Rethinking Urban Spaces: A Sustainable Approach with Kurt Volkman - REIA 502

First and foremost, with any renovation, if it's an existing residential and you're, you know, keeping it residential, that's probably pretty simple. It's when people take buildings that aren't residential and try to flip them to residential, there's an extra step I would, I would advocate for, and that's going to the municipality and making sure they're on board with it early on before you get into pre-meetings and all that.

Welcome to Streams to Impact and be inspired to engage passionately in the work of your calling while achieving financial prosperity through multiple streams of high-yield returns on investment to bring your dream of making a meaningful impact to reality. I'm your host, Dr. Allen, and I am delighted that you are joining us today. If you haven't yet, get a complimentary copy of our exclusive guide, High Yield Investment Blueprint: Secure 18%+ Returns in 60 Days. Go to our website, highyieldblueprint.com. That is www.highyieldblueprint.com. Just provide your email address and we'll send you a copy today. Hello, enlightened investors! Welcome back to Streams to Impact. I'm your host, Dr. Allen, and we're delighted that you are here with us today. And we have a Wonderful guest to share his experiences with us today. With over 30 years of trailblazing experience in urban planning, Kurt Volkman has become a visionary leader, reshaping the future of real estate through his pioneering evidence-based designs focused on sustainability and wellness. His work doesn't just build structures, it builds communities that enhance the quality of life for generations to come. As an associate principal at HED, one of America's top architecture engineering firms valued at over $1 million, Kurt specializes in multifamily housing and mixed-use designs. HED has been pushing the envelope in design innovation since 1908, and under Kurt's leadership, they continue to set new standards for sustainable living. Get ready for a conversation that will inspire us to rethink the spaces where we live, work, and thrive. Welcome, Curt. We're so glad you're with us today. So take us into the show and share a memorable experience that helped you to be who you are today.

Well, it was, uh, 2011. I was working on a hotel project in the city of Chicago and downtown, and it was one of the coldest winters on record that winter. That didn't obviously stop the contractors. So much respect for the contracting community and what they do and how they do it in all the elements. We had to weather test the building when it was -10 degrees outside, so I was up on a scaffold in, you know, in very cold temperatures, and they're blasting the facade with water at this point.

Man.

I never, uh, never in my life pictured myself being there doing that, uh, and in that weather. And these guys were doing it, uh, nonstop without fear or what seemingly, you know, even acknowledgement of the temperature. So, uh, that was one of those moments when You know, you just learn overall, like, the process of really what it takes to build a building and to do it properly to make sure it performs. And, you know, in the 13 years since that time, it's really kind of helped me really truly kind of think about all the processes that go into building that building and really just thinking of the contractor while I'm doing the drawings or my team's doing the drawings so that, you know, we're Designing in a smart fashion so that we're all one, you know, kind of cohesive unit.

Well, Curt, why don't you give us kind of a picture of what it is that you mean by smart building and how that really is a unified way to consider the contractors, to consider who's going to be using the building, and how that all comes into play with with sustainability?

Sure. So when it comes to sustainability, and in pretty much every development, I think one of the approaches I try to take with our team here is we try to turn as many unknowns to knowns as early in the process as possible. For any developer who's kind of worked in new construction or even renovation, obviously the unforeseen condition is, is a challenge, or, or just kind of Making decisions later in the game costs you more money. And that's, you know, kind of going through this for almost, you know, 30 years as an architect and planner, the one thing that I found is that the sooner we get to the point of decisions, the better it is. So we push to try to provide as much information to our developer partners, and we try to advocate for bringing builders and contractors on board early, just so that we can kind of flush out any—

Issues.

any known issues that we can see and, you know, and have the humility to say, you know, if a developer goes, that's not really what I'm looking for in terms of what my market study is suggesting, or in the contractor's case, that's not really buildable this way, can we try it that way? So it's just really being a good partner at the table and trying to, you know, get all that information out early so then we can just put our heads down and just build and go. Yeah.

