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Mökki pystyyn kivuttomasti | Veli-Matti Kurkela | 369 Neuvottelija – Litterointi

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0:00 All right, welcome to the Neuvottelija channel. I have Veli-Matti Kurkela as a guest. You came from over there, is it all the way from Pyhäntä?

0:09 No, I actually came from Oulu, even further north.

0:12 Ah okay. Yeah. But don't you have locations? You are the CEO of Salvos? Yes, yes. Yeah, in Pyhäntä we have a factory and well, but then we have locations. We have a bit all over Finland. We have some administration in Kempele.

0:24 So I mainly took this just to please you, a Tappara mug.

0:29 Now you are twisting the knife in the wound, indeed, Tappara is doing a bit too well from an Oulu perspective, a bit too well. It is, it is wonderful, wonderful!

0:38 But the topic is this distress in the construction industry, but couldn't you say that your business, meaning yard and leisure and cottage construction, is not quite as terrible, but could you throw a few observations about this construction side in Finland.

0:58 Yeah, well, construction has been beaten quite hard in recent years and the market has been reshaped, there is a massive number of bankruptcies, especially small house residential construction is, well, still in a pretty difficult situation, but then on the other hand, there are certain sectors, road and infrastructure construction seem to be doing fine and then it sounds like commercial premises and these welfare facilities and such

1:25 are doing quite okay, and then of course in our market, yard buildings and then in leisure buildings as well, a certain segment is still quite, let's say okay, so well, it's a bit like polarized, let's say the situation is like this.

1:41 Yes, that's how it is. So well, everything is quite awful. I mean, as a downtown Helsinki apartment owner, it's a bit nasty to look at that minus 20 percent drop that has happened here. But since it hasn't been realized, it doesn't affect my life. This is indeed made in commercial cooperation with Salvos. But let's discuss that a bit more perhaps personally, because I have had discussions with the board, meaning my wife, for over

2:10 many years about whether we should also have our own cottage. Well, we have a situation where, greetings to my mother, there in Sysmä, like a zoned lakeside plot. There are a couple of cousins' cottages already built and okay, it's about, is it 2 hours 40 minutes, so I guess it wouldn't be quite an unbearable distance. So how do you see, you probably see these situations quite a lot, so how do you tackle something like that?

2:38 Well yeah, I can say that, well, I can side with your lady.

2:42 I'm sure even Mauno the dachshund would like this.

2:48 Absolutely. Absolutely. Yes, indeed. And maybe like, yeah,

2:52 especially now that there has been migration to these population centers, meaning housing is concentrating and then rural areas are emptying out, well, and that trend seems to just continue, so there are these inherited plots or then there are old home places, where there are good memories and people would want to build something there, and well, or let's say there might be a cottage or an old detached house

3:19 or something similar, but your distance there is quite normal, like I don't remember. That cottage barometer came out from the Government just recently, and I think it defined the average cottage commute. I don't remember. It might not have been quite that long, but it was, well, over 100 km if I remember correctly on average, so we are quite, let's say it's within the margin, so to speak. Yeah, Petri Roininen has been my most frequent guest,

3:47 so I've joked that I have a Northern Finland vacation, which is going to the Flamingo hotel in Vantaa, but well, I am a nature person deep down, and there are good memories there, but then during COVID there was a huge boom and back then it was kind of tempting that it would be great to work from a second location in the middle of nature, but hasn't that trend changed a bit, that

4:12 it has leveled off a bit. Well, maybe from the absolute peaks, but if you think about it, as we live in growth centers, nowadays when construction costs per square meter are really very high still, well, and consumers still prefer to live in centers, want to live near services, and well, they are ready to compromise on square meters, and then these landscape things, they

4:40 are a real luxury in growth centers, so then as a counterweight, getting out of the growth center so that you have your own shore or something like that, nowadays that's quite a luxury. Yes it is, and it only has a slightly humic bottom, but I guess those can be dredged, and regarding that, well maybe we'll get to that 3/4 rule later, but I had a friend and board member and owner Petter Fredman, and in one

5:09 earlier episode this year, though not much of the year has passed yet, but he was praising Northern Finland, and then I read that Helsingin Sanomat article about the Rovaniemi Airbnb dispute, so maybe here it's also said that when they want more usage out of those apartments and then maybe bring in yard buildings and others there, but at the same time our decision-makers don't really know what kind of

5:37 laws to set for these. Have you looked into that? Well yeah, of course that's slightly separate, maybe more related to the accommodation business rather than directly to the cottage business, but yeah, that situation in Rovaniemi is quite peculiar. I mean, the same situation exists in larger cities generally speaking from an Airbnb perspective, but in Rovaniemi it has really escalated, because the problem there is, as I understand it, that the tourism business is so seasonal, let's say it's

6:06 maybe four months, it's still such a short time that if we look at a hotel builder, then because of the season, it's not really sensible to build. And then again, since hotel capacity doesn't increase, it leads to the situation where resort-type options are used instead, which have certainly increased a lot. Meaning that someone buys land and there, they invest in these separate small cottage solutions, like

6:34 studio-types or slightly larger ones with landscape windows, and then there is some larger restaurant or spa solution right there where people go to eat and so on, so that's another concept, which is a chapter in itself as to why it has taken off, but even that capacity has grown too slowly relative to the number of visitors, which leads to the fact that when demand exceeds supply, it goes to Airbnb. Mm-hmm.

