WEBVTT - McKissack CEO Sees Office Space Dwindling

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Tim

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<v Speaker 1>Stenebeck on Bloomberg Radio. I think this is really exciting.

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<v Speaker 1>Cheryl McKissick Daniel joins us right now. She is president

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<v Speaker 1>and chief executive officer at Makissik.

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<v Speaker 2>It is the.

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<v Speaker 1>Oldest minority owned professional design and construction firm in the US. It's,

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<v Speaker 1>as Carol was saying before the breakup, family owned business

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<v Speaker 1>for more than one hundred years. And I think it

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<v Speaker 1>is incredibly interesting now, especially because of all the problems

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<v Speaker 1>we're having regional banks, the jump in interest rates, the

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<v Speaker 1>tightening of credit markets. So I'm very pleased to welcome

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<v Speaker 1>Cheryl to the program. Thanks so much for joining us. Cheryl, Hi,

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<v Speaker 1>how you doing? We're doing I'll speak for both of us. Fantastic.

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<v Speaker 1>I love it because we have a whole week ahead

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<v Speaker 1>of us and I'm just getting settled in here. Let

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<v Speaker 1>me get first your take on being the oldest minority

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<v Speaker 1>owned business, the oldest minoritady know, design and construction business

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<v Speaker 1>in the US, and a family owned business for one

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<v Speaker 1>hundred years. How much does it mean to you? How

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<v Speaker 1>important is that to you?

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<v Speaker 2>Wow?

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<v Speaker 3>I stand on the shoulders of four other generations, and

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<v Speaker 3>so you know, I feel like I'm winning before I

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<v Speaker 3>get started.

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<v Speaker 2>For them to navigate.

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<v Speaker 3>This country of ours, this great country of hours for

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<v Speaker 3>five generations is.

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<v Speaker 2>An amazing thing.

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<v Speaker 3>And so I feel honored, I feel blessed, and I

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<v Speaker 3>feel as though I have a mission to keep this

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<v Speaker 3>company going, especially in New York City.

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<v Speaker 1>So how are you doing in that mission right now?

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<v Speaker 1>How is business at Meckissick?

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<v Speaker 2>Business is booming.

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<v Speaker 3>New York just passed a three hundred and twenty two

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<v Speaker 3>billion dollar budget and a lot of that is capital

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<v Speaker 3>work throughout the state. And then of course we have

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<v Speaker 3>a significantly large buzz for the City of New York,

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<v Speaker 3>so there is plenty of work for Mechisic corporations are

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<v Speaker 3>are working or have large capital programs. I think the

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<v Speaker 3>only area where we're seeing some slippage is with our

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<v Speaker 3>developers with respect to residential and office space. I think

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<v Speaker 3>the interest rates are affecting their ability to make these

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<v Speaker 3>deals work. And then we also need to deal with

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<v Speaker 3>our affordable housing. We need to get something in place

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<v Speaker 3>where we can get some assistance from our government for

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<v Speaker 3>affordable housing so we can make those projects work as well.

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<v Speaker 4>Cheryl take a step back let's go to office because

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<v Speaker 4>we certainly are just trying to figure out if that's

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<v Speaker 4>the next shoe to drop. And we've been speaking a

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<v Speaker 4>lot about, you know, the nervousness that continue, certainly among

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<v Speaker 4>the regional banks. They rallied a bunch of them today,

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<v Speaker 4>But nonetheless there's still questions. So office space specifically, how

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<v Speaker 4>would you describe it? And you guys really work within

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<v Speaker 4>the state of New York.

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<v Speaker 3>Correct, we're in New York, We're in Philadelphia, Orlando, and

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<v Speaker 3>down Nashville, and you know, office space right now has dwindled,

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<v Speaker 3>as we know as a result of COVID. You know,

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<v Speaker 3>if we just take my hometown Nashville, Tennessee, where Amazon

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<v Speaker 3>just finished a beautiful, you know, mid rise building, there's

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<v Speaker 3>nobody in it. People do not want to come to

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<v Speaker 3>work the way they used to. Most people want to well,

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<v Speaker 3>I wouldn't say most, but a lot.

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<v Speaker 2>Of people want to work remotely.

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<v Speaker 3>We in Nashville, we're trying to renovate or develop a

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<v Speaker 3>building that my building, my grandfather built in nineteen twenty four.

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<v Speaker 3>And I was just on the phone with a prominent

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<v Speaker 3>developer on Saturday saying, okay, can we make it office

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<v Speaker 3>space and the answer is absolutely not.

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<v Speaker 2>You can't get a loan from banks for office space.

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<v Speaker 3>For my understanding, a lot of the banks that are

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<v Speaker 3>failing are the bank that you know, let money on

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<v Speaker 3>you know, office space construction, and so you know, it

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<v Speaker 3>is in a crisis right now, and you know, I

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<v Speaker 3>don't see, uh.

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<v Speaker 2>And from what I can tell, how we're.

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<v Speaker 3>Going to recover with the office space without doing maybe

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<v Speaker 3>some conversions. Yeah, we know, the conversions, Yeah, conversions. Housing

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<v Speaker 3>is a big issue in New York. As we know,

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<v Speaker 3>we need over eight hundred thousand units of affordable housing.

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<v Speaker 3>Housing is an issue in most urban cities, and so

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<v Speaker 3>you know, maybe that's the answer.

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<v Speaker 4>But a bunch of developers I talked with at Milkin

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<v Speaker 4>last week, they said, how do you take those buildings

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<v Speaker 4>that are in midtown old buildings like they're just not

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<v Speaker 4>the idea of converting them into housing. It just doesn't

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<v Speaker 4>make sense. You really need to knock them down. But

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<v Speaker 4>then there's the problems and issues where the exteriors you know,

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<v Speaker 4>are old and wonderful and nobody wants to mess them up.

