As many of you may know, Englewood Construction recently completed Zara’s largest store in the United States at 700 N. Michigan Ave. in Chicago. For those familiar with Chicago, you may also know this store offers a prime corner location on the city’s famed Magnificent Mile. But what I want to do is tell you […]
I’ve got to ask, are you still competitively bidding the bulk of your commercial construction projects? Really, you are? Interesting….
Sure, I know there will always be developers who competitively bid all their projects, but from a construction cost and timeline perspective, it pays to negotiate with a designated general contractor versus requesting multiple bids on a construction project. And here’s why:
For a number of reasons – usually cost, location or a lease agreement – commercial real estate owners are opting to refresh or remodel their retail stores, restaurants and hotels instead of building new-construction projects.
In fact, just recently Disney announced plans to completely transform its 340 stores in the United States and Europe from Disney Stores to Imagination Park, http://bit.ly/14YNxn.
Regardless for your reason to remodel, you need to realize that a renovation is a completely different animal than building new construction.
For example, during a new restaurant construction project, owners are responsible for providing the majority of the supplies and drawings while the general contractor executes the work.
I’m not going to sugar coat it. Whether you’re a bank with distressed assets on your balance sheet, or you’re a real estate investor/developer who purchased a foreclosed commercial property, creating a viable workout plan can be an uphill battle. Each passing month brings further physical deterioration of unmaintained assets.
However, there are ways to stop the bleeding and minimize the costs of owning, maintaining and repositioning distressed and foreclosed commercial assets.
First, align yourself with a general commercial construction contractor familiar with completing distressed commercial properties. According to the fall 2009 issue of Development magazine, while hotels and retail properties are the most problematic in terms of default, foreclosure or bankruptcy, office distress is up 118 percent year-to-date in 2009 versus 2008. So make sure your general contractor specializes in the asset class of your distressed holdings.
There’s an old adage, “Better to be silent and thought a fool than open your mouth and prove it.” That may be true in some life situations, but not when it comes to hiring a firm to complete your next retail construction project.
Red Flag #1: Be wary of the general contractor that has no questions, exclusions or qualifications and agrees with all requests. A general contractor who just submits a bid without certain questions or qualifications may not understand the complete scope of work and schedule.
There’s no doubt that local businesses will have much to celebrate if on October 2, 2009, Chicago wins the 2016 Summer Olympics bid. But just how would Chicago hosting the Olympics affect the city’s restaurant and retail construction activity? Here are a couple of my predictions….
Some may disagree, but we at Englewood Construction think the challenges commercial developers face in opening a store in a vertical mall are more complex than any other type of retail store construction.
Why? Because a vertical shopping center can be made of many floors within a tight city block foot print that has only one opening (and if best two elevators) where all goods, materials, and debris can enter and exit. Coordinating traffic and usage between retailers, building operators and construction personnel can make or break the project.
Key Steps Commercial Developers Can Take to Ensure Their Contractors are Financially StableIn today’s market there’s no such thing as too much due diligence – especially when it comes to checking the financial stability of your contractors. Whether you’re hiring a general contractor, architect, engineer or some other consultant, their ability to pay their subs directly and on time affects the success of your commercial construction project.
For example, if your general contractor falls behind on paying their sub contractors, or they don’t pay them at all, then those subs have lien rights that you as the developer or your tenant will have to pay the sub contractor or defend your rights as a property owner.
How would you like to “find” thousands of dollars in your operating budget?
All you need to do is answer a couple questions. How did you file the documents for your last commercial construction project? Did your general contractor give you a big fat binder of information including your warranty letters, operating manuals, as-built drawings, etc? If so, you probably put those documents in a banker’s box or two and then stored them in your office. Or maybe you paid to have the documents stored in a warehouse.
For my first blog post, a lot of people at Englewood Construction suggested I write about how to choose a retail construction company. But one person said that would be “boiling the ocean.” After she explained to me what that meant, I agreed – it’s a topic too ambitious for me to conquer in one post. Instead, I decided to write a series on the topic, starting with where to find a reputable contractor and what questions to ask.