1
00:00:00,160 -->
00:00:05,800
Data centers used to be 10% of this market. Right now they're 60% of this market. If I were to pull
2
00:00:05,800 -->
00:00:12,060
all the data centers pending out, the number would show compression of about 3.5%, grew from 600
3
00:00:12,060 -->
00:00:17,160
billion to 680 billion, while the total construction fell down from 1.7% of total.
4
00:00:17,160 -->
00:00:22,199
Contractors have hit a graph ceiling because construction layoffs is hitting the lowest level
5
00:00:22,200 -->
00:00:28,800
since 2000. Governor Abbott directed to halt all permits until the utility regulator,
6
00:00:28,800 -->
00:00:33,359
Ercot, completes an audit. Do I think this is going to have any meaningful slowdown in terms of
7
00:00:33,360 -->
00:00:39,279
development in Texas and data centers? I think this has election signaling and politics all over
8
00:00:39,280 -->
00:00:45,600
it. Welcome to the Punch List Podcast, the number one podcast in the world for architecture,
9
00:00:45,600 -->
00:00:52,040
engineering, construction. Joined today by TC and Canova.
10
00:00:52,080 -->
00:00:59,080
Where in the world are you? Both of you now. Still staying afloat
11
00:00:59,080 -->
00:01:05,400
in Berkeley, California. Still in India in beautiful Bangalore. Visiting my plan office. Are
12
00:01:05,400 -->
00:01:11,440
you kidding? I'm in Menlo Park, California. Bay area. Uh, TK.
13
00:01:12,240 -->
00:01:18,919
Um, are you still getting like, a baby by your mother, or is she making food? Uh,
14
00:01:19,160 -->
00:01:24,600
ironing your underwear? What? What's what's a what's a visit home in Bangalore?
15
00:01:26,519 -->
00:01:33,040
No, I'm not at home. I'm in. I'm at a hotel. That's over. Bathing by my mother is
16
00:01:33,040 -->
00:01:40,040
over. Um. Yes. I'm acting like a functioning right now. You know about the past?
17
00:01:41,040 -->
00:01:47,920
Yeah. I was interested in talking about the past, John Watts. I'm very fascinated by your story
18
00:01:47,920 -->
00:01:54,080
of how you kind of came into real estate development. So tell us that story and also tell
19
00:01:54,080 -->
00:02:00,929
us, if not that, what would have been the alternate career path for you? Yeah,
20
00:02:01,489 -->
00:02:07,410
well, I think for me, you have to. That's a good question. Um,
21
00:02:08,130 -->
00:02:13,129
I have to look back at kind of the different phases of my life. And if I'm honest with you, it
22
00:02:13,130 -->
00:02:18,449
was what I thought I would do was different. And it depended on the phase of life that I was in at
23
00:02:18,449 -->
00:02:24,689
the time. As I kind of grew up, and so I grew up in a small town in Kentucky, and I went to college
24
00:02:24,729 -->
00:02:30,809
there, and I studied finance in college. So I thought I was going to be in banking or some type
25
00:02:30,809 -->
00:02:37,769
of financial job. Uh, I thought that was like the path. And then, um, I went to but I went to
26
00:02:37,809 -->
00:02:43,209
law school after that. And so for a period of time, I thought I was going to practice corporate law
27
00:02:43,210 -->
00:02:49,809
or transactional law, some kind of intersection of my financial, um, interest in the
28
00:02:49,809 -->
00:02:55,769
law. And towards the end of law school, I decided that that wasn't what the the path that I was
29
00:02:55,770 -->
00:03:02,689
going to take. So I took the bar exam just as a backup. And then, um, I got the opportunity
30
00:03:02,689 -->
00:03:09,209
to work for the president of the United States. So I had this, like, moment in time where I got to be
31
00:03:09,490 -->
00:03:15,089
working in a presidential administration. And so there was a moment there that I thought, okay,
32
00:03:15,089 -->
00:03:21,729
maybe I will live in Washington, D.C. and like, lobby the government or, you
33
00:03:21,729 -->
00:03:28,529
know, run for political office. I'm really glad that's not what I did. But, uh, after that,
34
00:03:28,529 -->
00:03:34,089
I went and worked for in a private equity firm and then real estate development. And I think it's
35
00:03:34,089 -->
00:03:39,849
like, oh, that's kind of all over the place. But if I think about all those sets of experiences, I
36
00:03:39,850 -->
00:03:46,330
think they kind of led towards real estate development because it's financial, it's legal,
37
00:03:46,729 -->
00:03:52,089
it's regulatory. It's getting, you know, things approved, interfacing with the government to get
38
00:03:52,089 -->
00:03:57,050
large projects approved and small projects approved. So I think things happen for a reason.
39
00:03:57,050 -->
00:04:03,649
They lead you on a path. And I mean, I've been doing this now for a long time. Um, you know, almost
40
00:04:03,649 -->
00:04:10,088
15 years in kind of real estate. So, you know, you land where you need to land. Uh,
41
00:04:10,089 -->
00:04:17,049
and, um, that's that's my story. Right? So, yeah, I don't know what I would want.
42
00:04:17,089 -->
00:04:22,129
I thought when I was also in, like, middle school and high school, I wanted to be like a talk show
43
00:04:22,129 -->
00:04:28,890
host. So I'm living that dream now. There you go. I'm not very good at it, but I'm, you know,
44
00:04:29,010 -->
00:04:35,809
get it? You guys are helping me realize that dream. Love it. Uh. I'll I'll I'll add one thing
45
00:04:35,809 -->
00:04:42,609
about John. As someone who's sat across the table from John negotiated things. His legal knowledge
46
00:04:43,290 -->
00:04:49,969
is very handy. He's one of the only clients where I actually had a lawyer with me the whole time.
