August 15, 2025 • 28 mins
This episode of First Draft Live is presented by Agora.
It’s been a chaotic year for the construction industry.
Between a volatile tariff regime, elevated interest rates and increased pressures on its labor force, contractors have had to navigate one of the most difficult environments in recent memory.
On this week’s First Draft Live, Shawmut Design and Construction CEO Les Hiscoe breaks down the impacts of the uncertainty and how his $2B Boston-based company is handling the turmoil.
“When things aren’t known and you can’t really plan on them in our industry, you can’t give our clients predictability,” he said on the show.
While many developers are responding to the moment by delaying projects — Hiscoe said one of his clients won’t start building until interest rates fall a full percentage point — Shawmut is advising them against it as the impacts of tariffs have yet to fully be realized.
“Waiting is a mistake,” he said.
Register on Bisnow.com to join next Friday's conversation live, or check back here for the conversation after it airs.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mark Bonner (00:08):
Alright. Welcome to First Draft Live. It's Friday,
August 15. I'm Mark Bonner,BizNell's editor in chief coming
to you live for New York. Thanksto everyone for tuning in.
But before we get started, I amproud to say for the first time
that this episode of First DraftLive is presented by Agora.
Whether you're managing deals,raising capital, or growing your
(00:32):
portfolio, Agora is your trustedplatform for seamless real
estate investment management.Visit agorareal.com to learn
more. That's Agora, real.com.Okay, today we're going to get
into the construction dangerzone and what it means when
(00:52):
every bid, every contract, andevery hire has to survive a cost
environment we've never seenbefore.
Non residential constructioninput prices are up 2.5% year
over year, and that's before theAugust tariffs fully ripple
through the supply chain. Copperproducts are already up 40% year
(01:12):
to date. Steel and aluminumimports from The EU, Japan,
South Korea, and now India carrysurcharges of upwards of 50%.
Fixed price bids are a scaryplace right now. Escalation
clauses and shared risk modelsare back, and some owners are
freezing start dates just toavoid getting caught in the next
(01:34):
spike.
And labor, it's tightening fast.88% of contractors say they
can't find skilled positions andimmigration crackdowns in states
like Texas and Florida arepulling crew crews off of job
sites. That national shortfallcould hit 400,000 workers by
year's end. Higher ed isshifting too. Tighter visa rules
(01:57):
are hitting enrollmentforecasts, shrinking tuition
driven capital budgets, andpushing universities towards
renovations over new builds.
Our guest today, Les Hisco, CEOof Shawmut Construction. He runs
a 1 and a half billion dollarconstruction management firm
known for their high profilework in higher ed, life
sciences, and cultural landmarksnationwide. Please send your
(02:20):
questions in the chat and we'llget to as many of them as
possible. Les, welcome to theshow. Thanks for being here.
Les Hiscoe (02:27):
Thanks for having me, Mark. It's great to see you
this morning.
Mark Bonner (02:30):
So, Les, that's a lot that I just got through.
Where do we begin? What does itfeel like to be you right now?
What is your greatest challengein this environment?
Les Hiscoe (02:41):
Yeah, it's there are many, but it is, you know, it's
a volatile, even use the wordchaotic environment, and I
think, you know, when thingsaren't known, you know, and you
can't really plan on them in ourindustry, it's much harder to
give our clients, you know,price predictability, schedule
(03:04):
predictability, supply chainpredictability, things like
that. So we're just more on topof the supply chain and price
and trying to get a year out infront of it than we ever ever
ever have been, or have had tobeen, I should say. So it's,
yeah, it's a it's a it's a bitof an uncertain time.
Mark Bonner (03:25):
Yeah, these tariffs have been a shock to the system,
in particular for construction,as you well know, Les. I mean,
how does this affect Sharmat'sprocurement and bid strategies
at this time?
Les Hiscoe (03:34):
Yeah, so we've always done a high percentage of
our work in what I would call amore kind of negotiated or kind
of early pre construction way.It just calls the need for even
more and more and more of that.So, you know, getting closer to
our trade partners to understandexactly what the impacts on them
(03:56):
are as far as price, being ableto then accurately reflect that
to our clients, but to do thatin a collaborative way really
early in the project, a year,two years before. I mean we've
been in an escalating priceenvironment for the last three
years, and any client who isgoing to plan a project, the
owners kind of create a budgettwo years ago, three years ago
(04:18):
when they get their projectapproved for their company or
for themselves, and three yearsof escalation on top of that,
budgets never pencil on thefirst time we give them a number
in today's current environment.So we're constantly fighting
this kind of escalationenvironment, Tariffs just add
another layer of complexity andthey're kind of unknown or
(04:38):
unpredictability.
They've gone up, they've gonedown, they change every day.
Just makes everyone moretentative, makes it harder to
kind of give that predictabilityto our clients.
Mark Bonner (04:49):
I'm sure you're battling the headlines too. You
know, every single day or everyweek, something new comes out of
the White House as it pertainsto tariffs. It's up, it's down,
there's an extension. How do youhow do you battle the headlines,
when you look at the thespreadsheets that are in front
of you? And then how do youcommunicate to clients?
Two years out, that might havebeen a good playbook pre Trump
(05:13):
and another administration thatmight have had a little bit more
stability in terms of itsdecision making. This
administration and, again, thisis not a judgment on the policy.
Things change rapidly by thehour, by the day. Are you
communicating with clients whenthese things happen?
Les Hiscoe (05:29):
Just as kind of frequently and as in short a
period of time as we can. Youknow, when we historically would
get subcontractor pricing,they'd hold their pricing for
ninety days because, you know,the contracting proposition is,
you know, clients want toprotect their cost risk by
(05:50):
hiring us, and we then want toprotect risk down through the
supply chain by, you know,containing that risk with our
trade partners, and then theycontain it with manufacturers,
etc. For the first time in along time, you know, even
manufacturers can't protecttheir costs, trade partners
can't protect their costs, andtherefore we can't. So we're in
(06:11):
this open, in some way theheadlines actually help us. It's
so unpredictable that theheadlines help us with the
clients to say, you know whatwe're dealing with, and so we
have to kind of face thistogether.
