CRE is changing, and so are construction trends. Here’s what you need to know

Aug 14, 2023

The industry is constantly evolving—necessitated by the need to retain and draw in business. And subsequently, as the industry changes, so too do related construction trends.

For an in-depth discussion regarding these trends—past, present and future—Illinois Real Estate Journal turned to Lendlease’s Kinjal Patel and Chicago-based McHugh Construction’s Steve Wiley and Ryan Pyatenko.

Illinois Real Estate Journal: What are the emerging/current construction trends to be aware of?

Patel: The trends that we are keeping an eye on include AI design, prefabrication/modular construction, carbon reduction initiatives and scarcity of qualified labor pool. Because of our integrated model, Lendlease is able to try out innovative techniques and technologies with our own developments before exploring them as options with our third-party construction clients. One example is modular construction—a strategy that is finally starting to take shape after years of anticipation. As an example of prefabrication while building The Reed at Southbank, Lendlease’s residential tower in the South Loop, we worked with our subcontractors to prefabricate all egress concrete stairs on an adjacent site before lifting them into place. Prefab techniques such as these have the potential to enhance project efficiency, quality and safety.

Wiley: In general, and specific to the Chicago market, adaptive reuse is supplanting new construction demand when it comes to multifamily and hospitality projects.

Illinois Real Estate Journal: How has the demand for sustainable and eco-friendly building materials changed in the last few years, and how is it influencing construction practices?

Patel: Building occupants and real estate investors alike have grown more cognizant of the need for environmentally friendly living options. You can only do so much by way of operational efficiency, which is why there has been more of a focus on how buildings are constructed. Concrete is perhaps the most ubiquitous building material in construction, but it’s also one of the most impactful, from a carbon point of view. However, we’ve seen a lot of progress in the past few years. At The Reed at Southbank, we used a lower-carbon concrete mix that swapped out a portion of the Portland cement with slag, reducing embodied carbon by over 32% compared to standard mixes.

Wiley: I have not noticed a significant change in the use of sustainable materials, however, we are seeing an increased interest in photovoltaic and geothermal systems as well a shift from gas to electric as a heating energy source. Recent code changes are also requiring significant design and construction requirements for thermally isolated balconies and parapet walls which will have an impact on construction budgets.

Illinois Real Estate Journal: Are there any new technologies or innovative construction methods that have gained traction recently? How do they differ from traditional approaches?

Patel: There have been incredible advancements in worker safety on construction sites. For example, personal harnesses have been the industry standard to prevent injury or death from falls. They are far from foolproof, however, which is why new techniques are required. Lendlease pioneered the use of a building cocoon system that wraps the structure in screens to provide passive fall protection during concrete installation. Recently we have taken it a step further in pioneering the same concept to wrap floors for ongoing façade panel installation.

Wiley: In terms of technologies, McHugh is rolling out a new state-of-the-art image capture product for our projects that gives us improved project build documentation tied to the project’s BIM model. This new tool not only benefits McHugh as the GC by more efficiently documenting construction progress and as-built conditions, but greatly benefits our clients once they occupy the new facility by providing them with imagery of constructed conditions at any location in their building by simply pulling up this information on a handheld device. The client’s building engineer will have the ability to walk to any point in the building and be able to identify the location of a shut-off valve above the ceiling, or what is inside the wall, for example.

Illinois Real Estate Journal: What are the primary factors driving the evolution of construction standards and regulations in commercial real estate? How do they differ from those seen three-or-so years ago?

Patel: Many municipalities are grappling with the climate impact of the built environment, leading to an increase in decarbonization regulations as well as standards designed to make buildings more resilient to extreme weather events and other challenges associated with climate change. In Chicago, for example, new amendments to the Energy Code call for infrastructure that primes a building for future carbon-saving upgrades, such as solar panels and electric appliances. Coming out of the pandemic, and in the wake of recent wildfires across North America, there have been renewed calls to update building codes with regard to ventilation and indoor air quality.

Wiley: Most recent construction regulation changes are energy related.

Illinois Real Estate Journal: How has the focus on wellness and employee well-being affected the design and construction of commercial properties, and what new features are being integrated to meet these demands?

Patel: Our business has always prioritized the health and safety of our people and our subcontractors. As one example, Lendlease developed a modular, enclosed and climate-controlled bathroom system, the H3 Wellness Hub. It’s far cleaner and more comfortable than a portable toilet and can be craned into place near workers so they don’t need to take the hoist down to the ground floor, which saves time. Here in Chicago, Lendlease used the H3 Wellness Hubs while constructing Cirrus, Cascade and The Reed and the response from our employees was phenomenal. Recognizing the fact that mental health impacts construction workers more than those in most other sectors, Lendlease has made it a priority. We regularly provide employees with training and resources to educate them about mental health and suicide prevention.

Pyatenko: Over the last three to four years, we have seen a dramatic shift in the design and construction of commercial properties as it relates to wellness and employee well-being. As new developments come online along with the renovation of existing spaces, there has been an all-arms race on the amenitization of the workplace. With the change in the way people work, the infusion of hospitality and experiential design has led to this change. We are seeing the integration of indoor and outdoor programming through the introduction of biophilic design, the creation of “me” versus “we” spaces for the separation of heads down and collaboration and culture time, along with enhanced food, beverage and wellness service offerings, such as mediation rooms, on-site spa-like experiences and state-of-the-art fitness centers.

Illinois Real Estate Journal: Have there been any notable changes in the materials sourcing and supply chain for projects over the past year? How have they influenced project timelines and costs?

Patel: While supply chain issues have eased somewhat, material lead times are still significantly longer than pre-pandemic levels. Rising costs continue to be a challenge as well. Lendlease employs a couple of tactics to keep project budgets and timelines in check. We maintain an in-house tracker that provides a real-time assessment of material costs and availability. This allows us to advise our clients on how, and when, to make smarter procurement decisions. We also encourage our project partners—including ownership and the design team—to coordinate with us as early as possible and to consider pre-purchasing, so as to stay ahead of supply chain disruptions.

Wiley: Material sourcing and supply chain issues for the most part have not changed where we source from, but rather when we source. We are putting greater emphasis on partnering with our clients and design teams to release early procurement of critical lead time components and systems.

Illinois Real Estate Journal: How has the growing emphasis on adaptive reuse and repurposing of existing commercial buildings influenced construction practices and decision-making over the past year?

Patel: The industry as a whole is still trying to figure out the best path forward when it comes to adaptive reuse, which we are seeing right now in Chicago with the LaSalle Reimagined initiative. Though it’s long been an office submarket, the LaSalle Street Corridor really is an ideal candidate for mixed-use conversions with its central location, wide sidewalks and existing ground-floor retail. However, multifamily buildings, for example, require different floor plate layouts, utility hookups, amenities and other features, so it won’t be a simple substitution. Any property owner looking to reposition their asset should engage with an experienced contractor as early in the process as possible to assess viability and anticipate challenges that might arise during the conversion process.

Wiley: Adaptive reuse has always been one of the pillars of our portfolio, but we are shifting more of our resources to focus on this market segment in response to client demands as they in turn respond to the shifts in the multifamily and hospitality market.