Impact

Eve Picker: [00:00:13] Hi there, thanks so much for joining me today for the latest episode of Impact Real Estate Investing.

Eve: [00:00:20] My guest today is Katie Faulkner, an architect with a 25-year career. She has traveled a long and winding road to find answers to the design issues she cares about – that design and architecture should be accessible to everyone, regardless of budget, and that all projects should have a net positive outcome. Starting with a master’s in architecture degree from Harvard, she added in an MBA and a stint with Kattera diving into the technological aspects of mass timber construction. Her work has earned her many awards. You will want to listen in.

Eve: [00:00:20] Be sure to go to rethinkrealestateforgood.co to find out more about Katie on the show notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small change.

Eve: [00:01:29] Good morning, Katie, I’m really excited to talk to you today.

Katie Faulkner: [00:01:32] Good morning, Eve. Thanks so much for having me.

Eve: [00:01:34] Yeah. So last week I was absolutely spellbound by the fabulous presentation you gave to our lovely Women’s Design Collaborative on the four ways in which COVID will forever affect design. And that presentation, for our listeners, is posted on the Small Change blog roll if they want to take a look. But I wanted to ask you, what inspired you to research and prepare that presentation?

Katie: [00:02:00] Sure. So, Rebecca Martinez and I did this together. Rebecca is located in L.A. and I’m in Boston. And both of us have lost our jobs during this COVID pandemic so we’ve had some time to really focus in on member advancement for the Women’s Development Collaborative. And that’s been great for me because it has opened up a world of development that I’ve long wanted to participate in, but actually as a designer and architect, haven’t done a lot of directly. So, Rebecca and I were brainstorming with Libby, who, you know, is our leader for WDC. And we had been talking about an open letter and a video that Sheryl Durst, who’s the CEO of IIDA, had put out there on the future of design. And she made some pretty bold predictions and so Rebecca and I started debating some of them, and that was really fun.

Katie: [00:02:50] We noticed that designers have been prognosticating since March. Some of the prophecies have seemed kind of silly. Some have been extremely elegant. All have called into question the way we go about our lives, how we interact with our fellow human beings, what we consider to be dangerous, what we consider to be fair, how we support one another. And we found that a lot of the changes that we were seeing had been things that had already been in motion before the pandemic. And what we were witnessing was some kind of acceleration. So, I think you’ve had some of the guests on your show in the past. Even before this you’ve had MASS Design on. They came out early with some restaurant guidelines and some health care standards. Other firms have done the same. The magazine Architizer, the online magazine, had all these articles of sort of X ways that COVID will change Y, you know, how housing will change, how office will change. And then, of course, I always like to give the last word to The New Yorker, which had this article on how the coronavirus will reshape architecture. So, Rebecca and I kind of sat down and we thought about it from our perspective on the West Coast and the East Coast, what were we seeing?

Eve: [00:03:55] And so, what did you find? Maybe the question should be: what are like the most ground-breaking things that you found, the most interesting things you found?

Katie: [00:04:03] We were all over the map because we felt, like, that we could base our one-hour presentation on so many topics that we found interesting, even if we just looked at how she saw L.A. and how I saw Boston. But given where we were in our careers, given that we were really trying to work with women and women in development, we decided to divide the presentation into four areas. Into work, into home, into the ground floor of what I’ll call mixed use development and then in terms of how we were seeing changes on the street. And so that’s how we started, and we began to pull together some studies that maybe had already been underway pre-pandemic but were now really being looked at. People like Heinz Development and CBRE were making some predictions about office. And we were seeing other architects kind of talk about the home. One of the things I think we zeroed in on immediately were how changes of work, our preferences in work. We did a poll of our own group, of our WDC membership, and I think you were there. Not one person in that group felt, like, that they would be going back to the office full-time even after a vaccine. I think that was the most startling discovery we made as we were pulling the presentation together.

Eve: [00:05:23] Interesting. Moving forward in your work, how are you going to act on what you found?

