3 min read April 2024 — In an interview with Invest:, Sean Buck, senior vice president at JE Dunn Construction, talked about the opportunities that have emerged with the economic and demographic growth in Middle Tennessee. He also discussed the development of landmark projects in Nashville, including the Neuhoff District, and the factors that are contributing to increased property insurance costs.
What is the state of the construction and real estate development industry in Middle Tennessee?
Turbulent would be the best description. There are still many opportunities in the market, but they are more complicated to analyze and execute than before. For instance, some of the asset classes and the ways clients finance projects have changed which shifts things quite a bit. Despite that turbulence, we have continued to have success thanks to our approach of being transparent, flexible, and understanding of our clients’ needs. Our clients are feeling additional stress with economic challenges and we have to use our expertise to help them add certainty and reduce risk to ensure that they can be successful.
There are a number of stresses that are specific to our industry. We have been dealing with labor shortages for a long time in Middle Tennessee. We have also been dealing with supply chain stress coming out of COVID-19 for a couple of years. These are two stressors that we are accustomed to dealing with but that we hope will soften over time.
I think we can expect labor shortages to continue for at least the next 12 to 24 months. We have seen supply chains stabilize to some extent which is a welcomed sight. Given the amount of current and future activity anticipated in Middle Tennessee, I think this market and the stresses that are impacting it will continue, and evolve, for the foreseeable future.
What projects are emblematic of the growth of JE Dunn in Middle Tennessee?
We have been fortunate to be a part of some high-profile, market-changing private development projects in the last few years. A couple of examples would include the Neuhoff District in Germantown which will finish next year as well as working with IPB Properties on an exciting mixed use project we expect to start in 2024. These landmark projects are not new to the market but are expanding and improving it. On the other hand, we are also present in some unique sectors, such as the electric vehicle (EV) battery space. For instance, we are thankful to be a part of major projects with LG Chemical and Dongwha Electrolyte in Clarksville.
Healthcare also continues to be a big focus for us. As the population shifts to Nashville, there is a lot of continuing demand in that sector. We are currently building a large tower expansion at Williamson Health, which is one of the flagship healthcare systems in the region. It will continue to help them improve and expand their ability to provide best in class healthcare to the residents of Middle Tennessee.
What is great about Nashville is that there is still a lot of growth to go and, since we are diverse with respect to the markets we serve, we have a lot of resources and experiences across the country that we can bring to this market to meet our clients needs.
What is the lay of the land for the Neuhoff District project and what is the role of JE Dunn in it?
We have turned over a large portion of it, including most of the shell office space, so tenants like us can start building out and preparing to move in the months ahead. The multifamily buildings will be finished next year and everything is coming together beautifully. The Neuhoff District is unique; there is nothing like it in the city and it is in an area that has tremendous character. The unique excitement around the project and the neighborhood has made it a very desirable space for new office tenants, residents, and retailers. It has been a pleasure to be a part of bringing it to life and we are thankful that we will also have the opportunity to move our Nashville headquarters there.
How does the continuous growth of Middle Tennessee and the arrival of new businesses and residents impact the development strategies of JE Dunn?
At a core level, no matter how much activity there is in the market, we want to continue working with well-heeled clients who want to do high-quality work in Middle Tennessee. Most of the companies that are doing well and developing landmark projects successfully have had that approach and I believe that is where the market is headed in the future. As long as we work with great people and stay true to our culture and those things that have made us successful as a company I am confident we will continue to be successful.
What factors are contributing to rising property insurance costs?
While I am not an insurance expert, I think there are likely several things that contribute to that. For instance, the replacement cost of buildings has gone up over time, which means that property owners have to insure higher amounts. Additionally, the risk profile around commercial real estate has shifted across the country, so the ways that those risks are backstopped and the insurance demand associated with that likely are also contributing to those rising costs. There is some recalibration going on that will probably influence those insurance costs for some time.
While there are some market dynamics in play there, one common thing that building owners can do to alleviate their own insurance costs and operating expenses is to stay focused on building high quality buildings. Making poor decisions to achieve cheaper front-end costs can often impose risks or additional operating and insurance expenses later.
What are some emerging industries or business sectors that are seeing high demand?
The most visible one is the EV battery industry as Middle Tennessee has become a hotbed for it. I think that will be a big part of our growth in this region for the next five to 10 years. We are also starting to see more domestic manufacturing companies onshoring products that were previously manufactured overseas.
In addition to the industrial and manufacturing space, we are seeing demand being driven toward data center and mission-critical projects. As an example, Facebook just did a data center north of Nashville. Healthcare has also become a big IT player due to the healthcare needs of electronic medical records, data analytics, and similar things.
What legislation or regulation may have an impact on JE Dunn’s business or its client portfolio?
Legislation around infrastructure and property tax structure is a big conversation in Tennessee as we have had some significant property tax growth over the last few years. Workforce development legislation is also a big deal for us. We want to understand how to be smart about bringing people back into the workforce and into our industry.
From a national standpoint, there are also some examples of legislation that is well intended but could have negative consequences if not handled appropriately. For instance, there are a lot of legislative priorities and discussions about “Buy American” and sole sourcing materials from U.S. based companies. While that sounds great on paper and is well intended, we would have to have the infrastructure and material availability to achieve that goal. Based upon the demand for materials, and the cost pressures that are already felt in the market, we don’t have that capacity as a country and likely will not for the foreseeable future.
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