A construction subspecialty - call it 'tenant improvements.'

New Mexico Business Journal, Feb, 1997 by Carole Hedden

It's called the tenant improvements market, and it's a type of construction that alters existing commercial space to meet the needs of emerging businesses, relocating businesses, or businesses that have outgrown their current space.

While the vast majority of construction dollars go toward the big, traditional projects, tenant improvements is carving out a sizable market of its own, according to several construction leaders. Bill Biffle of B.R. Gordon Construction, one of the area's leading tenant improvement specialists, says New Mexico is a land of small businesses - each with its own unique space requirements.

According to some estimates, this market of improving a piece of property for the specific needs of a tenant actually comprises about 60 percent of the building permits issued within the state. Biffle says B.R. Gordon works about 200 projects each year, and Jack B. Henderson Construction estimates that about 30 percent of the company's business is in tenant improvements.

Elizabeth Jeppesen, who specializes in tenant improvements for Henderson Construction, said tenant improvement projects range from clean rooms and laboratories to the 1997 renovation of the Albuquerque International Sunport's food and beverage space.

Jeppesen examined building permits within Albuquerque for four months in 1996 - just a snapshot in time of a much larger cycle. "If you look at this in terms of the number of projects, better than 60 percent of the building permits issued were for tenant improvements. Dollar value on the projects ranged from $875 to around $600,000."

Over the past decade, the entire approach to tenant improvements construction has evolved. Contractors are working with property owners to assure businesses can move more quickly than in the past, at a better cost, cleaning up as they go, and with minimal disruption to other tenants in the building.

That's important, and tenant improvement firms put a lot of effort into assuring this type of service. Firms specializing in these tenant improvements must focus on these unique needs of each client, as well as other tenants in the building. Biffle says his company has built long-term relationships with employees to assure continuity to the effort. "We go in while business is being conducted and make the needed changes. It requires a different approach on how to conduct yourself on the job, all day long. It's not a time for on-the-job training?'

Dan Gear of Gearcon says, "It's more like a home remodeling project because the contractor must go to great lengths to keep things clean, work during off hours as much as possible, and do everything to keep from disrupting the other people working in the building."

The better the contractor controls these "environmental" issues, the better he or she is prepared to play at the true construction game of meeting tight budgets and schedules.

Biffle said the one common factor in this construction market is that the businesses need their space, and they need it ready to use, today preferably. "By the time someone has identified a space in which to operate, he or she is ready to go, to begin business," Biffle said. "So we need to work quickly to accommodate that need."

To every improvement, there's a process. To meet those close timelines, most contractors recommend a streamlined process that relies on a team versus a single person. The process begins with the business itself. Henderson Construction's Jeppesen said the questions the tenant should ask herself before ever beginning a property search should include:

* How will I use this space?

* What are the thresholds for my business; how many people can I place here and how does that correlate with the projected growth for this business?

* What will employees be doing while here?

* What is my budget for space, and what's the premium I'm willing to pay to have the space customized for my business needs?

Mention the terms teaming, partnership, process and quiet as part of a traditional construction project, and you're likely to be greeted with howls of laughter. That's the soft, organizational stuff of offices and corporations, not the talk of a job site.

Yet they are terms contractors are learning more and more about as your team becomes a consortium of experts - from the Realtor who helps you identify a property to the person who owns that property and the people who will improve it for you.

When negotiating your lease, ask:

* Who is the property owner and can you talk with other tenants whose space has been improved?

* What kind of tenant improvement budget is included in the lease? Will you be provided with a larger tenant improvement allowance if you extend your lease?

* Is there a designer or architect provided as part of the tenant improvements? If not, is there an architect recommended by the property owner or the Realtor?

* Who are the preferred contractors used for tenant improvements? Is the contractor licensed and can you obtain names of other tenants whose property the contractor has improved? You should be able to review the work and discuss how the work was accomplished.