Hard Hat Chat

Observations and Conversations about Commercial Construction, Development and Management

How Commercial General Contractors Can Help Improve Shopping Center Space for Lease

Help-Shopping-Center-Owners-Lease-Space

Englewood moved escalators to the corners of Westfield’s Fox Valley Mall in Aurora, Ill. to create better foot-traffic flow and help struggling retailers.

Even in the best shopping center developments, not all spaces are created equal. Many shopping centers owners have difficulty leasing or keeping consistent retail tenants in certain portions of their shopping mall. In our shopping center construction experience at Englewood Construction, we have found that anchor tenants and smaller tenants in the center of the shopping center typically thrive, yet some pockets do not generate the traffic or the buzz necessary to create a successful retail development.

Surprisingly, the spaces that typically do the worst business are stores right next to shopping mall anchors. Commonly shoppers either visit anchors at the shopping center development, or, they enter at an anchor store and then make a bee-line for the center of the shopping mall, passing most retailers in between. This creates a problem for shopping mall owners.

Never fear. While admittedly there is no silver bullet for leasing woes, a good commercial general contractor can help make some minor changes to a shopping center development that may provide a boost to struggling tenants and help shopping mall owners capture higher, more consistent rents.

Here are four ways shopping mall owners can improve their property with minor shopping center construction projects.

  1. Move the escalators. Changing the flow of a shopping center development is one of the best ways to bring traction to less-visited portions of the mall. Most shopping malls have escalators in the center of the development. By moving escalators to the corners of the shopping center development and adjacent to anchor tenants, shoppers can now spend idle time on escalators and perhaps see stores they would otherwise simply pass. It also gives them a chance to check out both floors of the mall’s hard-to-sell areas. Englewood successfully completed this for Westfield at the Fox Valley Mall in Aurora, Ill. and the Hawthorn Mall in Vernon Hills, Ill. Once we were able to adjust traffic flow for mall owners, tenants around the newly located escalators began to fair much better.
  2. Install more kiosks around new escalators. Kiosk owners often pay the highest rent per-square-foot in shopping center developments to be in areas with the highest foot traffic. While they are typically drawn to the center of the mall, the new locations of the escalators will create more opportunities as the majority of the mall’s shoppers will pass the kiosks at some point during their shopping trip. The center of the mall will still attract kiosks, but these new high-traffic retail areas will create more opportunities to secure quality rents.
  3. Increase gross leasable area (GLA) by removing decorative pieces. Fountains are nice, but, let’s be honest, they don’t generate revenue. Most shoppers just fly right by such decorative pieces and never give them a second thought. It’s probably best to initiate an easy shopping center construction job and take these decorations out to increase the mall’s GLA. Shopping mall owners could add a coffee shop or a food station. Both would generate more revenue and probably be more of an attraction to shoppers.
  4. Create an entertainment area for children. While it may not be a direct revenue generator, it can help drive traffic to a specific portion of the shopping center development and also attract certain tenants. By developing a play area for kids in a slow corridor of the mall, mall owners could see foot traffic increase. More importantly, this demographic concentration would appeal to retailers such as toy stores or a children’s clothing store. By bringing targeted shoppers and tenants together, a formerly slow portion of a shopping center development could be revitalized and tenants could have an easier time achieving solid sales.

These are all relatively easy shopping center construction projects that can really benefit tenants, which in turn will help strengthen the balance sheets of shopping mall owners. No shopping center development is perfect, but a good retail general contractor can be an owner’s best tool for turning a mediocre shopping mall into a highly-profitable retail development.

Read related post by Englewood Construction on Shopping Center Construction and Development:

Commercial Construction Real Estate Trends from ICSC 2014

Commercial Construction Checklist for Retrofitting a Shopping Center in Today’s Climate

Retail Construction Trends: Shopping Center Construction Enters Renaissance with Renovation Work

Chuck Taylor
Director of Operations
Tel: 847-233-9200 x712

Questions? Comments?
You can reach me at chuck.taylor@englewoodconstruction.com
www.EnglewoodConstruction.com

Commercial Construction Real Estate Trends from ICSC 2014

If you are a player in the retail world, odds are you spent a few days in Las Vegas last month at ICSC’s Global Retail Real Estate Convention” (RECON). For one week each year, the commercial construction industry converges on the desert city as national retail construction firms, retail brokers and retailers all get together to make deals and plan for the following year. It’s always an exciting event for the retail real estate industry.

Commercial Construction Real Estate Trends from ICSC 2014This was my 18th time at RECON, and I have to say, I left much more upbeat than I have in previous years. I felt like this was the largest RECON I’ve attended since 2008, the last year of the retail construction boom. Last year’s RECON, as noted on this blog, was very positive, but there was still an element of caution in the air. Retailers and retail construction firms were ready to get back to work, but a key part of the equation was missing—commercial real estate lenders were not fully on board with new retail development yet.

If the buzz at this year’s RECON is an indicator of future retail trends—and it generally is—then the tide is about to change quickly, as commercial real estate lenders are now demonstrating real interest in new retail construction.