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<v Speaker 4>So it's it's complicated and converting isn't so easy, or

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<v Speaker 4>you know, creating conversions.

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<v Speaker 1>Is this good news?

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<v Speaker 2>Form chistic?

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<v Speaker 1>I mean, can you guys do conversions or can you

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<v Speaker 1>go to places where we knock down buildings and put

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<v Speaker 1>up new ones?

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<v Speaker 2>Is this great news? We absolutely can.

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<v Speaker 3>I mean any construction project that's vertical, we are happy

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<v Speaker 3>to participate it on in I can't say it's great

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<v Speaker 3>news for the private industry because we still need our

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<v Speaker 3>developers to be able to borrow money at a good

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<v Speaker 3>interest rate, so the deal makes sense for them, and

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<v Speaker 3>so that's a concern for our industry.

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<v Speaker 4>So how much has it slowed down? Like, does it

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<v Speaker 4>is a crisis situation in terms of what you've seen

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<v Speaker 4>slow down in terms of development? And what tier of

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<v Speaker 4>the market are you talking? You know, is it top

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<v Speaker 4>level top tier properties?

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<v Speaker 2>Is it like?

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<v Speaker 4>What is it?

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<v Speaker 2>So?

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<v Speaker 3>So at mchisick the majority of our work is with

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<v Speaker 3>large institutions and government. So you work for the higher

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<v Speaker 3>ed K through twelve.

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<v Speaker 4>You know, it's like the Columbia Business School right uptown.

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<v Speaker 3>Columbia Business School, Lehman College, hospitals, you know, Coney Allen,

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<v Speaker 3>So those projects are moving along. You know, the MTA

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<v Speaker 3>looks like you know, their their capital program is going

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<v Speaker 3>to be whole.

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<v Speaker 2>And so that is the bulk of of mckiswick's work.

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<v Speaker 3>We're not really working for private developers building residential or

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<v Speaker 3>office space. But I can only talk to you about

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<v Speaker 3>what my colleagues are telling me that are in that area,

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<v Speaker 3>and they're telling me that their projects are slipping out

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<v Speaker 3>to the point that, you know, they're carrying staff in

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<v Speaker 3>hopes that a project's gonna start in six months.

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<v Speaker 2>But what if it.

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<v Speaker 3>Doesn't, what if it gets you know, trashed completely because

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<v Speaker 3>the interest rates are still a problem.

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<v Speaker 2>You know, their companies in New York who have.

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<v Speaker 3>Gone out of business in the last two months just

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<v Speaker 3>around that issue.

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<v Speaker 2>Yeah, so they call staff.

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<v Speaker 1>You know you basically, I mean kissing you have the

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<v Speaker 1>dream product mix. Then you want to be in hospitals,

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<v Speaker 1>you want to be in universities, you want to be

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<v Speaker 1>in you know, federal government projects because they get credit

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<v Speaker 1>cards exactly. But your colleagues that are in uh, other sectors,

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<v Speaker 1>they're not able to get loans, or if they are,

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<v Speaker 1>the loans are just unaffordably expensive, is what you're saying.

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<v Speaker 3>Well, yes, right, And as a result, the builders for

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<v Speaker 3>those developers, you know, what do they do with their

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<v Speaker 3>staff because the way we went our work is by

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<v Speaker 3>having confident staff to you know, implement you know, whatever

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<v Speaker 3>project that we're going after. And you know, staff again

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<v Speaker 3>is hard to find, so you can't let us a

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<v Speaker 3>key staff person go. You have to hold onto them

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<v Speaker 3>in hopes that the project is going to start. And

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<v Speaker 3>so I'm seeing that across the board with these construction

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<v Speaker 3>firms that work for private developers that are in the

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<v Speaker 3>office space or residential space.

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<v Speaker 4>Yeah, we've heard that a lot in terms of the

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<v Speaker 4>labor market, that builders just don't have the people that

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<v Speaker 4>they need.

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<v Speaker 2>As a result.

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<v Speaker 3>What is that?

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<v Speaker 4>Still is that still putting pressure on costs, the development

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<v Speaker 4>costs and just unfortunately Shara only have about thirty forty

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<v Speaker 4>seconds left.

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<v Speaker 3>Yeah, well development costs, everything's going up because the supply

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<v Speaker 3>chain is a problem. Still so still yes, still, yes,

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<v Speaker 3>you know there are contractors who have contingencies just based

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<v Speaker 3>on supply chain issues and the cost that might you

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<v Speaker 3>know result as the you know, because you can't get

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<v Speaker 3>switch gear or any other kind of product in a

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<v Speaker 3>you know, reasonable amount of time, and as we know,

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<v Speaker 3>time is money, and so you want to make sure,

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<v Speaker 3>you know, you cover yourself if you have to wait

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<v Speaker 3>on a supply chain, so yeah, those issues are still

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<v Speaker 3>out there.

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<v Speaker 4>Wow yeah that listen. What a great vantage point and

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<v Speaker 4>just very real in terms of what's going on and.

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<v Speaker 1>What a great company. I want to come over and

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<v Speaker 1>check out the buildings you're putting up. It sounds awesome.

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<v Speaker 1>I want to go to Nashville and see that building

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<v Speaker 1>your grandfather put up.

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<v Speaker 4>Let's go on the road, Cheryl, come back soon.

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<v Speaker 2>We would love it.

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<v Speaker 4>Cheryl McKissick Daniels. She's president at McKissick, joining us via

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<v Speaker 4>Zoom in New York City,