As demand for new commercial building projects has dried up, more contractors, designers and architects are finding themselves chasing smaller jobs that they might have once been too busy to do, reports the Charlotte Observer.
In March 2008, about a third of commercial building permits issued that month in Mecklenburg County were for renovations. In March, renovations and upfits accounted for more than 60 percent of permits issued. An upfit is work done to an existing space to fit a tenant’s needs.
The total number of commercial building permits granted has plummeted since peaking in 2008. The Queen City was once dotted with construction cranes as firms, particularly banks, expanded. The growing demand, combined with easy capital, fueled a building spree. Then the recession hit, banks cut their spending and developers abandoned projects.
To survive the doldrums, construction companies are wooing firms that are either downsizing or adding employees but staying in their existing space.
Some building owners are taking advantage of relatively low labor and material costs to make their buildings more energy efficient. Other clients simply don’t have the money to build as big as once planned but want to make changes.
“Upfits is definitely one of the big names of the game right now,” said Dave Simpson, a N.C. building director for the Carolinas AGC, contractors’ trade group. “People in the construction industry are interested in doing any kind of construction, whether it be new buildings, old buildings, upfits, downfits, you name it. They’re extremely hungry right now.”
Getting more for their money
Johnson C. Smith University had planned to build a new student union building. Then the recession hit, and the university couldn’t afford a $15 million center, said Gerald Hector, the university’s vice president for business and finance.
So, the university reached out to its architect, Gantt Huberman Architects, to see what could be done to update the existing center, with its confining offices and stark blue and gold color scheme.
The firm spent 10 months redesigning three floors. Ultimately, the university spent around $1.5 million on changes that included updating the cafeteria flooring and ceiling, modernizing the color scheme and creating a contemporary glass partition that doubles as art.
Recyclable carpet and new lighting fixtures were installed in the upstairs lounge, along with a flat-screen TV and surround sound. The bottom floor, known as the bullpen, was opened up and modernized to create a more friendly gathering place.
A different type of work
Because renovations and upfits are typically quicker to complete and cost less than new construction, companies rely on a steady supply of the smaller jobs.
Of the $172 million worth of building permits issued in March, renovations accounted for $55 million.
“It’s why architects are struggling these days,” said architect Harvey Gantt, a former Charlotte mayor. “You have to do a lot of them.”
RT Dooley Construction Co. is doing a large number of renovations in uptown, benefiting from the center city’s oversupply of new office space.
Office vacancy rates have risen to recent highs – hitting 8.8 percent last year, up from 2.5 percent the year before – as an expected 3 million square feet of new space comes on the market. Tenants have been able to negotiate cheaper leases and upgrade existing space. Or they’re moving to newer buildings.
“It’s steady work,” CEO David Dooley said of tenant upfits. His firm has been busy preparing the 48-story Duke Energy Center for occupants. “I think over the next five years, you’ll see a pretty active market.”
Interiors work requires different thinking and customer skills than new construction, said Dooley, whose firm was acquired last year by Balfour Beatty Construction U.S. Renovations are sometimes done at night or weekends. Employees may work in occupied spaces.
“You’ve got to be very detail-oriented,” Dooley said, “and you’ve got to over communicate because you’ve got people working around you.”
Keeping workers employed
The increase in renovation work has helped local contractors keep people on their payroll.
The Charlotte-area construction industry has suffered staggering job losses during the recession, losing 23 percent of its workforce in the year ending in February. The broader region’s work force gained 0.2 percent during the same time.
William Caldwell II, a division president with Cox Schepp Construction Inc., said his company has devoted more time and people to landing tenant upfit and renovation work. He estimates there is about 50 percent more of such work available now than in previous years.
He said the company, which employs about 150 workers, is down to a “core group” and the goal is to keep that group busy.
As the market improves, he said, the company will hire more workers.
Last year, his division built six new office buildings. This year, it has two under construction.
“It’s not like a total retraction, or the parting of the seas,” he said of new commercial work. “But the level is just not as high as it used to be.”
He said the interiors and renovation market has grown “very, very” competitive because more companies are seeking the work. Cox Schepp is heavily involved in Ballantyne Corporate Park in south Charlotte, and did more than a million dollars in renovations for the new headquarters for snack-maker Lance Corp.
Caldwell said he’s been pleasantly surprised at how strong the upfit and renovations market has proved for his company.
Company earnings are down compared to previous years, he said, but “they’re a lot better than we thought they were going to be.”
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