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COMMERCIAL BUILDING OWNERS REMODEL TO ATTRACT TENANTS, CUSTOMERS
July 2, 2009

Repairing rather than replacing, and remodeling rather than building new, were the two largest remodeling trends cited by members of the Milwaukee/NARI Home Improvement Council, Inc. in its most recent survey.  These trends apply not just to residential, but also to the commercial sector.

According to Jim Klappa, CGR/CAPS, of JDJ Builders, Inc. in Greenfield, the downturn in the housing market applies to business buildings as well.  “I see people buying buildings at a reduced cost because of the economy.  There are some good bargains out there,” he says.  “People are buying these corporate buildings at a deal, and then preparing the buildings so they can either move their business into it or make rental space for tenants.”

Klappa typically sees more businesses renting space than owning it.  “There are more vacancies now than there have ever been in the corporate sector,” he believes.  Building owners interested in attracting tenants have come to remodeling contractors like JDJ Builders for help making the space more functional, adaptable, and appealing.

“How much is the owner of the building willing to invest in you, the tenant?  We find that owners are willing to offer more to the potential renter.  They’re trying to get tenants in their buildings, and they’re willing to make improvements.  But as far as ‘accessorizing,’ they stick to the basics – making it functional for an affordable cost,” he says.

“Years ago, they wanted the ‘glitz and glitter.’  Today, it’s about functionality rather than luxury.”

When asked why building owners are remodeling, Greg Adamec of Milwaukee Millwork says that energy costs are the first and foremost reason.  “Clients and tenants are looking for energy efficient units where they can save money on heating and cooling cost,” he says.  “It all flows to the bottom line.”

Consistent with the Milwaukee/NARI survey, the types of projects Adamec sees now are updates to existing buildings rather than building new.  Rather than building out condominiums, owners are holding onto the building and renting the units out as apartments, he says.  “When the market turns to a more favorable position, the owners can then decide to sell as condos or hold for an investment property.”

For Klappa, conversions have been a big commercial remodeling trend recently.  “They purchase a building that had one purpose and want to convert the building into a space that is adaptable to a different type of business.  As an investment, purchasers may buy a building that had been used for manufacturing and is a big open space, and they remodel it to attract something like a real estate agency.  We enhance the building look, make it work as office space, and improve the street appeal from the exterior.”

For one corporate center in Brookfield, JDJ Builders handled ceiling grid systems, shelving, doors, and more. Part of the plan was to keep the un-rented space well camouflaged.  “If there was only one tenant in the building, you would not know,” he says.

As space was rented out, they would put the demising wall between the spaces depending on the square footage that was rented, allowing for flexibility in the area required.  It was only when space began filling up that sizes to choose from were limited.

“When someone moves out, the building owners have the space redesigned,” he says.  “The people moving in never use the space in the exact same manner as the previous tenants.”

Like homeowners, commercial building owners are rolling up their sleeves to save money.  “Building owners that are putting their own businesses in are willing to do some of the work themselves, such as demolition of existing walls and partitions that may have to be changed, doing the painting, and anything else they can to save on expenses,” Klappa says.  “At the same time, just like with homeowners, you still do have the occasional client that is not concerned about budget. They have their list of everything they want done and the means to pay for it.”

Although there are real estate deals out there for commercial buildings, Klappa cautions purchasers to be prepared for the remodeling that may be required.  He has found that some communities, despite the current economy, have many rules that must be followed, and this can cause unexpected costs and project delays.

Klappa says, “One of our clients purchased a building that they discovered needed to be brought up to certain codes.  Aspects of curb appeal, ADA accessibility, new signage, accessibility of bathrooms, and sprinkler and alarm systems were all required of the new owners.”

“Green remodeling” has also had an effect on the industry.  “We are seeing a lot of owners looking at implementing sustainable products into their commercial remodeling projects,” Adamec says.

The Milwaukee/NARI Home Improvement Council was chartered in July 1961, as a Chapter of the National Home Improvement Council.  In May of 1982, the National Home Improvement Council merged with the National Remodelers Association to form NARI – the National Association of the Remodeling Industry.  The Council’s goals of encouraging ethical conduct, professionalism, and sound business practices in the remodeling industry have led to the remodeling industry’s growth and made NARI a recognized authority in that industry.  With over 900 members, the Milwaukee Chapter is the nation’s largest.

For more information or to receive a free copy of an annual membership roster listing all members alphabetically and by category, and the booklet, “Milwaukee/NARI’s Remodeling Guide,” call (414) 771-4071 or visit the Council’s Web site at www.milwaukeenari.org.