I often say to the clients, maypay a little more for this
particular building at thismoment in time, but you will
have you know a long term assetthat will work itself out. For
(06:35):
us, it's a short term price riskthat we can't absorb fully
through the traditionalcontracting method.
Mark Bonner (06:42):
So to that end, I mean, are clients more open to
escalation clauses and thatshared risk model that you
referenced?
Les Hiscoe (06:51):
For sure they're more open today. It's been, you
know, I would tell you sixmonths ago when this started
happening, they were less open,and prior to the kind of
headlines, we were in anescalating time through really
2022, 2023, 2024, clients wereless receptive to escalation
(07:12):
clauses, and we started doingthis work back then, and we've
gotten better at it, you know,as normal escalation, I'm going
call it, just normal priceescalation, with varying types
of escalation causes tied to anindex on a material, certain
percentage limits with caps. Thething with the tariffs has been,
(07:33):
you know, one day it's 10%, thenit's 25%, then it's 50%. There's
just no way for, you know, we'lljust tell the clients, listen,
we have to put some contingencyin your project with that
contingency that we very wellmay use. We'll use it together,
we'll collaborate, and does yourproject pencil with that
(07:54):
contingency amount of money inthere?
Mark Bonner (07:57):
Yeah. Are contingency budgets, you know,
in the pro formas ballooning? Imean, I know it probably was one
thing a year ago. Do you have tomake that wider to capture the
unpredictability of what ishappening with these trade
negotiations worldwide?
Les Hiscoe (08:13):
Yeah, to an extent, I'd say yes. And you know, I
think of the impact of tariffsalone on budget, and you know, I
like to use the example of$100,000,000 construction
project, 60% labor, 40%materials, so 40,000,000 in
materials. Let's say 25% of thatis imported. So 20 so
(08:39):
$10,000,000 imported, apply, useround math, a 25% tariff to that
material broadly, and it doesn'tquite work with that, it's
probably a little bit less, butthat's $2,500,000. $2,500,000 on
$100,000,000 projects,2,500,000.0.
That's not going to make orbreak most projects of that
size. However, you do havenormal escalation if it's in the
(09:03):
commercial real estate ordeveloper space, you have the
cost of capital, which has been,which really had things on the
sidelines for a couple of yearsnow as well. It's another
additive factor that may causesomething to stall. It certainly
gives clients pause, launches usinto a better pre planning
process to find alternatives.And so we're constantly doing
(09:24):
value design these days andvalue engineering to try to get
clients budgets to work forthem.
Mark Bonner (09:29):
There's been a lot of reporting that's come out of
the business owners room overthe last six months that some
owners are delaying start datesto avoid these tariff driven
cost spikes. Are you seeing thaton your end, Les?
Les Hiscoe (09:41):
Not not delay specific because of tariff. We
have seen it. We have hadclients say we have projects on
the shelves because of interestrates. One developer in
particular has said, until I seea quarter, another quarter point
drop, we're not going to pullthings off the shelf. We've had
another large real estatedeveloper, we need a point drop
(10:03):
to make our numbers pencil.
So not tariffs specifically, andthe weighting to me, the effect
of tariffs has already causedsome price increase. And so one
solution is to go domestic withall of your procurement. Well,
(10:25):
that's going to create a demandissue domestically, and those
prices are going to go up. So Ithink waiting is a mistake, and
that's what we're advising ourclients. Waiting is a mistake.
It's never it's not going to getlower than it is right now.
Mark Bonner (10:37):
Labor is also causing pressure nationwide on
construction sites. You know,we've got this statistic here
from the Associated GeneralContractors of America that says
88% of firms can't fill skilledroles this year. Trump has
stepped up immigrationenforcement, especially in
places like Texas and Florida aswe discussed. He's trying to
pull both undocumented andlegally authorized workers off
(10:58):
of job sites, tightening analready short labor pool that's
a generation in the making. Thatnational shortfall could hit
400,000 individuals by the endof the year.
Plus, when you look at that ontop of everything else, what's
your perspective? Is thisaffecting your world?
Les Hiscoe (11:16):
So a large, you know, about half our business,
half the company is in theNortheast from New York up
through New England. The otherhalf is the rest of the country,
Miami, Los Angeles, Texas. Sofor half the company, it's not
really affecting us, the laborshortage up in the Northeast.
We're not really seeing it. Nowwe've been dealing with this
(11:38):
labor shortage for quite a fewyears.
This is not a new issue, this isa decade in the making at least.
So again, it's to get upfront ayear in advance of a project,
deal with trade partners thathave frankly more investment in
their company for their people,their people tend to stay with
them, better workforcepredictability, really better
(12:01):
businesses. Now with those typesof companies, we're able to
predict when they have gaps intheir labor force, when they
don't, so we haven't we've beenmanaging it well and haven't
been all that affected in someof the more Southern and Western
states. The immigration issue,we haven't really had an effect
yet. It's just it's a scaryissue, and so everyone's nervous
(12:24):
about it.
It hasn't affected us directlyyet, but again, in the types of
trade partners that we use, wehaven't had the issues we're
able to get some laborpredictability. The bigger issue
is how do we get new entrantsinto the trade space and the
construction management space.We're doing a ton on that front,
(12:47):
as are many of our large peersgetting into the high schools,
getting kids interested. We'rebig proponents and sponsors of
ACE nationwide and in ourlocales. We sponsor direct
scholarship programs toconstruction management schools
to have folks that get into theconstruction management trade,
we scholarship them all the waythrough so that they will join
(13:09):
the industry, things like that,things like Posse.
So we're in probably five or sixdifferent organizations and
initiatives to try to get folksmore interested in coming into
the construction field and intothe trades, maybe at times
versus, you know, going intocollege.
