Renovation resurgence cuts across sectors

Reconstruction work is alive and kicking for many AEC firms. “Higher education is huge for us, and that sector just stopped spending when the recession hit,” recalls Mark DiNapoli, President and General Manager (Northeast Region), Suffolk Construction. “Now we’re seeing projects starting to take off.” Healthcare, science and technology, and commercial (office/retail/hospitality) are also coming back in the Northeast, he says, as clients “think about how to transform their existing buildings.”

“The reconstruction market has gotten much busier,” notes Karl Anoushian, Senior Vice President and Director of Preconstruction Services at Structure Tone. “The smart landlords, the financially stable ones, have timed the market and are pulling the trigger on deals.” The strategy: repositioning—reskinning exteriors to make them pop, sprucing up lobbies and core bathrooms, upgrading the lighting, air-conditioning, and elevators.

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Mary Miano-Sleeper, Vice President/Director of Corporate Development in the Dallas office of PageSoutherlandPage, says the growth in the rehabilitation of “tired spaces” in Class B and B+ buildings is “due to the availability of capital that was on the sidelines waiting for distressed assets to be vetted and put back into play.”

Wight & Co. has been getting “a good share of our work out of renovations,” notably for college and K-12 structures of the ’60s and ’70s, says Ken Osmun, PE, LEED BD+C, DBIA, Group President, Construction. The work often entails adding air-conditioning, bringing buildings up to code, and restoring their original appearance.

 “Most of the activity we are seeing is in cities immediately adjacent to large cities,” says Mathew Dougherty, PE, Vice President, McShane Construction. High-density, mixed-use urban infill developments with substantial upgrading and direct access to public transportation remain “highly popular with both tenants and developers,” he says.

MAKING THE DEALS WORK

AEC firms have to help clients capture available funds, such as historic tax credits, says Suffolk’s DiNapoli. “We provide detailed cost information every month so that they can collect their funds,” he says. “We’re much more involved at an early stage on these projects, to help with financing.”

In older cities like Boston, infrastructure usually has to be upgraded when a building is renovated. “The utilities are requiring transformer vaults inside the buildings instead of pad-mounted transformers,” says DiNapoli. That’s a hidden cost the client has to absorb, but it’s necessary to help prevent brownouts.

AEC firms are making the business case for reconstruction. Wight & Co. recently completed the renovation of a 70-year-old college residence hall that came in at one-third the cost of new construction. “Our clients have limited budgets, so renovation can help them manage their resources,” says Osmun.

Structure Tone’s global procurement process provides dollar savings and accelerated product delivery for clients. The firm also uses its contractor-controlled insurance program and subcontractor qualification process to hold down costs. “We’re big in cost segregation, which can have real tax advantages for the owner,” says Anoushian, whose firm does 800-900 reconstruction projects a year. “We try to offer the client the best savings over the life of the project.”

USING TECHNOLOGY WISELY

For a 420-bed hostel in Boston, Suffolk laser-scanned the interiors of all six floors of a landmark building and created a Revit-based BIM model that informed the design. “In reconstruction, the unknown is more important than the known,” says DiNapoli. “We need to provide clients with as much information as possible, set budgets with appropriate contingencies for unknowns, and plan, plan, plan.”

“We’re doing animated flythroughs on our renovation jobs, using Revit and 3D, to articulate to clients what they’re actually going to get,” says Osmun. “There may be piping that will affect actual ceiling height, or a column that can’t be removed. This helps establish client expectations more realistically, before we start the work.”

Structure Tone routinely uses geothermal and ice-storage technology on office renovations. “Major financial institutions have huge data demands, and you have to keep their data centers at 60 degrees” [Fahrenheit], says Anoushian.

STEADY GROWTH, BOOST IN SUBCONTRACTOR COSTS

“The second half of 2012 will continue to show slow but steady growth in reconstruction,” says PageSoutherlandPage’s Miano-Sleeper.

“After dropping their fees just to retain their people, subcontractors are trying to make a recovery,” says Suffolk’s DiNapoli. “We’re definitely seeing price escalation from subs, 6-8%, and it’s been a little startling for our clients—and for us.”

Wight & Co.’s Osmun says, “Our estimators are saying it’s a 2% increase overall in the last year. We have to sharpen our pencils more than ever. We have to be smart, and we can’t make a mistake in the field.”

“Firms need to develop ways to meet client needs for remodels and expansions,” says D. Bruce Henley, AIA, LEED AP, DBIA, Principal/Office Director with Dewberry. “It will mean survival for many.” +

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