Recession

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Reimagining Retail

February 17, 2012 in Construction Trends, Recession | No comments

Since the big squeeze started four years ago, we’ve seen lots of retail companies go out of business, change locations or infill/ backfill. As survivors adjust to reality, innovative ideas continue to pop up. Two of these are on my radar at the moment: right-sizing big boxes and creative uses for excess second floor space.

Right-Sizing.

Recently, it seems healthy retailers are getting new starts and becoming healthier by “rightsizing” their current square footage. This means staying within their box, but reworking overhead in proportion to sales volume. In many cases, this plays out as a sublease of space to complimentary, non-competing retailers.

We are working with a customer right now who has a development of 90,000 sf. This single tenant will reduce their footprint by 40% as they bring in a for-profit college. This is obviously not retail, but it does solve the occupancy problem. The college will bring vitality, energy and several hundred people to the center each day.

To me, the real key is the balancing act as the economy heals. When the GDP grows, the retailer may need more space in that same location. Shorter-term leases for their new neighbor could be the answer.

Second Floor Space.

Too much big box space has a cousin: too much second floor space.

During the boom, we saw lots of good-looking proformas using upper-level open-air retail. The fact is, second floor retail works in a only few locations. Most of this space has remained vacant.

I was in Florida last week looking at a “note buy” project with some pretty good retailers below. I brainstormed with the new owner about opportunities on the second floor. Since this is a high tourist area with a heavy density of vacation condos, one idea is to create executive office space for those coming on vacation. It could provide short-term connectivity for those needing to check in on work matters for a few hours during their stay. We also discussed introducing service companies in the second floor space. While they are not retail, they bring people and life to the center.

Just like Detroit, it’s amazing what a good recession can do for us.

While it has been painful, I do believe the downturn helped get us all on the right track. Internally, we are tightening up, trying not to “waste a good recession.” We’ve gotten creative and try to help our customers do the same.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email


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What’s Beyond the Horizon?

December 5, 2011 in Construction Trends, Recession | No comments

In the U.S. today, right now, we have more of everything than we need. More housing, more GLA of every type of space, more service providers, more developers and more building contractors.

In order to survive this cycle, we’ve remained nimble, watched expenses and never forgotten what brought us to the party. Our goal is to not lose sight of the future. As Wayne Gretzky said, “I skate where the puck is gonna be, not where it has been.”

To me, being successful long-term will come from helping others achieve success. This means practicing what you do best and at the same time thinking ahead.

These are the best of times and the worst times for all of us. The best of us will be able to look over the horizon. I’ve been trying to anticipate what we will need more of in the next 5 or 10 years. Here are a few things we’re thinking about:

  • Housing for senior living. This is for the 60 and 70-year-old age group, which is the new 40. What will it take to be cool and reach folks who haven’t retired yet?
  • Urban Infill. Is the trend toward repurposing land within a built-up area a fad or a permanent path?
  • Medical sector. Can we put medical where the people are–in neighborhoods–taking advantage of existing GLA?
  • Office Buildings. How can we use the square footage of a space more efficiently?
  • Product distribution. How can we do this more efficiently? We’re looking for lower cost, less carbon and more seamless delivery.

Of course, these are some tricky challenges. But think about the folks who developed the coffee chain with the hard-to-pronounce drink names. Or the person and company who developed that device for us to listen to music downloaded from the Internet. As Steve Jobs once told BusinessWeek, “A lot of times, people don’t know what they want until you show it to them.”

To me, it is important not to forget what brought you to the party, and at the same time not miss the opportunity for what’s on the horizon.

Better yet, what’s over the horizon?…

 

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email


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Trends Show Construction Industry Looking Up

November 16, 2011 in Construction Trends, Recession | No comments

Our CFO Del Allen recently attended the Birmingham Aon/Smith Currie breakfast, where they presented a “state of the union” type look at the construction industry.

Later this week, I will share 3 key issues effecting talent in the construction industry, but first I thought you might like to take a look at the stats. Many thanks to Brian Moore of FMI for allowing us to share.

Highest volume segments in 2011:

  • Power–Driven by environmental regulations and transmission/distribution projects.
  • Educational–Due to rapidly increasing student populations, widespread overcrowding and antiquated facilities.
  • Highway and street–Tough climate because state revenues are declining and residential construction is slow.

Strongest gainers in 2011:

  • Power (7%)
  • Commercial (7%)

Weakest segments in 2011

  • Religious (-18%)
  • Lodging (-16%)
  • Manufacturing (-6%)
  • Office (-5%)

Before you start thinking these numbers look dismal, consider the losses in 2010. Lodging and office construction were down 53% and 32%, respectively.

Total “put in place” (construction that has finished and is now being used) lost 10% in 2010, but is expected to grow 2% in 2011. Forecasters say we’ll be up 6% in 2012. From what I can see, we are healing.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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Job Seekers: Hints from a Hiring Manager

September 9, 2011 in Management, Recession | 2 comments

Times are getting better, but still tough.