47
00:04:49,969 -->
00:04:55,049
And paying for it. If I had to threaten John that, hey, you'll have to pay me for this law because,
48
00:04:55,329 -->
00:05:00,969
you know, it's as a construction project manager, I don't have the chops to do the legal. Yeah. Back
49
00:05:00,970 -->
00:05:06,529
and forth with John, I'll say that. And I don't have the technical expertise. I've acquired some.
50
00:05:06,529 -->
00:05:13,289
But, you know, uh, I always admired that about you. Took your background as a structural engineer,
51
00:05:13,290 -->
00:05:18,410
and you could really look at the fundamentals of a building and think about it as we designed it.
52
00:05:18,410 -->
00:05:24,849
So there's such a good correlation between the good correlation between politics,
53
00:05:25,649 -->
00:05:32,570
law, lawyer ship and construction. Right. I see a lot of overlap between these three. So
54
00:05:32,609 -->
00:05:39,449
when you do not want to pursue politics, is it a now thing or is it is it a forever thing? I don't
55
00:05:39,450 -->
00:05:46,328
want to pursue politics forever. It's a forever thing. I mean, I appreciate people who, um, are
56
00:05:46,329 -->
00:05:50,409
thoughtful politicians and want to get in there for the right reasons. And I would say there are a
57
00:05:50,410 -->
00:05:56,739
lot, but I just don't. It's not something that it's not a career. It should not be a lifetime thing.
58
00:05:56,739 -->
00:06:03,179
I'm kind of a. I kind of subscribe to the notion of like, you come in. You do your service and you
59
00:06:03,179 -->
00:06:10,099
get out and you know, you it's a you know, it's not your your main thing. Um, I think you need I think
60
00:06:10,099 -->
00:06:15,018
the best politicians are ones who have, um, a background in something else in the private
61
00:06:15,019 -->
00:06:21,939
sector or a they're a doctor or they have real, you know, life experience and they draw
62
00:06:21,939 -->
00:06:28,700
upon that to inform, you know, their views. So the Founding Fathers as well.
63
00:06:28,980 -->
00:06:34,458
Interesting. Uh, but yeah, never say never, man. I mean, who knows? You might be you might be
64
00:06:34,459 -->
00:06:41,179
devolving back into it for some time. Pretty pretty confident now. Okay. Well all right,
65
00:06:42,140 -->
00:06:48,700
thank you for that. Uh, and we'll sharing about ourselves. So number one story
66
00:06:48,899 -->
00:06:55,379
today is just construction growth numbers that came out for August and September and,
67
00:06:55,619 -->
00:07:02,380
um. Interesting data here. TK. You want to walk us through it? Yeah, yeah. So before I start,
68
00:07:02,380 -->
00:07:08,980
just to lay it out right, the, um, the construction, uh, spending projections
69
00:07:08,980 -->
00:07:15,658
by, uh, Census Bureau, they're almost flat. But what they're hiding is the
70
00:07:15,659 -->
00:07:21,019
reason they're about to stay flat is mostly due to data centers, which is not a tailwind at this
71
00:07:21,020 -->
00:07:27,739
point of time. It's a gale, right? It's just totally carrying the industry. So,
72
00:07:28,099 -->
00:07:33,299
um, let's look at the data here a little bit. And then, uh, I would love to hear everyone's thoughts
73
00:07:33,299 -->
00:07:40,299
here. This is the Census Bureau report, but the two major columns to watch is, uh,
74
00:07:40,299 -->
00:07:46,659
annualized, uh, spending in August of 2025. And then what's projected, uh, August
75
00:07:46,700 -->
00:07:53,219
of 2026. Right, a year apart. So it has gone down a little bit by
76
00:07:53,219 -->
00:08:00,219
1.7%. But here's what's concerning to me. And then, uh, would like to
77
00:08:00,259 -->
00:08:07,060
open it up and hear you guys concerns or thoughts. So on residential we are
78
00:08:07,060 -->
00:08:13,820
looking at about a 5% reduction, which is huge given that that number is almost
79
00:08:13,820 -->
00:08:20,619
$900 billion. The other big loser seems to be manufacturing, which is down
80
00:08:20,619 -->
00:08:27,580
19.2% from 211 billion to 170 billion. And like we
81
00:08:27,580 -->
00:08:33,620
talked about, the biggest winner is office, which has gone from 120 billion to 150 billion.
82
00:08:33,900 -->
00:08:40,619
And so the way census works is data centers sit in the office category. And right
83
00:08:40,619 -->
00:08:47,419
now, like back in the day in 2020, data centers used to be 10% of this market. Right now they're
84
00:08:47,420 -->
00:08:54,219
60% of this market. So almost all of this upswing is coming from data centers right now.
85
00:08:54,340 -->
00:09:01,259
There they are at about 85 billion out of this $150 billion number. And that's what's
86
00:09:01,260 -->
00:09:07,939
carrying this report right now. Um, we'd love to hear your thoughts on this and
87
00:09:08,140 -->
00:09:14,979
I'll share mine as well. I mean, first of all, this is a loose projection. Uh, not a
88
00:09:14,979 -->
00:09:21,419
tight one, but it tracks though it tracks properly because our data centers.