Mark Bonner (13:28):
Yeah, I mean look and that's been a broader effort
over the last ten or fifteenyears. Is it working? I mean I
see the wages increasing, that'sobviously affecting budgeting.
There's time and effort anddollars that it takes to do the
cross training to build that newrecruitment pipeline. I mean, do
you see it making a difference,Les?
And and if you do, I mean, whenis the payoff going to come?
(13:51):
Because the construction laborcrisis has been with us for
quite a while and it justdoesn't seem like to the average
observer that much progress hasbeen made.
Les Hiscoe (14:01):
Yeah. I think it's all helping, and I think it
needs more. I frankly think ourentire industry needs to kind of
do more on that front. I thinkwe're all, you know, I sit on
the construction roundtableboard nationally, and every one
of the large contractors in TheU. S.
(14:22):
Is facing this issue, dealingwith this issue, and making some
impact on the issue. It doesn'tfeel like there's this watershed
moment. It feels like it'sincremental. Keep at it. Keep
getting more folks kind of intoit.
And I think we're doing okay. Ithink we can do we're gonna need
(14:44):
to do more for our industries tobe okay.
Mark Bonner (14:47):
If you're just tuning in, this episode of First
Draft Live is presented byAgora. We're here with Las
Hisco, CEO of Chamot Design andConstruction. Les, I know
Chaumet has a big footprint whenit comes to higher ed and we've
talked about some of the policythat's come out of the White
House regarding we call it justcall it there the attacks on
(15:08):
some of the Ivy Leagues. Thathas had a demonstrable impact on
a number of fronts, but inparticular on your world. What's
going on here, right?
Like why is this happening andwhat are you doing about it?
Les Hiscoe (15:22):
It's, yeah, for our, so education is our biggest
business at Chamot, and we workin higher ed across both
K-twelve and higher ed, butprimarily higher ed across the
country, and significantly withthe Ivy League institutions, we
work for almost all of them.There is a tough time right now
(15:46):
for them, I mean it's almost,you know, I use the term triple
whammy, but now it's quadruplewhammy, and now it's kind of
even more. You know, the cuttingof research funding has direct
effect to them, and so it'sgoing to have to change their
operating model, right? Sothey're planning for that. When
they have to plan for somethingdifferent, they pause projects.
(16:07):
You know, less enrollment fromforeign students based on, you
know, immigration issues andpolicy. Foreign students tend to
pay fuller priced tuitions,that's just another financial
impact on these universities.The talk about taxing endowments
has them spooked for sure, andit's sometimes cutting out
(16:32):
funding altogether to aninstitution negotiation, right?
It's kind of cut first,negotiate second, seems to be
the tactic. So it's got ourinstitutions all contingency
planning, and so the bigger onesthat we have spoken with
directly, every departmentwithin those institutions has a
(16:53):
plan B and a plan C.
If we lose this much, do we youknow not spend here? Do we do
this? Do we do that? And we'reseeing a little, we've had a few
of our projects put on hold andcanceled. The things that are
underway all seem to becontinuing and going underway.
We've not had anything stopped,but I think until deals are
(17:14):
made, and I do think you knowthere were a few deals being
made with liability institutionsnow that will at least make the
unknown known, settle thosefolks down, they'll know how to
plan for the future. For us, itgives us a gap, though. If
there's a pause now, that'llaffect us eighteen to twenty
four months from now. So we haveto plan for that in 2027 for our
(17:35):
business if things get pausednow.
Mark Bonner (17:37):
I was just going ask you, I mean, you know,
assuming this policy is here tostay and it's not going away,
how do you pivot?
Les Hiscoe (17:44):
So we're, yeah, we're kind of strategically
planning if our educationbusiness comes down, what else
do we fill it in with?Technology, tough tech, data
centers are all things thatwe're getting more interested
in. Infrastructure, publicspending are things we do a
little bit of, but are making amore concerted effort to then go
(18:06):
do more of those things, and sowe run with kind of
diversification mentality. Themore diversified our business
is, both in size of project,type of project, and geography
of project, the better we are toweather regional and national
storms.
Mark Bonner (18:22):
Let's go to a question from the audience here.
Les, are you implementingrobotics in your projects? Can
that make a real difference inyour need for labor?
Les Hiscoe (18:34):
We've dabbled in robotics. We're not I would not
say I wouldn't go so far as tosay we're implementing robotics,
you know, directly on projectsites. Certainly some robotics
are getting used in themanufacturing of goods that do
make it to our projects. But Idon't see robotics affecting our
(18:58):
labor force anytime in theforeseeable future for us. Just
don't.
Mark Bonner (19:04):
Tech adoption is speeding up though, right? I I
know Shalman uses AI in terms ofestimating. There's some
advanced project management thatcan cut delays and boost
accuracy. Tell us about that.Like how does that transform
your business, and what do youthink the future of that is?
Les Hiscoe (19:23):
We're fully embracing AI in our business and
adopting wherever we can and howI'm seeing it at the moment, and
so very different than robotics.It's in it's we're integrating
into a lot of our processes, andit's really all to drive kind of
efficiency, and if you think ofAI and it's really the use of
data to kind of get quickeranalyzation and a quicker set of
(19:46):
desired outcomes and options,we're able to use it to get more
accuracy in some of ourestimating processes and
procedures. We're using it insafety to get from reactive to
predictive to prevent injury,and so we've done that via video
capture, via predictability, youknow, of data input into our
(20:07):
safety apps. We've created acustom safety app. So love it
there, and we're using it inmarketing, we're using it in
contract review, so we have alot of little place.
So it's plugging into all theselittle process pieces, and
that's helping us be efficientnot to reduce our construction
(20:28):
management side labor, toactually let our construction
management side labor be moreeffective on the process side of
things and efficient andactually spend more of their
time problem solving for ourclients, meeting with our
clients, and driving more valueon that side is really what
we're trying to do.
