Retail Traffic

On the fast track

A Target store in New Jersey was constructed in five months. A new Lowe's in Kentucky went up in four months and three weeks, while the completion of a Bed Bath & Beyond in Virginia took just 74 days.

Contractors are under intense pressure to deliver retail projects in a shorter time frame, and they're shaving weeks, even months, off traditional construction schedules.

Retail has always been time sensitive, but never more so than today. The demand for malls and stores to be up and running in time for peak shopping seasons and grand opening celebrations leaves little room for delays. Moreover, retailers and developers are facing their own pressures to produce quick returns.

"The faster they can open, the faster they can start making money and getting a return on their investment," says Craig Willcut, a senior vice president of commercial construction for Irvine, Calif.-based MBK Construction Ltd.

Individual retailers see those time constraints magnified with multi-store rollouts. "Most large chains, such as Circuit City, can't enter a new market with one or two units. They need to saturate the market," says Melvin Gray, chairman and CEO of Homewood, Ill.-based Graycor Cos.

Graycor is building more than two dozen Circuit City and CVS drugstores throughout the Midwest. The common challenge is that these expansion programs are not spread across a long time horizon. "Whenever you have multi-unit expansions, time is extremely important," Gray says. "It's always a matter of doing it in the absolute minimum amount of time."

That time crunch is forcing contractors and construction managers to speed up already-tight schedules. Often, by the time the contractor steps in, the project is already behind because of front-end issues such as site selection and city permitting, which squeezes the schedule even further at the back end.

What's causing the crunch? A shift in client base is shortening construction schedules for some contractors. "We're seeing more private developers out there vs. the retailer," says Tom Eilerson, president of Richmond, Va.-based EDC. Those relationships present some challenges in communication.

"When we used to work for the retailer, or a project where the retailer owns the project at the end, we tended to have better communication," he says.

Having a private developer involved creates an extra layer of people between contractor and retailer. "Often, the construction department or design department isn't involved until the lease is signed," Eilerson says, adding that the result is an unrealistic construction schedule.

Retailers are demanding that their stores be built more quickly, and those deadlines are being incorporated into leases complete with damage clauses for missed deadlines. The damages are subsequently passed on to contractors through their construction contracts. Those penalties depend on the scope of the project. A 40,000 sq. ft. project, for example, might have a late penalty of $1,000 per day for the contractor.

"The way you get hit with those penalties is not so much the punitive damages but the lost relationships," Eilerson says.

Ironically, the faster construction pace is something that many contractors have forced on themselves as a competitive edge. In 1990, St. Louis-based R.G. Brinkmann Construction Co. built a 200,000 sq. ft. Wal-Mart Supercenter in five months, two months ahead of the industry norm. "So we have set the pace internally for our company," says Bob Brinkmann, the firm's president.

The rise in popularity of big boxes also has had a significant impact on construction schedules, with contractors becoming more efficient in delivering the space. Big boxes can be constructed in a shorter time frame than traditional retail stores, Eilerson explains, because they are fairly straightforward. Although they involve a fair amount of interior finishes, it's easier to work in one giant room than several small compartments, such as with a classic strip center.

"Big boxes rarely have more than a five-month construction schedule," Eilerson says, "and it's not unusual to see those time frames compressed to three and a half months."

Bigger projects, fewer workers Expanding project size is hindering project delivery. Several years ago, superstores were being built in about seven months. Despite the fact that many of those big boxes are being "supersized," retailers expect construction to be completed in five months or less.

"The retailers' theory is that once you decide to build the store, the additional space is low cost to build and operate, and it allows for more merchandise," Gray says. "Retailers are looking to provide a greater selection of options for the shopper."

Big-box category-killers are not the only retail projects growing in size. Everything from movie theaters and grocery stores to power centers and superregional malls are expanding.

For example, Graycor recently worked on an expansion at Woodfield Mall in Schaumburg, Ill., which added 200,000 sq. ft. of retail space as well as a 400-car parking deck.

Adds Brinkmann, "Retail projects are growing. Our developers 10 years ago were not doing 700,000 sq. ft. projects." R.G. Brinkmann Construction is about to start work on Chesterfield Commons, in Chesterfield Valley, Mo., which will total nearly 800,000 sq. ft.

Projects are also more complex, with contractors called upon to complete related infrastructure work. Chesterfield Commons required a $10 million interchange, Brinkmann says.

Not only are projects bigger in scope, but there are fewer laborers to build them. The active development market continues to put a strain on available labor. Nationally, the unemployment rate is about 4%, but many markets are even lower. Minneapolis, for example, has an unemployment rate of 2%.

"With the industry at a high, I think everyone is challenged by the need for more laborers, especially skilled craftsmen," says Tom Hartwell, vice president of business development for Minneapolis-based Weis Builders Inc.

The shortages are widespread, appearing in trades such as concrete, drywall, carpentry, framing and electrical, as well as unskilled labor. The tight labor market creates problems for contractors who are bidding projects.

