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Unique Growth Opportunities Accompany Tenant Improvement Projects

When Market Contractors, Portland, Ore., opened its doors in 1977, it found a niche remodeling local grocery stores. After building its portfolio in the local area, Market Contractors expanded into Seattle by working with major grocery chains Safeway and Albertsons. This led to a contract in 1999 with U.S. Bank to build 200 new branches of Safeway and Vons grocery stores in California, Arizona and Nevada.

Market ContractorsIn 2010, Market Contractors acquired Financial Supermarkets, Inc., which completes similar work on the East Coast. Though the company, which is based in Cornelia, Ga., kept its name to maintain its East Coast brand recognition, the acquisition gave Market Contractors a nationwide reputation for performing construction in an operating building as unobtrusively as possible.

“We can work in environments that already exist without disrupting the clients’ business,” says Market Contractors’ Marketing Coordinator Jodi Dakin.“We’ve been able to find that synergy where we can all work together.”

In addition to its work in the bank market, Market Contractors added retail, health care and restaurants to its portfolio—and even a few ground-up construction projects.

“Each industry has its special needs; nothing’s cookie cutter,” Dakin says. “So we have brought on experts who know the needs and special requirements for different buildings to help us see potential problems.”

For its most recent endeavor, Market Contractors conducted research for four years and opened Sorbella Practice Builders in 2012, which focuses solely on smaller, more convenient medical facilities such as urgent care clinics. “We’ve hired experts in the medical industry to help us create the brand and credibility, which crosses over with our experience in design and construction. We have a well-rounded team.”

Sorbella Practice Builders recently landed a contract with Fast Care to build facilities in the Midwest, and it expects the amount of similar projects to increase due in part to the effects of the Patient Protection and Affordable Care Act.

“There are going to be millions of newly insured Americans, so there is going to be an influx of patients,” Dakin says. “That was our motivation to create the new division. We see a trend over the next several years for patients to go to a clinic to get care rather than going to a physician’s office or hospital.”

A Specialized General Contractor
In the late 1990s, local real estate brokers hired Jeff Vilkin, president and owner of Las Vegas-based Tradewinds Construction, to be the general contractor for tenant improvement projects in a 40,000-square-foot industrial facility. With no prior experience in this niche, Vilkin agreed to complete the first tenant’s office in two weeks—not knowing what a heavy load he had just taken on.

“I did it on time and I did it all myself,” he says. “Some of the commercial brokers were impressed, and then I was doing tenant improvements left and right due to referrals from the broker community.”

TradewindsThe brokers who owned that project went on to become members of the Society of Industrial and Office Realtors, and they still recommend Tradewinds Construction for tenant improvement projects today. Vilkin also found specializing in that type of work as a general contractor allows Tradewinds Construction to continue offering its core subcontracting services, including commercial wood framing,mechanical/plumbing, panelized roof systems, and metal stud framing, drywall, paint and acoustical ceilings.

“Because we are a large subcontractor in a small market and 70 percent of our business comes from other general contractors, we don’t want to bite the hand that feeds us by taking food off their plates,” Vilkin says. “When Vegas was a fast-growing city, most of the big general contractors didn’t want to do tenant improvement work. They wanted the big projects, so they would refer us.”

Although the firm performs tenant improvement work as a general contractor, the projects run along a similar schedule to subcontracting.

“If you look at a typical general contracting job, the attention span necessary is at least nine to 12months,” Vilkin says. “Tenant improvements require about eight weeks, which is more like the attention span needed for subcontracting. Our business model is built around a high number of projects that are smaller and have bigger margins.”

The company self-performs a lot of the work due to its subcontracting experience, which ultimately serves as a competitive advantage and saves clients’ money. At its peak before the recession, Tradewinds Construction completed 60 to 80 tenant improvements per year, two-thirds of which were design-build projects.

But even with a diverse skill set, Tradewinds Construction was hit hard by the recession, which Vilkin calls the “economic apocalypse.”

“Vegas fared well through previous recessions in the early1990s and 2000s, but it got way overheated from 2004 to 2007,” he says. “The economy blew up and came straight down and just stopped—it didn’t even bounce along the bottom.”

Tradewinds Construction experienced an 80 percent reduction in annual revenue, decreasing from $40 million to $9 million. Vilkin sold his entire fleet of vehicles and liquidated the office. The company was unable to pay employees for holidays and they were required to take furloughed days. Vilkin and his business partner didn’t take home a paycheck for two years.

Then the Federal Deposit Insurance Corporation came to town and closed many community banks that offered commercial real estate lending for projects around the city. Funding for many construction projects stopped immediately, leaving unfinished work throughout Las Vegas.

Tradewinds Construction saw better days in 2012 and 2013. It recently completed a 13,200-square-foot office building for Slick Deals, an online discount shopping network. For this turnkey design-build partnership, Tradewinds Construction developed and produced the project drawings, as well as coordinated Slick Deals’ interior design selections and the mechanical, plumbing and electrical designs. The project consisted of a 1,200-square-foot lobby, 435-square-foot data room, eight offices, four conference rooms, four meeting rooms, two employee lounges, a kitchen and an open business area with space for 24 work stations. 

Aviation Institute of MaintenanceTradewinds Construction also recently finished a project for the Aviation Institute of Maintenance, a 37,000-square-foot facility that includes classrooms, a multimedia library and a computer lab. The company had less than six months to complete the project before the 2013 school year, and it finished on time and under budget.

Vilkin predicts 2014 will be even better. Many of the unfinished projects around the city are finally getting financing and construction is picking back up. He has seen an increase in tenant improvement projects in medical office buildings, retail and hotels.

Tradewinds Construction is about to begin tenant improvement projects on eight medical office buildings. The shells of the buildings were 90 percent complete when the owner, Lehman Brothers, filed for bankruptcy in 2008. After a five-year process, the new owner recently obtained a clear title and hired Tradewinds Construction to begin the construction process.

Jessica Porter is assistant editor of Construction Executive. For more information, email porter@abc.org, visit www.constructionexec.com or follow @ConstructionMag

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