Mark Bonner (20:44):
I mean, when you look out two or three years,
where do you think this isleading towards? Right? Some
people have said, I think,hyperbolically that this could
help solve the labor crisis. AndI'd love your thoughts on that.
But in terms of streamliningyour business, getting things
done faster and moreintelligently, like, where do
you think this is going to be intwo or three years with
(21:04):
implementation of AI and otherthings like that?
Les Hiscoe (21:07):
It will again, don't see a dramatic shift in how and
what we do. I think it'll bebetter and better and better. I
got this amazing presentationfrom this AI consultant that had
a really cool graph, it was likepeak hype, trough of
(21:30):
disillusionment, and then kindof plateau of enlightenment,
like were these three terms,
Mark Bonner (21:34):
and it was really pretty cool.
Les Hiscoe (21:35):
And I think we're gonna, we're probably a little
bit in the trough ofdisillusionment still and on our
way to the plateau ofenlightenment, but I think it's
getting better and better, and Ithink the more, I think we're,
our people aren't using it everysingle day in everything they do
yet. So it's more the company istrying. We're figuring out where
(21:57):
to use it. I think in threeyears when every single person,
it's just part of their day iswhen you really will see a huge
efficiency gain.
Mark Bonner (22:04):
Just really quickly as a follow-up, mean when you
say using it, like are youtalking about ChatGPT, are you
talking about Gemini or Azure,or are you talking about
something that is more custombuilt for your world?
Les Hiscoe (22:19):
So definitely ChatGPT, Gemini, obviously data
concerns and where our data goeswith those things, and so we're
creating our own kind of customAI apps that really use only our
company data, confine it tothat, create, you know, an
internal ChatGPT like interfacethat our folks can find anything
(22:45):
they want about our process, ourdata, our old pricing data, our
old project data, lightning fastversus what now takes quite a
bit of time.
Mark Bonner (22:55):
Let's go to one more question from the audience.
How are lead times withelectrical gear less? Any
concerns with the mass amount ofpower needs for data centers and
grids already strained?
Les Hiscoe (23:08):
It's, yeah, concerns, absolutely, is my
quick and easy answer. Leadtimes for electrical gear can be
out a year when the types ofkind of heavier and bigger gear
that, you know, data centers areusing aren't necessarily going
into our commercial buildings,but I met with a data center
(23:30):
client a couple weeks ago thatthey're in, you know, they're
actually, the whole roles arereversed. The client has to
essentially woo the electricalsubcontractor and the electrical
manufacturers to get in theirassembly line two years early to
make sure they havepredictability. So, we're having
(23:50):
to get way, way, way out infront of it.
Mark Bonner (23:52):
Now let's just look ahead here. You know, as we
discussed, you know, this is apretty remarkable moment in time
where you've got all of theshifting plates with tariffs and
everything else. What earlyeconomic or policy signals, Les,
would you like to see that wouldgive you confidence that you
(24:14):
could be making more stable,predictable decisions that are
going to play out down the line?
Les Hiscoe (24:22):
One, I think kind of rate reduction really has to
happen, and I think when it doesin a meaningful way, you'll see
a lot more commercialdevelopment activity, and that's
going to be good for all of us.Two, and I don't know that
that's possible with thisparticular administration, but,
you know, get deals settled,have tariffs not change anymore,
(24:46):
have, you know, know, all the,know, trade deals done, policy
changes kind of done, and youknow, when you once those things
settle, people will, you know,will be able to kind of say,
okay, I now know what new normalis, let's plan and let's go. So
we're just staying as abreast ofit as we can and communicating
(25:10):
that to our clients every singleday. They're dying for the same
information we are, you know.
Mark Bonner (25:14):
If you would ask me a week ago if interest rates are
gonna come down in September, Iwould have said likely yes. Then
earlier this week, the inflationdata comes out that throws cold
water all over again on thecentral bank's ability to lower
rates. It's now a highlypoliticized issue as we all
know. The market has beenscreaming for 25, fifty, seventy
(25:35):
five basis point reduction bythe end of the year. Looking
less likely.
I mean, so just assuming for asecond less that we continue to
go deeper into the year in thiswhole steady pattern with
interest rates. Like, what shoesdrop for you in your in your
business if you don't get that?
Les Hiscoe (25:55):
Yeah. If specific to us, we're not, you know, one of
the sectors, you know, reallyheavily affected by the census
rate is multifamily development,and that's not a huge sector for
us. So for us, a shoe doesn'treally drop. We're getting more
and more into that sector. Ithink, you know, the industry
(26:18):
and it's been happening over thelast couple of years, finding
better ways to do a better mixof units that, you know, do
pencil, attracting differenttypes of capital that are
willing to take a little bit ofless return, longer term view,
you know, and again, back to thepreconstruction piece, value
engineering is ever morecritical to get these building
(26:39):
costs down.
So and I was with a group ofbankers yesterday, and the
discussion was exactly as youlaid out. Some said, yeah, we'll
definitely get a quarter point.You know, Monday I would, you
know, people were saying, wemight get three quarters of a
point. Yesterday, it was aquarter point, if anything,
right? So who knows?
We're just going to have towait, and we're going to
(27:01):
continue to just get as far outahead of us as we can. That's
how we're running the businessnow.
Mark Bonner (27:06):
Okay, final question. What do you think then
what is the inflection pointthat you're waiting for next
where you know you'll be able tomake a turn towards
predictability? Is it thatinterest rate decision, or is it
a combination of things, or isit something policy related?
Les Hiscoe (27:20):
I think it's it's probably the three things you
just mentioned. It's interestrates. One one move in a
direction is gonna be a hugesignal. Two, a few more trade
deals getting done is gonnasettle things down. And there's
a point in this cycle where thisadministration is going to start
(27:42):
looking toward, you know, towardreelection, you know, not the
president specifically, but the,you know, other party, and that
will actually settle down, Ithink, the onslaught of this
policy change in the first, youknow, year and a half here.
