The commercial real estate industry is a competitive one. Any company that can thrive in this business for a decade or more? It’s doing something right.
And that includes St. Paul, Minnesota-based Big-D Midwest, a regional office of contracting firm Big-D Companies, which is celebrating a decade of operations in the Midwest.
In its 10th year of operation, Big-D Midwest has surpassed the $1 billion mark in work projects won and has completed more than 5,000 apartment units in the Midwest.
“At the end of the day the goal is to provide a place for people to work, grow their careers and do what they love while providing a high-quality product,” said Cory Schubert, Big-D Midwest’s senior vice president and managing director. “Ten years is a nice round number we’ve hit. We’ve become a big player in this market now. I’m excited to see what the next decade has in store.”
Part of the Big-D Family of Companies, the Big-D Midwest office opened in St. Paul in the summer of 2013. Local construction industry veterans Schubert, Chris Grzybowski and Tom Driscoll had approached the leaders at Big-D Construction’s headquarters in Salt Lake City, Utah, with a vision: Their idea was to bring the Big-D brand to Minnesota, a strong market for general contracting work.
With a focus on community and multifamily structures, Big-D Midwest’s portfolio includes The Gatsby in Downtown Minneapolis; The Reserve at Sono; Aster House Apartments; and The Rowan, several of which were financed by U.S. Department of Housing and Urban Development funds.
Schubert credited much of Big-D’s success in the Midwest to the careful planning that he and his fellow partners engaged in before making the move to St. Paul.
He also pointed to the long history of success that the Big-D brand had already enjoyed. Big-D Midwest was able to build on the procedures that its parent company had already enjoyed success with, Schubert said.
“We came to the market with a list of processes and policies, procedures and safety programs in place,” Schubert said. “Those processes were already proven before we embarked on this journey.”
At the same time, Big-D Midwest didn’t just jump into the Minneapolis-St. Paul market blindly. The leaders behind the expansion had already forged strong relationships in the market, something that helped Big-D Midwest enjoy quick success once it opened its doors.
“To stay relevant, we have focused on creating a successful culture here,” Schubert said. “The goal is to create repeat clients. When you can create the right culture, that results in repeat clients. A lot of our work comes from repeat clients. That has led to a lot of success in our market.”
After first arriving in the Twin Cities, Big-D Midwest experienced a period of what Schubert calls explosive growth. That’s evident in the numbers: The company started with three people. At its peak, Big-D Midwest employed 54.
The company’s leadership eventually decided to slow its growth. The goal, Schubert said, was to grow strategically and organically. Explosive growth was not healthy or sustainable, he said.
“We wanted to focus on being better, not just on being bigger,” Schubert said. “We paused our growth and realigned the direction of our company. We took some time to understand what we really wanted to accomplish. That paved the way for the success we experienced during the last five years.”
Among many partners in the market, Big-D Midwest has built an especially strong relationship with developer At Home Apartments. The two firms have collaborated on nine different projects, with more expected to come in the future.
“Our incredible partnership, which also includes Collage Architects, has delivered some of the most unique and desirable apartment communities throughout the Twin Cities,” At Home’s senior leadership, which includes Mike Cashill, Alan Spaudling, Leanna Stefaniak and Tami Wegwerth, said in a joint statement. “We are proud to call Big-D our partner, and our friend.”
With the bulk of Big-D Midwest’s portfolio in Minnesota, the firm plans to extend its footprint into neighboring states in the coming year.
Why did Big-D Midwest decide to locate in the Twin Cities market? Schubert says it came down to the area’s positive metrics.
The Twin Cities is home to several Fortune 500 firms. Demand for commercial real estate has been strong. Development activity has been consistent. Local government bodies are also known for being friendly to businesses.
This combination makes the Twin Cities a strong market in which to do business, Schubert said.
“We had a book of information, a briefcase, if you will, that we were prepared to present to the chairman of Big-D on why this market was right,” Shubert said. “The Twin Cities is a strong, growing market. The stars aligned, and this was where we opened.”
Like in all markets, though, the commercial real estate industry in the Twin Cities has experienced a slowdown thanks largely to higher interest rates. That slowdown has hit the multifamily sector here, too, a sector that has been strong for a long time.
The higher interest rates, though, have slowed the number of multifamily sale transactions taking place throughout the region.
“The third and fourth quarters of this year will be a little bumpy given the state of the market and high interest rates,” Schubert said.
The good news? The demand for new apartment buildings remains strong. To Schubert, this means that new product will inevitably be built here, and that construction activity will pick up once the Fed stops raising interest rates.
Just look at the apartment vacancy rate throughout the Twin Cities market. It remains low, making it difficult for renters to find units, especially modern apartment units in urban locations.
“Our multifamily vacancy rate remains one of the lowest in the country,” Schubert said. “With the higher interest rates, it makes it more difficult for some of the new apartment buildings to pencil out. But we still have that demand for new apartment space with our high occupancy rates.”
Multifamily developers are also dealing with higher construction costs. Fortunately, Schubert said, the costs of some materials are finally beginning to dip.
“It’s not enough to put us back to 2021 construction costs, but there has been some downward movement,” Schubert said. “Still, things are working against one another. If you have the costs of earthworks, framing and drywall stabilizing, you might still have mechanical and electrical increases that are offsetting those costs that are decreasing.”