7:01 which of course leads in extreme situations to the fact that there isn't enough other capacity there and, well, then of course to these side effects, if you live in the same apartment building with 25 apartments, where 20 are used for Airbnb, it can make life quite restless, which partially disturbs the users, and then on the other hand we also run into zoning regulations and such, whether you can run this kind of accommodation business. These are really awkward, difficult, yeah,

7:30 difficult situations, and it's starting to escalate a bit in Rovaniemi.

7:32 Yeah, and I visited there myself, I take a trip like that every couple of years, a long trip usually to Norway for some hiking, and then well, there in the northeast, must be northwest Finland, this is actually embarrassing, I still have that... so, so there, while driving through the Levi area, there were exactly those kinds

7:59 of things you mentioned, like a hub and then those cottages. But doesn't Salvos's, isn't salvos a technical term for log construction? Yes, it's like, well, logs have to be joined at the corner in some way. There's dovetail, there's cross-corner and then miter corner and all sorts. So well, that joint is called a salvos. Yeah, folk tradition. Right. But wouldn't your concept basically fit that too? Like a bit of a... well, I don't know, I visit Vierumäki sometimes. I'm not very

8:27 athletic, but in a way it's a nice kind of cottage village too. Yes, yes, yes, yes. And we actually built one this year, one entity of 40 accommodation modules or well, we delivered the modules, didn't build them. That's a more precise term, but anyway, for Ounasvaara in Rovaniemi for this kind of use, so yes it... well, we have 600 modules this year, last year 600 modules were finished in the factory, we have quite good capacity to make those kinds of solutions, so well, we were able to act in a way... if I recall correctly,

8:56 it might have been at the end of March when we reached an agreement with this client and then we had to deliver by the end of October, so it's a pretty fast pace. To catch the season. M but the point there is that, anyway, the investment in that room capacity compared to when you build a hotel, mm, I mean the cost per square meter, the return on capital is completely different in this kind of not-so-heavily constructed space, which nevertheless

9:25 is very luxury and a good solution.

9:28 That's the point, that's why it tends to go towards these resorts, especially in this kind of situation, a resort-type thing instead of a hotel investment. Of course, one solution could be that even there in Lapland, I've thought about it a lot, how to get...

9:42 because currently winter is the thing there, but Finland's nightless night is a pretty unique case and especially since Central European summers sound like they are getting quite hot.

9:53 so quite a few foreign tourists already come just because there are human conditions there. Yeah. That fall foliage tourism is quite from the summer because well, exactly during the worst blackfly time, I haven't visited then, so well, but I've heard some stories about it, so maybe that's a small downside.

10:22 Yeah, but that fall foliage tourism is at least a total ace, and it's definitely growing. But maybe the production method interested me. We could put some of that running in the background. In this Petter Fredman video, this was shown. We had set up some kind of robotics there for coffee filters and such, but well, wouldn't that kind of modular leisure construction, you probably... I had a guest, sorry this is jumping

10:51 around a bit, this question, but that Lapland concept came to mind, they were like Lego stuff.

10:56 Don't you have a bit of the same vibe? Well yeah, with the difference that we make the buildings completely ready, but the same, I mean this industrial manufacturing is interesting in the sense that it has been tried and developed, it has indeed been developed in recent years a lot in my opinion, but the challenge is precisely this logistics, that if we talk about larger buildings, for example detached house solutions for residential use, they are made to some extent, brought in ready-made or brought in as

11:25 finished modules. They have been developed, but there's exactly that challenge, logistics, that logistics is challenging and it's really expensive, whereby the industrial manufacturing cost benefit goes into logistics and anyway, you still have to do on-site construction. But then when we move to leisure construction, if you think that, for example, the average floor area of new leisure buildings based on Statistics Finland data was about 60 square meters.

11:47 Mm-hmm. which for us too is, for a cottage building, quite our so-called core business.

11:50 Yeah. So that's a solution that is industrially well-producible. And of course then, when we join modules, we have the ability to join them in a protected way, so we can join two spaces together, then we get those parts small enough so that we can also transport them cost-effectively. So we get the benefit of industrial manufacturing. Then the transport and, I mean, if you think again about traditional small house business, there's been this ready-made construction for a long time. Well, but turnkey suppliers are not very interested in this small... this sorry, this leisure construction because... well, there are actually a couple of reasons. They are quite small

12:18 and then leisure construction is located outside growth centers. So you have to haul supplies and labor to the countryside, to the provinces, which is really expensive and well, through that it hasn't really been made cost-effective, which is why this industry has traditionally been quite conservative, meaning it's this traditional supply delivery, where materials are delivered and the customer organizes construction themselves or via subcontractors or however they organize it, so this has been a very favorable spot for industrial preparation which we've targeted. But we've done this, first we started with just basic yard buildings, yard saunas, outbuildings and from there we very quickly started developing cottage solutions as well

12:47 how this has changed. I mean, I remember, greetings to my mother's brother Pate, I remember in my childhood, they were putting up logs themselves, like in a square shape.