Mark Bonner (27:57):
Les,
Les Hiscoe (27:57):
My thank you so much for being here pleasure. Really
my pleasure. Thanks, Mark.
Mark Bonner (28:02):
And a big thank you to Agora for presenting this
episode of First Draft Live.We'll be back with another
episode of First Draft Live nextweek, so don't miss out. You can
sign up now on our event page.You can also find today's
episode and all of our pastconversations on your favorite
podcast app. This is First DraftLive.
Have a great weekend, y'all.
Alright. Welcome to First Draft Live. It's Friday,
August 15. I'm Mark Bonner,BizNell's editor in chief coming
to you live for New York. Thanksto everyone for tuning in.
But before we get started, I amproud to say for the first time
that this episode of First DraftLive is presented by Agora.
Whether you're managing deals,raising capital, or growing your
(00:32):
portfolio, Agora is your trustedplatform for seamless real
estate investment management.Visit agorareal.com to learn
more. That's Agora, real.com.Okay, today we're going to get
into the construction dangerzone and what it means when
(00:52):
every bid, every contract, andevery hire has to survive a cost
environment we've never seenbefore.
Non residential constructioninput prices are up 2.5% year
over year, and that's before theAugust tariffs fully ripple
through the supply chain. Copperproducts are already up 40% year
(01:12):
to date. Steel and aluminumimports from The EU, Japan,
South Korea, and now India carrysurcharges of upwards of 50%.
Fixed price bids are a scaryplace right now. Escalation
clauses and shared risk modelsare back, and some owners are
freezing start dates just toavoid getting caught in the next
(01:34):
spike.
And labor, it's tightening fast.88% of contractors say they
can't find skilled positions andimmigration crackdowns in states
like Texas and Florida arepulling crew crews off of job
sites. That national shortfallcould hit 400,000 workers by
year's end. Higher ed isshifting too. Tighter visa rules
(01:57):
are hitting enrollmentforecasts, shrinking tuition
driven capital budgets, andpushing universities towards
renovations over new builds.
Our guest today, Les Hisco, CEOof Shawmut Construction. He runs
a 1 and a half billion dollarconstruction management firm
known for their high profilework in higher ed, life
sciences, and cultural landmarksnationwide. Please send your
(02:20):
questions in the chat and we'llget to as many of them as
possible. Les, welcome to theshow. Thanks for being here.
Les Hiscoe (02:27):
Thanks for having me, Mark. It's great to see you
this morning.
Mark Bonner (02:30):
So, Les, that's a lot that I just got through.
Where do we begin? What does itfeel like to be you right now?
What is your greatest challengein this environment?
Les Hiscoe (02:41):
Yeah, it's there are many, but it is, you know, it's
a volatile, even use the wordchaotic environment, and I
think, you know, when thingsaren't known, you know, and you
can't really plan on them in ourindustry, it's much harder to
give our clients, you know,price predictability, schedule
(03:04):
predictability, supply chainpredictability, things like
that. So we're just more on topof the supply chain and price
and trying to get a year out infront of it than we ever ever
ever have been, or have had tobeen, I should say. So it's,
yeah, it's a it's a it's a bitof an uncertain time.
Mark Bonner (03:25):
Yeah, these tariffs have been a shock to the system,
in particular for construction,as you well know, Les. I mean,
how does this affect Sharmat'sprocurement and bid strategies
at this time?
Les Hiscoe (03:34):
Yeah, so we've always done a high percentage of
our work in what I would call amore kind of negotiated or kind
of early pre construction way.It just calls the need for even
more and more and more of that.So, you know, getting closer to
our trade partners to understandexactly what the impacts on them
(03:56):
are as far as price, being ableto then accurately reflect that
to our clients, but to do thatin a collaborative way really
early in the project, a year,two years before. I mean we've
been in an escalating priceenvironment for the last three
years, and any client who isgoing to plan a project, the
owners kind of create a budgettwo years ago, three years ago
(04:18):
when they get their projectapproved for their company or
for themselves, and three yearsof escalation on top of that,
budgets never pencil on thefirst time we give them a number
in today's current environment.So we're constantly fighting
this kind of escalationenvironment, Tariffs just add
another layer of complexity andthey're kind of unknown or
(04:38):
unpredictability.
They've gone up, they've gonedown, they change every day.
Just makes everyone moretentative, makes it harder to
kind of give that predictabilityto our clients.
Mark Bonner (04:49):
I'm sure you're battling the headlines too. You
know, every single day or everyweek, something new comes out of
the White House as it pertainsto tariffs. It's up, it's down,
there's an extension. How do youhow do you battle the headlines,
when you look at the thespreadsheets that are in front
of you? And then how do youcommunicate to clients?
Two years out, that might havebeen a good playbook pre Trump
(05:13):
and another administration thatmight have had a little bit more
stability in terms of itsdecision making. This
administration and, again, thisis not a judgment on the policy.
Things change rapidly by thehour, by the day. Are you
communicating with clients whenthese things happen?
Les Hiscoe (05:29):
Just as kind of frequently and as in short a
period of time as we can. Youknow, when we historically would
get subcontractor pricing,they'd hold their pricing for
ninety days because, you know,the contracting proposition is,
you know, clients want toprotect their cost risk by
(05:50):
hiring us, and we then want toprotect risk down through the
supply chain by, you know,containing that risk with our
trade partners, and then theycontain it with manufacturers,
etc. For the first time in along time, you know, even
manufacturers can't protecttheir costs, trade partners
can't protect their costs, andtherefore we can't. So we're in
(06:11):
this open, in some way theheadlines actually help us. It's
so unpredictable that theheadlines help us with the
clients to say, you know whatwe're dealing with, and so we
have to kind of face thistogether.
I often say to the clients, maypay a little more for this
particular building at thismoment in time, but you will
have you know a long term assetthat will work itself out. For
(06:35):
us, it's a short term price riskthat we can't absorb fully
through the traditionalcontracting method.