89
00:09:22,140 -->
00:09:28,819
So office today, as we said today, last month, analyzed our data center spend is about 84
90
00:09:28,820 -->
00:09:35,219
trillion, sorry, 84 billion, which tracks to what the industry is saying as well. I mean, they have
91
00:09:35,219 -->
00:09:41,459
commissioned 150 billion of that, but 84 is happening, right? So that tracks um.
92
00:09:43,539 -->
00:09:50,029
I'm not too worried about residential because if you go down and see a multi-family is
93
00:09:50,030 -->
00:09:56,389
0.6% decline, it's almost flat. So it's 115 billion annualized.
94
00:09:56,950 -->
00:10:02,710
Uh, single family has dropped. And that's primarily because of,
95
00:10:04,389 -->
00:10:11,190
uh, the interest rates. I mean, if you if you get the interest rates down, this will bump up again,
96
00:10:11,230 -->
00:10:18,110
right? And and, uh, within this residential. Right. So
97
00:10:18,110 -->
00:10:24,989
it's 88, 82 of 82 billion of residential, right, which is single family multifamily. The
98
00:10:24,990 -->
00:10:31,229
third line that's not there is is home home improvements. Whenever single family goes
99
00:10:31,230 -->
00:10:37,830
down, home improvements go up. So people are always thinking, I cannot buy a home next year. Let me
100
00:10:37,830 -->
00:10:44,589
upgrade the home I'm living in. So that's where the spend goes up a lot. So there's a
101
00:10:44,590 -->
00:10:51,109
huge spend happening in home improvements compared to single family, but the family's flat
102
00:10:53,030 -->
00:10:58,589
dataset is an interesting one. You know, it's I mean, this data is not cut the right way for us to
103
00:10:58,590 -->
00:11:04,509
analyze, and we can't cut the data in the private players per se. But my hunch is
104
00:11:05,590 -->
00:11:11,988
that the large developers, the AR 50, uh, 20 or 50 somewhere in that range
105
00:11:13,070 -->
00:11:19,590
are getting a lot of demand to build data centers fast. And they are
106
00:11:20,069 -->
00:11:27,069
picking up that demand. And because they're picking up the demand. The demand is so huge in
107
00:11:27,070 -->
00:11:33,789
terms of growth. I have a feeling there's no data to prove it, but I have a
108
00:11:33,790 -->
00:11:40,149
feeling that they're leaving behind some commercial healthcare education to do data
109
00:11:40,150 -->
00:11:46,908
centers, and that could be an opportunity for a mid or small size GC to step up
110
00:11:46,909 -->
00:11:52,909
and go upmarket and grab that. You know, um,
111
00:11:53,869 -->
00:12:00,629
I like the optimistic outlook. Um, and, and not to sound like a pessimist, but here's,
112
00:12:00,630 -->
00:12:06,469
here's, here's my concern and I and actually I'm more concerned about the small to mid-size
113
00:12:06,469 -->
00:12:13,228
general contractor him. Okay. So so today what we can factually agree on is data
114
00:12:13,270 -->
00:12:18,709
centers are is what's carrying the market, just like we talked about in a previous podcast. If I
115
00:12:18,710 -->
00:12:24,990
were to pull all the data centers pending out, the number would show compression of about
116
00:12:24,990 -->
00:12:31,830
3.5% on. Because here's the other thing. We make a big deal about data center, but
117
00:12:31,830 -->
00:12:37,070
they're actually a very small part of the overall construction dollars as well, which I'd love to
118
00:12:37,070 -->
00:12:43,760
share a graph to show that. But regardless, it's not. It's $85 billion, which is not nothing. Um,
119
00:12:43,800 -->
00:12:50,560
with a projected increase in the future. So now let's do a projection.
120
00:12:50,599 -->
00:12:55,959
Right now, projection. Like we've talked about where the data centers are today. If I were to
121
00:12:56,000 -->
00:13:02,159
project out, data centers are going to keep increasing their share of office space is going
122
00:13:02,159 -->
00:13:08,558
to keep increasing. The squeeze we are seeing in other markets. I,
123
00:13:09,280 -->
00:13:15,000
I think it's going to get worse. And here's why I feel it's going to get worse. Interest rates are
124
00:13:15,000 -->
00:13:21,559
going up. Supply chains are going to get messier and messier. Tariffs don't seem to
125
00:13:21,600 -->
00:13:28,359
be like on a on a downward trend or on a downward trajectory, at least not in the immediate
126
00:13:28,359 -->
00:13:35,319
future. All these things hit the little guy harder than the big guys in the
127
00:13:35,320 -->
00:13:42,240
general contractor world. Also, all these things make Developers who do most
128
00:13:42,240 -->
00:13:49,079
of these residential build outs shy away from investing? I mean, I mean, I'd love to hear John's
129
00:13:49,120 -->
00:13:55,959
thoughts on this as well. Um, as to what that's going to do to developers. But that's what I
130
00:13:55,960 -->
00:14:02,038
feel. I think they're going to get smaller and smaller piece of the pie, and that's gonna
131
00:14:03,040 -->
00:14:07,760
have a larger impact on the small and midsize GC than on the big GCS.