Katie: [00:05:30] Well, interesting. I mean, personally, as I’m launching a firm myself, it’s really given me pause to think about what to invest in. In a normal situation, I would have run right out and subleased some office space as I have a number of friends and colleagues who have small offices who have been great about offering me desk space and resources. But I haven’t needed it because so many of my colleagues and the people I’m collaborating with are not going back to the office. They have families, they’ve got reasons to stay home. So, I don’t think I’ll do that immediately. I’ve spent more time investing in my home office. I’ve spent more time investing in my technology platforms and learning new tools so that I can produce work by myself or produce work with a series of collaborators. So, it’s a little bit of a different model. Again, the technology platforms, I think, were things that we were already all using, but we’ve really accelerated our investment in ways that we might not have seen before.

Eve: [00:06:33] Yeah, and I think in the same way we’ve seen acceleration of businesses that were maybe dying. It’s almost like a compacted 10 years, isn’t it, during this pandemic of things that have changed?

Katie: [00:06:46] Yeah, another thing that surprised us quite a bit was retail. I don’t think anybody is surprised that retail is being challenged during this time, because I think we’ve been watching, over the last decade, retail try to adjust to online competition. But I do think that what we found in a McKinsey report was that, it’s thought that we’re pushing 10 years early in the acceleration of consumer penetration on digital platforms. And by that, I think they mean that there has been this gradual movement to people doing a lot of business online, even things like their health care, more than just ordering groceries or products, actual real penetration to digital platforms. So suddenly, in three months, we’ve moved 10 years forward.

Katie: [00:07:36] So what does that mean for our own mixed-use development? I mean, you and I have talked about this before, that in housing developments, there’s going to be this assumption that there’s an activated street, right? That there’s a ground floor that’s dynamic. Well, if that’s not going to be retail, if that’s not necessarily going to be small business, what’s it going to be? So that, I think, caused Rebecca and I to really take a deeper dive into things like omnichannel retail and what does that look like? Who’s likely to take ground floor? Or maybe things like ground floor housing, maybe? What does that look like? So, that’s interesting. And of course, not everybody is in a highly populated urban area, but I think that still does cause to call into question kind of ground floor housing models. So that was a bit of a discovery for us.

Eve: [00:08:23] And what do you think is going to happen with offices on the whole? I mean, we hear people want to go back to office. They want to go back to work. They don’t like working in isolation, but also isolation might be a little bit safer and cheaper and all of those things.

Katie: [00:08:40] Yeah, that was confusing. I think for me, I’m still on the fence on how that’s going to go. If you look at CBRE or a recent article that I read about Heinz, people in commercial are predicting a decrease in overall office demand for sure. But it seems like they’re predicting, kind of, a small decrease that I’ve read as low as two percent. And the reason they say that is because they think that there’ll be an overall demand for more space in your office. Maybe offices aren’t going to bring the whole group downtown, but when they do, people will want 15 percent more space than they had. I don’t know about that. I mean, it isn’t that I don’t believe people want more space, but the open office was already kind of well underway. That kind of studio model that architects and designers have been used to was really taking over all kinds of office sectors. But that being said, I don’t know that everybody, I’m going to go back to that informal poll that we took just with our own group, I think most of my colleagues don’t think that they’ll go back every day. That maybe they’ll check into their office hub once a week, but they won’t be showing up every day. Now, that begins to call into question things like the nine to five schedule, right? So many of us work in different time zones and we have colleagues that work maybe overseas. Why limit our work to nine to five? If I’ve got parents or children or other pressures, I can get just as much done, but maybe I’m restricted by school hours, et cetera. So now we’re thinking like, whoa, what about the weekend?

Katie: [00:10:20] It’s a really interesting question to begin to think about how we structure our workday. If we don’t have to be in that physical office space, that the Headquarters becomes more of a network and less of a physical space to be, I’m not so sure. I mean, we’ve listened to other people talk about this kind of glut of office space going into the housing market. So maybe two problems get solved at once. I mean, it’s all very fascinating. I don’t know that the data is there yet, but it certainly gives one pause in terms of how we think about how we’re going to structure our work life balance.

Eve: [00:10:54] You know, I couldn’t really answer that poll because the question for me would have been, were you going to the office 9 to 5? I mean, I lived two floors above my office, and so my schedule was already sometimes at home, sometimes at the office. And that’s going to continue. And I’ve been using Zoom for years. So, for me, it’s really not much of a shift.