Mark Bonner (06:42):
So to that end, I mean, are clients more open to
escalation clauses and thatshared risk model that you
referenced?
Les Hiscoe (06:51):
For sure they're more open today. It's been, you
know, I would tell you sixmonths ago when this started
happening, they were less open,and prior to the kind of
headlines, we were in anescalating time through really
2022, 2023, 2024, clients wereless receptive to escalation
(07:12):
clauses, and we started doingthis work back then, and we've
gotten better at it, you know,as normal escalation, I'm going
call it, just normal priceescalation, with varying types
of escalation causes tied to anindex on a material, certain
percentage limits with caps. Thething with the tariffs has been,
(07:33):
you know, one day it's 10%, thenit's 25%, then it's 50%. There's
just no way for, you know, we'lljust tell the clients, listen,
we have to put some contingencyin your project with that
contingency that we very wellmay use. We'll use it together,
we'll collaborate, and does yourproject pencil with that
(07:54):
contingency amount of money inthere?
Mark Bonner (07:57):
Yeah. Are contingency budgets, you know,
in the pro formas ballooning? Imean, I know it probably was one
thing a year ago. Do you have tomake that wider to capture the
unpredictability of what ishappening with these trade
negotiations worldwide?
Les Hiscoe (08:13):
Yeah, to an extent, I'd say yes. And you know, I
think of the impact of tariffsalone on budget, and you know, I
like to use the example of$100,000,000 construction
project, 60% labor, 40%materials, so 40,000,000 in
materials. Let's say 25% of thatis imported. So 20 so
(08:39):
$10,000,000 imported, apply, useround math, a 25% tariff to that
material broadly, and it doesn'tquite work with that, it's
probably a little bit less, butthat's $2,500,000. $2,500,000 on
$100,000,000 projects,2,500,000.0.
That's not going to make orbreak most projects of that
size. However, you do havenormal escalation if it's in the
(09:03):
commercial real estate ordeveloper space, you have the
cost of capital, which has been,which really had things on the
sidelines for a couple of yearsnow as well. It's another
additive factor that may causesomething to stall. It certainly
gives clients pause, launches usinto a better pre planning
process to find alternatives.And so we're constantly doing
(09:24):
value design these days andvalue engineering to try to get
clients budgets to work forthem.
Mark Bonner (09:29):
There's been a lot of reporting that's come out of
the business owners room overthe last six months that some
owners are delaying start datesto avoid these tariff driven
cost spikes. Are you seeing thaton your end, Les?
Les Hiscoe (09:41):
Not not delay specific because of tariff. We
have seen it. We have hadclients say we have projects on
the shelves because of interestrates. One developer in
particular has said, until I seea quarter, another quarter point
drop, we're not going to pullthings off the shelf. We've had
another large real estatedeveloper, we need a point drop
(10:03):
to make our numbers pencil.
So not tariffs specifically, andthe weighting to me, the effect
of tariffs has already causedsome price increase. And so one
solution is to go domestic withall of your procurement. Well,
(10:25):
that's going to create a demandissue domestically, and those
prices are going to go up. So Ithink waiting is a mistake, and
that's what we're advising ourclients. Waiting is a mistake.
It's never it's not going to getlower than it is right now.
Mark Bonner (10:37):
Labor is also causing pressure nationwide on
construction sites. You know,we've got this statistic here
from the Associated GeneralContractors of America that says
88% of firms can't fill skilledroles this year. Trump has
stepped up immigrationenforcement, especially in
places like Texas and Florida aswe discussed. He's trying to
pull both undocumented andlegally authorized workers off
(10:58):
of job sites, tightening analready short labor pool that's
a generation in the making. Thatnational shortfall could hit
400,000 individuals by the endof the year.
Plus, when you look at that ontop of everything else, what's
your perspective? Is thisaffecting your world?
Les Hiscoe (11:16):
So a large, you know, about half our business,
half the company is in theNortheast from New York up
through New England. The otherhalf is the rest of the country,
Miami, Los Angeles, Texas. Sofor half the company, it's not
really affecting us, the laborshortage up in the Northeast.
We're not really seeing it. Nowwe've been dealing with this
(11:38):
labor shortage for quite a fewyears.
This is not a new issue, this isa decade in the making at least.
So again, it's to get upfront ayear in advance of a project,
deal with trade partners thathave frankly more investment in
their company for their people,their people tend to stay with
them, better workforcepredictability, really better
(12:01):
businesses. Now with those typesof companies, we're able to
predict when they have gaps intheir labor force, when they
don't, so we haven't we've beenmanaging it well and haven't
been all that affected in someof the more Southern and Western
states. The immigration issue,we haven't really had an effect
yet. It's just it's a scaryissue, and so everyone's nervous
(12:24):
about it.
It hasn't affected us directlyyet, but again, in the types of
trade partners that we use, wehaven't had the issues we're
able to get some laborpredictability. The bigger issue
is how do we get new entrantsinto the trade space and the
construction management space.We're doing a ton on that front,
(12:47):
as are many of our large peersgetting into the high schools,
getting kids interested. We'rebig proponents and sponsors of
ACE nationwide and in ourlocales. We sponsor direct
scholarship programs toconstruction management schools
to have folks that get into theconstruction management trade,
we scholarship them all the waythrough so that they will join
(13:09):
the industry, things like that,things like Posse.
So we're in probably five or sixdifferent organizations and
initiatives to try to get folksmore interested in coming into
the construction field and intothe trades, maybe at times
versus, you know, going intocollege.
Mark Bonner (13:28):
Yeah, I mean look and that's been a broader effort
over the last ten or fifteenyears. Is it working? I mean I
see the wages increasing, that'sobviously affecting budgeting.
There's time and effort anddollars that it takes to do the
cross training to build that newrecruitment pipeline. I mean, do
you see it making a difference,Les?
And and if you do, I mean, whenis the payoff going to come?
(13:51):
Because the construction laborcrisis has been with us for
quite a while and it justdoesn't seem like to the average
observer that much progress hasbeen made.