"We are very dependent on subcontract trades because we are construction managers - we don't perform a lot of that work," says Mike Willingham, director of operations for R.A.S. Builders' Denver region. "Subcontractors are so busy that it is difficult for them to find the manpower to bid additional work."

Finding good subcontractors these days requires a little creativity, says Jay Prybylski, a vice president with New York-based Bovis Interiors. The company maintains a database of area subcontractors and their specialties. The database tracks a subcontractor's workload from Bovis and other clients. "The database lets us know who is overextended," Prybylski says.

Many contractors rely on existing relationships to lock subcontractors into new jobs, while others utilize a regional network of subcontractors to fill empty slots. "We have the ability to draw on sub-trades from other locations to supplement the workforce," says Willingham, whose company has nine offices, the majority of which are located in western states.

The labor shortage should ease up as construction intensity slows. However, there is continued concern about the decrease in new people entering skilled trades.

But hope springs eternal for industry professionals. "People are coming into the industry, it just may not be as prevalent in the age of information that we live in," Hartwell says.

High school students do have more options today when taking industrial arts courses. Some schools offer computer-aided design as opposed to courses where students build with their hands. "I still think there are going to be people who gravitate toward jobs in skilled labor," Hartwell says.

In addition, some labor unions are taking a more proactive approach to get young people involved in trade areas.

Need for efficiency As construction times get shorter, projects get bigger and labor gets tighter, contractors are forced to find ways to streamline the construction process.

"The industry is the busiest it's been in decades, which is a major factor in people's need to fast-track, regroup and figure out more efficient ways to complete construction in a timely basis," says Jeffrey Brown, CEO of New York-based Jeffrey M. Brown Associates Inc.

The most important element of fast-tracking is involvement in strategic planning of a project in the pre-construction period. "If you do that, then you start actual construction of a project with a strategy in hand. If you don't do that, and you think you can strategize simultaneously, it doesn't work," Brown says. "Basically, you look at each job and try to eliminate the surprises as much as possible before you begin."

Studying the design, plans and specs before a project starts allows contractors to get a jump on delivery items that must be purchased out of sequence. The lead time on ordering structural steel, for example, is 12 to 18 weeks. "That can have a tremendous effect on any construction schedule," Brown says. "So ordering critical materials before you begin a project can save on delays."

Contractors must also meet with municipalities and understand the public demands and procedures from the start. Different cities have their own rules and regulations regarding procedures and inspections.

The pre-construction period also allows contractors to understand the scope of the project and research the best subcontractors. The contractor can pre-select and pre-qualify its subcontractors, which in turn allows subcontractors to be more efficient in allocating their available labor.

"For the savvy buyer of construction services," Brown says, "there is no substitute for hiring somebody who will be your partner in helping you see where your money is being spent, give you accurate information, and then take the burden of construction off your hands by producing a project in a timely manner and within budget parameters."

Increasing numbers of contractors are adopting similar partnering concepts. "It allows us to become active in the process in an earlier stage," Gray says. Graycor stepped into the pre-construction stage with its recently completed SouthPark Center in Strongsville, Ohio. "From our perspective, the contracting strategy and the relationship between contractor and owner are critical."

Says Willcut, "The biggest trend in recent years has been owners opening up to let contractors be part of the team." Contractors are more involved in the design process, making recommendations and doing more analysis in the early stages of a project. "In our opinion, that better serves the owner."

The partnering concept applies not only to owners and architects but also to subcontractors. "It seems to be very difficult to find enough labor, which is why partnering is so much more important," Willcut says.

Technology takes off Ten years ago, fax machines revolutionized communication within the construction industry. Now, laptop computers, digital cameras and the Internet are the new tools of the trade. "Everything we do as a company to manage risks now can be found in software packages," Willcut says.

The major advances have been in computer software programs that improve project administration via more efficient scheduling and data tracking, as well as Internet technology that allows for real-time communication.

A major time-saver for contractors, computer technology allows the management team to obtain information on a daily basis. Electronic transfer of messages, photos, shop drawings, project specs and other documents improves communication between all parties. Instead of sending documents out for changes and waiting for their return, contractors, architects and owners can save significant time by relaying the information electronically.

"Communication and information exchange is as critical a component as any other process in this business," Gray says. The ability to use e-mail to distribute field reports to the entire project team is of enormous value in enhancing understanding, he says.

Some contractors are even developing direct electronic connections to clients. Graycor relied on the Internet to improve communication during construction of the 590,000 sq. ft. SouthPark Center project. The Internet was instrumental in connecting Graycor's own St. Louis office and the project's Montreal-based architect with the Ohio job site.

Technology has enhanced both the speed and quality of communication. "It helps when the owner calls and says, 'Have you seen this?' " Brinkmann says. "And not only have you seen it, but you have the digital photo of the project in front of you."

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