Karyna Cheng and Co-Lab Contracting Inc.: Navigating New Challenges in the Woodworking Industry

Karyna Cheng is the absolute model of the ideal young business owner: educated and experienced, knowledgeable in both business and woodworking, a second-generation business owner with a stellar reputation from a family of craftsmen, and an active part of her community both locally and industrially as vice-president of AWMAC Ontario. However, Karyna Cheng is now very suddenly facing the highly challenging obstacle of finding new manufacturing space after their industrial plaza was purchased by foreign buyers who jacked up the price of rent 300%.

A significant factor affecting the wood manufacturing industry in Canada, particularly in metropolitan areas, is the shortage of industrial space. The lack of available industrial land and building space in major markets like Toronto and Vancouver has exerted pressure on cities, leading to businesses moving to outlying areas or smaller cities. This shift has resulted in rapidly increasing lease rates, with some tenants experiencing a doubling or tripling of rents when renewing leases in larger markets. This trend is part of a broader challenge in Canada’s industrial property market, where industrial land continues to trade at record prices and the national industrial average vacancy rate was a low 2.2% at the end of 2020.

 

To be clear on two points: this is a serious and challenging situation for any business to be in, however, while I’m sure they would appreciate the industry’s continued support, Karyna Cheng and her organization are everything that I said at the start and possess the expertise and resources to surmount this challenge. This article is then an opportunity to not only cover the background of M+K Contracting as it becomes Co-Lab Contracting Inc., but also a chance to observe how an established industry leader navigates challenges and obstacles outside their control.

The name Co-Lab Contracting Inc. relates to Cheng’s detailed and holistic method of project management, bringing all the key decision makers together and getting them on the same page.

“I really enjoy collaborating with everybody and everyone. When I’m working with corporate clients and I am the GC, I might be doing the millwork, but I also bring in the electricians and the plumbers very early on with the architect and engineers. We conduct a round table to discuss the design and how to minimize construction waste and reduce long-term maintenance fees. A lot of corporate stores are on a 10-year lease, and most will go on to renew that lease at least once. So, we’re looking to exceed a lifespan of 25 years. A lot of people will put cheap stuff in, like 5/8” particle-core cabinets that only last 3-5 years and are then demolished and replaced with a redesign. That’s really wasteful.” Says Cheng. “If your point of service, for instance, is built of quality materials that are meant to last you can change the veneer or the front face to update the look and keep the bones of the main structure.”

Karyna’s work involves high-scale millwork and luxury renovations throughout the GTA. There are some clients who have a nearly unlimited budget. Her work also includes critically important furnishings for spaces with accessibility needs and budget restrictions.

“My strength is in project management, but I also come from a business background, so I definitely understand the numbers and building a business. I know exactly what all the costs are and I’m able to make the decision to take on one or two projects per year that are almost pro bono, but it’s something that’s worthwhile and I think it does a good deed, such as ADA accessible kitchens in an affordable living apartment. I will price those projects at the cost of labor and the cost of materials. But do I think it’s worthwhile? Yes. Because people with a disability should be able to have a kitchen that they can use so they’re not reliant on food deliveries or other alternatives where it’s not as healthy and ends up being very expensive.”

Karyna Cheng and her family also have a history of supporting new Canadian businesses and new immigrants.

“When my dad was originally starting out, he worked on a clinic for a veterinarian in Vaughan which developed into doing the millwork for many others. The veterinarian was introduced to my dad through a mutual friend. The man had recently become a vet due to his medical degree not transferring during his immigration from Sri Lanka.”

 

Some of the Vet office in question.

Because the vet was honest about his limited budget and situation, Micheal Cheng took the project on and used it as an opportunity to learn about the legal requirements and restrictions on furniture and millwork in veterinary clinics. The choice to support that new Canadian business led to other locations opening and referral work, where Cheng could continue build and install the furnishings that other practices would need to similarly flourish. The veterinarian is still the Cheng family’s vet to this day.

 

 

 

Background

“My father and mother were both born in Hong Kong. My father immigrated to Canada in 1989 and my mom followed shortly after. They got married, had me, and started the company in 1994.

At the time my dad was working with a partner and doing a lot of business in the residential sector. However, my father saw that the industry was constantly a race to the lowest price and pivoted to doing more commercial work. Doing work in construction he realized that there was a lot of demand for millwork and set up a millwork manufacturing shop in Suffolk. I would say that in the early 90’s most Chinese restaurants around the GTA were either built by my father or his other competitors. There were only a handful because there wasn’t a huge migration of Chinese people at that time yet.

“My mom had a bridal boutique with her sister. During wedding season, it would be really busy for my mom. Because I didn’t have any other family members in Canada to take care of me, my dad would pick me up from school and bring me to the shop as a treat. I loved going to the shop with my dad because that meant I got a McDonald’s Happy Meal as my after-school snack.

“He would sit me in the front office and make sure I did all my homework while he was in the shop. When I was done with my homework I would say ‘Dad, I’m bored’ and he would teach me things like sanding millwork boxes or filling things in with wood filler. literally the most tedious jobs you can imagine for putting a bored kid to work.

The shop foreman taught me how to use the SCM edge bender, pushing in the boards and showing me how the edge was done when it came out the other side, and then using the correct tool to trim the excess off the edges. As a kid you think it’s just fun and later on you realize the value of that level of exposure and the positive associations with that environment.

“My dad was also doing the estimating at night at home. So, from an early age I would sit on his lap in front of these rolls of drawings learning how to use a scale ruler, make various measurements, and read architectural drawings. That was a great advantage.

“I also got to learn about pricing things. One way of teaching your child how to learn multiplication is literally estimating. You have your price per linear foot, you measure out how many linear feet you have, and you multiply it. It’s basic mathematics.