Les Hiscoe (14:01):
Yeah. I think it's all helping, and I think it
needs more. I frankly think ourentire industry needs to kind of
do more on that front. I thinkwe're all, you know, I sit on
the construction roundtableboard nationally, and every one
of the large contractors in TheU. S.
(14:22):
Is facing this issue, dealingwith this issue, and making some
impact on the issue. It doesn'tfeel like there's this watershed
moment. It feels like it'sincremental. Keep at it. Keep
getting more folks kind of intoit.
And I think we're doing okay. Ithink we can do we're gonna need
(14:44):
to do more for our industries tobe okay.
Mark Bonner (14:47):
If you're just tuning in, this episode of First
Draft Live is presented byAgora. We're here with Las
Hisco, CEO of Chamot Design andConstruction. Les, I know
Chaumet has a big footprint whenit comes to higher ed and we've
talked about some of the policythat's come out of the White
House regarding we call it justcall it there the attacks on
(15:08):
some of the Ivy Leagues. Thathas had a demonstrable impact on
a number of fronts, but inparticular on your world. What's
going on here, right?
Like why is this happening andwhat are you doing about it?
Les Hiscoe (15:22):
It's, yeah, for our, so education is our biggest
business at Chamot, and we workin higher ed across both
K-twelve and higher ed, butprimarily higher ed across the
country, and significantly withthe Ivy League institutions, we
work for almost all of them.There is a tough time right now
(15:46):
for them, I mean it's almost,you know, I use the term triple
whammy, but now it's quadruplewhammy, and now it's kind of
even more. You know, the cuttingof research funding has direct
effect to them, and so it'sgoing to have to change their
operating model, right? Sothey're planning for that. When
they have to plan for somethingdifferent, they pause projects.
(16:07):
You know, less enrollment fromforeign students based on, you
know, immigration issues andpolicy. Foreign students tend to
pay fuller priced tuitions,that's just another financial
impact on these universities.The talk about taxing endowments
has them spooked for sure, andit's sometimes cutting out
(16:32):
funding altogether to aninstitution negotiation, right?
It's kind of cut first,negotiate second, seems to be
the tactic. So it's got ourinstitutions all contingency
planning, and so the bigger onesthat we have spoken with
directly, every departmentwithin those institutions has a
(16:53):
plan B and a plan C.
If we lose this much, do we youknow not spend here? Do we do
this? Do we do that? And we'reseeing a little, we've had a few
of our projects put on hold andcanceled. The things that are
underway all seem to becontinuing and going underway.
We've not had anything stopped,but I think until deals are
(17:14):
made, and I do think you knowthere were a few deals being
made with liability institutionsnow that will at least make the
unknown known, settle thosefolks down, they'll know how to
plan for the future. For us, itgives us a gap, though. If
there's a pause now, that'llaffect us eighteen to twenty
four months from now. So we haveto plan for that in 2027 for our
(17:35):
business if things get pausednow.
Mark Bonner (17:37):
I was just going ask you, I mean, you know,
assuming this policy is here tostay and it's not going away,
how do you pivot?
Les Hiscoe (17:44):
So we're, yeah, we're kind of strategically
planning if our educationbusiness comes down, what else
do we fill it in with?Technology, tough tech, data
centers are all things thatwe're getting more interested
in. Infrastructure, publicspending are things we do a
little bit of, but are making amore concerted effort to then go
(18:06):
do more of those things, and sowe run with kind of
diversification mentality. Themore diversified our business
is, both in size of project,type of project, and geography
of project, the better we are toweather regional and national
storms.
Mark Bonner (18:22):
Let's go to a question from the audience here.
Les, are you implementingrobotics in your projects? Can
that make a real difference inyour need for labor?
Les Hiscoe (18:34):
We've dabbled in robotics. We're not I would not
say I wouldn't go so far as tosay we're implementing robotics,
you know, directly on projectsites. Certainly some robotics
are getting used in themanufacturing of goods that do
make it to our projects. But Idon't see robotics affecting our
(18:58):
labor force anytime in theforeseeable future for us. Just
don't.
Mark Bonner (19:04):
Tech adoption is speeding up though, right? I I
know Shalman uses AI in terms ofestimating. There's some
advanced project management thatcan cut delays and boost
accuracy. Tell us about that.Like how does that transform
your business, and what do youthink the future of that is?
Les Hiscoe (19:23):
We're fully embracing AI in our business and
adopting wherever we can and howI'm seeing it at the moment, and
so very different than robotics.It's in it's we're integrating
into a lot of our processes, andit's really all to drive kind of
efficiency, and if you think ofAI and it's really the use of
data to kind of get quickeranalyzation and a quicker set of
(19:46):
desired outcomes and options,we're able to use it to get more
accuracy in some of ourestimating processes and
procedures. We're using it insafety to get from reactive to
predictive to prevent injury,and so we've done that via video
capture, via predictability, youknow, of data input into our
(20:07):
safety apps. We've created acustom safety app. So love it
there, and we're using it inmarketing, we're using it in
contract review, so we have alot of little place.
So it's plugging into all theselittle process pieces, and
that's helping us be efficientnot to reduce our construction
(20:28):
management side labor, toactually let our construction
management side labor be moreeffective on the process side of
things and efficient andactually spend more of their
time problem solving for ourclients, meeting with our
clients, and driving more valueon that side is really what
we're trying to do.
Mark Bonner (20:44):
I mean, when you look out two or three years,
where do you think this isleading towards? Right? Some
people have said, I think,hyperbolically that this could
help solve the labor crisis. AndI'd love your thoughts on that.
But in terms of streamliningyour business, getting things
done faster and moreintelligently, like, where do
you think this is going to be intwo or three years with
(21:04):
implementation of AI and otherthings like that?