Here are my three takeaways for retail construction trends from RECON 2014:

  1. Money is out there. From meeting with our connections in the commercial real estate banking industry, we’ve been assured there is no shortage of financing for commercial construction projects today. In fact, our commercial real estate financing sources are actively reaching out to us to see what our developer clients are working on. They are all looking for quality commercial construction projects and want to fund new commercial real estate development opportunities. This is a far cry from the last few years, when commercial construction firms and some retailers were ready to go, but lenders were still apprehensive. Today, commercial real estate lenders are complaining about the difficult competition in the lending market and the lack of quality commercial construction projects to finance. Which brings us to the second trend…
  2. Tenant scrutiny. While money is readily available, commercial real estate lenders won’t just give it to anybody. That’s probably a good thing, but it will likely keep commercial construction levels from reaching full potential in the next few years. In the past, location was enough to get substantial commercial real estate financing, but today’s lenders need to see a healthy tenant roster as well. Six or seven years ago, a mom-and-pop shop or an unproven international retailer could get a prime spot in a shopping center. Not today. Now, lenders want to see national, proven retailers attached to a commercial construction project, which amounts to low risk for them. In fact, when putting together shopping center construction deals today, we are often given a list of retailers from lenders that we can’t pursue. Some of the names wouldn’t be shocking, but it does show a change in the commercial lending environment. If you don’t have a stellar tenant list, don’t bother asking for the money.
  3. The bigger the better. Real Estate Developers are looking for large ground-up retail construction projects or significant retail redevelopment opportunities. We are currently in the design process with a client for multiple major shopping center redevelopment projects across the country. This hasn’t been the case in recent years, but the trend seems to be changing. In the Chicago-area alone, we can point to several major shopping center construction projects taking place. In Chicago, the New City Project is underway in Lincoln Park’s Clybourn Avenue corridor, an addition is being put on the Chicago Premium Outlets in Aurora, a new outlet center is going up in Country Club Hills, and a redevelopment will be taking place at the Charlestowne Mall in St. Charles, along with additional space being added to Hawthorn Center in Vernon Hills. We haven’t seen that much new retail construction at once in quite some time.

All and all, it was a great experience at ICSC once again. The trend I’ll take away that got me most excited is the commercial construction industry can think big again. It’s been a long time coming.

Bill Di Santo
President
Tel: 847-233-9200 x710

Questions? Comments?
You can reach me at bill.disanto@englewoodconstruction.com
www.englewoodconstruction.com

Commercial Construction Best-Practices: How to Avoid Scandals

How to Avoid Commercial Construction Scandals

Workers remove wall panels from a high rise to accommodate new windows for one of the many projects Englewood Construction negotiates with its clients. Be sure to check references of general contractors before entering into a negotiated or competitive bid situation.

We never like it when scandal rocks the commercial construction industry. Commercial general contractors generally don’t find their way into the mainstream news unless it is for something negative, often involving criminal activity. Unfortunately, there have been several high profile news stories recently featuring national commercial general contractors engaging in fraud or out-right theft. I’d like to say every commercial construction firm out there is honest and forthright, but as we all know, that’s not how things work in the real world. People and businesses will sometimes take advantage of others or misrepresent themselves to get ahead.

These episodes always seems to cast a shadow over the entire commercial general construction industry in the public’s eye, when, in fact, the overwhelming majority of successful commercial general contractors are hard-working, honest businesses that maintain wonderful client relationships and deliver excellent work.

But the saying goes, all it takes is a few bad apples…

Rather than going into a lengthy condemnation of firms engaging in shady practices, or, spend too much time defending an industry that really shouldn’t need it, I thought it might be helpful to point out a few warning signs for tenants and owners to keep on their radar when reviewing commercial general contractors. The next time you are looking to develop a retail construction project or a restaurant construction project, take note if the commercial construction company bidding the job is attempting to do any of the following:

  • Be wary of construction contractors who are willing to drop fees. A properly-sized commercial general contractor is going to maintain a certain amount of overhead. That’s a given. If a firm is aggressively trying to drop its fees to win your business that should be a red flag. Commercial construction companies need fees to cover their overhead. It’s safe to assume that they are not going to work for free. So…if they are dropping fees, the money will likely come from somewhere else. That should make a client nervous.
  • Look for self-performance line items in proposals. This is a very grey area in the commercial construction world and it typically benefits the contractor, not the client. It is a tool that contractors can potentially use to make up money and fees. For example, a commercial general contractor may self-perform the installation of concrete, masonry or carpentry. These are potential line items for contractors to bury costs if they are not receiving competitive bids from the marketplace. One of your qualifying questions should be “what, if any, divisions of work does your company intend to self-perform?” If there is a scope the commercial construction company intends to take on itself, there should be proposals they can provide to justify why they are keeping that work in-house.
  • Don’t work with construction contractors unwilling to lay the proposals on the table in a negotiated project. If you are in a negotiated contract situation it should be a transparent process. The contractor should always reveal its lowest bid for every aspect of the project. If a commercial general contractor is unwilling to do this, you could have a problem. By not showing its lowest possible bids, a commercial general contractor may be cherry-picking more profitable bids for itself and its subcontractors. Those higher bids might be the one a client ultimately chooses due to the quality of the subcontractors involved, however, it’s a client’s right to see the lowest bids. This scenario does not apply to competitive bids.

As I said, the overwhelming majority of commercial general contractors are upstanding businesses, but it never hurts to be aware of items that could protect your business from fraud or theft.

And one final piece of commercial construction best practices advice…be sure to check all of the construction company’s references. Directly speak to people they have worked with, in both competitive and negotiated bid scenarios. This will give you a much better understanding of the firm.

There’s no need to cheat to get ahead. When you see the fines levied against firms engaging in deception and fraud, it hardly seems worth it. Just do good business and the clients will come.

Chuck Taylor
Director of Operations
Tel: 847-233-9200 x712

Questions? Comments?
You can reach me at chuck.taylor@englewoodconstruction.com
www.EnglewoodConstruction.com