12:58 Their cottage there. It's still there and I remember that job when people were just carrying the logs themselves those long logs there and then some help came and they were pulled around the cottage with a tractor, but I mean, today's crowd wouldn't endure that, and of course there's no sense in that do-it-yourself style or you have to be quite a Rambo to build something yourself.

13:13 But I mean, couldn't you say this is now quite unimaginably easy. And in a way, haven't these municipalities' attitudes improved, meaning the zoning processes and systems have become more sensible, so they don't try to sabotage it. As a word of encouragement, it's not such a big deal, because many fear it will be a financial bankruptcy and a long project and all budgets will be exceeded.

13:37 Of course this can always happen in construction, but it's reasonably easy, such a leisure... well, if we think that we can nowadays... our service concept includes the really ready concept as a marketing term, so we apply for permits for a leisure home, which still requires a permit, on behalf of the customer and do the necessary groundworks and foundations and deliver a completely finished building, well, the average delivery time from order to handover is roughly half a year, so in that way it's...

14:07 and all costs are defined in advance, so industrial production has brought that to it, but imagine for example the situation where you started building a cottage there in Heinola and tried to organize it from here all the time.

14:17 Then materials are taken to the site, for example, so your... this also are getting a felt roof, so you have to reserve that felt...

14:28 Well, Heinola is still quite... it doesn't sound like a very remote place yet, but anyway you have to reserve enough felt so it doesn't run out, because if it does, it's an absurd cost.

14:34 Then if you have to go, in the best case, hundreds of kilometers away to a hardware store to fetch the supply, it's expensive, so you have to load up extra so it doesn't run out.

14:40 Yeah. And then how cost-effective the job is and then how much waste is generated and how problematic it is in that sense, so it's...

14:49 so in that sense, if we think about our operation, we can anyway... well, we take that felt roll, when it ends, we cut the felt roll where it suffices for this building and continue with the next one, so it is much more efficient and clever to do that job with industrial processes, well, that distance often makes organizing leisure construction very challenging if you can't get it completely ready.

15:01 There might be some cottage road infrastructure there there could be, but well, in our situation everything would already be done, so in that sense it sounds frighteningly easy.

15:08 Quite excellent. We can talk in more detail over lunch.

15:11 Yeah, I have to look into this and tweak the budget a bit. This kind of well, a year or a bit longer ago when I came from London back in the day, well I bought a plot from Suvisaaristo then with my wife and we were planning a Kannustalo, a mansard house, maybe a competitor of Pohjolan Design-talo, and then a surprise came up, since we got a slope plot, an extra 100 square meters popped into the basement, there was a master builder who considered these things, but I remember it would have been a bankruptcy for young Sami, but then help arrived and we sold the zoned plot for a profit and the next owner made a slightly smaller, less grandiose system.

15:24 Yeah. But I remember it was kind of... even though there was a master builder, it was quite a pain when you still had to take a stand on every little thing and sweat over where to get a block basement built and who digs it and such, so there are many advantages in your model.

15:30 Absolutely. Yeah. How about a typical customer in general? I just vented here about how I was thinking about this most actively 10 years ago, so I thought, now that I'm 55, is it already a bit too late?

15:33 right in the core. Right in the core, actually even a bit young for this.

15:38 Let's wait a couple of years, but yeah. What was it by the way... there was an interesting cottage barometer from the Government that just came out, so was it that over 50% of cottage owners are pensioners and 80% are over 50 years old? This is interesting in that there's a big generational shift coming from that basis, so that...

15:42 but yeah, to the question of if you're too late, well, it's an easy word...

15:46 yeah, is this a typical situation? Many think the old cottage stock is, well, partly built with care using traditional methods, but the requirements have risen quite a bit, like wanting year-round living and well, electricity and heating and fiber optics, so...

15:54 yes, yes, well, especially that remote work thing has contributed, and then consumers, even if they talk about not needing running water, still want a pretty fancy solution.

15:58 Precisely regarding the condition of cottages, as 3/4 according to this cottage barometer study still... well, a very good study, worth reading...

16:01 are in use for three seasons, meaning cold in winter, and especially if it's a board structure solution with maybe sawdust insulation or similar, a large part of the cottages probably aren't in very good condition, so that brings up whether it's worth renovating or replacing. This has often been about us handling the demolition via a subcontractor and bringing in a completely new solution, but yeah, clearly the pandemic added to the desire for things like good internet connections and these directional cottage antennas to get 5G even a bit further away and so on, so it...

16:07 maybe people want a better level of equipment, but then the size doesn't need to be so large, that a small one is accepted.