Les Hiscoe (21:07):
It will again, don't see a dramatic shift in how and
what we do. I think it'll bebetter and better and better. I
got this amazing presentationfrom this AI consultant that had
a really cool graph, it was likepeak hype, trough of
(21:30):
disillusionment, and then kindof plateau of enlightenment,
like were these three terms,
Mark Bonner (21:34):
and it was really pretty cool.
Les Hiscoe (21:35):
And I think we're gonna, we're probably a little
bit in the trough ofdisillusionment still and on our
way to the plateau ofenlightenment, but I think it's
getting better and better, and Ithink the more, I think we're,
our people aren't using it everysingle day in everything they do
yet. So it's more the company istrying. We're figuring out where
(21:57):
to use it. I think in threeyears when every single person,
it's just part of their day iswhen you really will see a huge
efficiency gain.
Mark Bonner (22:04):
Just really quickly as a follow-up, mean when you
say using it, like are youtalking about ChatGPT, are you
talking about Gemini or Azure,or are you talking about
something that is more custombuilt for your world?
Les Hiscoe (22:19):
So definitely ChatGPT, Gemini, obviously data
concerns and where our data goeswith those things, and so we're
creating our own kind of customAI apps that really use only our
company data, confine it tothat, create, you know, an
internal ChatGPT like interfacethat our folks can find anything
(22:45):
they want about our process, ourdata, our old pricing data, our
old project data, lightning fastversus what now takes quite a
bit of time.
Mark Bonner (22:55):
Let's go to one more question from the audience.
How are lead times withelectrical gear less? Any
concerns with the mass amount ofpower needs for data centers and
grids already strained?
Les Hiscoe (23:08):
It's, yeah, concerns, absolutely, is my
quick and easy answer. Leadtimes for electrical gear can be
out a year when the types ofkind of heavier and bigger gear
that, you know, data centers areusing aren't necessarily going
into our commercial buildings,but I met with a data center
(23:30):
client a couple weeks ago thatthey're in, you know, they're
actually, the whole roles arereversed. The client has to
essentially woo the electricalsubcontractor and the electrical
manufacturers to get in theirassembly line two years early to
make sure they havepredictability. So, we're having
(23:50):
to get way, way, way out infront of it.
Mark Bonner (23:52):
Now let's just look ahead here. You know, as we
discussed, you know, this is apretty remarkable moment in time
where you've got all of theshifting plates with tariffs and
everything else. What earlyeconomic or policy signals, Les,
would you like to see that wouldgive you confidence that you
(24:14):
could be making more stable,predictable decisions that are
going to play out down the line?
Les Hiscoe (24:22):
One, I think kind of rate reduction really has to
happen, and I think when it doesin a meaningful way, you'll see
a lot more commercialdevelopment activity, and that's
going to be good for all of us.Two, and I don't know that
that's possible with thisparticular administration, but,
you know, get deals settled,have tariffs not change anymore,
(24:46):
have, you know, know, all the,know, trade deals done, policy
changes kind of done, and youknow, when you once those things
settle, people will, you know,will be able to kind of say,
okay, I now know what new normalis, let's plan and let's go. So
we're just staying as abreast ofit as we can and communicating
(25:10):
that to our clients every singleday. They're dying for the same
information we are, you know.
Mark Bonner (25:14):
If you would ask me a week ago if interest rates are
gonna come down in September, Iwould have said likely yes. Then
earlier this week, the inflationdata comes out that throws cold
water all over again on thecentral bank's ability to lower
rates. It's now a highlypoliticized issue as we all
know. The market has beenscreaming for 25, fifty, seventy
(25:35):
five basis point reduction bythe end of the year. Looking
less likely.
I mean, so just assuming for asecond less that we continue to
go deeper into the year in thiswhole steady pattern with
interest rates. Like, what shoesdrop for you in your in your
business if you don't get that?
Les Hiscoe (25:55):
Yeah. If specific to us, we're not, you know, one of
the sectors, you know, reallyheavily affected by the census
rate is multifamily development,and that's not a huge sector for
us. So for us, a shoe doesn'treally drop. We're getting more
and more into that sector. Ithink, you know, the industry
(26:18):
and it's been happening over thelast couple of years, finding
better ways to do a better mixof units that, you know, do
pencil, attracting differenttypes of capital that are
willing to take a little bit ofless return, longer term view,
you know, and again, back to thepreconstruction piece, value
engineering is ever morecritical to get these building
(26:39):
costs down.
So and I was with a group ofbankers yesterday, and the
discussion was exactly as youlaid out. Some said, yeah, we'll
definitely get a quarter point.You know, Monday I would, you
know, people were saying, wemight get three quarters of a
point. Yesterday, it was aquarter point, if anything,
right? So who knows?
We're just going to have towait, and we're going to
(27:01):
continue to just get as far outahead of us as we can. That's
how we're running the businessnow.
Mark Bonner (27:06):
Okay, final question. What do you think then
what is the inflection pointthat you're waiting for next
where you know you'll be able tomake a turn towards
predictability? Is it thatinterest rate decision, or is it
a combination of things, or isit something policy related?
Les Hiscoe (27:20):
I think it's it's probably the three things you
just mentioned. It's interestrates. One one move in a
direction is gonna be a hugesignal. Two, a few more trade
deals getting done is gonnasettle things down. And there's
a point in this cycle where thisadministration is going to start
(27:42):
looking toward, you know, towardreelection, you know, not the
president specifically, but the,you know, other party, and that
will actually settle down, Ithink, the onslaught of this
policy change in the first, youknow, year and a half here.
Mark Bonner (27:57):
Les,
Les Hiscoe (27:57):
My thank you so much for being here pleasure. Really
my pleasure. Thanks, Mark.
Mark Bonner (28:02):
And a big thank you to Agora for presenting this
episode of First Draft Live.We'll be back with another
episode of First Draft Live nextweek, so don't miss out. You can
sign up now on our event page.You can also find today's
episode and all of our pastconversations on your favorite
podcast app. This is First DraftLive.
Have a great weekend, y'all.
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