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It’s certainly been a taxing, grueling two years for the construction and real estate markets. From the onset of COVID-19 to still-lingering supply chain setbacks, both construction and real estate have felt the kickback effects. A session at the CLM Construction Conference this September 21-23 in San Diego will dive into the economic factors that are affecting regional construction and real estate markets.

“It is a fiction that there is a national real estate market,” said Gary H. London, senior principal, London Moeder Advisors. “In the sense that people talk about the real estate market being strong or not. There are a few national factors, such as interest rates and employment that have an influential effect on all real estate markets, but the markets themselves are very regional, even local.”

London will be a keynote speaker at the conference. His presentation is scheduled to be the second premier session on the second day, titled “Post-Pandemic Economic Statistics [and] Real Estate Market Projections for 2023.”

London will address the state of the economy and its effects on legal practitioners, suppliers and advisors to the construction industry.

Risk management and mitigation and claims considerations will be important elements in the discussion. But attendees will also count on hearing how different needs on the part of residential and commercial property users are driving change.

The event is one of several annual conferences sponsored by the Claims and Litigation Management Alliance, which is affiliated with The Institutes’ Risk & Insurance Knowledge Group.

Although he is a real estate and land-use economist rather than a macro-economist, London will touch on some of the macro-economic factors by way of overview, before turning to the specifics of the regional and sectoral markets.

“There are several main ‘food groups’ among the real estate sectors,” London explained.

“As many people are aware, there are residential, commercial, office, retail, hotel, and industrial. Residential is divided into single-family and multiple dwellings. Each of the food groups has its different realities. They all move at different paces. Even the same segments in different parts of the country are likely to be at different stages in their respective cycles.”

There are also local issues, such as zoning or land-use policy, that exist everywhere, but are present to greater or lesser degrees. London spoke of Houston, which is famous, or notorious, for being the largest city in the country with no zoning laws.

That is technically true, but in any practical consideration there are other relevant city and county land-use regulations in play there — the city of Houston is primarily Harris County, but not all of Harris County is Houston, and the city sprawls into several adjacent counties.

As noted in a 2021 report by the Kinder Institute of Urban Research at Rice University in Houston, the city’s charter specifically bans zoning. However, Houston also has a historic preservation ordinance that was ruled as not a form of zoning after a seven-year legal dispute.

“The decision seems to clear the way for more local experimentation with urban design and development rules,” the report added.

While bearing in mind a national perspective, London will focus primarily on the two coastal markets, especially the West Coast. “Most of the large markets in the U.S. are on or near the water,” London said.

“That is especially true on the West Coast where the bulk of the population density is within 20 or 30 miles of the water. Markets get very different as you move inland.”

Even so, there are growing exceptions. “Riverside and San Bernadino [Calif.] are among the highest growth areas in the country because they are a little farther from the premium areas that have already been developed, and so have more available land,” London said.

As a further example, London noted that the “Bay Area” is a very broad term that extends across as many as nine counties. “As you go inland, Sacramento is a very different market. And those differences go to the core of the point that there is no national market. There is an aggregate shortage of residential real estate, but in each region that his highly variable based on demographics, interest rates, and now inflation.”

On the topic of interest rates and inflation, London stressed that “while rates have risen sharply in the past year or two, they are still low by historical standards.”

That means he thinks demand for housing will remain strong, again, in some regions more than others.

“Generation Y is driving the need for housing as they seek bigger homes,” he said.

Office real estate is on a different trend. “I will take poll of how many attorneys’ firms have not chosen to downsize,” London said.

“There is not likely to be a single hand raised. Most firms have realized that their space needs have decreased dramatically, perhaps 30%. That trend was already underway as an evolutionary trend, when the pandemic accelerated it into a revolutionary need.”

For years, the conventional metric was 250 square feet of office space per employee, London detailed. Now that is 175 square feet or less.

The trends in different sectors, driven by different factors, seem to be converging. “There is a broad trend to residential-dominated mixed-use development,” London said.

“Many of these are in what previously was office or retail space, he added

“We are in a transformative moment,” London said, referring to other trends.

“The best solution to transportation congestion are land-use policies that encourage people to live closer to work. That said, we will still need big infrastructure projects to be the backbone of transportation,” he added.

By big projects, however, London does not mean the scale of ‘urban renewal’ that began in the 1950s. “That was when the automobile culture started. Now the shift is to bring projects down to human scale. The best environment is away from zoning for separate uses to mixed use with people living, working, playing, and shopping all in the same area. None of that is incompatible, the question is how rapidly can land-use policy catch up.”

In California, London noted that most areas have rules against greenfield development, but also mandate low-density housing.

“As things are, we are seeing infilling and getting denser development. There is a big national conversation about how to grow urban and suburban communities. Downtowns are front and center for discovering new uses for existing buildings and infrastructure. We are crafting new policies, and the ability to remediate [older facilities] is greater than ever. This is definitely a national trend.” &

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Succession planning should be at the heart of any reputable business or organization.

It’s vital to put a plan in place to ensure that entity’s continuity over the long-term, and to avoid any shocks or sudden changes.

But in the insurance captive industry, succession planning is more challenging than for most other fields.

The Baby Boomer generation that started the industry in the 1980s is retiring and there aren’t enough new professionals coming into the industry to fill the void. The problem has been exacerbated by the COVID-19 pandemic and the Great Resignation of 2021.