A recent article in the Wall Street Journal compared job seekers now–often isolated and searching online–to those who were looking for work during the Depression.

In the 1930s, folks were more likely to call  in favors to friends and family or knock door to door asking for work. Ironically, 27.5% of external hires made now come from referrals, even in our more connected world.

Perhaps we would be wise to focus more on personal relationships and less on the keyboard.

That said, the web is an excellent portal. I get 4 to 5 inquiries a week from our site and I try to read each one. I know behind each resume is a real human being who needs a job.

If you are on the job hunt, can I advise you to be…

Flexible. Focus on getting a job. Once you have a job it is always seems easier to find another position. Look beyond your field for the next two or three years.

Sincere.  When resumes come in, I try to envision the kind of person who sent it. Is he/she sincere? Was there an effort to get to know us? I try to respond to each inquiry individually, and I feel a larger motivation to respond to those that are personalized as opposed to mass mailing.

Present. Ask to stop by. Even if I can’t offer you a job at the moment, talking in person might give me some thoughts on other places for you to inquire. The more you ask and connect, the higher you likelihood of getting hired.

Healthy. Maintain your eating and exercise routines. Get out there and do some volunteer work. It never hurts to look around and be able to count your blessings.

Encouraged. I do think there are the right jobs out there. Just like 1938, it’s often about being in the right place at the right time.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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Is Now the Time to Renegotiate Or Right-Size?

August 4, 2011 in Construction Trends, Management, Recession | No comments

Recessions don’t have many redeeming qualities, but they do create opportunities that wouldn’t exist otherwise.

Let me explain myself with an example. During our current economic downturn, commercial and retail spaces have often been leasing at reduced rates. Many of the prime locations already have been scooped up by opportunistic businesses.

There still are good options. According to a recent article in The Wall Street Journal titled, “Time is Ripe for Negotiation,” annual leases for U.S. office properties averaged $23.20 a square foot during the fourth quarter of 2010, down from $25.02 in 2008. Meanwhile, despite the discounts, office vacancies have increased to 13.4 percent from 11.8 percent.

Trends are similar in the retail and industrial sectors.

  • Retail property leases averaged $15.56 per square foot during the fourth quarter of 2010, down from $17.51 in 2008.
  • Retail vacancies rose to 7.3 percent from 6.6 percent.
  • Industrial property leases dropped from $6.28 a square foot in 2008 to $5.47 last year.
  • Industrial vacancies bumped up to 10.2 percent from 8.8.

Having more available space on the market combined with lower rates means this is an excellent time to negotiate with landlords. They would prefer to lease part of the space rather than let the entire building sit empty.

This is also a good opportunity to right-size. We’re increasingly seeing retail boxes get smaller in an attempt to be more effective and profitable.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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Economic Downturn: How Much Longer?

June 14, 2011 in Construction Trends, Management, Recession | 2 comments

It’s no secret that the aftermath of the Recession continues to take a toll on the construction industry. Last week, as I listened to more struggling economic news, I must admit that I thought to myself, “How much longer?”

I have seen several of my competitors – companies I have bid against for the past 30 years – go out of business. It’s been difficult to watch.

Lucky for me, we have people around here who pick each other up. A day or so after my low point, our CFO told me he thinks things are gradually getting better. Here are a few thoughts for an improved outlook:

Think like a golfer. To me, the downturn might be like a golf handicap: you work hard, a few changes start to occur and then one day things are better.

Don’t trust the status quo. They say that housing always leads us into a recession and always leads us out, but it has become obvious that will not happen this time. There’s no need to wait around for things to happen as they have in the past. Be innovative. Be the catalyst for change.

Play up what works. In times like these, I feel it is important to focus more on the bottom line than on the revenue. Instead of taking an elaborate project outside your normal realm, concentrate on projects that you do best. This will enable you to offer value to customers in terms of quality service and quick delivery.

Like most companies, we have taken a financial hit recently, but we’ve still turned a profit every year. We’ve done it by working smart and staying within what we do best, commercial building construction. By focusing on your strengths, you CAN overcome the weakness of the current economy.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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Looking Ahead at Construction Materials

April 6, 2011 in Commodities Pricing, Construction Trends, Projects, Recession | No comments

As the economy continues to improve, construction demand is slowly increasing. As a result, the demand for construction materials is also increasing and one has to assume those costs will continue to go up throughout 2011.

Recently, I was talking with one of our fabricators who supplies steel for projects throughout the nation and he told me he has seen more orders this year than in any of the past three years. He also said steel is going up nearly every day, be it because of demand or the futures market or scarcity of the product. This, of course, is impacting construction costs.

This got me to thinking about what the cost of other construction materials may look like going forward this year and into 2012. I did a little research, and here are my findings:

● Cement and Concrete: The Recession had a significant impact on this industry. Because of reduced demand, 14 cement plants closed in 2009 and several others suspended planned expansions. But after a flat 2010, demand is expected to rise 1.4 percent this year and 4.0 percent next year.

