Hard Hat Chat

Observations and Conversations about Commercial Construction, Development and Management

How Trusting Relationships Build Better Commercial Construction Projects

How Trusting Relationships Build Better Commercial Construction Projects

Englewood Construction is currently negotiating a contract with Mrs. Green’s to convert former Fox and Obel in Chicago.

Like most businesses, the commercial construction industry is a relationship business. The best work is typically done when a project is viewed as a partnership between a client and commercial general contractor. We have been fortunate to have great partnerships with dozens of clients throughout the year on work ranging from shopping center construction projects to high-end restaurant construction assignments, thanks to the negotiated contract process.

For us, this arrangement is far more preferable to the common competitive bid process. Of course, we understand the desire to keep costs low, but giving commercial construction work to simply the lowest bidder can lead to plenty of problems.

In our experience, we have found clients who care about producing the best commercial construction projects are more likely to engage in the negotiated contract process. Sure, the costs may sometimes be a bit higher, but clients know their commercial construction project will have the best level of finishes and be delivered on time. By negotiating and locking in a fee up front, clients will have the peace of mind that their costs are fixed, and, they will feel like they are working with their selected general commercial construction contractor in partnership. In the competitive bid process, clients typically write the smallest check possible up front, but if things go wrong during commercial construction, as they often do with low-quality subcontractors, costs can come back to bite them.

Here are the top three reasons to work with general commercial construction contractors in a negotiated bidding process.

  1. Setting expectations. In the competitive bid process, the general contractor’s most important expectation to meet is the price—and in this case, it’s making sure it’s the lowest qualified one. In the negotiated process, expectations are set differently. Clients and commercial construction contractors work together to define the most important aspects of a project, which allows the general contractor to identify where and how much money should be allocated. For a shopping center construction project it might be the lighting; for a restaurant construction project, it might be HVAC equipment.  By defining expectations, the commercial construction contractor will undoubtedly deliver a better final product.
  2. Identifying the right subcontractors. By setting expectations, the commercial general contractor will have a better idea of which subcontractors would be best suited for a project. If flooring is key to your retail construction project, then we might decide to allocate more of your budget toward top-tier carpenters who can deliver quality. Of course, in the negotiated process, the client has final approval of all subcontractors as well. This process delivers another level of relationship, as the commercial general contractor will typically have a good working relationship with the subcontractors. In the competitive bid process, a good general contractor subcontractor relationship is rare, as subs are picked solely on price.  Problems can arise, and often due, in these instances, as poor quality subs show their true colors once a commercial construction project begins. In fact, subpar work can actually end up costing a client more money. So there goes the low competitive bid, and a client’s budget now needs to increase.
  3. Potential project savings. While a competitive bid may allow for the lowest price possible at the onset, a negotiated bid has the potential to save clients money while still delivering the highest-quality possible. In a negotiated bid, a commercial general contractor will actively seek ways to save costs for clients. This could be by suggesting different materials, construction methods or project schedule. All of which can reap significant savings. The incentive in a negotiated process is that commercial general contractors generally split savings with clients seventy-thirty, with the seventy percent going to the client.  In a competitive bid, clients do not receive this treatment. General contractors and subcontractors simply do what was put on the bid sheet and nothing more. If we are negotiating in a partnership, we know the project’s sacred cow and can work around it to find savings where clients need them, helping them to accomplish goals in a less expensive way.

For all of these reasons, take a look at the negotiate bid process before simply trying to save a buck on commercial construction through competitive bids. It makes for better projects, and, with established partnerships, makes for long-lasting business relationships.

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

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

Top 5 Construction Strategies to Consider Before Purchasing an Underperforming Shopping Mall

Englewood Mall Redevelopments

Englewood Construction is currently engaged in several mall redevelopments across the country. Dated interiors, as seen at this EC project, require significant work and reimagining.

As we have mentioned in previous posts, opportunities abound for investing in underperforming shopping malls right now. As the economy improves and prices hit bottom, these transactions have become more realistic for commercial real estate investors when compared to past years.

However, like all major investments, due diligence should be a major component prior to the purchase. Perhaps the most important aspect in this process will be engaging a national retail commercial contractor for advice and feasibility studies. Many of these purchases will come with a significant retail renovation and construction component that is imperative to making your overall deal work and keeping your commercial construction budget in line.

Here are some points to consider before purchasing an underperforming shopping mall.

1)   Don’t be afraid of a big retail construction project. Believe it or not, a lot of shopping center landlords and retail investors are afraid of a shopping mall construction project. They think major retail construction turns people away from their shopping mall. In fact, just the opposite is true. Shopping mall construction attracts curiosity and builds buzz for a shopping center. People want to know what is going on, and a shopping mall owner showing a proactive approach can also help lure new tenants. Don’t be afraid of shopping mall construction.

2)   Know your construction limits. While you shouldn’t shy away from a major shopping mall construction project, it’s also important to know your limits. The best national retail construction firms will have significant shopping mall experience and can gauge just how much retail construction work an underperforming mall will need to make it viable. If an older shopping mall is a complete gut rehab, it may not be as financially viable of a project as originally thought, no matter where the location.