132
00:14:10,599 -->
00:14:15,000
And they got to be thinking about their future. They've got to be finding ways. How do they
133
00:14:15,000 -->
00:14:20,559
attract talent in this market? All the holding that's happening of capable people is also on the
134
00:14:20,559 -->
00:14:27,519
data center side. Yeah. When I look at that list, uh, two things stand out. One
135
00:14:27,520 -->
00:14:34,439
is on the power side, up almost 10%, I assume, on the nonresidential construction
136
00:14:34,439 -->
00:14:41,399
that's tied to the data center development. Um, that's probably. I'd like to see that trend over
137
00:14:41,400 -->
00:14:48,280
the last couple of years. And then, um, where is in this list? Uh, industrial, like
138
00:14:48,320 -->
00:14:52,839
traditional industrial, small bay, large bay, industrial. Is that on the commercial or the
139
00:14:52,840 -->
00:14:59,519
manufacturing? Uh. That's manufacturing. Yeah. So that's that's a major drop off. I mean, that was
140
00:14:59,520 -->
00:15:06,439
really a really hot thing. You know, during and post Covid. Um,
141
00:15:07,159 -->
00:15:13,959
that has seen a a massive drop off. Um, and we should dig.
142
00:15:13,960 -->
00:15:19,599
Why? One thing I would clarify, John, just for our viewers as well, the way Census Bureau treats this
143
00:15:19,600 -->
00:15:25,199
is offices where work is done and data centers are considered places where work is done. That's
144
00:15:25,199 -->
00:15:30,599
why it's in office category, commercial or where goods are sold. So it's a lot of retail store
145
00:15:30,599 -->
00:15:35,199
development. That's what that is. And then manufacturing is where industrial resides, where
146
00:15:35,200 -->
00:15:40,039
you're building things and any place where you're building things. So that's just how Census Bureau
147
00:15:40,160 -->
00:15:46,239
things through things. And that's what these numbers represent when they say that. Yeah, I mean,
148
00:15:46,240 -->
00:15:52,479
I think all these numbers track to what we're seeing, what I've, what I've heard at the industry
149
00:15:52,479 -->
00:15:59,039
conferences over the last several weeks in terms of the residential side, the data centers.
150
00:15:59,480 -->
00:16:05,119
Uh, nothing surprised me about this other than the, you know, really steep drop off in the
151
00:16:05,120 -->
00:16:11,520
manufacturing category. I just didn't realize it was that the contraction was that large. Um,
152
00:16:12,400 -->
00:16:19,279
on the debate between the large and the small GSEs. I mean, uh, I'm
153
00:16:19,280 -->
00:16:26,158
not sure how that breaks down, other than it makes sense that maybe if the larger guys are are
154
00:16:26,400 -->
00:16:32,398
distracted and pursuing the the data centers, that there could be more traditional work for the
155
00:16:32,399 -->
00:16:38,768
midsize or smaller ones. But I tend to think the large guys can sop that up too, when demand is
156
00:16:38,769 -->
00:16:45,649
just down generally. So, um, it's tough out there right now. I mean,
157
00:16:45,650 -->
00:16:52,449
there's this there's a good news and bad news. Uh, let me share the bad news first.
158
00:16:53,089 -->
00:16:59,569
Uh, first one in the mid guys. I mean, TK was right. I was just looking at the data here.
159
00:17:00,090 -->
00:17:06,889
So the top 400 contractors grew from, let's call it 600 billion
160
00:17:06,890 -->
00:17:13,809
to 680 billion. Their total revenue. Right. So it's 2.2 trillion overall. Uh, the
161
00:17:13,810 -->
00:17:20,089
top four guys grew from 600 million to 680 billion, while the total construction fell down
162
00:17:20,090 -->
00:17:27,049
from very small percentage, 1.7%. Right. So which means the big guys are increasing
163
00:17:27,050 -->
00:17:34,009
their market share compared to small guys. And that's the bad news, right? The good news is, uh,
164
00:17:34,010 -->
00:17:40,889
which is an opportunity for the small contractors, and the midsize is the top four.
165
00:17:41,050 -->
00:17:48,009
Contractors have hit a craft ceiling of skilled labor resources. Right.
166
00:17:48,490 -->
00:17:55,249
So if you are a midsize contractor and you have you, you you, you form good tie
167
00:17:55,249 -->
00:18:01,889
ups with midsize subcontractors who have really good craft
168
00:18:02,369 -->
00:18:09,249
labor available with them. You can do magic and you can outcompete, uh, the large
169
00:18:09,249 -->
00:18:15,769
guys who are busy building data centers or, or or big office buildings in, uh, in smaller office or
170
00:18:15,770 -->
00:18:18,009
smaller hospitality jobs.
171
00:18:22,729 -->
00:18:29,650
What do you. Think reaction to that? Um, you know, so so
172
00:18:29,650 -->
00:18:36,369
I'm gonna I'm gonna digress a little bit here and then um, and hopefully try to answer this
173
00:18:36,370 -->
00:18:43,209
question. Um, first thing is I the, the craft ceiling that
174
00:18:43,209 -->
00:18:49,849
we're talking about getting hit. It's, it's the same for the small guys do. And it's probably
175
00:18:49,849 -->
00:18:56,569
worse for them because they don't have. They have they have lesser ability to attract top
176
00:18:56,569 -->
00:19:02,649
talent there because the work is not long term enough, and it's not high enough as compared to
177
00:19:02,689 -->
00:19:09,530
what large guys are pursuing, at least today. Yeah, I agree with that. I agree with you. And and so so
178
00:19:09,530 -->
00:19:16,170
again, I, I feel like it's it's a little bit more of a bad news for, for, for them. And what I'm
179
00:19:16,170 -->
00:19:22,769
trying to see if I can pull here is my concern also becomes backlog.
180
00:19:22,770 -->
00:19:28,409
So so so people who are building data centers, larger jobs have more predictable backlog.