Vermont, however, is a prime example of a domicile that’s bucking the trend and creating a blueprint for others to follow. With a 40-plus-year history of stability, the state’s Department of Financial Regulation’s Captive Insurance Division has been actively promoting from within wherever possible and its workforce’s longevity is evidenced by its low turnover rate.

Sandy Bigglestone, Director of Captive Insurance, DFR

The Division’s succession planning has been epitomized by the recently announced transition of its Director of Captive Insurance, Sandy Bigglestone, into the Deputy Commissioner’s role. With Dave Provost retiring from the role in the summer, Bigglestone, who has been with the Division since 1997 and, in fact, hired Provost in 2001, will step up to replace him.

It’s a move that has been in the offing for some time, with the pair working closely together and Bigglestone getting to know the role inside out over the last 14 years. Having started as an entry-level examiner and worked her way up, she also has a deep understanding of what is required through her interaction with the National Association of Insurance Commissioners and its accreditation program, as well as the legislative and budget processes.

“Succession planning should be an ongoing thought process,” said Bigglestone. “Organizations need to look at their leadership pipelines and make sure they have a plan in place for when the time comes for the person at the top to move on.”

“In Vermont’s case, strong regulatory continuity is key for the captive industry we serve. It’s testament to our job satisfaction and retention that many of our senior people have held key leadership positions for so long.”

“Our team is fully vested in and wants to contribute to the industry’s success. That type of commitment will ensure we are sustainable moving forward.”

Rather than being reactive when people step down or leave the industry, organizations need to be proactive and plan for the future. That requires building the infrastructure needed to attract and retain more talent on an ongoing basis.

Succession planning brings several key economic benefits too. A stable captive industry boosts its domicile’s economy through significant tax and fee revenue, which is used to support and employ local residents. In Vermont’s case there are about 400 Vermonters in direct jobs in the sector, according to a 2019 survey.

There’s also a large downside to not implementing succession planning. Failing to do so means vital knowledge and experience is lost.

“There’s a big price to pay for not having a succession plan in place,” said Provost. “That’s why it’s vital there are people at all stages of the career path that are ready to step up when the moment comes.”

Dave Provost, Deputy Commissioner, Captive Insurance Division, DFR

A big problem with hiring people into the industry, however, is the perception of an insurance job as a salesman in a suit. To address the issue, organizations need to engage more across a broader spectrum of people and dispel that myth by selling the full range of jobs available.

“We have to get the message across that it’s not all about sales,” said Provost. “There are some really interesting jobs out there that people don’t immediately think of, such as data analytics, and safety and loss control.

“Also, the work is highly engaging and diverse. In what other line of business would you get to talk to people about what they do for a living and gain a unique insight into how their business works? Every company is as different as the next.”

Those career choices need to be reinforced by establishing stronger connections with colleges and universities, and attending careers fairs and giving presentations to students. The industry should also be running more campaigns and education events in the wider community, and taking advantage of the media to raise awareness of the opportunities available.

Vermont’s Captive Insurance Division hires interns every summer and directly involves them in its work. They also attend the Vermont Captive Insurance Association’s annual conference, where they get to interact, learn from educational programs and see the industry firsthand.

The division, in conjunction with the Economic Development Department, has also launched a new career page on its website (www.vermontcaptive.com/careers/) which features a host of resources for people to learn more about the captive industry as a career choice. In addition, it has run a series of blogs and a video focusing on some of the newer professionals that have joined, and the job satisfaction and benefits they have enjoyed.

“A big part of education is just sharing some of the success stories about people in the industry,” said Brittany Nevins, Captive Insurance Economic Development Director for Vermont. “We’ve been explaining all the benefits of a job in the captive industry, such as an average pay of $91,000 per year, and the chance to travel, and gain an insight into a host of different types of businesses and sectors. Particularly in Vermont, a rural state, it’s rare to find all these benefits in any other industry sector.”

Brittany Nevins, Captive Insurance Economic Development Director, State of Vermont

Flexibility is another key selling point. The Captive Insurance Division was already geared up for remote working before the pandemic struck, enabling it to appeal to a wider pool of employees.

As far as training is concerned, the Division runs an ongoing program to improve existing skills and develop new ones. It also fosters a culture that attracts critical thinkers and problem solvers, and looks to support people in their growth and professional development, and provide new opportunities to those who want them.

“We want to provide opportunities for people to stretch their abilities so that they achieve their full potential,” said Bigglestone. “For example, if someone had to drop out of an important meeting, I want to feel confident someone else could step in. It will be important to facilitate a process for future succession by making sure others are ready to take on the roles and responsibilities.”

Another vital part of the equation is diversity and inclusion. Vermont provides its staff with specific training on the subject, and some staff are part of industry-wide initiatives such as the Captive Insurance Companies Association’s Amplify Women™ and NextGen committees.

“These initiatives are helping to increase opportunity for people to have their voice heard and be recognized for their contribution to the industry by being nominated for awards,” said Nevins. “They are also enabling historically marginalized groups to work their way up in the industry by providing them with opportunities for networking and speaking engagements. These initiatives help compliment succession planning efforts and companies and organizations should encourage their staff to participate whenever possible.”

To learn more about Vermont’s Captive Insurance Division and opportunities in the industry, visit www.vermontcaptive.com.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.

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