Opportunities for renovation projects go beyond residential “fixer-up” work, offering electrical contractors a way to participate in a market that can provide increased growth. For example, in California, there have been a number of bond measures floated throughout the state to refurbish schools and universities to modernize them with the latest technologies. And, it is now mandated that older hospitals in the state be renovated to be seismic compliant by 2010 (which may get extended to 2012).
“Every existing hospital not built within the last 15 years or so must have its entire structure updated, providing electrical contractors with a large market opportunity,” said Tom Tatro, vice president of operations, Contra Costa Electric Inc., Martinez, Calif.
In addition, hospitals in California that are not seismic compliant are increasingly being converted to medical office buildings for doctor’s offices and outpatient procedures.
Another statute that helps provide electrical contractors with opportunities for renovation work is the law recently passed in Chicago that requires upgrading fire alarm systems and installing sprinkler systems in buildings of certain sizes or occupancy rates, according to Michael McInerney, president and CEO of Gibson Electric & Technology Solutions, Oak Brook, Ill.
Opportunities for renovating banks for retail use in Utah is a specific opportunity that the company has seen in the market, according to Scott Jensen, vice president and manager of the design-build division of Cache Valley Electric Inc., Logan, Utah.
“Generally speaking, however, changes in technology provide a great number of opportunities to renovate buildings’ older power distribution, voice and data, and emergency and life safety systems,” Jensen said.
In older buildings, the existing power distribution systems no longer meet the power needs or demands for the number of devices in the environment and also offer electrical contractors an opportunity to promote their renovation services.
It doesn’t stop there. For example, within the oil sector, the opportunities for renovation work are growing as states shy away from refinery construction due to environmental reasons. But modern reformulated fuels and increased production in existing, older facilities require reautomating outdated instrumentation systems. In places such as Salt Lake City, where businesses have left downtown areas over recent years to follow the population growth in the suburbs, existing, abandoned facilities are being refurbished to lure them back.
“There are also increased opportunities for renovating buildings with historical significance to protect them from seismic disturbances, or to bring them up to code and provide them with more modern systems,” Jensen said.
In other states, such as Oklahoma, many opportunities for renovation work are available because of the large amount of available space, which can be renovated for new tenants or converted for a different use.
“However, new construction in the industrial market in the area is not speculative, but customer-specific, which will not provide great opportunities for the conversion market in the future,” said Rob Cherry, president of Osborne Electric Co. Inc., Oklahoma City.
The Chicago area also offers a number of different opportunities to renovate buildings for a different use because of high vacancy rates of Class A and B office space.
“A number of old warehouse buildings are being converted to residential lofts and some of the older Class B office buildings are becoming condos,” said McInerney.
Code upgrades and technological advances are two of the most important issues driving the commercial and industrial renovation market. Electrical contractors can address code upgrade issues in this market by having good relationships with local inspecting authorities, according to Jensen.
“Getting inspectors involved as early as the planning and permitting process enables contractors to take advantage of their expertise and better understand what will be required to ensure that the renovated building will meet all applicable codes and pass inspections easily,” Jensen said.
Where fire marshals and inspectors are driving most changes to upgrades in buildings’ fire and life safety systems, there is also an increased focus on enforcement.
“All this requires the contractor to fully understand changes to the code and their effect on any renovation construction,” Cherry said.
Buildings that were only constructed several years ago are already lacking the infrastructure to take advantage of modern communications technology. That means electrical contractors need to extensively review the customer’s needs and draw on design and engineering resources to determine how to cost-effectively meet them. It also means, however, that contractors can provide customers with state-of-the-art energy savings and building automation systems and grow their market share.
Other issues that affect the commercial and industrial renovation market include finding buildings that are easily convertible to a new use in a cost-effective manner, interest rates staying low to avoid a slowdown in real estate, and understanding which delivery method will be most effective for the project.
“Owners need to be educated about what delivery method is best and to expect the unexpected when renovating a facility. The older the building is, the more unknowns will probably be encountered,” Cherry said.
Meeting market challenges
According to Charles Hadsell, Contra Costa Electric’s commercial division department manager, selling renovation solutions to customers is one of the hardest challenges.
“It’s tough to get them to understand the cost structure of a renovation project, primarily because they usually base their cost expectations on historical data,” he said.
Contra Costa meets this particular challenge by developing and maintaining honest, open relationships with its existing customer base to demonstrate that the estimates provided are determined honestly. In terms of a building’s actual construction, it is a challenge for the electrical contractor to accomplish the customer’s demands and modernize the facility without totally gutting it. Because of this, budgets, the building’s constructability, and meeting the demands of the property’s current owner or developer become huge issues for the contractor.
“One of the best ways of dealing with these challenges is to have the appropriate experts become involved early in the project to help with constructability reviews and to make recommendations,” Jensen said.
According to Cherry, it is also difficult to educate the owner and the rest of the construction team about the best delivery method to use to achieve the project’s goals.
“It is important to work closely with general contractors and owners to develop open communication and long-term relationships so that they trust that your suggestions will fulfill the project’s final requirements,” Cherry said.
So, what is the best delivery method for commercial and industrial renovation projects? The answer is design-build, especially when a facility’s existing systems are to be utilized.
“Design-build offers both the contractor and the customer a shorter construction schedule in some cases, because the team is not waiting for the design process to be completed before construction begins and is a particular advantage when the facility is unique in nature,” said McInerney.
According to Jensen, design-build is the most efficient delivery method because it offers the opportunity to conduct constructability reviews, participate in project budgeting early in the process, and design conflict mitigation.
“Design-build offers advanced opportunities for coordination between the team members to solve any problems and issues before construction even begins,” Jensen said.
Design-build also lowers all of the team members’ exposure to increased cost, which is the most important advantage. Cherry believes design-build allows the electrical contractor to offer its expertise and any familiarity it has with the building. In addition to design-build, companies such as Contra Costa are seeing increased use of design-assist as a delivery method in renovation projects, particularly in the healthcare market.
“Both design-build and design-assist, which allows the contractor to work with the project’s architects and engineers to develop solutions, provides the opportunity to determine constructability and control costs,” said Joey Ramirez, department manager for Contra Costa’s industrial division.
The electrical contractor with design and engineering expertise is best suited for this type of work. According to McInerney, this is especially true for renovation projects because they don’t always have the detailed architectural and structural drawings often found in new construction.
In addition, electrical contractors have to be careful to ensure that environmental and worker safety concerns are being addressed, such as exposure to and mitigation of lead, asbestos and PCB-contaminated electrical devices.
“Contractors need to be aware that any renovation project will have surprises inside of it that may derail its budget and schedule,” Jensen said.
It is also important to have the staff expertise to make determinations about the building’s existing systems and the extent of renovation that is really necessary.
“Renovation requires a different approach than new construction,” Jensen said. “The contractor should have a work force that is creative and innovative to devise solutions for the owner that will accomplish the project’s goals.”
Renovation projects can carry the biggest risks, but also the biggest rewards. The risk involves losing a great deal of money on any particular project.
“But the rewards are great when the electrical contractor understands all of the issues involved, can offer design-build services, and has developed extensive industry relationships in the community,” Cherry said. EC
BREMER, a freelance writer based in Solomons, Md., contributes frequently to ELECTRICAL CONTRACTOR. She can be reached at 410.394.6966 or firstname.lastname@example.org.