Michael Neal, CEO, KAST Construction
KAST Construction CEO Michael Neal talked to Invest: about the ways in which the company has continued to prioritize maintaining its prestigious presence in South Florida while growing in tempered, intentional ways. “Our company leaders are very intentional in our efforts to plan and prepare for success,” he said.
Reflecting on the past year, what have been the most significant milestones or achievements for KAST Construction?
As a company, we’ve been forward-thinking enough to understand volatility and uncertainty in the market. Economic and politically created volatility is a fact of life for every business leader. We pay close attention to things we have control over, including unexpected shocks to our industry created by tariffs, rising material costs, and supply chain disruptions. Our company’s leadership is intuitive and operates cohesively through frequent internal communication. We are observing the landscape even more closely since the presidential election, and we monitor and evaluate how changes enacted by the new administration could impact the construction industry. We can’t control what happens as a result of executive orders or policy changes, but we can plan for it and communicate with our customers about it. In the meantime, we can’t let these issues allow us to take our eye off the ball and distract us from growing our business and taking care of our customers. Miami is KAST’s youngest business unit, and we have been very intentional about scaling our growth in Miami. We wanted to have a solid infrastructure of very experienced leadership resources on the ground who could build solid customer relationships and grow the business in a controlled, profitable manner. We now have an exceptional leadership team in place in Miami and have completed some of the largest projects in South Florida. Our success in Miami-Dade County is gaining momentum, and having the experienced resources on the ground who understand the market and have long-standing relationships has been critical. At the same time, leaders like our COO, Sean Ouellette, are helping ensure that as we grow across all markets, we remain consistent in our client delivery and focused on performance and quality. It’s quite simple, actually — when you do good work, your customers become your best salespeople. Many of our customers work in all three markets where KAST has offices, so when they hear good things about us in Miami, that gives them confidence to ask us to work with them in Tampa or West Palm Beach.
Given the current challenges in real estate development, how is KAST adapting its strategies to help clients get projects to underwrite?
This is something we have been focused on since the pandemic, which set off a series of shock waves through the economy and our industry. In 2021, the industry experienced unprecedented inflation and cost increases that exceeded 40%. Nobody, including developers, contractors, investors, or lenders, could have anticipated this shock wave created by the COVID-19 economy shutdown, but we all had to deal with it as best we could. The lesson that all businesses had to learn, but more importantly remember, is that there have been and will be future “black swan” events that occur, and we must be better prepared to anticipate and deal with them. Following this event, we felt that we had to pay more attention to economic trends, material and commodity pricing specific to the construction industry. Monitoring these market movements will help us spot or identify potential threats and adapt to them proactively rather than deal with them in a reactive manner. We also felt strongly that sharing this information with our customers would be very beneficial to them as well. We now prepare a monthly briefing on the material markets and review these trends internally and distribute them to our clients.
We feel that being more data-driven in our business helps us address issues that arise during a project in a more intelligent and factual way. The transparency of sharing this data with our customers allows us to have an open dialogue about unforeseen market shifts caused by issues beyond the control of the team and shape a fair and equitable solution to how the team deals with these issues. Here again, the theme of volatility and uncertainty seems to be pervasive in the industry, with increased risk being felt by both contractors and developers in an environment of constant change and unexpected economic impacts arising from these changes. We continue to adapt to these changes and continue to seek out new and better approaches to mitigate the impact of a more volatile and uncertain world.
What are the most significant trends shaping the construction industry today, particularly in Florida?
One of our largest sectors has historically been in multifamily housing, with other primary focuses on hospitality and condominiums. Higher-end projects are easier to get financed. Multifamily housing has unfortunately seen a significant fall off in new starts because of the high costs, including interest rates, insurance, and rising construction costs. Rents are stabilizing or, in some markets, decreasing because of increased competition and large amounts of inventory. There are many renters who want to be homeowners but can’t afford it, and this factor is keeping many aspiring home buyers trapped in being renters. At the moment, deals are not rich enough for investors to take risks on multimillion-dollar projects when no one can earn a return on their investments. We are currently in a holding pattern and have experienced a 35% drop in multifamily starting projects, particularly with high-rise projects.
As labor shortages remain a critical issue in the construction industry, how is KAST attracting and retaining top talent while maintaining high morale and efficiency?
Construction is a service industry. That means all of the services we provide are through our 300 employees. With this at the core of our business model, we focus on the human aspect of what we do and how we deliver our services. The customer experience and how this shapes our brand is essential and drives our culture, how we treat our employees, and how we prepare them to deliver exceptional service. We measure our success one customer at a time, but we like to end up at a point where 80% of our business is from repeat customers. We try to benchmark some of the best service companies in the world, including Disney, Nordstrom, and Ritz-Carlton service models, to develop our people, to refine our culture around award-winning customer service, and to ensure that our customers continue to come back to us time and time again.
How is KAST leveraging technology and innovation in construction to enhance quality management and project execution?
The technology we employ in our business helps manage our time more effectively, helps us complete tasks quickly, and creates a platform for collaboration with clients, architects, and subcontractors. There is some technology that we use that incorporates AI and allows for verification of the dimensional accuracy of work we put in place and also to help identify potential coordination issues within the contract documents. This technology enables time-critical information to flow more quickly between project team members and keeps work in the field moving forward without needless interruption.
What are KAST Construction’s top priorities for growth and expansion over the next two to three years?
KAST has offices located in the best three markets in the state — Miami, Tampa, and West Palm Beach. We have always strived for controlled, profitable growth in each market and have tried not to take on more work than our resources can handle. This allows us to execute and deliver projects at a high level and keep our reputation as a quality builder intact.
I believe that the right strategy for KAST is to continue to acquire more market share in each of our three markets before considering further geographic expansion into new markets. Staying close to home allows us to continue to service our current customers, control our resources at a higher level, and grow our business in a controlled fashion. While we are not itching to move into new markets at the moment, there is the possibility of doing so in the future. The Southeast U.S. seems to be experiencing strong growth and several of our customers have asked if we would have interest in building projects for them in cities including Nashville, Atlanta, and Charlotte.
In the meantime, the best way to prepare for future growth and expansion would be to continue to develop our people to prepare them for future leadership opportunities as our appetite for growth and expansion outside of our core markets increases.