Well, I'm sure your years of experience have helped you work through those things, but I know in renovation and new construction that there's always surprises even for the most experienced.

No doubt.

In terms of sustainability, everybody wants sustainable design, and yet there is a tremendous amount of, I don't know what you, controversy in terms terms of, I think, what that really means, particularly here in the United States, it seems like. How do you navigate those waters of all the controversy surrounding sustainability?

Well, Allen, I think it's pretty straightforward, and it kind of goes back to that same principle about turning information over. So we have at our power the ability to kind of energy model a building and show that, hey, If you take these measures, it will save this much in terms of energy. Energy is operating expense at the end of the day, right? Whether it's passed on to the tenants themselves, if it's common areas, all that kind of stuff. So that obviously becomes a landlord cost. So then what we try to do is, okay, if you give an à la carte menu back to our clients, and this is why it's helpful to have the contractor and builder on board. When we talk about it, it's like, hey, I want to increase the R-value of the roofing to this. Then the GC can say, okay, well, that's a premium of $5,000. Our energy model, for argument's sake, will say, okay, well, you get that return on investment in 2 years' time, let's say. Well, that becomes then a decision the developer can make in a smart fashion saying, okay, my operating expense will pay that back. You know, in 2 years' time, is that worth the upcharge to do that work? That's— then they can kind of sit there and that, you know, goes to them. Similarly with walls, similarly with light fixtures, and, you know, and just overall energy consumption and plug load within the buildings, right? And that's just only part of it. Mechanical systems too are becoming hyper-efficient in terms of what they do and how they do it. And one of the things that's really important when we look at retainage in these units, right, we don't want to turn over leads. So one of the big aspects of retention in multifamily that we found is comfort. If a person is comfortable in their space, right? So that comfort is not only thermal comfort, it's acoustical comfort, and it's, you know, kind of just overall, is it a comfortable space for them to live in? Is it big enough? Does it have enough storage? Things like that. So when you start tackling those aspects of it, especially the Thermal comfort, you know, then, you know, if we attach that and then if the, you know, the tenant's paying their electrical bill and they're like, oh, my electrical bill's low, I'm kind of, you know, lower, I'm feeling pretty good in here. I've got enough storage. I'm feeling safe. I'm like, why move? Right?

Right.

So we try to think of all this early on in the design process so that we get on board with the developers and say, here, you know, You know, if the national rates are 58%, let's say, in terms of retention, we're striving for 70%. How do we do that? And here's the strategies. And in our experience, a high-performing building, both thermally and electrically, is one of the key ways to do that because the residents find value in it.

Well, a lot of the projects that we're involved in are value-add projects. With existing buildings and not so much new construction, what recommendations do you have for taking buildings that were built in the '70s and '80s up to the sustainable standards of today? Is it even possible to do that?

It's absolutely possible. I think it gets into your level of pain, right, when you're doing a renovation, right? So how nuts do Yeah. The first and foremost with any renovation, if it's an existing residential and you're, you know, keeping it residential, that's probably pretty simple. It's when people take buildings that aren't residential and try to flip them to residential, there's an extra step I would, I would advocate for, and that's going to the municipality and making sure they're on board with it early on before you get into pre-meetings and all that, right? So there's a lot of cost going through through the zoning process and getting use permits and change of use. Get in front of the zoning people fast and just understand their temperature for it. They might have a different plan, and then you're wasting cash. We don't want you to waste cash, right? So the other aspect of it, Allen, if you're looking at these buildings— and I've done renovations of '70s buildings, I've done renovations of 1920s buildings, and everything kind of in between. The insulation levels are never going to be, you know, kind of what the current code requirements are. So know that you're going in, that's messy work. You're going to have to engage in that messy work if you're trying to keep it that way, right? Or if you're trying to improve that stat, you know, improve it to be a modern performance. So look at ways to do that in the most efficient ways possible. And, you know, if you're pulling out old fiberglass, that's messy. You probably want to replace it with a spray foam or something like that, right? So Just having those conversations up front with your builders and contractors and understanding, hey, I want to achieve this R-value. How do we do that? And, you know, R-value in the building— in the buildings you're working with, probably you're never going to get too much R-value, right? Where it has a diminishing return. So I think you have to kind of pair the amount of insulation And you pair it with the, you know, in getting that building as, you know, kind of airtight as possible, and that allows you to keep as much heat inside. So that's why I'm an advocate for spray foams, both open cell, closed cell, depending on what makes sense for your climate.