3)  Develop a support plan for national retailers. A shopping mall is only as good as its tenants and large, national retailers are typically the biggest traffic draw. Shopping mall investors should know the amount of interior construction upgrades and tenant improvements it will take to keep current marquee tenants happy. Also, national tenants like to be located by other national tenants. Will the shopping mall require significant build-out work or floor plate reconfiguration to accommodate more national retailers? These are questions that have to be asked. It would be a waste to purchase a shopping mall only to see top tenants leave.

4)  Know the status of existing mechanical infrastructure. It’s best to know the status and potential lifespan of main mechanical, electrical and HVAC systems. If their services can be prolonged, it can make all the difference for a successful retail construction project. This would allow more funds to be directed toward other shopping center construction needs. If new systems need to be purchased, it can be factored into the cost, or, the investor may look for a better space elsewhere.

Englewood Mall Redevelopments

With interior upgrades and significant construction, many obsolete malls can be made viable again.

5)  Do you really need all that anchor space? Sometimes, the smartest thing to do is shift strategies and re-imagine a property. In the changing retail landscape, many regional shopping malls don’t support more than two or three anchors, yet they were originally construction to house more. Rather than killing yourself for a lease that may not be coming, sometimes it’s best to repurpose some anchor space. The space could be reconfigured to house two or three regional tenants, or, perhaps a more interesting approach, it could be chopped off all together and rebuilt as a dynamic food court with fast casual chain restaurants. We’ve seen both approaches done with success.

We’re certain this shopping center construction trend will continue in 2014 and beyond, but like all retail construction projects, each will require its own unique approach. For those commercial real estate investors willing to review several construction options and consider different retail construction strategies, the path to success may be all the more apparent.

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

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

Retail Construction: Successful Steps in Grocery Store Redevelopment

Grocery store construction

Englewood recently completed a Trader Joe’s in Libertyville, Ill. The grocery market has been extremely hot in the Chicago area.

In the depths of a historically cold Midwestern winter, one market has remained particularly hot for Chicago commercial general contractors—grocery store construction.

The Chicago grocery construction market has long been dominated by two titans of the industry-Jewel-Osco and Dominick’s. Yet in the last several months, this status quo has changed dramatically, as Dominick’s stores closed every one of its 72 locations in the Chicago area in December, pulling out of the market completely.

This changing of the guard has brought a tremendous amount of opportunity to new grocery providers, new store concepts, and, national general contractors with expertise in grocery store expansions.

Now, Chicago specialty grocers and other regional chains will have an opportunity to gain a larger piece of the market in Chicago. With 57 of the 72 closing Dominick’s up for grabs, this has already begun to happen. As the owner of one of Chicago’s best grocery construction contractors, I find the most exciting and surprising thing about the process is the sheer amount of grocers expanding in the market.

As I said before, this was typically a two-store town. Not anymore.

Specialty brands like Whole Foods and Mariano’s are making moves because of the recent closings, and Dominick’s main competitor, Jewel-Osco, has also snatched up several of the stores. Yet more than just these three providers are expanding. Specialty stores such as Trader Joe’s, Native Food’s, Mrs. Greens and Pete’s Fresh Market are expanding at rapid clips as the Dominick’s closings have left many suburbs and neighborhoods undersupplied. The moves have not just been in the high-end or mid-market either, budget grocers such as Aldi and Ultra Foods have become staples in many markets across Chicago.  

At Englewood Construction, we completed grocery construction projects for many of these brands, most recently on five Trader Joe’s across Chicago and the suburbs.

When undertaking a big grocery construction project, there are a few things that the best general contractors will always look out for.

  1. Parking is a premium. Parking is important with almost any retail construction project, but with grocery, it is even more important. Most shoppers like to stock up for a week or more, prompting them to drive to the store. If parking is not a top priority for your development, you could have a problem. Recently, we completed a Trader Joe’s in Chicago on Diversey Parkway that required two levels of parking to be built on top of the store. The area demographics were amazing, but Trader Joe’s needed an innovative parking construction solution to fit the lot’s footprint.
  2. Shoppers, get your carts. Shopping cart placement may not seem like a big deal, but with grocery store construction it is huge. The majority of shoppers will be using a cart and where they are strategically placed in the store and (especially) in the parking lot can make a world of difference. The last thing your grocery store construction project needs is a logistical nightmare because proper cart storage space has not been accounted for.
  3. Start on the frozen foods early. It’s best to start on infrastructure for the refrigeration section early. The equipment is so large, when it arrives, it needs to be installed right a way so it is not taking up valuable space.
  4. Reuse existing infrastructure when possible. Obviously, a grocery store requires more infrastructure than a typical retail location, with the freezer section and a powerful HVAC system necessary. If you can reuse existing space, as is the case with Dominick’s, it is always best and the most cost efficient approach. However, the best commercial contractors will help grocers differentiate themselves from previous users and rebrand the space appropriately. Shoppers should feel like they are walking into a completely different store when they enter.
  5. Create an experience, not just a grocery store. The emergence of the specialty grocers has been based on creating a special experience for shoppers. Some of these stores have cafes, wine bars and even sushi bars. Shoppers want an experience today and perks like cooking demonstrations or free sample stations will bring them back. Making sure the floor space and layout is able to house all of these possibilities is an important step in the grocery store construction process.
Bill Di Santo
President
Tel: 847-233-9200 x710

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