181
00:19:28,410 -->
00:19:35,179
Predictable backlog means they can hold manpower in an assumption that there will be more future
182
00:19:35,180 -->
00:19:42,180
work. This is another luxury small to mid guys don't have. I really
183
00:19:42,180 -->
00:19:47,979
do think there needs to be a big. If I if I were running a construction business right now and I
184
00:19:47,979 -->
00:19:54,819
was a small to mid guy, I would be really beefing up my brick on site to build
185
00:19:54,819 -->
00:20:00,858
that backlog because that's going to be the name of the game to build predictability, because once
186
00:20:00,859 -->
00:20:07,740
I have predictability, I can I can go after the skilled labor I can have. Because what the way GC
187
00:20:07,740 -->
00:20:13,459
business works is like, you know, as our viewers also know, you need to have a strong cadre or core
188
00:20:13,459 -->
00:20:19,819
team of strong foremen who can go run a job and you have to hold on to them. And even even if you
189
00:20:19,819 -->
00:20:25,300
don't have work, you want to hold on to them. And for that you need to have backlog. So backlog is
190
00:20:25,300 -->
00:20:31,698
the name of the game. I wish there were reports out there. Uh, if there is a backlog report on
191
00:20:31,699 -->
00:20:38,259
where backlogs are by this split, you know, for for for like non data center work
192
00:20:38,260 -->
00:20:45,139
split. You know this is so point on tick about the about the
193
00:20:45,139 -->
00:20:51,698
volume of people. Because that's the last thing you want to do is like like not have people when
194
00:20:51,699 -->
00:20:58,259
the demand comes back. Uh uh and. Well are you seeing that
195
00:20:58,819 -->
00:21:05,739
that there is not layoffs tied to this, that people are holding, uh, people back and keeping
196
00:21:05,739 -->
00:21:11,779
them on payroll until the demand comes back? That's that's exactly what I want to kind of, uh,
197
00:21:12,139 -->
00:21:18,739
this is a good progression to our next topic, which is, uh, that's happening is
198
00:21:18,819 -->
00:21:25,459
construction. Layoffs is hitting the lowest level since 2000. Right. I mean,
199
00:21:26,900 -->
00:21:33,540
uh, layoffs are All time low. And that's because people know that the demand will will
200
00:21:33,540 -->
00:21:40,099
rebound, uh, when the interest rates go down and when the interest rates go down and the demand
201
00:21:40,099 -->
00:21:45,499
rebounds, they want to make sure that they have the authority people with them. Right. So
202
00:21:46,900 -->
00:21:53,780
so yeah, that's uh, it's a 49, 46% drop drop on layoffs compared to a year ago.
203
00:21:54,140 -->
00:22:01,059
Like that's huge. Yeah, I think that's a positive sign. And confidence. Yeah. Set aside
204
00:22:01,180 -->
00:22:07,979
set aside interest rates. I think that's just a view that people feel that the demand is,
205
00:22:08,020 -->
00:22:14,659
is either coming or here and going to come back. That's a very positive sign that the
206
00:22:14,659 -->
00:22:20,419
industry is it's it's a it's a sign that the, you know, of the realities of the worker shortage, but
207
00:22:20,419 -->
00:22:26,938
also that they think that they can hold on. They're seeing it. There are two
208
00:22:26,979 -->
00:22:33,419
50,000 open jobs like the one new hire there. I mean, there's a backlog of people who want to be
209
00:22:33,420 -->
00:22:40,420
hired. And I mean, I urge all the tradesmen or people who
210
00:22:40,420 -->
00:22:47,260
want to get into trades, like there are schools being opened up. Uh, Metta has opened a school, a
211
00:22:47,260 -->
00:22:53,739
school for trades to, to train them on the job and the real life job, uh, for four months and then
212
00:22:54,060 -->
00:23:00,019
get them, like, learn how to how to lay a cable, how to lay a fiber, how to do all that stuff. I mean,
213
00:23:00,499 -->
00:23:06,099
there's a lot of trade schools being opened up, and, uh, these jobs can be filled up pretty fast.
214
00:23:06,219 -->
00:23:12,858
Yeah. I mean, and the thing is, I wonder if this report does this breakdown
215
00:23:12,859 -->
00:23:19,739
so, so lot. I think a lot of the trade partners, uh, or subcontractors, whatever you
216
00:23:19,740 -->
00:23:26,500
might want to call them, they, they have, they have the ability to serve or like hit
217
00:23:26,550 -->
00:23:32,030
most of these, like like an electrician, like the concrete guys and all that. Right. So I think, I
218
00:23:32,030 -->
00:23:38,269
think what this is a vote of confidence for is the overall construction that will go on in the
219
00:23:38,270 -->
00:23:44,229
market. Um, it's hard to break it down by being sector specific.
220
00:23:45,550 -->
00:23:52,390
I wish there was a report that did that, um, in a more detailed way. But I would
221
00:23:52,390 -->
00:23:59,108
say on a positive note, I, uh, I did see this backlog report that I was able to pull
222
00:23:59,109 -->
00:24:05,790
up. Let me let me pull this up here. No, I mean, so so so
223
00:24:05,790 -->
00:24:12,630
so what this is showing is backlog in months, right? So again, August 2012. And this is by ABC. So
224
00:24:12,630 -->
00:24:19,229
this is a this is not government but uh, ABC is associated
225
00:24:19,230 -->
00:24:25,149
uh, basically general contractors, very, very uh, Associated Builders and contractors. So it's a
226
00:24:25,150 -->
00:24:31,309
very reputed organization, um, considered fairly reliable, have large membership. So.
