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Page 28 — Property Management Quarterly — July 2017
firsthand from our national
work with Spaces, a leading
collaborative workspace pro-
vider.
“The professionals who
rent Spaces workspace pre-
fer our boundless common
areas without barriers to
organic collaboration with
others who are sharing in
the same struggles and suc-
cesses of entrepreneurship,”
said Sheldon Shadrach,
Spaces area manager.
What this means for tra-
ditional buildings attract-
ing collaborative workspace
tenants is nothing new: The
usual cost-benefit analysis of
tenant type and prediction
of the life of a trend remains.
However, negotiating who
will bear the increased costs
of the transformation gets
a bit trickier. Sophisticated
tenants and brokers will
recognize much of the costs
are related to permanently
repositioning a space and
not related to usual finishes.
Owners and property man-
agers will have decisions to
make whether a portion of
their assets should be repo-
sitioned to accommodate for
this demand and whether
premium rates are justified.
The industrial look and
collaborative work environ-
ment is much more than
just empty space. It is delib-
erately designed and becom-
ing more desirable for a
wider range of tenant types.
While the construction itself
may cost more than tradi-
tional finishes, what is the
opportunity cost of ignoring
the trend? s
office design, it is the human
factor – the quality of life –
that most often can dictate
tenant satisfaction and sub-
sequent retention.
The manner in which peo-
ple interact and collaborate
within any given building
lobby or office suite in today’s
commercial marketplace can
supersede design and even
location. So again, health and
safety are the foundation on
which owners can build their
brand and overall tenant
satisfaction. The 2015 IECC
promotes the improvement
of that foundation.
The pragmatic side of that
equation is that landlords
must obey the new code
requirements in order to
obtain building permits. And
that’s not cheap.
The 2015 IECC code lever-
ages innovative technologies
that were not fully available
in 2012. Almost certainly, the
2018 code will introduce new
and improved products and
methods of lighting power
that we don’t know about
yet. For municipalities that
choose to adopt the new
code, there is a significant
expense in upgrading obso-
lete products and systems or
choosing new ones to meet
compliance.
State-of-the-art fixtures,
switches and sensors cost
more because they’re new
and perform at a higher level.
It would behoove landlords to
standardize new equipment
in remodels rather than mix
and match pieces and parts
from different manufacturers.
Although this certainly adds
yet another level of expense,
repair and replacement out-
lays at the front end can be
eased by reduced energy
costs over time. And it’s bet-
ter for the environment.
Commissioning can cost
owners 14 cents to $1 per
square foot or more. That
is a staggering cost by any
measure. All office remodel
projects in Denver require
electrical commissioning and
most require some level of
mechanical commissioning
as well. While this type of
“soft cost” may be difficult
to recover, landlords can
take comfort in the notion
that their buildings and ten-
ant spaces have been for-
mally inspected and tested
for functional performance.
Aside from the obvious
benefit of having the most
efficient and sustainable
systems available, landlords
who have complied with the
code have a certified market-
ing edge over those who have
not.
Forward-thinking munici-
palities understand that
technology is the glue that
holds the 2015 IECC code
together, and technology isn’t
going away. It’s just a plus
for all parties involved when
technology is the driver for
both life-safety and energy
conservation. It’s also good
business.s
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byMichelleZ.Askeland
Since theGreatRecession ended,
construction costs inColoradohave
skyrocketed.Thewaypropertyman-
agersbudget tenant improvement
projectsandbuildingupdatesmust
beadjusted to take the rising costs
into consideration.
“In 2014, the costsof construction
caughtupwith this rapid increase in
demand,andwe saw costs increase
somewherebetween 15and 20per-
cent,”saidDougMiller,directorof
essdevelopmentandprecon-
only 3percentperyear,soa 15 to 20
percent increase in costs inoneyear
ishuge.”
Ona typical commercialproject,
a costbreakdownof theprime con-
tractamountwill reflect 25 to 30
percent forprojectmaterials,45 to
50percent fordirect labor,and the
balance goes tooverheadadminis-
tration costsandprofit,saidTerry
Hordinski,ProvidentConstruction
chiefoperatingofficer.
With the largestpercentageof
thebudget going to labor costs,
theundersupplyof skilled labor inggest impact
that the costof laborhas goneup 10
to 15percentperyear for thepast
threeyears.
It’s important tounderstand
what caused this shortageof labor
inorder tounderstand its current
effects.Adecadeago, the construc-
tionmarketwas stableand expand-
ing eachyear,with costson the rise.
That changedwith the recession,
whichbegan in 2008but lagged in
the construction industrybyabouta
year,saidMiller.
“In 2009, the rubber reallymet the
road,andwe tumbled into theGreat
Recession,”saidHordinski.“That
painful,both forprimea
contractors.All contract
drastically cuttingback t
force,especially in the r
community,whichdirec
the commercial commu
you’rebasicallyworking
samepoolof labor.”
The reduced constructionmarket
continued into 2012.“Asa result,
youhada tremendousamountof
displacedworkers,whowent into
other fields to find employment,”
saidHordinski.“It ismypersonal
opinion that somewherebetween 30
PleaseseePage15
August 2015
How construction costs could affectyour next project
Photo courtesy i2
For tenant improvementprojects or commonareaupgrades,propertymanagers shouldbudget15 to20percentmore than theywouldhavebudgeted for the samepr
While the Colorado Real Estate Journal continues to run a multifamily news section in each
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interesting projects and people, trends and analysis, and covers all commercial property
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architects, property managers and building operating service & supply firms.
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