Katie: [00:11:17] I have the same issue. I had been practicing with a firm that I co-founded for almost 11 years, and then I’d taken a job with a West Coast construction company with the understanding that I’d move out there when my youngest son graduated from high school. So, from the time I started that job, I was completely remote. I’d go to Seattle a week a month, but otherwise completely Zoom-focused. Because of their West Coast time zone, I’d also adjusted my schedule to match theirs. So, I was already quite comfortable with that as a way of working and it really gave me a sense that people could work almost anywhere as long as they could find the time to come together. So, I think what you’re pointing out is something that was already happening. I mean, the real reasons why we’re not going to the physical office anymore, but I’m not so sure that we actually have to go back, at least in the way that we did. I think people will feel safe eventually when there’s a vaccine, but there’ll be other reasons why we’ll call into question, I mean, why would I battle traffic? Why would I kind of expend that carbon footprint to drive in if I live out of the city? It begins to not make a whole lot of sense.

Eve: [00:12:24] Yeah, yeah. You’re an architect and you obviously care about design very much. And I just wanted to understand why it’s important to you and why you think, I believe you think, it should be important to everyone?

Katie: [00:12:36] Oh, that’s, yeah, so I have been practicing since the late 90s and almost since the beginning have had a real fascination with prefabrication in construction and the ability for construction to be much more efficient in a way that had a much lower carbon footprint. This was, I think, back before, I think even then we all knew that we had a real responsibility to the climate but maybe the climate as a crisis wasn’t screaming at the top of our agenda the way it is now. I think we’ve always, as architects, had a Hippocratic Oath to do no harm. And as time has gone on, it’s been clear that we, as an industry and construction, actually contribute to a good deal of the carbon emissions globally. So even though we, I think, have always been trained to make the world a better place, and I really do fundamentally believe in the power of design to do so, as we’ve matured as designers, as I think data has been made more available to us, we realize that we’ve been as much of the problem as any other industry, if not more so.

Katie: [00:13:48] And I think that we cannot alone, as designers, make a change. But if we begin to look at the way we deliver projects, if we begin to look at the materials that we use and the way that we work as industry, developers, manufacturers, we could do a great deal better in in reducing carbon footprints to the point where our buildings would have not only a zero carbon footprint, but actually would have the ability to be productive. And we’ve seen people do that. What’s been the challenge is that it’s expensive. It’s not for everybody. I think as I’ve gotten to what I think is probably the sort of, you know, final yards of my career, the sort of next 20 years, it’s so important to me that the work that I do be moving us all in a positive direction. And I know that most of my colleagues feel the same way. We’re all looking at issues of storm surge. We’re all looking at issues of climate. We’re all looking at the responsibility of making the world a more sustainable, a more fair and inclusive place. And I’m definitely not alone in that. I think designers kind of bring that passion. I hope so anyway.

Eve: [00:15:00] But I think you’ve gone a little bit further because you worked with, for Katerra, right?

Katie: [00:15:05] I did.

Eve: [00:15:05] On timber housing solutions.

Katie: [00:15:09] That’s right.

Eve: [00:15:10] What is mass timber construction?

Katie: [00:15:13] Oh, well, I’m happy to talk about that. So, in 2011, I launched a firm with a couple of partners called NAADAA. One of them is the designer, who’s fairly well known, Nader Tehrani. And that practice was really focused on design excellence, but design excellence with a really profound engagement with the materials of construction and how construction, kind of the means and methods of construction. So, we were very interested in mass timber when people started talking about that. And it has been a common material in Europe for decades. There are housing, there are examples of schools. Europeans, Austrians, Germany in particular, have done a magnificent job in turning that into an affordable and sustainable way to do all kinds of construction. The US has been behind that, meaning lagging, in that our zoning codes, our building codes did not necessarily make it easy for us to use the material. It’s also not been cost effective. What it is, is mass timber incorporates everything from cross-laminated timber, which is a series of what we’ll call lam stock, general old two by four construction, glued up into layers and then layered upon layers so that it becomes a pretty robust material that can compete with concrete.

Katie: [00:16:31] It’s also glulam which is very typical. Lots of people have been using glulam for years, which is again another glued-up means of using just regular timber stock into something that has a lot more resilience, both structurally and with fire protection. If done well, mass timber can be very sustainable and work very well with forestry management and actually help bring industry to parts of the country that have not necessarily had productive forest for a long time but have a lot of timber. There’s a whole wealth of research that’s being done by the Carbon Leadership Institute or the Carbon Leadership Forum. There are companies like Katerra that have been founded on bringing cross-laminated timber into the mainstream of construction.