227
00:24:31,829 -->
00:24:38,749
Um, so this is ABC's projection. Uh, they are in August. They have actually
228
00:24:38,750 -->
00:24:45,549
seen for commercial and institutional backlog go up by 0.5. Uh, sorry by 0.2
229
00:24:45,550 -->
00:24:50,149
months. So it's kind of. The number means the higher the number means they have, they have more,
230
00:24:50,149 -->
00:24:57,030
uh, uh, dollars booked already for construction structures. Okay. Yeah. So that means I have
231
00:24:57,069 -->
00:25:03,989
eight and a half months worth of work booked today. I can keep my whole army,
232
00:25:04,629 -->
00:25:10,109
uh, employed for next eight and a half months. But this is where it gets interesting and kind of
233
00:25:10,150 -->
00:25:16,469
runs counter to what I was saying. So. So let's let's look at this. So under 30 million,
234
00:25:17,869 -->
00:25:23,068
it has gone up from last year the backlog.
235
00:25:24,269 -->
00:25:30,509
But the only thing to argue on my behalf, I'll say, like I when I was talking about small guys, I was
236
00:25:30,510 -->
00:25:37,469
talking about people who do, uh, projects that are worth sub 10 million, which is which is where I'd
237
00:25:37,469 -->
00:25:44,350
be interested in seeing what's going on there. Um, but over 100 million, it's gone
238
00:25:44,350 -->
00:25:50,709
down. And that might be that might be biased to the membership also for ABC. So I'm not going to
239
00:25:50,750 -->
00:25:56,870
hold that accountable. Like AGC has has a bigger membership or for large contractors. So though I
240
00:25:56,870 -->
00:26:01,869
think you can knock out a data center in 12 months anyway. So, you know, I don't know how much,
241
00:26:02,550 -->
00:26:09,468
um, the backlog would be there, but it just feels like larger people building larger
242
00:26:09,469 -->
00:26:16,109
projects have a smaller backlog, or at least it has reduced somewhat. And then they have another
243
00:26:16,109 -->
00:26:23,069
one, the construction confidence Index. Um, it's actually more now Then it used to
244
00:26:23,069 -->
00:26:29,789
be last year. I mean, two things are very clear from this, right? Which is one. Um,
245
00:26:30,230 -->
00:26:36,830
if you do like, let's summarize this point about what should a small or midsize GC do in today's
246
00:26:36,830 -->
00:26:41,669
environment and what's happening in the environment today. Right. What's happening today is
247
00:26:41,670 -->
00:26:46,389
the larger GCS are winning larger jobs and they're growing faster.
248
00:26:48,629 -->
00:26:55,149
You, as a smaller mid-sized GC can seize this opportunity, uh, to win the smaller breadcrumbs of
249
00:26:55,149 -->
00:27:00,948
the larger GCS which are leaving behind for you, which will be bigger projects for you.
250
00:27:02,069 -->
00:27:09,069
Uh, if you establish a good recon team and go after the opportunities more and more,
251
00:27:09,630 -->
00:27:14,789
if you see some good partnership with subcontractors to have good demand and and hence
252
00:27:14,789 -->
00:27:21,400
the stability of labor. And if you keep on holding your best project managers and executives, uh,
253
00:27:21,600 -->
00:27:28,399
and, uh, super in attendance with you. Right. So, so keep your employee base as
254
00:27:28,399 -->
00:27:34,359
loyal and as retained as possible. Keep on doing more brick on work. Keep on having a good
255
00:27:34,359 -->
00:27:40,999
relationship with the subcontractors. And and go slightly prior to a slightly upmarket. Try to go.
256
00:27:41,560 -->
00:27:47,839
Try to win. If you're doing a civilian job, try to find a 5 million job. Try to find a six minute job.
257
00:27:48,199 -->
00:27:54,319
Uh, you might be able to get it because the bigger guys might be leaving it behind. So
258
00:27:55,040 -->
00:28:01,760
just do these four things, and you might. You might actually use this as an opportunity versus, uh, a
259
00:28:01,760 -->
00:28:08,120
bust. I mean, I'm gonna say it again, backlog is key, especially when when the market has these, these
260
00:28:08,120 -->
00:28:13,920
shifts happening. Right. Like between between different sectors. The distribution like like I
261
00:28:13,920 -->
00:28:20,919
said, um, office uh, when we, when we used to look at the office market Data centers used to be 10%
262
00:28:20,920 -->
00:28:27,920
and now they're 60. So there is a shift definitely happening there. And and your predictability
263
00:28:27,920 -->
00:28:34,759
is completely depending dependent on having a solid backlog, which is what recon team's job is.
264
00:28:35,040 -->
00:28:41,118
Final topic. State of Texas Governor Abbott directed the Texas Commission on Environmental
265
00:28:41,119 -->
00:28:47,999
Quality to halt all permits until the utility regulator, Ercot, completes an
266
00:28:48,000 -->
00:28:54,718
audit. Um, in terms of, you know, capacity and demand, I think, uh.
267
00:28:54,760 -->
00:29:01,680
So, look, this has been talked about. I'll just say it. My take is we're, uh, a month
268
00:29:01,680 -->
00:29:08,680
out from the November elections. I think this has election signaling and politics all over it.
