The New Frontier of Decarbonization with Built Environments and the City of Tomorrow: Part 1

Well, hello there, listeners and viewers. This is Ron Faski with another episode of disrupt ed. And I'm up bright and early with one of the most efficient human beings. At a resting heartbeat of twenty six, Ron Henry is the senior vice president of Sacksi Construction, and we have known each other for about five years. And I as we've continued this series on decarbonization, we've talked with folks from Angie. We've talked from folks from Centure. We've talked with Ann Pardington from the Talber Institute of Sustainable. And I wanted to get Ron talking with us this morning about decarbonization in the built world. Ron brings an amazing amount of experience to this discussion he's a fellow, u of m, alum with a masters in architecture, and he has done architecture and construction for his career here in the Greater Detroit area. So, Ron, welcome to the show. Thank you very much, Ron. It's a pleasure to be here. Bright and early and, look forward to the conversation with you. Yeah. And so let's, let's get started with a little bit, your origin back which I found fascinating beyond the twenty six beats per minute. You know, you're very efficient dude. Very, very, you know, chill. Self proclaiming world's most efficient human being. Right? Yes. Lance are I love that. The high rate is thirty two. So some other guy from Spain twenty eight, so I'm the world record holder in my opinion. There you go. Well, you and I did something similar, and that is we decided as empty nesters to move into this city Detroit. So tell us a little bit about your origin story, what brought you here into Saksi and how you're looking at a vision for Detroit and beyond, through your projects and the immense amount of growth you've, developed and cultivated at Saksi. So, well, thank you for that. So roughly thirty how many years ago was it? Thirty nine years ago, I started into this lovely world of design and construction. I'm an architect. Worked my way through college, Lawrence Tech and then University of Michigan always lived out Supervia, but always worked in downtown Detroit. So my, recreational life and family life was always in suburbia, and then I would make my way downtown, typically driving anywhere for forty five minutes to an hour plus, struggling through traffic and emitting a whole lot of carbon. Along the way. And now we're empty nesters. And a year and a half ago, we sold our house in suburbia in a day. The market was great. We tried to figure out what's next, and we thought, let's make a stopping point in downtown Detroit. So we found a place down here. And much to my surprise, my wife fell in love with it. So she's a Beaumont nurse. She works from home. She's get this. She's an anesthesia nurse that works from home. So I say it's all out hypnosis, but there's a long story there that, I could go with a few more But, so she fell in love with being in downtown Detroit. So we found a different place that's got a a wonderful view at a we're right Weird Grand Circuit Park, and I walk to work. So I'm reducing my carbon footprint on a daily basis. I love that. And it's about a mile walk. Today was a challenge because it was raining really hard, and I had to get here. And I this queue line doesn't start our street car doesn't start running until eight fifteen. So I I took a scooter with an umbrella stuck down into my jacket, and don't do that. I might add her into Mary Poppins and flew off into the sunset. Oh, no. I didn't make it for this, discussion this morning. But so we love it down here. It's been a lot of fun, but there's a few things that, I don't know that it's our call it our final resting place. Because it becomes a noisy city, it becomes a very here's the noisy city. It's a You know, there's a lot of energy, which we like, but there's also not a lot of rest, which there's times after work where you wanna have that recreational time. But there's so much to do down here. Been great. There is. And I, you know, we live such parallel lives because I lived in the neighborhood. You're at the Broadway Tower, which is absolutely stunning. We were at the library loss around the corner. Yeah. And we faced we faced, what is now becoming the new Hudson development -- Right. -- replacing the old Hudson's building And, and some and my wife had the same epiphany that yours did when we moved down here. She really loved her urban life. And, you know, a lot our friends who've been down here described Detroit as a really cool playground for those of us who are graying up top and empty nesters that there is a lot going on. And it's a point of fact, it was weird after knowing you for five years. I'd finally discovered that your, Detroit Yacht Club member as well, have your boat over there. So, you know, there are all these sort of parallel moments that we're figuring into. And, so when I thought about you know, when I thought about some of the conversations we've been driving here on disrupted, I thought, you know, you'd be a perfect person to bring into this conversation. You've been an amazing thought leader in the world of, the built environment. You have been a powerhouse you know, looking at your track record at Beaumont and other places and then coming to Saksi and literally tripling the size of that company. So You know, that body efficiency, obviously, you've put to good use because you've, you've exponentially created some real growth. But, you know, let's talk a little bit about your vision for Detroit and the built environment as we go through our next phase and how I'm curious how decarbonization fits into the plan because I understand that that more than anything has become a big business. Ten trillion dollars will be invested in build structures over the next decade. Yep. And that's an incredible number. And, obviously, you are leveraging that with your customer relationships to build that out with Saksi. But what does that look like? In the CDD trend, what does that look like for your building we think about this all the time, and it's a it's a real challenge because thirty seven percent of the buildings, buildings account for thirty seven percent of all carbon emissions in the world and thirty five percent of the energy demand in the world. So when you think about that, it's a it's a third of everything over a third of everything that we do is in our buildings, is detrimental to the world that we live at. When you look at where is that coming from? So there's in this world of decarbonization, there's scope one scope two, scope three, where scope one, right, harbin, that's directly coming from the building. So your mechanical systems, your HVAC systems. Your heating systems. Right? Scope two is the