[00:17:20] It can be done as a hybrid. It can be done with steel, it can be done with concrete, and even then, still very much lowers the carbon footprint. It isn’t just the material itself, but it’s the ability to do a lot of the fabrication offsite. So, when it comes on site it can get erected relatively quickly. We at NADAAA put together and successfully delivered the first mass timber student residence for Rhode Island School of Design in Providence. That is a hybrid. It’s not completely mass timber and by that, I mean the structure itself is steel, meaning the columns are steel, but the slabs are cross laminated timber. So, you can leave those exposed with certain construction types so you get beautiful ceilings and you can really appreciate the natural wood. Goes up very fast, has much less dust and waste than concrete. It’s a wonderful material and we could do a very deep dive on that in this podcast. I know we’ve talked about the WDC doing something on it. There’s no shortage of information on it. It’s a really fascinating material and I think the challenge now is to find ways to bring it into the market so that everybody can access it, so that it really can be cost effective for housing, for schools, for all kinds of typologies that really need not only carbon with a low footprint, but with a cost price point that that makes it accessible to everybody.

Eve: [00:18:44] You know, I was interviewing an architect in Amsterdam, Superlofts.

Katie: [00:18:49] Oh, yes.

Eve: [00:18:50] In my podcast. And he also brought up another aspect of mass timber that I thought was really fascinating from a design point of view. He was designing communities where he expected people to want to change their spaces, you know, add maybe another unit or subtract a room over time. And mass timber gives you the ability to break through and change the space that someone occupies much more easily than other materials, which I thought was really interesting.

Katie: [00:19:21] You know, we talked a little, we’ve talked a little bit about this, that, again, just getting back to this discussion of acceleration, pre-COVID if we were talking about housing, I would have said the biggest challenges to housing in the next decades are social justice, the delivery method, and then, of course, climate. I mean, those three things could be put to just about any construction type. But that social justice component it’s exactly that. That way that we could deliver housing to people that would give them the flexibility to grow so that maybe when you’re just starting out, it’s just a small household. Maybe it grows to have a family or have a multigenerational component where parents move in or people stay.

Katie Faulkner: [00:20:05] And you’re completely right, mass timber allows for that because it’s this, kind of, terrific almost plug and play kind of construction that you can have the slabs put in place would have structural integrity themselves and have a pretty decent span. And you can kind of leave it as a shell and then outfit it as time goes on with either a timber construction or a hybrid construction of something that’s more of a lighter frame. And it is exactly that. It’s extremely flexible. So, you can build this kind of grid system that’s quite elegant, that allows itself to be a studio, a one bedroom, a two bedroom, a three bedroom. It can be townhouses. So, we’re not yet doing a lot of that here and again, I think that the barrier is market driven. It’s that it’s not yet cost competitive with other construction types. But I think that that’s coming. I think you’re going to see that in housing, this ability for people to get a housing unit, a housing type, and then grow into it. So, your Amsterdam architect is spot on and I think the U.S. will catch up.

Eve: [00:21:10] Yeah, cool. Shifting gears, do you think architecture offers the same opportunities for women as men?

Katie: [00:21:19] I do. I’m very optimistic about architecture, where I’m less optimistic is architecture within the integrated delivery process. So, I really, as an architect coming up, feel that I had a lot of opportunity to grow. I had a lot of support, even though I would often find myself the only woman at the table. When we would get on the job site, as soon as the project would leave the office and expand into the what really is, I guess if I could back up, what really is a project has a great deal more than architecture. Architecture has the ability to bring some vision and really help clients see the potential of their project. But you can never do that without engineers, without the funds, whether that be developer funds or client funds, and certainly without contractors. The world of construction is not necessarily as supportive of women as architecture has been. Architecture is by no means without problem. But I think that if you look at where we are, there are a lot of women in leadership positions and more all the time. I have a lot of role models in architecture who have been women who I’ve looked up to, both well-known and not. But as soon as we leave the office and we go into that world of project delivery, whether it be development or construction, it’s discouraging.