269
00:29:08,680 -->
00:29:14,959
I don't think it's meaningful. Do I think it's probably, uh, meaningful that they do audit their
270
00:29:14,959 -->
00:29:21,360
capacity and make sure they can provide power in Texas for all this data center development? Yes. Do
271
00:29:21,360 -->
00:29:25,479
I think this is going to have any meaningful slowdown in terms of development in Texas, of data
272
00:29:25,480 -->
00:29:31,919
centers? No, I think this is. I'm calling it today in early October. This is all
273
00:29:31,919 -->
00:29:38,760
politics. The fundamental thing is we there needs to be more power capacity. I mean,
274
00:29:39,400 -->
00:29:44,319
yes, we have seen like, well, we were just talking about it having a 10% increase. Well, it needs to
275
00:29:44,320 -->
00:29:51,318
be more like. Yeah. Just to find that gas in Texas. I totally agree, there needs
276
00:29:51,319 -->
00:29:57,079
to be more power capacity. Yeah, I'm just saying and I'm not disputing that they probably need to
277
00:29:57,120 -->
00:30:03,679
make sure that they have enough. I think this is all election stunt by Abbott to
278
00:30:03,719 -->
00:30:09,599
give people cover that. Hey, I did a little bit of I addressed your concerns about AI and data
279
00:30:09,640 -->
00:30:14,919
centers by putting on a little pause, but I think it's convenient that it's a month out. I think it
280
00:30:14,919 -->
00:30:20,809
will fizzle and melt away after the election. Of course it is. I mean, Abbott was the strongest
281
00:30:20,810 -->
00:30:27,410
advocate of data centers. He caught so many of them in Texas. Like Texas is the biggest
282
00:30:27,410 -->
00:30:34,169
beneficiary of data centers movement period this year. So it is
283
00:30:34,809 -->
00:30:40,609
I. Can I can envision a room with people sitting around being like, okay, we gotta figure out some
284
00:30:40,609 -->
00:30:45,328
way to throw them a bone here. But like, what can we do? That really doesn't do anything. And that's
285
00:30:45,370 -->
00:30:52,209
we need an audit. Okay. Like that's like that's like corporate and government 101 to
286
00:30:52,249 -->
00:30:58,530
do something but do nothing. Right. But you know, what's the the meta point is important though,
287
00:30:58,570 -->
00:31:05,408
which is, uh, why were data centers marketed the wrong way? And what
288
00:31:05,409 -->
00:31:12,209
are the data center developers doing to market it the right way? Right. So we
289
00:31:12,250 -->
00:31:18,249
we busted the water myth. The water consumption myth. Sometime back in the pot as well. Like if you
290
00:31:18,250 -->
00:31:24,929
have like the AI leaders speaking of doom and the world dying
291
00:31:24,930 -->
00:31:31,689
and all that stuff, like, uh, who do people put their aggression back into
292
00:31:32,449 -->
00:31:38,848
the manufacturers of these, this AI now? See, as as Trump says.
293
00:31:38,849 -->
00:31:45,689
But who is who is the man? Where is the temple of AI?
294
00:31:45,890 -->
00:31:52,768
It's the data centers. Right. So? So you just kind of blast blast that as consumers,
295
00:31:52,810 -->
00:31:59,289
right? So that's a very easy one. But these different centered developers are AI labs have to
296
00:31:59,289 -->
00:32:05,649
do a better job communicating why they are good for those economies. And I think Dena Powell
297
00:32:05,650 -->
00:32:12,569
McCormick did a great job. She she advocates for meta. And uh, Wadena came
298
00:32:12,570 -->
00:32:18,089
in the came in the all in summit and give a nice talk she's advocating in the Congress, in the
299
00:32:18,089 -->
00:32:24,689
white House as well. They ran a good experiment in one city. I forgot the cities, the
300
00:32:24,689 -->
00:32:31,489
counties name them. Uh, it was in Louisiana. Yes. Louisiana? Yeah. So that.
301
00:32:31,569 -->
00:32:38,249
So that city, uh, was failing by. By failing, I mean, it
302
00:32:38,250 -->
00:32:44,369
was lower growth. Young kids were going out of the city to bigger towns and bigger cities to get
303
00:32:44,369 -->
00:32:50,969
jobs. Uh, teachers were not getting paid more. Uh, schools were dying. Now comes
304
00:32:50,970 -->
00:32:57,889
the the data center. There is huge, uh, like the city's treasury gets filled up
305
00:32:57,889 -->
00:33:04,689
with money. And guess where? Guess where does that treasury get distributed to
306
00:33:04,729 -->
00:33:11,009
school teachers? Now school teachers are getting got paid like $50,000 a year
307
00:33:11,050 -->
00:33:17,128
apiece First teacher more. Uh. Last year.
308
00:33:18,050 -->
00:33:24,969
So getting $50,000 checks more beyond what they're earning, which might be like 60, 70 K.
309
00:33:25,010 -->
00:33:31,449
Like, it's a huge bonus. There were teachers from other cities saying, do you have a job in your
310
00:33:31,449 -->
00:33:37,170
city? Like, I would love to teach here. Like, like the huge demand of teachers coming in. The city is
311
00:33:37,170 -->
00:33:43,929
flourishing back. They have more taxes. Like like talk about those things that that made the city
312
00:33:43,969 -->
00:33:49,289
come back into action. Right? Spring back into action. Like that kind of communication needs to
313
00:33:49,290 -->
00:33:56,208
happen more and more for the cities to, uh, and the and the citizens in those cities to to feel
314
00:33:56,209 -->
00:34:03,089
good about this. Yeah, let's let's be practical here. You know, there are places to put
315
00:34:03,089 -->
00:34:07,489
large data centers in their places, not to put large data centers. There are places all over
316
00:34:07,490 -->
00:34:14,219
America that want this. Uh, that story is not being told. My hometown just got
317
00:34:14,219 -->
00:34:20,699
awarded a massive data center on a on a piece of federal land that was a former
318
00:34:20,980 -->
00:34:27,659
nuclear uranium enrichment site. It has massive power capacity. It's already a major
319
00:34:27,659 -->
00:34:34,540
industrial site. They've been searching for years of what to do with this thing. Um,
320
00:34:34,659 -->
00:34:39,099
you know, it's been decommissioned. It's been recommissioned. This is a win win. I mean, there are
321
00:34:39,100 -->
00:34:44,739
people there that don't want it for sure, but by and large, the community wants it. It's going to be
322
00:34:44,739 -->
00:34:51,059
a massive capital influx. There's going to be new jobs. It's going to be repurposing a site that was
323
00:34:51,060 -->
00:34:57,539
essentially dead. And that's a win win. There are other places around the country that want this.
