In two decades of moderating CEO power panels among residential real estate, development, and building enterprise leaders, two oft-quoted insights stand out for having weathered boom, bust, exponential technology, economic reset, societal upheaval, and nature’s whims.

  1. This is a people business
  2. There’s what you can control and there’s what you can’t control as a leader; we focus on what we can control

Those two, and “all real estate is local” are probably the observations I’ve heard most often in 20 years from the C-suite. There’s probably a good reason for that, and it’s what’s gnawing at me today.

External – or as economists say, exogenous – challenges appear to be defining the operational, tactical, and strategic framework and environment of leading today, what with the passel of known and unknown struggles that lay strewn in the critical path of continued building.

However, it’s a hidden-in-plain sight challenge – and opportunity – that relentlessly holds our own focus today. So much so that we’d go as far as to say our business community’s most profound, immediate, and sweeping priority has nothing to do with what’s going on in world outside our organizations, and everything to do with what’s been happening inside them.

The biggest risk to your businesses, we’d assert, is a cultural one, not a nameable list of negative drivers or scenarios.

It’s the real potential of losing the heart of resolve, commitment, alignment, trust, and engagement of people on the varying rungs of your organization’s talent chart – who’ll only deliver on your firms’ promises if they’re inspired, motivated, educated, and empowered.

Otherwise, what?

They’ll

Source: John Burns Real Estate Consulting

That said, we expect to see some dynamic pricing. Will the price increases stick? The best elasticity profiles are for the complex products in our vulnerability index (labor-intensive, components that cross international borders, etc). Less complex products may have a harder time getting all their increases. Will builders see price resistance with the added starts and potential inventory? Time will tell. Builders need to prove they can deliver, and in the face of the labor shortages that may be a problem.

Builders in our survey and in their earnings calls say the price pressures they are experiencing now in Q4 may stifle the earnings they’ve been used to in 2021, but those hits will be “more than offset” by their own price increases in Q1/Q2. In fact, that quote, “more than offset” was used in at least 7 earnings calls this week in relation to current results and 2022 guidance.

Below the surface of these issues, Tim affirms, roils an issue that falls very much within the realm of what organizations can control, but are at risk of not doing so. In his words, and underappreciated

Extreme shortage of construction managers and superintendents because of so many being recruited to commercial.”

Consider three phenomena underlying the defining craziness of now:

  • Many of your younger team member talents have entered and come of age in this business since the Great Recession. They have never known a down cycle, and they probably believe that a lot of what’s gone right with their careers and their firms has everything to do with them.
  • Tim Seims’ point about the competitive risk of commercial construction companies tapping and poaching talent, because their interests and stakeholders are as driven and as talent-challenged as employers in residential construction. And, they have budgets for bigger compensation packages!
  • Thirdly, we haven’t even begun to see the impact of the release of infrastructure spending on federal, state, and local government construction projects, again a risk of siphoning off your talent, in every discipline and at every management level.

This is why – for all the priority given these days to supply chain externalities, to inflation, to interest rates, and to the economic impacts of these forces on your business – the big business risk of the moment is a cultural one.

It’s also your biggest opportunity. If you solve for how to retain your most talented, committed, resolved, empowered, and engaged team members, solutions to what you can control in your business arc will come second-nature.

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