This is Forest to Frame, where we explore how restoring forests creates beautiful spaces. A podcast dedicated to conversations with industry leaders, shaping the future of the forest industry. And now, here's your host, Russ Vaagen Hi, everybody. Russ Vaagen here again for another episode of the Forrest Frame podcast. Welcome. Thanks for taking part in our podcast and look forward to engaging with you further. And if you have any questions or ideas or things you would like me to cover in the future, just reach out. Whatever platform you're watching this on, reach out, make a comment. reach out to let us know what it is you think we should cover. In this episode, I'm gonna talk a little bit about the current real estate market. We're in the early part of the summer 2025, and we have seen quite a shift in real estate in the last couple of years. We had a very robust real estate market ahead of COVID happening. And then COVID, I think everybody kind of calls it the COVID crazies, those years that, you know, raw material prices went crazy, and our prices were very high, and it was difficult to get materials. And so now that we're back to some sort of semblance of normality, when it comes to materials and building, we've seen that with the rising inflation and accompanied rise in interest rates, that it's really slowed down a lot of the building markets. In the West, in particular, we have seen a lot of these projects slow down. Looking back on it now, it seems like the market was going up. People were expecting growth on their equity of their buildings. And so to choose a new material like mass timber, CLT and glulam specifically, people were anticipating that their equity was gonna grow and the interest rates were low. So underwriting a project like that, making it cashflow and either selling it at the end or keeping it for their rental income, was something that was working. Since then, the interest rates have come up quite a bit, and any of the projects that were leveraged with a lot of debt, they became unfeasible. A lot of them have either stopped, paused, or gone away completely. I looked up some statistics, and it's pretty crazy. The The number of tower cranes at the height that were in Seattle, and Seattle had the most in the country, so it was very much booming there for a number of years. The height, I think it said, was 67 tower cranes. Currently, there's about 17 tower cranes. That's a 50 tower crane delta. All those large projects were either completed, or stalled, or there's not new ones going on. We haven't maintained that trajectory. That, to me, is an indicator of those markets in Seattle, Portland, the Bay Area. they've been slow. And when they're slow like that, there's not a lot in the mass timber and commercial building world that is going on. So when the building industry as a whole is down, of course, mass timber is going to be down. And I think what there's a heavier risk intolerance, it makes it a little more difficult. We've seen that ourselves. Our mass timber orders have been a lot lower than they had been in previous years. And even the last eight months have been down from prior. We would typically get calls from projects that were designed for our product that we weren't even in the loop on. That happens now instead of happening maybe once a quarter, it happens maybe once a year. the project size that we're talking about. We were talking about projects in the five, seven, some over $10 million worth of mass timber in the project, and they would take months to complete. Very complicated, but a lot of volume and you could forecast that. I would say our projects are now that we're part of our You know, one and a half to two millions on the larger side, there's a few that get a little bigger than that. But a lot of them are in the quarter million dollar to million dollar range. So there's a lot more projects. The good news for that for us is that smaller projects tend to. meet their schedule quite well. Some of the larger projects have a lot of different things going on out in the marketplace. They're sometimes delayed, impacted by strikes, weather, other material flow issues. It's not bad having smaller projects, but you have to have enough of them. we've seen that, you know, be down quite a bit. So I was at a few different events over the course of the last year and talking to others in the industry, and they are seeing the same thing. And it was interesting, though, on a recent trip to the East Coast, I stopped in Detroit, had some meetings there, travel a little bit around, the greater Detroit area, went out to East Lansing and was just looking at some of the projects that were going on there and meeting with some folks. Notice that the building hadn't dropped off as much. I think it was probably because Seattle, as an indicator, was really growing like crazy, so it fell way off. I think Detroit was growing and didn't see the same fall off. A few months ago, I was in Salt Lake and I've been into Boise and a few other places that didn't seem to have the same fall off because I don't think they grew quite as robust as Seattle did. And then I went to the AIA conference in Boston. Again, everybody was saying, yeah, things are down, but they're not so bad. I did think that it was interesting though, I talked to a number of principals of large architecture firms, and they're down quite a few staff so they had some layoffs and their staff levels were down so they don't have as many projects either. I'm hopeful that now that it looks like prices of things have come down, whether it's hotel rooms, airline fees, I was experiencing some, and I don't know if it was when I was traveling, but it was very high, cost of rental cars, cost of all kinds of things. Now, it seems like everything's kind of modulated and come down, and they have dynamic pricing. If the airline's prices are down, that means not as many people are using it, using the airlines, same with hotels, etc. When I've had to go use rental cars, they're available and not expensive. I think costs, have come down and have flattened a bit across the board. I'm hoping that means that we can start bringing the interest rates back down because from my vantage point, if we could bring the interest rates down a point or more, you're going to see a lot of those projects take off that were on the sidelines. The real estate part of our economy, the construction, the movement of materials, all of that leads to a more robust economy and an improved, basically, lifestyle for everybody. The companies do better, the stock market does better, there's more jobs, et cetera. So we did have a pretty serious inflation issue there for a while. But I've always read and heard and seen that The monetary policy has a lot to do with inflation. You print a lot of money, you end up having a lot of supply of money, which draws the value of that money down. Therefore, it takes a lot more of that money to buy certain products and goods. I'm hopeful that that inflationary pressure is coming off and that we can see interest rates come back down to a level that incites more activity and building in the marketplace and drives more demand for mass timber but everything in construction, and I've talked to other folks and in wood products and other industries and they're all down a bit as well so. You know, we don't need to grow like crazy all the time. Having some consistent growth is really helpful. And it allows companies like ours to operate at an efficient level and bring prices down for the marketplace. So just because the economy is super strong and going, it doesn't mean that prices are just going to go up. I think that's the balance in making an economy work is making sure there's not too much inflation, but at the same time, you want everybody working effectively enough so they can be efficient and deliver goods and services at a reasonable price. That's the episode of Forced to Frame today. I think the economy is struggling, but it appears to be getting a bit better. We'll see. We've seen some more orders in the recent month or so, and we're engaged in a lot of projects that are of size. I think that size is moving up, which maybe means that people are getting ready to do more projects. We're excited about that, looking forward to a more robust building market and a stronger economy. Thanks for listening and Thanks so much for tuning into this episode. We sure do appreciate it. If you haven't done so already, make sure you're subscribed to the show wherever you consume podcasts. This way you'll get updates as new episodes become available. 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