324
00:34:58,060 -->
00:35:02,379
Let them have it. Let them go for it. Let them compete for it. That that is a winner for all of
325
00:35:02,379 -->
00:35:06,699
us. Let's not try to ram these things down into communities where they don't want it, but in
326
00:35:06,699 -->
00:35:13,339
places where they do. Let's go. And I also think the other positive spin here,
327
00:35:13,340 -->
00:35:20,099
and is not even spin as just good news is, I think it's great that some of the smartest people in
328
00:35:20,100 -->
00:35:26,099
the entire world with a massive profit motive. Frontier Labs and
329
00:35:26,780 -->
00:35:33,059
Data center developers need to solve the power issue in the power generation issue in America.
330
00:35:33,219 -->
00:35:39,459
Let's let them rip. We need new. We need a generation before the data centers. We need to
331
00:35:39,459 -->
00:35:46,459
upgrade our distribution. China has massive, more, uh, generation than we do for all their
332
00:35:46,460 -->
00:35:52,340
industrial capacity that we don't have anymore. Let's go. Let's build it. Let's let this be the
333
00:35:52,340 -->
00:35:59,139
catalyst for it. Um, let's reactivate old nuclear sites. Let's do al, let's go all in on this thing
334
00:35:59,139 -->
00:36:05,979
and get the benefits of this new technology. You're so right. I mean, Industrial Revolution was
335
00:36:05,979 -->
00:36:12,539
more based. This will be power based. And if China
336
00:36:12,580 -->
00:36:19,179
increased the power capacity in the last five years, what US had overall absolute
337
00:36:19,500 -->
00:36:23,739
like the increase in capacity in China for the last five years was as what, US has a total
338
00:36:23,740 -->
00:36:30,179
capacity. That's how big they have gone and let them rip. I like that statement. I also like the
339
00:36:30,179 -->
00:36:37,139
fact that for the first time, these rich people are not adding wealth on just the
340
00:36:37,139 -->
00:36:44,020
coasts. They're adding wealth across the US. Like the building hard assets. Yeah, I'm middle
341
00:36:44,020 -->
00:36:50,980
of nowhere. Towns are getting rich for the first time compared to the coasts. Only New York and San
342
00:36:50,980 -->
00:36:57,378
Francisco and L.A. got rich before. Right now we have all these small cities getting rich. So
343
00:36:58,780 -->
00:37:05,659
let's go. Let's do it. Yeah. You know, this ties into our discussion about the trades.
344
00:37:05,860 -->
00:37:12,179
Look, I think it's better. There needs to be more
345
00:37:12,179 -->
00:37:19,179
people. Not like me, you know, law school and a finance degree and push a paper
346
00:37:19,179 -->
00:37:25,299
pusher. We need people who can design and build things in the real world. That is better for
347
00:37:25,300 -->
00:37:31,979
society. It's better for our country. You know, big trends like this generate demand for that,
348
00:37:32,020 -->
00:37:38,820
both on the design side and the engineering side. And then the implementation side. Let's go. It's it
349
00:37:38,899 -->
00:37:45,859
gives this next generation a chance to do something different. Um, and so let's let's embrace
350
00:37:45,860 -->
00:37:52,699
it. I mean, I'm all for building more more power for sure. I'm still not clear on
351
00:37:52,700 -->
00:37:59,339
how the small towns get rich, but that's, uh, that's probably a separate topic that we should cover
352
00:37:59,340 -->
00:38:06,110
because I. I'm still. Not kidding. I appreciate everyone to, uh, go online. Go see
353
00:38:06,149 -->
00:38:13,070
Dina Powell McCormick's All in Summit video. Uh. Like, it's not just her. She
354
00:38:13,070 -->
00:38:19,629
brings in, uh, people from that city to speak. Uh, so you hear the real stories? That's the other
355
00:38:19,629 -->
00:38:24,870
part. The people who are getting the benefits should come out and speak about it. Or we should
356
00:38:24,870 -->
00:38:29,709
give a chance to for them to speak about it. That resonates more than this. Rich people are talking
357
00:38:29,710 -->
00:38:34,949
at the top of their voice, right? Because that doesn't help anyone. Awesome. Well, guys, I think
358
00:38:34,950 -->
00:38:41,869
this was, uh, a thoughtful discussion today and, um, looking forward to again next
359
00:38:41,870 -->
00:38:47,708
week. And, um, TK, you coming back soon or you're just going to stay there forever
360
00:38:48,709 -->
00:38:55,668
mid October. All right. Well, we'll be excited to see you in person. Kind of uh,
361
00:38:56,429 -->
00:39:03,269
great to see you and talk soon. Yeah, yeah. Let's catch up soon. And some guys. See you
362
00:39:03,310 -->
00:39:03,909
guys.