Is it cost-effective to do that? And in terms of, I mean, the way that of course we're going to make money on these value-add projects The rents are at a current level, and in order to increase value on that, we're of course going to have to increase the rents. Well, there's a cap on how far we can raise those rents because we have to stay competitive with our markets.

Sure.

Is it going to be cost-effective to go in there, take out all of that insulation, and put in spray insulation that's going to increase the R-value Perhaps not to today's standards, but it's going— it will increase it. Is it? How can we justify that?

Yeah, no.

So studies across the market have shown more sustainable projects achieve higher rents. Now, whether you're able to achieve it in your market, that's a study that individuals will have to see. The, the good thing about a spray foam is the kind of Airtightness too, right? It's less permeable and that lack of kind of draft through wall is almost as important as the insulation itself, right? So I think it gets into a value decision. Like if you're looking just to kind of fill and get it to 100% occupied and flip this, then that's a value judgment.

Mm-hmm.

And that's what we try to get to early on in the design process, right? So I can't, as an architect, I can't dictate the business practice, right? But I can arm, you know, with choices on either side of it. Like, hey, if you're looking at a 10, 15-year hold and you want to reduce, you know, operating expense, here's one strategy. If you're looking to fill and flip, here's a different strategy. And, you know, ideally your architects and contractors and builders, all that have to be at the table as a partner. And listening to the developers and saying, here's the strategy. And you even draw the building that way when we have that information up front. I will say honestly that we do draw buildings differently if we know someone's going to kind of occupy and flip the building versus a long-term hold.

Yeah.

So it changes our approach. It changes how we draw it. It changes what we offer back to a client in options.

Well, beyond sustainability, you also design for wellness and well-being. And as you're talking here, I'm getting the impression that those are not necessarily mutually exclusive. But how do you address the wellness aspects of it beyond the sustainability?

Well, it's For me, it's really starting to understand just the natural phenomena around the building, right? So if a client calls me and says, hey, I'm looking at renovating a building, per se, I would then kind of go to that building. First and foremost, I'd probably study it on Google Maps first and Google Earth and just try to get my understanding of the general area and what's around that building. If I can come up with any traffic data, Okay. On the surrounding area, that's important. Why that is important is acoustics do matter, and that's sometimes the case for improving insulation. Now, there isn't any real data about, you know, rents and better acoustics at this point that I've found, but there is medical data that suggests that the more a person's exposed to higher noise levels, the greater there is a risk of Uh-huh. So, you know, that's a challenge that, you know, you're just building up kind of this, you know, kind of environmental stress level over time. So really the goal in a wellness sense is to try to drive down some of these environmental stressors, whether it's noise levels, bringing in more, you know, opportunities for daylight if possible, if we can get natural breeze in there so you're getting more airflow. Not just conditioned air, but actually bringing in actual airflow through windows. All things that kind of help a person, you know, kind of feel better. And then just even in the lighting itself, what happens at nighttime, right? So is it downlights or is it uplights? How do we manage that so it's, you know, better for the eyes, better for the hearing, better for the heart? There's architectural, you know, steps we can take. To just kind of minimize some of that environmental stretch with the stress that goes to the wellness aspects of a place.

Well, another question I have is that a lot of materials today are made with a lot of toxic materials, and, uh, and they, they, they bleed out into the environment. How do you take care of that particular issue?