“I wasn’t at home for university. I was at Queens in England. I did a double major in economics and history, but the history was more in archaeology at the Bader International Study Center. You have your normal courses, but you also get to participate in archaeological digs using mapping radars. You would find an archaeological piece then bring it back to clean the artifact and log it. That grew my love of history and also archaeology, and ultimately fueled my love of doing heritage work, but archaeology does not pay. Getting a job is very difficult in archaeology.

“When I graduated in 2013 it was during a recession. One of my professors said that because I already had a few master’s credits it would only be about one more year of work and I could have a master’s degree. I had to really think about it because at the time my mom was going through cancer and my dad was struggling with work. He had a lot of projects, but no one was helping him, especially not with my mom being out sick. He had to take care of my mom as well too.

“I had to think, was I going to do this master’s thing or was I going to take care of this situation that I had going on at home? Do I stay an extra year away from home to finish off my masters? It’s a huge expense and I didn’t know whether or not I would get a job out of it. Ultimately, I decided to drop that part, go back home, and help out wherever I could.

“I took ownership during COVID, but even before COVID my dad had been going through health issues and then during COVID we told him just to retire. He’s been having complications with diabetes for over 20 years, and when he fainted on the shop floor, I took full ownership so he could take the time to just rest.”

 

New and Unprecedented Challenges

“When my father first started he at 3000 square feet. We quickly outgrew that and he built a mezzanine over top. Even with the mezzanine adding an extra 1000 square feet still wasn’t enough space. We moved to Trojan Gate which was about 5000 square feet. Eventually we grew to being in Markham at 8000 square feet.

“We were in Markham for over 10 years, but this year I’ve had to face one of my greatest challenges yet. My expenses for rent were way over a million dollars. My lease was to be renewed in June, but we had a new landlord by January. It was no longer an insurance company that owned the space. Instead, a Chinese foreign buyer paid cash and brought the entire industrial Plaza. The new landlord then increased the rent from $10/ sq ft. to $30/ sq ft., an extra $20,000 per month. That’s very difficult for a single family-owned business. I don’t have any partners that could bring in capital and sustain paying a decent living wage. I really do believe that the people that work for me, producing the quality that I ask them to, deserve to have the wage update that we pay them. That is basically feeding and doing everything for their family. It wouldn’t be fair for me to ask any of my guys, whether it’s my installers, my cabinet makers, anybody to reduce their income.” Says Cheng.

“I know all of my staff and employees. I know their spouses, their children, I know who’s going off to university and all that stuff.

One thing I have to thank my father for is the mentality that when you bid on a project, don’t just think of the next project in terms of profit or success, but also factor in the risk because it’s not just the risk for you, it’s also the risk for your employees as well. And they are family. So you have to mitigate and determine if a risk is worth taking. As a responsible business owner, you need to consider yourself responsible for their kids as well. I think that is a very traditional method of thinking, which I’m thankful my parents passed down to me.”

There are less protections preventing foreign buyers from purchasing retail or industrial properties and less and less area is being zoned and developed for manufacturing, exacerbating an ongoing supply shortage. The Prohibition on the Purchase of Residential Property by Non-Canadians Act, which started on January 1, 2023, was primarily aimed at curbing speculation in the residential real estate market and ensuring that houses are used as homes for Canadians rather than as financial assets for foreign investors. However, commercial and industrial properties are essential exempt from the law based on how the federal act was written, leading to a sharp redirection of foreign purchasing into the commercial and industrial property sector.

Responding to the sudden and drastic change, Cheng began to immediately organize and prioritize the most essential components of her business: her staff and advanced machinery.

“I’ve sold off a lot of my older machinery to a guy that was looking to move to a bigger space and also sold them the remainder of my lease and my inventory.” This was an especially advantageous move, Cheng explains, due to the cost of hiring electricians and the proper moving/handling services for selling and storing machinery or inventory.

“Right now we’re just doing a lot of installation jobs. There are smaller things that we can manufacture. I’m sharing a space, a friend’s facility to do it. I have one way for layout and organization, how I like my machinery to be set up, and they have it completely opposite, so it’s an adjustment, but it’s productive. They are geared towards residential work but want to get into commercial millwork, so I was able to move my existing employees to his shop on a one-year contract to train all their existing staff on how to build proper commercial millwork to NAWWS standards.”

Cheng’s search for suitable manufacturing space is still ongoing and she reports facing a certain amount of discrimination from industrial landlords for being in millwork regardless of whatever assurances or contractual provisions Karyna had been open in order to assuage concerns about sawdust or property maintenance.  Another problem is not being allowed to put in a spray booth even though Cheng made the switch to water-based finishes soon after taking over the business. There can also be additional steps that the city will require businesses to take to complete an ecology report.

“If you’re looking at buying, long gone are the days of $200-$300 per square feet. If you’re in Mississauga, you’re looking at $400 a square foot for industrial space. In Scarborough or even Markham, Richmond Hill, up to almost New Market, you’re looking at $560 a square foot. At 10,000 sq ft. you’re looking at more than $5 million.

“I don’t mind downsizing back to a 5000 sq ft. shop. We were able to produce sales at 3 million – 4 million dollars. I don’t mind going down to a 5000 square foot shop if that’s what is closer to my budget or would make sense.

“You don’t have to be in a hundred thousand square foot facility to feel successful. You can feel success in a two thousand square foot shop or three thousand square foot shop or however it is. As long as you are in an industry that you love, that you go to work every day knowing that your expenses are covered and that you’re producing things customers enjoy. Those things last. I think that is success in itself.”

Tyler Holt is the Editor of Wood Industry / Le monde du bois magazine. He has a master’s degree in literature and publication, and years of experience in the publishing and digital media industry. His main area of study is the effect of digital technologies on industrial and networked production.

 

 

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