fuel consumption, the fuel generation to create that ability to heat your buildings. And that scope three is all of the products that you're using, where are they coming from. So when you think of a building, Where is that structural steel coming from? Where's the concrete coming from? Where's the wood coming from? All of those things play a factor. And so we're a construction company where we work all over North America. We're at about a dozen different market sectors from multifamily office, high end retail religious higher education, health care, light industrial. And what I find interesting is when you hear about decarbonization in the world, typically, it's facing our vehicles and the way we commute and, obviously, the electrification of transportation, and then heavy manufacturing and industry. But it doesn't get into the world of call it general construction as much as you think that it should. Typically, our owners, so we build projects for owners. They're faced with ever increasing construction costs. And they're trying to get their scope completed within the budget that they have and call these niceties at times of Going to a heat pump system or going to geothermal or different ways to make your building more green, are often left on the drawing because the the financial metrics are working out. So it's a it's a real challenge. You see it. Like I said, you see it more nationwide or worldwide, it heavy industry, And then in some markets where it's a a moral obligation, like higher education. Right. Education buildings, you will see them working hard to reduce their carbon footprint, whether they be net zero or carbon neutral. You know, the carbon neutral is more about buying credits then net zero is about -- For being net. -- producing less carbon than you create. Alright, or offsetting less than you create. So it's a real challenge in the world when you think about all of these projects that are being done year in and year out. We do hundreds of projects a year. And I guess simply put we're following the lead of the owner and what their desires are. And we could advocate for some of these things But if their dollars still, allow for it, we can't make them do it. Right? So often, it becomes a regulatory item. What should we do as a society to encourage and require change in the way our buildings are designed and constructive that will contribute to the betterment of society and the reduction of all these, carbon issues, greenhouse gas emissions that we're doing. Right. So it seems to me, you know, and and we've had a number of people on the decarbonization to discussion here on disrupt ed. And what I find fascinating is that in some respects, it feels like the economic incentives are starting to align. Yep. You know, so that if you're talking about a ten trillion dollar spend over the next decade, in the built environment. You're talking about a lot of money being poured into activities and construction that will be net zero. Yep. And, certainly with scope three. And so there's sort of a forced incentive, isn't there to kind of bring these folks that may have taken things off the drawing board and said, well, now we need to do that because in scope three, you'll always have a bifurcation of properties that are you know, lead compliant and debt zero and those that aren't and those that aren't are are gonna fall off the face of the earth from evaluation back. Correct? Am I right in assuming that? You are right in that. And we're we're seeing, increased interest in it because the word you used in setups. I'm gonna pick on multi family, two apartment buildings. We do a lot of those buildings around country. Incentives are required to get these projects to move forward. Unless, of course, you're a billionaire that's building a project that doesn't necessarily have to have a a positive ROI or a good pro form a. Most everybody else, almost everybody else, need some form of incentives, whether it's historically, you go to a historic tax credit, or a brownfield, or a energy, conservation or decarbonization, or something like that is beneficial. So I think over the course of my career, I've seen this shade. So I'm an architect by background. I've seen this change in the interest in sustainability going back many, many years ago when Lead first came out in the sustainability objectives in buildings And it was strong for several years, but I think it's lost a lot of interest because it's a a checklist of items that you can't always control, like your relationship to other businesses in the area, for example. If a if a deli goes out of business, you lose a point because you don't have your connectivity into the local neighborhood like you did. So I think people are less interested in getting lead certification. At least this is just my opinion. Right? I have a joke that I refer to myself as the founding father, lead c o, which is conscientious objector. The reason they say that I'm all for sustainability and, positively impacting our future. When I'm all against just doing it on paper and not actually living it. And Lee became such an odorless process that most of our clients don't go through it. They say we wanna go through those, sustainable ideals to improve our buildings. So where I think it's headed is with energy. In energy conservation, you had shaving the different systems that we employ in our buildings so that we are Oh, in the power plants, in other words. Correct. And there's real value there because It's not just check marks out of paper, on the paper. It's truly seeing your bills go down, seeing your long term operating efficiencies of the building, much more beneficial to your bottom line. And that's getting people's attention. As opposed to the, you know, recycled content of your carpet, which is important. Right. And it goes to the source of, you know, the scope, three things, or where you're drawing things from. But ultimately, if we can get to, where it really impacts the bottom line of the client, then we're gonna start seeing movement forward. Makes a lot of sense to me. You know, we were we've been talking to a number of people across the sector, and we were talking to Kristen forums at Angie an energy producing company, and they did the controversial thing five years ago of of deciding to get out of the fossil fuel business entirely and moved to sustainable renewable energy. And one of the things that they're finding is that as they're writing these projects now, they've done that And in the process, they actually increased their revenue and profits by doing that. And, one of the things that they're saying is that people are finding that the incentives are aligning so that even small companies can see energy savings. And I think you're right. I think