Well, I think One of the key factors that happened in my career over time was companies like Google, right? So massive companies, they developed their own internal red list of approved materials and non-approved materials. And then the industry, architect interior design industry, have taken that, some of those lists and compiled our own. And now there's product declarations and all that you can find online about most construction products going out there for sale in the marketplace. So you can choose to find good elements. I think the other aspect of it is you can go tried and true, right? As natural a product as possible, right? And you know, wood's wood. You've got to be careful about what you put on it, right? If you're putting heavy stains and varnishes and things like that, yeah, there's going to be fumes and all that, and you have to be kind of mindful of that. But that's the other aspect of it is, if to your point, you can choose natural materials, natural materials are not going to tend to off-gas. Now, you know, there's a lot of new products out there, like a lot of, you know, linoleum tile is very popular right now as a source, and that's actually a natural material, right? That's a plant-made oil that's, you know, kind of then extruded and formed into these planks. So So, there are good choices to be had out there. The other thing that you can do is, and granted it takes a little bit of time, but just kind of air out the place when you're done, you know, kind of with the construction. Let some of those off-gassing materials, let them breathe and let them get that fresh air that I'm advocating for. And that helps kind of drive some of that out of the space sometimes. So, there's different strategies you can take.

Well, Kurt, tell us a little bit more about HED, the services you provide, and how it is we can get in touch with you to take advantage of those.

Sure. HED is a firm where architects, engineers, interior designers, and landscape architects, and graphic design as well. So we can handle all aspects of a building except for the actual construction itself. So we've been in business well over 100 years at this point, and we have 9 offices across the United States. And we work in multiple sectors, not only housing, science and technology, advanced manufacturing. We do healthcare work, we do a lot of senior living through that, and skilled nursing, which is a big— you know, senior living is a big market and continues to be a big market with the amount of baby boomers kind of hitting that demographic. And then, you know, we have pre-K through 12 education and higher ed. So we're in a lot of different sectors, and we take what we learn in all these different sectors and apply them to one another. So if we find a good technique, let's say, in doing a school, you know, we try to figure out, can that apply to us doing residential work too? So it is something that we pride ourselves on, on kind of being intellectually curious. Right. So in that, people can reach out, you know, hed.design is our website. They can reach out to any number of people depending on the kind of project you're looking at. We're more than happy to help and jump on and answer any, you know, questions anyone might have.

Okay, and we'll have that contact information in the show notes as well. Kurt, you've been in the business for Over 3 decades now, and you've seen a lot of changes. What have been the good changes?

I think we've gotten smarter about building, and what I mean by that is when I was a little kid— I'm not that old, thank God— when I was a little kid, you know, like The Jetsons were on, right? And we can, we could actually do some of those things now. If we really wanted to. And it costs, I get it, it costs a lot of money. But that's where we're heading, right?

Mm-hmm.

And so I was in a meeting last week kind of discussing how we could, you know, implement more modular construction, right? So why that's valuable to a developer is that's speed to market. You're getting rents sooner. You're reducing construction costs. You're reducing construction waste even. So it's good for the environment, good for the developer, good for the bottom line. I'm like, okay, so we're getting smarter about how to do this on all aspects of the job, and it's just been this incremental evolution which is really inspiring. So even me, who I used to be really computer savvy, now I'm not as computer savvy as I used to be as I've gotten older in the profession. So, you know, it's just we're finding ways that it's working to kind of really attack the bottom line in a bunch of different ways that we never were doing before, or we just thought was a pipe dream before.

So how do you bring modular units to the market without them looking like cookie-cutter modular homes or apartments, whatever?