● Copper: Building construction accounts for nearly half of all copper consumption, and the demand today is far less than it was five years ago. Production is forecast to decline by 1.8 percent this year. But the demand should increase as the construction industry improves, which could result in copper shortfalls in 2012 and a spike in prices.

● Drywall: New residential construction accounts for half of all drywall consumption, and residential demand remains low. The price for gypsum, the primary component in drywall board, rose slightly in 2010 but began 2011 heading downward.

● Lumber: Prices dipped late last year, but we’re still up nearly 5 percent over 2009. Demand is not expected to increase significantly this year, however, as long as new residential construction remains flat.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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Save Time & Money by Watching ASTM Standards

March 28, 2011 in Community Service, Customer Relationships, Leadership, Recession, Tips from the Field | 1 comment

ASTM International (American Society for Testing and Materials) is an organization that can have a substantial impact on construction projects, yet quite a few folks are not familiar with it. ASTM was founded in 1898 for the development and delivery of voluntary consensus technical standards for a wide variety of materials, systems and services.

ASTM’s construction standards are generally recognized as the benchmark by which materials are tested. They cover basics such as wood, stone, concrete, geotechnical engineering and much more. In many projects, these standards can be the deciding factor in whether the job proceeds, so it’s important to get to know them.

Unfortunately, people do not respect the ASTM standards until it’s too late. Even though the building owner may not ultimately be responsible for low results on strength tests, he or she will be affected if a job is delayed significantly because of it.

We prefer “Design-Build” projects as we can utilize these ASTM standards and are prepared before we reach problems during a project. We work with architects directly on behalf of our client and this helps to alleviate any problems before they arise thanks to our knowledge of ASTM standards and past experiences.

Therefore, it is wise to be respectful of ASTM. These technical committees meet twice a year, so keep track of any changes in standards. It might not seem like the most interesting material to monitor, but it could be the most important.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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Three Years and Counting

February 10, 2011 in Construction Trends, Customer Relationships, Leadership, Recession, Team Building | No comments

Few people endure slumps and a downturn in performance as often as professional athletes. Even the greatest sports stars suffer through stretches where seemingly nothing goes right. During his heyday, Michael Jordan had a commercial in which he stated, “I’ve failed over and over and over again in my life.” Then, after a short pause, he said, “And that is why I succeed.”

The point being that we all will go through tough times. To me, The key is how we handle the difficulties, and what we do to maintain a positive attitude and emerge stronger and better.

We have been in an economic slump for the past three years. This downturn has been longer than anything I have ever experienced, and it is not over. But things are improving. Most people expect that 2011 will be better than 2010, and 2012 will be even better than that.

Still, the psychological effects of a bad economy are similar to an athletic slump. Eventually it is difficult to keep your spirits up and you become convinced that the good times will never return. That is precisely when it is vital to visualize success.

A recent article in the Wall Street Journal stated that golfing legend Jack Nicklaus used to step back and “consciously regain a positive frame of mind” whenever things were going wrong. Former Atlanta Braves pitcher John Smoltz broke out of a lengthy slump by watching a two-minute video of a series of perfect pitches he had made.

Here are a few things I do to try to encourage those around our office to keep their spirits up:

  • We have company lunches from time-to-time. Some of the ladies in our office take advantage of our kitchen and cook some wonderful and tasty full-course meal for everyone.
  • We go on company outings occasionally. Recently, many members of our staff attended a local football game and we invited not only staff, but their family as well.
  • We ensure that all employees have knowledge of our projects and company functions. While not mandatory, their level of involvement is determined by their own interests and time. This increases their own interests and helps create a sense of not only teamwork, but also ownership of the projects.

I am interested to hear how you keep employee moral up in your office or other suggestions you may have on this topic ?

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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Right-Size For Profits

December 22, 2010 in Construction Trends, Green Building, Management, Recession, Remodeling | 1 comment

Right-sizing, why did I not have this in my vocabulary before ’07?  Makes sense. We are constructors of buildings and handle the civil management of projects, but the bottom line is that we are service providers. Just like architects, engineers, lawyers, bankers or accountants, all service providers of different sorts.

We need to be adjusting( or at least thinking about) our overhead and other needs such as office space and selling space, if you are retailer, routinely. Constantly thinking about expanding or contracting to “right-size”.

The last three years everybody has been downsizing in the “right size” process but going the other way is equally profitable. In the last 2 months, we have hired two more office team members. Getting ready slowly as the economy heals.

Seems our retail customers are working smarter and as are our office building customers. Getting more out of less.  Some of the retailers are combining the Internet and their stores more effectively. Someone orders on the Internet and it is shipped from a store. Someone does not like their order from the Internet, they returned to the store. The stores provides a retail environment and a distribution center. Be more efficient and right sizing, a double win for the company  and a win for the customer.

Maybe I can be more disciplined in the future:

  • I promise to watch our G&A more closely which is profit spent on something else
  • I am going to try to be quicker with the decision, than I have in the past, to upsize or downsize (a common problem among contractors)

We see many good opportunities in what we have learned. What are your thoughts?

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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