many, many more companies are becoming very, very cognizant of how energy is being produced to support the plant, and then how it's being expended and how it could be, you know, done more efficient. Everything from putting stuff on the rooftops to all kinds of different things. I mean, solar is getting another renewal. It seems to be, again, because of incentives where it previously wasn't as cost effective. Back to the earlier point about the so we're in Detroit. So the audio and auto industry has a huge impact. And they were getting those incentives, and they're seeing the the light by incorporating incentives in their projects, whereas all the other types of projects, the ones that we do a vast majority of they didn't have exposure or ability to get those incentives, which it's starting now. And so we're gonna see rapid change in this whole building industry. When you think about the building industry, it's interesting though. Over hundreds of years, thousands of years, it hasn't changed. It's a primitive technology. It's brick by brick. Think about building a car and all the automation, the robots, and all these different things that are brought into the process, or most other industries have advanced significantly with the all this technology that we have at our disposal. You still paint a wall with this, maybe a brayer, really advanced or a roller. You still, like I said, brick by brick, stud by stud. So it's very primitive in the cost of construction. This is I find this fascinating. Engineering news record has tracked the cost of construction since roughly nineteen ten. And it goes to my point earlier that owners are extremely challenged with the rising costs of construction. In inflation has gone up significantly. So what you were trying to build something for three years ago, if somebody could say you could build it today for that price, you would jump all over it, because our prices have gone up twenty, thirty percent. But over the period of a hundred and what is that? Thirteen years from nineteen ten, do you know the number of times that the construction cost index, which is the overall index of construction costs in the industry, taking all different trades. How many times has it gone down? You would think two thousand eight, perhaps it went down. Maybe back late nineties, early two thousands, it went down. It didn't. It's only gone down two times in the early nineteen thirties. It's great depression every other year, construction cost year over year has gone up. And it's gonna continue to do so. So when people say If we waited, weight this out, will cost come back down next year? No. They're not. You have debt, you have taxes, and construction costs are gonna be higher next year. Those are the three knowns in society. So it that adds to the challenge of decarbonization because if it's gonna cost more money, you may not be able to afford it. So you need, again, incentives. And that's where the government comes in, and entities come in that can help propel this movement forward. You know, Ron, I'm interested, you know, since we're both living downtown, we've seen explosive growth in the city, you know, restoring buildings and also a a new built environment of, apartments and is, which we never saw, you know, growing up, in suburbia watching Detroit. Detroit was never an apartment or condo place. It was always, you know, small homes and homeowners that drove the growth of Detroit. You're American. But now you're looking at it and seeing that you know, in the COVID world, I'm kinda curious in the post COVID environment what's happening to building and can are we going to see, you know, what is your prognostication for what we're gonna see? Do we have an excess capacity? Do we have too many buildings as companies are deciding to make more of their employees remote or is that gonna level off based on growth and other countervailing forces? I mean, what are your thoughts about So in the last ten to twelve years, there's been significant investment in downtown Detroit in multifamily, conversion of historic buildings and new construction, but a lot of it has been the conversion of historic buildings. It's a multifamily that may once have been an apartment, and it was vacant for thirty or forty years, or it may have been an office and converted. So we've got a significant amount, hundreds of buildings in the city, of projects like that that, have occurred in the last twelve years. What we're seeing now is it's slowing down in the city and suburbia is trying to catch up with a product that is has the similar cool factor to many of these buildings that have been built in downtown. So we're doing many multifamily buildings at Serbia that's replacing that apartment building that was built in the seventies or the eighties or earlier that are pretty tired with some very cool open amenity spaces that have the work work areas and common spaces for the young professional to work in or the older person to enjoy and and have the sense of community cities like Birmingham are just on fire with the amount of construction that are going down there. So we're seeing a tremendous amount of growth beyond the city, but in urban course. So there's not a lot of new development that's your You know, your new office building or your new apartment building that's on a greenfield site, not in close proximity to any which drives the notion of walkable cities, drives the notion of reducing that carbon footprint so that you can live work and play in a tight, tight knit area. It's really interesting, you know, and you think about it. You know, I'm really struck by your comment about how primitive the art of construction has been. But it's also a bedrock business. Right? And so, To our listening and viewing audience, we've been talking with Ron Henry, the senior vice president of Saksi Construction. We've been talking about decarbonization and the built environment. And we've been talking about our parallel pa past watching the city of Detroit, reinvent itself and rebuild itself we're gonna take a short break here. And then when we come back, I wanna talk with Ron about the talent implications because in this primitive bill building of buildings, you know, we have skilled trades and we have construction, you know, talent that has been one of the driving forces that increases in costs in recent year because we don't have enough people in the skilled trades. And this is something that, Rod and his executive team at Saks, he have taken very seriously in made conscientious social investments in the talent, here in Detroit and elsewhere. So let's take a quick break. And we'll come back and we'll talk to Rod about talent in this disrupted decarbonizing world. Thanks for joining us. Come back for episode two.