No, no, the process has gotten a lot better. And I've done all sorts of offsite construction techniques, whether it's panelization, specialty systems, or now even real modular. The challenge of it is always, to your point, the aesthetic of it. What we're doing now with some of these, and when we're looking at it, it's like the skin doesn't go on until the very end. The modules come out, they're literally fully finished on the inside, and really the last thing to do is put them in place, make all the necessary connections And then dress the box. So I think as architects and engineers really start to understand, you know, what's capable and how we can push limits a little bit and where we want to kind of push aesthetics, you know, if we think about the process early enough, we can kind of challenge that aesthetic choice and make it not look like a bunch of kit parts and more look like a cohesive building.

Yeah. Well, I've done some modular work and local contractors often bulk against modular and why is that from your perspective?

A lot of times the local contractor doesn't like it because it's being built off-site and if you're in a union space, it's potentially built non-union and being shipped to your site and then you're left to your devices to kind of, you know, put it in place and go. It does result in the GC kind of being on site less, right? So they're not getting that time on site. It does mean your local subtrades probably aren't doing as much because a lot of that's done in a factory now away from you. So that's with true modular. Now with other systems like panelization and other specialty systems, there's more opportunity to have more engagement with local subtrades. So I think it's, there's a little territoriality to it, Allen, I think in terms of people wanting to, you know, kind of get the biggest piece of the pie if possible. And it's definitely competitive. It's kind of hard sometimes to argue with the speed-to-market aspects of it though on the developer side. So it doesn't always work in every location. You know, I'm in downtown Chicago. It'd be hard-pressed to get a lot of modular in here, but it can be done.

Yeah.

So you have to find a way to thread the needle sometimes. Right, and you might be doing it from 10 feet away sometimes in a city like Chicago or Philly or whatever, but it can be done.

Well, in terms of— we've been talking really on individual sites, individual units. How do you take these concepts of sustainability and health and wellness from the site itself to influencing Hmm.

So this is where I kind of switch hats. I get off my architecture hat and I put on my planning hat. One of the keys for developments, I think, going forward— affordable housing is, is, you know, a big demand in the marketplace, right? And some of the challenges with affordable housing is the level of regulation that exists, and the funds for it are very competitive. But there is a demand for it. There's also a demand for workforce housing. housing, right, that missing middle. And that typically doesn't have to go through the same rigor that affordable housing does in terms of, you know, set of taxes and set-asides and things like that. So, and then, you know, your traditional market rate and above. So what we're seeing is, especially in an urban sense, if I can get a big enough site and developers, if they're so inclined, you know, a lot of municipalities require a certain level of affordable. So that leads us to kind of think about a concept I've titled MAUI— mixed age, use, and income. So in urban environments and even suburban environments, you need people really of all economic statuses to kind of work, right? You need people to, you know, kind of take the day-to-day jobs in terms of labor, in terms of fast, you know, whether it be fast food, Construction, you know, everything, right? And then up to your more professional jobs, white-collar jobs. So then really the challenge is where do you build housing for all of those in one area? And we think about our commutes and things like that. So how can we shorten the commute time? Because we don't want people spending their life in their car, right? We'd love them to kind of be able to walk to work, even if that's possible. And foot traffic in a retail sense is more dollars for everybody, and it makes it safer for communities. So bringing more people into kind of a central business district of all different economic classes and ages too— empty nester housing is a key market that's actually kind of in deficit now, right? So there's not only a huge need for, you know, affordable housing, so up to like $700 million units nationally. There's also a need for empty nester housing because, as you know, interest rates are kind of driving this, but people aren't selling their houses. Part of that is the interest rates. I think that's a big part. The other part of it, there's nowhere for them to move. There's not housing being designed for the empty nester themselves. So, and, you know, they've built life in a community and they want to kind of age in place in a community level, not necessarily in a house. So if we can kind of give them that same experience and that same comfort but in the same community but in a unit more kind of fit for their stage of life, I think that's also important too. So I think there's opportunities out there in the development community to build these mixed-age use income developments. And what's nice about building affordable, workforce, and market rate all in one community is the market rate kind of helps pay for the affordable and you're less reliant on all the federal funds, there's less competition, and you can find a balance than having kind of a better investment level in my mind. Because we know affordable and workforce have much higher occupancy rates and retention rates than market rate. So it's kind of like your retirement funds, right? You have some— you maybe have some low yield, but they still yield all the time. Versus some more, you know, kind of risky speculative type stocks. This is kind of the same way with a housing solution that you can be thinking about.

