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The State of the Industry

The latest Shopping Center World survey shows that while some leading retail contractors are struggling with challenges, others are reaping the benefits of doing business in the strongest economy in recent history.

The nation's economy continues to grow; unemployment is at an all-time low, people have cash in their wallets (or credit left on their cards) and are willing to spend it on all types of retail goods. As a result, the nation's retailers have been opening new stores at a brisk pace - creating plenty of work for shell and interior contractors.

But even boom times like these are accompanied by a variety of problems. While a nearly full-employment economy means more money in the hands of consumers for retail purchases, it also means that the contractors who build and expand the stores have to scramble to find the labor necessary to get projects done. At the same time, strong demand for building materials serves to jack up prices and create shortages.

The fittest of the fit Against this backdrop, there are a lot of retail contractors that have been having a banner year or two during the past five years. But, as you might have expected, the group occupying the top tiers of the SCW Leading Contractor Ranking for 2000 is very similar to the one that appeared in last year's list.

In SCW's shell space category, the Baltimore-based Whiting-Turner Contracting Co. topped the list, with some 22.3 million sq. ft. of construction completed during the past five years. It was a close contest, though, with the second-place winner (and last year's champ), Chattanooga's EMJ Corp., weighing in with 22.26 million sq. ft.

Meanwhile, San Francisco-based Fisher Development Inc. retained the top spot in the interior space construction category, with its five-year total of 26.7 million sq. ft. of space expansion handily edging out the runner-up by some 1.7 million sq. ft.

A tough business This year is shaping up to be a tough one for the interior space contracting business, according to Tomasso Latini, president of the Contracts Division of Fisher Development. The boom time most contractors are now enjoying is to blame.

"I think this business is getting substantially harder," says Latini. "We have had a number of our own people leave us and start their own companies because business is so good and it looks to them like it is so easy to make it."

This not only serves to increase the competition for jobs, but also for what are becoming scarce resources in the retail contracting business - workers and materials. "All the suppliers and subcontractors are very busy," notes Latini. "And with the growing economy driving an enormous amount of expansion," he adds, "time-tested, quality subs are getting especially scarce."

How to succeed - and excel In this difficult environment, "what's going to make contractors successful as we go forward is their stability and financial backing," according to Latini. "We have found that more and more [clients] are coming to us because we are well-known and financially stable," he says, "which makes me think that this is a key part to doing well in the long run."

"It's easy to get work these days - but excelling is harder," according to Barry Shames, CEO of Livermore, Calif.-based Shames Construction and president of the Retail Contractors Association.

"There's plenty of work available, but having a lot of projects and getting a lot of revenues doesn't necessarily equate to being profitable, or having happy clients," says Shames.

This is close to a "dream market" for retail contractors, according to Shames. "Because things are so busy, a lot of contractors are turning work away, or trying to increase their markups," he says. "In this kind of market, a lot of owners are just hoping to find a contractor that will give them the attention they need to get their projects built in a timely manner," says Shames.

Today's "dream market" has to end sooner or later, though. "If interest rate hikes start to put a pinch in retailers' and developers' bottom lines," says Shames, "we may see next years' projects curtailed, postponed or just moved out." The contractors who excel in their field will be those that continue to do business the same way, no matter the state of the economy.

Contractors who hope to be successful over the long term, he adds, "are those that realize this is very definitely a relationship business."

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