When Erik Hayden’s real estate development firm Urban Catalyst was forced to lay off 75% of its staff and move operations into a plumbing company office, it crystallized a harsh reality about the development business: macroeconomic forces beyond any developer’s control can destroy even well-positioned companies.
Global macroeconomic pressures – including the pandemic and elevated interest rates – severely undermined his first company. The experience pushed him to diversify into a more stable, demand-driven service line alongside his development business.
The Vulnerability of Development-Only Models
Hayden’s experience reflects a broader challenge facing the development industry. Periods of low interest rates often lead to rapid expansion and excessive building, while periods of high interest rates tend to push many developers into financial distress.
The 2022–2025 downturn was especially harsh. Urban Catalyst, which had raised more than $300 million across several funds and managed a portfolio of over 1,000 investors, experienced a 95% drop in fundraising activity as interest rates climbed and real estate lost appeal as an investment.
In response to the slowdown, the firm undertook deep internal cuts to stabilize operations. The process was difficult, but the company positioned itself to endure the downturn and continue operating.
The Appeal of Recession-Proof Services
The new service business is designed to provide Hayden with a more predictable income stream. He highlights that demand for basic household repairs remains constant over time, even during economic slowdowns, and that operations can be adjusted to accommodate changing market conditions. He also views the model as relatively insulated from major technological disruption, unlike other industries that have been reshaped by large tech companies.
To build out the venture, Hayden secured capital for roughly 10 partners and established an operation with seven trucks, seven technicians, and a 9,000-square-foot warehouse. The company currently handles around 15 residential service calls per day, with plans to expand to 75–100 trucks before pursuing a sale in roughly five years.
The Psychological Appeal of Tangible Work
Hayden’s move into home-service operations is partly a response to the instability he experienced in real estate. After macroeconomic shocks and rising interest rates crippled his previous company, he sought a business that could generate steadier cash flow regardless of market cycles. The downturn from 2022 to 2025 underscored that need: development firms faced severe pressure, fundraising slowed dramatically, and Urban Catalyst saw its capital inflows drop by more than 90% as higher borrowing costs reshaped investor appetite.
To create a more predictable revenue base, Hayden built a service business designed to be resilient, less exposed to interest-rate swings, and insulated from tech-driven disruption. He has already raised capital for multiple partners, assembled a small fleet and team, and established a warehouse to support daily residential service calls, with plans to scale substantially over the next few years.
The venture also gives him something traditional private-equity development lacks: a direct sense of impact. He values being involved in work where results are immediate and tangible, similar to the satisfaction he gets from seeing completed buildings. The business also allows for closer interaction with everyday customers and workers, offering a grounded, hands-on dimension he felt was missing in high-level fund management.
Industry-Wide Diversification Trend
Hayden’s diversification strategy may signal a broader trend among development professionals seeking to reduce their exposure to interest rate cycles. The 2022-2025 downturn was particularly severe, lasting longer than typical real estate cycles, which Hayden describes as usually “about a seven year up and then, like a two or three year down.”
“This is a really long down,” he says of the current cycle, which he dates from 2020 to 2026. The extended nature of the downturn may be pushing more developers to consider alternative revenue streams that aren’t tied to financing markets.
Hayden’s decision to diversify draws on his experience weathering multiple economic downturns. He entered engineering during the dot-com crash, shifted into development before the real estate collapse, and launched Urban Catalyst just as the pandemic began. These back-to-back disruptions shaped his approach to building more resilient business lines.
Looking Forward
Hayden’s career has repeatedly coincided with major economic downturns. He entered engineering during the dot-com crash, shifted into development before the real estate collapse, and launched Urban Catalyst just as the pandemic hit. These cycles pushed him to diversify, leading him to develop a parallel service business that could provide steady revenue regardless of market swings. And although he sees signs of recovery in the development sector – with equity groups reengaging and new projects moving forward – he views the plumbing company as a long-term safeguard against future volatility.
Whether other developers follow similar diversification strategies will depend on how the current cycle plays out and whether the industry concludes that development-only models are too vulnerable to macroeconomic shocks. For now, Hayden’s approach represents one response to an industry grappling with its fundamental dependence on factors beyond its control.
