Paced by a generation of free-spending high-tech entrepreneurs, Seattle’s custom home market has long been one of the liveliest in the country. And for just as long, some of the city’s coolest new houses have risen behind a sign reading “Joseph McKinstry Construction Co.” But as new-home starts have dwindled, Joe McKinstry’s job mix has mix shifted away from trophy houses. “Right now,” he reports, “we’re probably doing 20 percent new homes and 80 percent remodeling.”
Lenders remain shell-shocked, McKinstry explains, so even his best clients find loans difficult to come by. “The bankers want them to put up almost 50 percent,” he reports. Competition for jobs is fierce, with commercial builders often crowding the field. “There was a time in Seattle when you couldn’t find two builders who were available,” he recalls. One recent potential client interviewed eight, “and the winning bid was $200,000 less than our cost.”
Faced with this hostile environment, McKinstry followed a tried-and-true strategy to generate business: “You go back to your base—to your clients and your architects—and you drum it up.” And as it has in the past, remodeling proved a reliable backstop. “Because of the housing stock in Seattle, I never gave up on remodeling,” McKinstry remarks. “There’s always going to be rot.” Last year he dipped into his company’s capital reserve and took a negative-margin job to maintain staffing. But, he adds, “Slowly, other jobs came in, and right now we’re slammed. I’ve actually added two full-time employees.” McKinstry sees signs of new construction picking up, too, but he hedges his optimism. “I think it’s going to be a hard scrabble for the next three or four years at least,” he says. As the market rebounds, lenders will remain conservative. Material costs will rise. Clients will be looking to spend less, and builders will have to comply. “Four years ago, if a client said, ‘We’re going to buy all our fixtures online,’ we would say, ‘No way.’ Now we say, ‘Sure. We have a person in our office who can help you with that.’ You’ve got to be nimble in this market. If you lose that flexibility, you’re going to be crushed.”
Joseph McKinstry Construction Co., Seattle
www.jmcc.com
Type of business: Custom builder and remodeler
Years in business: 32
Employees: 18
2009 volume: $5 million
2009 starts: 14 (plus 40 service jobs)
