What's Hot in Construction
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Federal and office work may have slowed, but some building projects still thrive. Which ones?
Brookfield VP John Landry told 250 at our Bisnow Construction Summit at the Willard last week that building repositioning is huge. One trend: Adding residential touches to office buildings, like lobbies that look more like lounges with coffee bars and TVs.
Lobbies are even transforming into event venues and collaboration spaces for workers. At Brookfield's 2001 M St, which it bought in 2004, it added a rooftop terrace and lounge, a spa-like fitness center, bike storage rooms and vehicle charging stations. Also, the top two floors of the 285k SF building were made into "super floors" with 11-foot floor to ceilings heights. Look for completion by next spring.
First Potomac Realty Trust VP John Sadlik says these repositioning projects have unique challenges: 1401 K St tenants wanted preservation of the historic building's architecture while also delivering modern amenities. At 440 First St, First Potomac had issues with column spacing and floor heights. The solution was to take a whole floor off, and add a few more floors and square footage. The firm integrated a dedicated outdoor air system, which allowed for better ceiling heights because they require less ductwork and fewer mechanical shafts.
On the topic of challenges, Studios principal Brian Pilot says a Georgetown University building it worked on, 650 Mass Ave, had generous ceiling heights but designers had to put in a four-story atrium to deal with the 100k SF building's lack of windows. He says it helped to have collaboration between the owner, the tenant and the GC.
Repositionings often happen when a building is occupied. GHT Limited senior principal Craig Eichenlaub cites GHT's work on the Tip O'Neill Federal Building, whose central system was serving a separate building across the street. “That’s like giving somebody a heart transplant while they’re sitting at their desk," he says. The tenants flip at different times, yet building owners want to reposition the entire building and contractors have to find ways to keep HVAC and electrical systems working.
How bankers view repositioning projects: EagleBank EVP Tony Marquez, flanked by CohnReznick managing partner and panel moderator Jim Martinko and Sustainable Building Partners' Dan Wilcox, says an interim lender wants to understand how quickly they can exit a project. The lender also weighs the strength of the team behind these projects, which are viewed as more risky because things are unpredictable.
DAVIS Construction VP Matt Weirich says multifamily dominates his firm's workload, with 11 projects underway. Thank Millennials, as most projects go in urban areas near public transit. He says construction firms are also busy with new and expanding spaces for data centers, IT and cybersecurity companies, and higher ed institutions amenitizing student housing to attract the best students.
Bognet Construction SVP Jennifer Bognet says her firm is seeing lots of fast-track tenant work from nonprofits, associations and law firms. Bognet has been recession-proof because leases are always expiring and people are always moving, she adds. It's good for the firm even if they’re moving to smaller spaces.
Government work has been slow, but there are some backlogged projects that may get approved, like FBI and Federal Triangle South. Gensler managing director Jeff Barber says some of those projects are still hard to figure out, as GSA works slowly. The lack of government work in the last few years has made the rest of the construction industry more competitive.
Construction prices are also going up, and one of the region’s biggest projects is to blame: The MGM Casino at National Harbor. Donohoe Construction SVP Neil Stablow says prices were bid up on certain trades like earth work at the start of the project, affecting prices throughout the city. That’s expected to continue as the casino moves on to other kinds of labor. Subcontractors once guaranteed pricing for 30 days; now it’s more like 15, he says. The project will require about 2,000 workers over the next two years, making it challenging to find skilled labor for the rest of the industry.
Construction projects in multifamily, data centers and higher ed will continue to soar, but everything else is still uncertain, says Tishman Construction EVP John Barron, snapped with Shapiro, Lifschitz & Schram partner and moderator Judah Lifschitz. The region is losing 10,000 federal jobs a year and offices are shrinking. (Millennials require less square footage.) There’s pent-up demand for seniors housing, but it’s hard to say if it will take hold in the District because of high land prices.