Katie: [00:22:54] I think that I’ve wanted, my leaving NADAAA was difficult to do because I loved it. I love architecture but I really wanted to make an impact and I thought the best way, I think the best way to do that, is to somehow move a little bit more directly into construction and development. That has been extraordinarily difficult as a middle-aged woman or frankly, as a woman at all. That is challenging. And I’m frustrated. I think that women in development, there aren’t very many, you and I have talked about this before. If we really want to look at women run projects, there are great examples where a lot of the leaders are women. But if you dig deep, they’re often backed by firms that are led by men. I’m not saying that that’s a bad thing. There are plenty of very enlightened men. But for women to have these opportunities, I just think that the barriers are huge. We often don’t even really know about development. And when we get there, I don’t know. there’s just, this topic is so rich, but the short answer is, is it’s a challenge for sure.

Eve: [00:24:03] You know, for quite a long period of time I think that was the only female developer in Pittsburgh, which was a little startling to me.

Katie: [00:24:11] That doesn’t surprise me at all. I mean, that’s frankly, before I even knew about WDC, I had researched you and had seen a project on Small Change and gotten really excited about you as a woman developer. I mean, I’ve contacted women developers all over the country just to meet them, just to kind of find out more, to see how I can get started. Fortunately, I mean, what I will say is that when you do meet people in development who are women or who want to see women succeed, there are a lot of tremendous resources for us. Finding those, though, is difficult. And kind of finding the capital and the wherewithal to start a project, as you know, is challenging.

Eve: [00:24:54] Yes, but don’t give up because it’s a lot of fun.

Katie: [00:24:57] Well, I’m trying, I do, I’m very optimistic and I’m extremely grateful for WDC and for our members because there’s a lot of support there.

Eve: [00:25:05] Yeah, it’s great. Well, I’m going to shift gears again and ask you, I think I know the answer, do you think socially responsible real estate is necessary in today’s development landscape? Essential, not necessary?

Katie: [00:25:19] Oh, I think it’s essential. It really is. I mean, I don’t think that where we are today with our issues of equity and diversity and inclusiveness, I don’t think that’s any accident. I think that the tragedies that brought it to the forefront, that brought people out to the street, that was just something that was waiting to happen. There have been so many challenges to housing, to work, to various industries. I just cannot see that the social challenges and the environmental challenges that we have are not inextricably linked, that when we build anything, we have to look at the neighborhood that it goes in, the group that it is meant to serve. You cannot come into an area as a developer or an architect or a constructor without having the very people that the project is meant to serve at the table. And you cannot but think about the impact of the building on the neighborhood and the neighborhoods of the neighborhood, it’s just not a question anymore.

Katie: [00:26:26] You know, you put something up and the hope is that you make the place better than it was, that you’re giving people opportunities that they didn’t have. We talk about kind of a scorecard, right.? And sort of, how do we look at a project? There’s the environmental component, there’s a jobs component, there’s an inclusiveness component. There’s just such a complex, three-dimensional web. We cannot not do that, no matter what it is that we’re building – a factory, a distribution center – it’s long past time. And I think that as developers, as architects, as builders, we can only do so much. We’re going to have to take a really good look at our land-use restrictions, at our zoning requirements, at the building codes. There’s going to be a lot of work. But I think that the louder the conversation is, the more people that are standing up and saying, hey, wait a minute, I think this is an extraordinary time. I think in many ways we will look back at 2020 as being a year of sea change, a real pivotal year.

Eve: [00:27:29] No, I agree with that. But I think probably my biggest frustration is still finance and…

Katie: [00:27:35] So true.

Eve: [00:27:35] You know, what’s happened in the last month, it’s a very odd phenomenon. Over a period of four months, things were pretty quiet as people grappled with their own situations around the pandemic and whether or not to move forward with their projects. But now, all of a sudden, everyone’s gotten very busy. And I had a conversation with a developer yesterday who is doing a really interesting, worthwhile little project, not so little, actually, and wants to raise money for it. And the proportion of money he wants to raise is actually pretty high. So, my first question is always, can you get a bank loan? Because bank financing is the cheapest money you’re going to get. You should always look for a bank loan before you look for equity. And he said no. The banks here have stopped lending, there’s nowhere for me to go. So, we’re in this time of change, right? And we need to be thinking about the new next things and the way we’re going to live. And our financial institutions seem to be shutting down. That’s big.

