $27,000 a year in ’97 and actually have a life. It was good, but I’m here for a different reason now. As a business owner, I love the attitude of this state, and I love the attitude of this town. It’s can-do — anything’s possible.
KRUEGER: And, it’s generous.
LOWE: Exactly. And it’s an attitude that’s hard to find. I love New York, I love LA. I love lots of places in the world. I’ve been a lot of different places, and I love them, but I would not trade any of them for my home. I think we’re blessed to be where we are.
POWELL: I grew up outside of Indianapolis, and when I was a thesis student I looked at the Sunbelt. I felt like the growth of the United States was going to happen in the south. A lot of my family, cousins and aunts and uncles, were moving to the Sunbelt and I thought, ‘Wow, there may be something going on here.’ So I looked at Atlanta, Dallas, Houston, San Antonio, and Phoenix, Tucson. Dallas in 1976 was the emerging market. In 1976, there wasn’t much design in Dallas. But the point is, Dallas has been great for business. And when I got here as a 24-year-old college graduate, people gave me opportunities. By the time I was 30, I had designed 10 million square feet of office space. If I had stayed in Indiana, that would have been a half a million square feet.
NOBLE: If you had gone to New York, you might not have had that opportunity.
POWELL: For me … the quality of life, the win-win attitude, and the expectation that if you worked hard and you were smart, you could succeed here. [That] still exists 40 years later.
NOBLE: It’s a level playing field.
MANNO: I’m not going to diss on Dallas in any way. When we interview new grads — we interviewed globally — and ask them what office they want to go to. You have to do exactly what you guys have done at this table: You have to go through plenty of reasons to come here. That’s the challenge we have.
NOBLE: People who haven’t experienced what we have — it’s hard to sell it. [Dallas-Fort Worth] is a very welcoming place. Toyota couldn’t have been happier. They’re extremely pleased. And we should be grateful that we’ve got a community that is so embracing. To me, it’s about opportunities and employment.
Let’s get into the presidential election. How do you think it’s going to affect your firms and the North Texas economy?
NOBLE: I believe it will have little effect. I think our international work might suffer. We have offices in Mexico City, Shanghai, Singapore, Delhi, London, and Abu Dhabi, and with the combination of this and Brexit — and I don’t know what will happen there — there could be a slowdown. Our work in London hasn’t slowed down. This could be much ado about nothing. Domestically, I don’t think it will hurt at all, other than the fact that we are an isolated economy. And if our trade agreements start to have a deleterious effect on the economy, it could unravel into a recession. I don’t believe that will happen, but I wouldn’t be surprised if it did. I didn’t think Trump would win President and I am surprised that he did, so that tells you what I know.
KRUEGER: I don’t necessarily disagree with Dan [Noble]. I woke up this morning, and the biggest concern I have for the North Texas market is the labor force. I think we all would agree Trump was a lot of talk. We don’t know how much of that is going to come into place, but it could have a pretty serious effect on the construction industry, which could then trickle its way through the rest of the economy.
POWELL: I am an independent, and for me this election was eye-opening. I’m optimistic about reduced taxation because I’m a small business. We have been reluctant to work cash because we didn’t want to pay 35 percent taxes for retaining cash in the company. We’re an LLC, but we still pay 35 percent for anything we retain in the company. So the idea is, today we can maybe have a path forward to have cash reserve buildup at a reasonable cost, and then if we need those reserves down the road, we’ll be getting a much better platform and not have to pay taxation twice.
MANNO: For those of you who have international offices, the perception of the attitude he presents concerns me. I guess, the first person to call him was [Russian President Vladimir] Putin — to congratulate him. I don’t know whether that’s a positive or a negative, but I do worry that we’re setting a parameter. There is so much negativity that went through this campaign, and I don’t know how you can turn that around to make things more positive. And, if that negativity keeps going, I don’t think people are going to want to mess with us, and I don’t blame them. I hope it’s a better attitude going forth, but I’m not hopeful that’s going to happen.
MOUNTFORD: I’m reluctant to comment at all about it, but business specifically, we’re very economy-based. If the economy’s doing well, we’re going to do well. In interest rates — and clearly if there is any uncertainty following the election — that may help interest rates, and will keep them at a low level, which I think is necessary for our business. I would be concerned about labor issues. We have 2,000 guys on the Toyota job site right now. We have to make sure that they all are still there.
NOBLE: I’d like to add onto what Paul [Manno] said. About 20 to 25 percent of our workplace is outside the United States, and if we start to become a populist world that wants to protect our borders and we start to restrict trade, we start to restrict the flow of labor, and intellectual capital that runs across our borders -- it hurts all of us. It’s an additional cost of work we do. And in the end, attitudinally, just as Paul [Manno] said, there is, I think, a dangerous momentum that we’ve set in motion here with this idea of populist nationalism which increased to Portugal, and the Middle East, to Brexit, to Scotland, and now to the United States. It’s eerily like other times in history when the pendulum swings to this sort of myopic view of a fearful way of looking at people not like you. It might not be short-term.
POWELL: I think giving power back to the people is not a bad thing. We’ve lost power in this country. I believe in the fact that the pendulum does swing and it over-corrects every time it swings, but it ultimately moves back toward the middle. And, over the last several years, it has seemed to move toward a zone that I’m uncomfortable with because I don’t like being branded. If I don’t agree with one person’s point of view, I’m branded because I don’t agree with it. It doesn’t matter if I oppose it if I just don’t openly agree with it.
LOWE: Well, I think we’re going to be just fine. I’ll just go ahead and state where I’m at in the world. When Donald Trump first announced he was going to actually put his hat in, I did predict — probably, I was one of the minority who thought he would win — and he did. I think things were way too far for one side that there had to be some sort of over correction. There always is, right? There is a balance that has to be struck. And it wasn’t because we’ll see if he’s going to be a good president or not, but he was the only one that had the capability of that type of correction from my vantage point. I do think it’s interesting. I think everybody I know was up last night watching. I actually got a text from four of my clients throughout the evening and early into the morning and, overtly, they’re pretty hardcore Republican folks, but they thought this was going to be a very positive thing. As a matter of fact, one of them even this morning said, ‘Hey, let’s go build something.’ I think with Donald Trump’s background — and now it looks like Republicans are going to control the House and the Senate, as well — I think he certainly knows what it takes for a real estate project to be successful. Financing is a big piece of that — and taxation, health care, and those types of things that have been a real hit to our business, as a small business, and something that is difficult for us to manage with employee expectations and those kinds of things. I think this is going to loosen up some financing and those kinds of things where I think we are on the backside of a cycle. Maybe that puts a pillow out there. Maybe the landing’s a little softer because of some things that can happen, given his understanding of the market that we’re all in.