Thursday, August 4, 2011

Renovations Dominate Weak Buildings Market

PHOTO COURTESY OF PERKINS + WILL TRANSFORMATION Perkins + Will is devoting a lot of effort to refreshing and bringing new life to older buildings, such as the Presidio in California.

Although many clients have cash, developers have to be creative to secure financing, says John Adams, principal at Los Angeles-based Gensler. Given the troubled real estate market, repositioning existing facilities, sometimes purchased from troubled owners, is often the clearest path. "Developers we've worked with have had to change their game," he says. "Repositions are the name of the game today. Instead of building spec, they typically try to steer the client to an existing building that's more easily financed. Then, we modify as necessary to get them into a great new space while keeping as much as possible of the existing building. We're seeing a lot of that."

On the West Coast, Adams sees much of that work in modest buildings, often renovations of two- to three-story tilt-up structures built in the 1970s and 1980s. He says the decision is equal parts necessity and austerity. "The sweet spot isn't the tall class-A urban stuff but more the suburban support space for corporations. Clients don't want flashy spaces because it doesn't look appropriate these days." That austere image extends into the public market. While much work funded by the American Recovery and Reinvestment Act is completed, federal goals to modernize existing facilities remain.

"There's a huge energy initiative under President Obama to achieve energy reductions in the government's existing facilities," says Mike Doiel, director of marketing at Omaha, Neb.-based HDR. "We're seeing that gear up significantly, and we're very focused on it. There are some very targeted [indefinite-delivery, indefinite-quantity, or IDIQ, projects] out there that are focused on energy audits, energy modeling and solutions to get improvements in these buildings."

Rick Lincicome, executive vice president and director of global architecture at Los Angeles-based AECOM, says that while the federal budget process is "bumpy," his firm sees a lot of "churn work" from IDIQs. He says the focus on energy-efficiency upgrades and other modernization fits the times. "The clear message is: It needs to be economical, it needs to express efficiency and value to the public," he adds. "[Agencies] will tell us, 'This has to be built, but it will not look like it's expensive,' and there's nothing wrong with that."

Charles Smith, principal at Niagara Falls, N.Y.-based Cannon Design, sees similar trends in higher education. When fund-raising is challenging, institutions increasingly turn to renovations and expansions to meet immediate needs.

"There simply isn't the funding to build like there used to be, especially at public institutions," he says, noting that renovations are particularly strong at East Coast and Midwest campuses, which tend to have older buildings.

Chicago-based Perkins + Will made a move to increase its share of the renovation and restoration markets just as the recession took hold. The firm acquired SMWM of San Francisco in 2008, bringing in principal Cathy Simon's extensive background in adaptive reuse. The firm launched transformative design as an official discipline last year with the intent of bringing new life to outdated buildings.

At the Presidio in San Francisco, for example, Perkins + Will is working on multiple projects, including the $15-million reahbilitation of the 43,000-sq-ft Presidio Officer's Club, which is scheduled to be completed in 2012.

Simon says the opportunities are widespread. "A lot of the buildings we care to work on are just ordinary, decent buildings that we want to refresh and repurpose," she adds, noting that midcentury buildings are prime targets.