Katie: [00:28:47] That is big.

Eve: [00:28:48] They were already not amenable to new ideas because money is lent based on performance of projects just like it before. So, if you’re doing something new, it becomes very difficult to finance something. And we need new now, right?

Katie: [00:29:04] Yeah, I second that. I find that the most frustrating part, well, one of the most frustrating parts about trying to launch new businesses, there is a lot of lip service to supporting new businesses, small businesses, women-run businesses. There aren’t a lot of financial resources there. And you’re right, the first place I would go would be a bank. But if you haven’t done a project before, if you don’t have a track record as a developer, even pre-COVID, you’re just not going to get that loan. So, I don’t know how to solve that problem. I mean, I think that, again, there’s all kinds of places that I can go to offer me training, to offer me, kind of, coaching but where to get the money? Difficult. Very difficult.

Eve: [00:29:54] Very difficult. So, at Small  Change we try to do a little bit of that, but it’s a really big problem to solve. As big as zoning and everything else. Now, I feel really depressed.

Katie: [00:30:05] But you shouldn’t because I actually think that you have stood as an example of what’s possible. I mean, you know, all of these things that crowdfunding brings opportunity to people who a) might not have had access, even just to the equity, but b) wouldn’t have the wherewithal to know how to do it. So even though I think it’s challenging and we’re looking at, we have ambitions maybe to do bigger projects, the fact that you have allowed a group of people who might not have even had access to it, the notion to better understand how to get a project developed, that’s huge. And if those rules change, I mean, that’s really something.

Eve: [00:30:44] Yeah. Yeah. Well, final question. What’s next for you? Well, you’re in the next, right?

Katie: [00:30:51] I think so. I mean, I’m really trying to make lemonade. I, again, I was, it was a little bit of a, well is very much an unplanned shift. I had joined Katerra, which was a big change. I mean, I’ve been an architect in conventional practice for, I like to say over twenty-five years, because as we get to 30 years, that’s starting to sound kind of ridiculously old, but it’s been a long time. So, the notion of moving to a construction company was a really big change and for a number of reasons that didn’t work out. So, I’m trying to go back to kind of what my ambitions always were, were to do an impactful, sustainable, socially responsible architecture and development. I think that architecture as an art can only go so far. And to really be impactful, I’m going to have to enter the world of development and that’s new to me. So, I’ve spent most of the last four months trying to learn more about development, trying to partner with others who are small enough to want to kind of take on a collaboration. It’s very, very challenging in Boston. But to begin to maybe look outside the well-developed metropolitan areas to some other Opportunity Zones that are well served by public transit. It’s been a learning curve for sure, but I’m optimistic. It’s also an incredibly exciting time. I think people are motivated. As you said, we need a new new. That being said, it’s a bit of a, it’s a bit of a cliff that I’m trying to scale. So, let’s check back in a few months. But I’m hopeful that we’ll see some progress.

Eve: [00:32:27] We should try and do a project together. And if there are any, anyone else out there that wants to join us, that would be amazing.

Katie: [00:32:33] It would.

Eve: [00:32:34] My big dream is, sorry gentlemen, but an all-woman-run development project would be just amazing.

Katie: [00:32:45] It would, it would. I think we have a shared ambition there and I believe, I believe we’re going to see it. I’m going say in 2021. So, let’s cross our fingers.

Eve: [00:32:53] I hope so. Well, thank you very much for joining me. I really enjoyed the conversation.

Katie: [00:32:58] Oh, thanks for your interest. It was a pleasure.

Eve: [00:33:07] That was Katie Faulkner. Many architects stay within the confines of prescribed architectural roles. Katie has really stretched herself and now she wants to stretch herself more. She sees real estate development as the ultimate way to take control of the physical landscape. And I’m right there with her. Let’s hope she succeeds and brings her wealth of knowledge and compassion to the real estate development world.

Eve: [00:33:42] You can find out more about impact real estate investing and access the show notes for today’s episode at my website, rethinkrealestateforgood.co. While you’re there, sign up for my newsletter to find out more about how to make money in real estate while building better cities.

Eve: [00:33:59] Thank you so much for spending your time with me today and thank you Katie for sharing your thoughts. We’ll talk again soon but for now, this is Eve Picker signing off to go make some change.