Patrick Callahan
President, Callahan Construction Managers
Age: 57
Industry experience: 36 years
Callahan Construction Managers has kept busy in recent years at a wide range of notable development projects in Greater Boston, from the Abby apartments in North Quincy to a new life science building nearing completion at 440 Bedford St. in Lexington. After working at the company during his school summer vacations, Patrick Callahan joined the family business in 1988 and was named president in 2000. Under Callahan’s leadership, the West Bridgewater-based company has expanded its market reach from New Jersey to Maine and trained staff in emerging construction techniques reflecting the race to decarbonization in commercial real estate.
Q: As a family-owned business, what is Callahan Construction’s approach to succession planning?
A: It’s obviously a challenge in a family business. I’m the second generation and we have the third generation working in the business at this point. One of the things we’ve always said is it doesn’t have to be a Callahan that runs Callahan. It’s ideal that it is, it just needs to be the right person at the end of the day. That’s the mentality, as well as encouraging the younger siblings to get involved to see if they like the business or not. We’re in the infancy of a transition mode, and I would suspect in five or 10 years I may transition out and be on the board of the company.
Q: What is the company’s growth strategy into new geographic markets?
A: We have been working in the tri-state area for 10 or 15 years, but not with an office down there. We opened an office there [in 2020] and we’re committed to being down there. We have a long-term lease and we just wrapped up three projects, and we’ve probably got about 10 projects in preconstruction. A lot of those are stalled just because of market conditions. It’s no different than the Boston area: a lot of these deals are finding it tough to attract equity. It’s a matter of letting the cycle work its way through.
Between interest rates, construction costs and high land values, it just gets to a point where it equates to a low return until land values come down. Construction costs are trending down already. We have $2.5 billion in preconstruction projects. We’ve never had more, so once equity opens up there will be a nice flow of work. For the most part, developers are trying to capture the lowest cost to make these deals work and they are looking for strength in their general contractor costs. They are looking at that a lot more than they have in the past, because of the volatility in the market. Some of the smaller contractors may not have the balance sheet to make it through the tough years.
Q: What types of projects could fill the gap from the office and lab downturn, such as flex and R&D type uses?
A: We are just wrapping up a 330,000-square-foot life science project [at 440 Bedford St.] in Lexington this summer, and that’s the last life science project we have right now because the market is a little saturated. We are seeing some office building-type projects trying to get converted to residential, or repositioning the land to a residential application. A lot of developers are looking at trying to reposition office buildings in the suburbs like Lexington and Waltham.
But a lot of office buildings don’t lay out properly for residential. There’s too much waste in doing so, so it just makes sense to demolish the building and start fresh. We’ve priced some [flex conversions], but we don’t have any under construction right now. The problem is the floor loading, and it depends upon the number of stories. It almost changes the entire structure. Does it make sense to try to adapt it? You’ve got a lot more unknown costs and contingencies trying to adapt an existing building.
Q: What are Callahan Construction’s largest current projects?
A: We’ve got a $143 million project in Wakefield, The Basin, and a large project in Salem, New Hampshire at Tuscan Village: $107 million, with 340 units and a grocery and retail on the first floor. In New Rochelle, New York, we’re working for Twining Properties as construction manager for Pratt Landing, a mixed-use project including retail space and 600 multifamily units, and we’ve got a large affordable housing project at 57 Alexander St. in Yonkers.
Q: How are regulations in areas such as decarbonization affecting the cost of projects?
A: Because of the slowdown, we’re not seeing any escalation. If anything, we’re seeing pricing drop. In 2023 we saw about a 3 percent to 5 percent decrease in construction costs across the board. We anticipate the same in 2024 and 2025. In general, it’s trending down. Lead times have gotten back into check, except for maybe the electrical transformers. Labor in general has gotten much better, where we are able to manage the jobs in a normal style you’d see in a regular market. Our company has 30 Passive House-certified employees, and a few additional staff members are in training now. We have Passive House-certified [employees] on the preconstruction side so we can inform the customers of the costs, as well as the field side for the execution of the work. That’s a good start. We have taken that very seriously.
Q: What’s the typical cost premium for that construction method?
A: Every job is a little different. As a round number, I would say 3 percent to 6 percent, though there are some new incentives for developers to take advantage of to help mitigate this on top of the utility savings that reduce annual operations costs significantly as well.
Callahan’s Top Five Skiing Destinations
- The Andes in Chile for heliskiing
- Gunbarrel Run at Heavenly, California
- Revelstoke, British Columbia for tree skiing
- The China Bowl at Vail, Colorado
- The True Grit trail at Waterville Valley, New Hampshire
