Remodeling jobs keep builders afloat

With the prolonged downturn in new building construction, tenant improvements and commercial remodeling jobs are about the only reason many northern Nevada construction firms are still solvent.

And it's not just small firms that are scratching out a living in renovation work. Companies that have erected some of the largest and newest buildings in the Truckee Meadows are focusing on tenant improvements to keep revenues flowing.

For example, a quick glance at recent Washoe County building permits shows Q&D Construction, Frank Lepori Construction, Panattoni Construction and United Construction all involved in modest commercial remodel or tenant improvement "TI" for short projects.

United Construction, which erected two of the largest new buildings in the Truckee Meadows with the NOW Foods and Urban Outfitters facilities, has seen revenues from its TI division grow by 10 to roughly 25 percent annually over the past few years, says Michael Russell, chief operating officer.

United has done tenant improvements ranging from $2,500 to more than $1 million, Russell says. The company has shifted some of its new construction field managers into its TI division to keep abreast of the remodel and renovation work.

"A lot of large companies have gone away from picking and choosing the work they do and are pretty much chasing almost every project that has any value and funding to it," Russell says. "A lot of local companies may not have survived if they didn't have this TI or commercial remodel work. A lot of that TI and renovation work has kept some of folks in business. The bigger guys will always survive, but some of the smaller guys have made their living doing those kinds of projects through the downturn."

For smaller general contracting firms, tenant improvements have been a lifeline to financial stability.

"It's the only thing keeping us going," says Ed Shaw, president of Shaw Construction.

Work has been sporadic, but Shaw has landed several fair-sized remodel jobs, converting a vacant building in Carson City into a Big Lots! store.

The firm was general contractor of the fa ade remodel on the former Raley's building at Reno Town Mall to reposition the space as Food Source. Shaw also has done several small jobs inside Reno Town Mall, including remodeling New Horizons Learning Center and Marchele's Bridal Boutique.

Shaw currently is working on a $256,000 office improvement project in a building at 80 First St. in Reno. Much of the work the past two or three years, Shaw says, has come from landlords repositioning older properties.

That's the kind of work that Alex Hose, president of Tico Nevada, has made a living at since the late 1980s.

"It is critical for Washoe County to transform all the different buildings we have to meet the needs of people who want to come here," Hose says.

Tico has renovated seven older buildings in the area, particularly in downtown core. Tico of Nevada recently completed work on three floors of the Bosma Business Center just east of downtown and also worked on repositioning the old Fitzgerald's property into the CommRow concept.

Some construction companies are building to suit after erecting building shells to control costs. Brett Sabatini, owner of BR2 Land Development and partner in Longley Corners LLC, has been overseeing work on 20,000 square feet of retail space at the corner of Longley Lane and McCarran Boulevard.

All but 2,000 square feet of space is leased. Companies already occupying space or expected to move in by July 1 include Anytime Fitness, Adecco Staffing, financial planning group Edward Jones, business management company Sierra Management Group, Dr. Jim Pappas Active Sports Medicine and Nevada Physical Therapy.

Other companies have tapped into Washoe County School District infrastructure and information technology upgrades to find work in the remodel sector.

West Coast Contractors, which is putting the finishing touches on the new dormitory at University of Nevada, Reno, has worked on four school upgrades and will complete two more this summer, says Chief Executive Officer Andy Ramirez.

The remodels include new doors, windows, interior finishings, flooring, bathroom fixtures, doors and countertops, as well as computer infrastructure to bring the schools' technological requirements up to par.

"At this point any work is good work; there is just nothing out there," Ramirez says. "There is not much on the horizon, and not much work in this area. These school rehabs are huge."

Q&D Construction is doing a great deal of tenant improvement work with Southwest Airlines jobs won through a relationship forged when the Sparks-based general contracting firm revamped the baggage check-in terminals at Reno-Tahoe International Airport in 2009.

Q&D has won work for Southwest from Los Angeles to Richmond, Va., says Tim Kretzschmar, vice president of building. Q&D also is working on a new baggage claim and consolidated security checkpoint job at the airport that began last year.

Despite having a few large contracts in place, Kretzschmar says Reno will be a tough place for vertical construction companies over the next few years.

"I will have more guys working out of the area than I will in the area," he says "Everybody is having to travel more but hey, they are all surviving."

Tico's Hose says that unused space in existing occupied buildings will dampen the need for new construction for quite some time. Shaw says there is a perception among building owners that construction costs should be falling, but in reality, he says, outside factors are pushing up construction costs.

"Fuel costs are up, environmental permitting costs are up, and contractors are caught between the perception that prices should be falling while all the forces are driving costs up."

United's Russell says tenant improvement work is expected to outpace new construction for the coming year or longer because it's still cheaper to reposition older properties than erect new structures. And the Reno-Sparks area has a high proportion of aging industrial and commercial properties that need upgrades for landlords to keep or draw tenants, Russell adds.