Well, with gen— I mean, with development often comes gentrification. And how do you as a planner help to defeat that so that we can have the kind of communities that you are talking about here?

Well, I think it starts a couple ways. I think when we think back, like when I was a kid, most suburbs were stratified, right? They had kind of different levels of economic status even within a suburb. Now we're seeing, especially in major markets, like I'm in Chicago and I've experienced this in other kind of Midwestern cities especially, you know, a city, a suburb becomes kind of dedicated, or a neighborhood becomes dedicated to kind of one economic class. And that has advantages and disadvantages. The disadvantage being if, you know, for all the kind of day-to-day stores and jobs that exist there, that means those people have longer commutes to get to that work. All right. And it makes it harder to then fill those positions, right, versus the person that's able to kind of walk to work in a shorter period of time. So I think, you know, kind of breaking down, going back in our history to a time when, you know, America was kind of a little bit more diverse in its makeup within these neighborhoods, I think is not necessarily a bad thing because it does allow you to kind of see— again, foot traffic is the key, right? And getting different services all within it, right? So we talk about the You know, there's an urban planning concept, the 15-minute city. You should be able to— wherever you live, you should be able to walk and get to everything you need in life within 15 minutes. And I would say that beyond that, there really should be an 18-hour principle, right? From 6:00 a.m. to midnight, you know, what— when I look at a master development for, you know, that has multiple uses in it, like, what is going to generate the most foot traffic From 6:00 AM to midnight and then plan those different uses within the master development. So then, you know, it's like, okay, for 6:00 AM, I know what those uses are. Maybe they go over here. And that's how I help developers say, you know, kind of maximize their value, right? Because if there's foot traffic, you know, you don't have to deal with the turnover of businesses, right? No one likes an empty storefront, you know. And empty storefronts, not necessarily the safest thing in some environments, right? When the storefronts are on and when people are coming and going, they're just safer overall. So we're looking at strategies that generate foot traffic, generate, you know, kind of eyes on the street, generate, you know, retention in a way that will kind of help build a little thriving kind of district. That district becomes a regional destination. People then come to it, and it's a win for everybody.

Well, just one last question, Curt, and that is, What has been your most challenging experience? How did you come through that, and what were the lessons learned from that?

Well, I think the last couple recessions have been difficult for the profession. The last one, when we had a trade war with China and we blew up NAFTA kind of at the same time, construction pricing went crazy. I saw a lot of deals that I was really proud of then kind of get shelved. And it's a challenge, right? And it just makes you nimble to kind of survive. And you have to kind of figure out what's the pathway when you're on the phone with developers and they don't even know their pathway.

Hmm.

We're trying to find strategies and solutions and so forth. So I think for me it was you know, how do I make sure I stay valuable in the marketplace, right? And as an architect, it's not only designing housing, but is there other things I can design and add value in there? So I think, you know, like for instance, I was doing a lot of high-rise work. We started a trade war with China. Next thing you know, steel, aluminum, glass all get more expensive, all things that go into into a high-rise. So then we're not doing high-rise, so I have to become more versed in wood construction. It's not that I didn't know it, but I have to, you know, really pivot and focus. And so I think the tough times have taught me to be nimble and stay intellectually curious to make sure I'm staying with, with times and not, you know, kind of forcing myself out of the market.

Yeah. Well, Kurt, it's been a wonderful pleasure having you here. Very informative conversation. So thanks for being with us and Uh, enlightened investors, thank you for being with us today. As always, we're delighted that you are with us. Please take a moment to like, share, and subscribe. And if you would, please leave us a rating and a review. Until next time, live abundantly, and we'll see you in the next episode.

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