Today’s commercial construction and real estate industry has been significantly changed by the post-pandemic economic realities. These realities require thoughtful new approaches to ensure success. Stronger partnerships between owners and their GCs are at the center of an important market shift occurring to manage this new commercial real estate reality.
Today’s Challenges:
Fluctuating Costs and Inflation – Historically, construction proposal costs were routinely held for 30, 60 even 90 days. Today, certain components of pricing are stale the day after presented. This has been magnified by inflation driven by supply shortages and high demand which are driving construction prices to record highs. The price changes are large and unpredictable.
Lead-times for Basic Materials are Unpredictable – Lead times on materials (the time it takes to procure and arrive at the site) has always been an issue for specialty items incorporated into projects. Now even basic commodity items such as insulation, drywall and fasteners are problematic.
Commercial Owners’ Focus on the Lowest Rent Costs is Increasing – Commercial rents, particularly in the office and retail sectors are not keeping pace with the cost of construction which demands owners drive to the lowest possible price. Increasing interest rates are placing further pressure on owners.
Construction Lenders Need Greater Contingencies – In reaction to price uncertainty lenders are looking for larger contingencies in contracts calculated into their numbers.
Owners’ clearly need the lowest possible construction prices to make their numbers work. Conventional wisdom seems to suggest that creating hard bidding competition can reduce prices, but the best approach to success is to engage a GC partner upfront. Partnering much earlier in the cycle, with a qualified contractor that provides enhanced services and adds value, while making a fair and reasonable profit is critical to succeeding in this difficult climate.
How Partnership-Focused General Contractors Meet these New Challenges:
Not all GCs are focused on the success of the project and the owner. Those that are take a partnership approach and meet the market challenges with extra effort and attention. For example:
Staying informed on pricing trends on key construction components by establishing ties to industry indicators, manufacturers and suppliers rather than waiting until a new problem presents itself.
Ramping up the analysis of even the most basic materials early in the pricing process so that realistic and reliable schedules can be developed rather than providing schedules that sound great but are impossible to meet.
Properly identifying current price increase risks and trends and proposing purchasing strategies to ensure best value rather than simply waiting for the actual materials’ price and passing it onto the client.
Timing the start of projects to ensure that the construction process works much like manufacturing’s “Just in Time” approach, rather than allowing job sites to sit idle while materials are on order.
These new strategies place great stress on GC firms not accustomed to delivering these value-added services. At KasCon, we have always believed in careful planning, partnership and creative problem solving and have seamlessly added these services to our standard offerings to better serve our clients.
The world has changed and with it, so has the commercial real estate and construction industry. This new reality may be with us for a long time, possibly indefinitely. With these changes, success will depend upon innovating and reacting to the new challenges in a proactive and thoughtful manner.
/wp-content/uploads/2019/03/kascon_logo.png00Jeff Kassman/wp-content/uploads/2019/03/kascon_logo.pngJeff Kassman2022-09-06 14:34:582023-05-09 19:52:54Succeeding in Today’s Challenging Commercial Real Estate & Construction Climate
Today’s construction environment is nothing short of crazy. Inflation, supply chain problems, labor shortages. you name it. But work still needs to go on and projects continue to move forward at a fever pace. Figuring out what a project will ultimately cost and how long it will take to design and construct has always been essential to clients during the early concept stages. In today’s world, this is much more difficult, and not all contractors will take the time to do it right. Clients looking to hire a general contractor should use this initial process to evaluate their potential partner for overall approach, attention to detail and willingness to tell it like it is, even if it may be hard to hear.
Projecting a Realistic Cost
No one wants their project’s cost to be more than their budget will allow. An experienced contractor can take limited conceptual information available in a preliminary stage and use their knowledge to read between the lines and extrapolate to the eventual project. The issue is most often not what is on the concept drawing or space plan, it’s what isn’t on the drawing. Owners should be able to rely on a general contractor’s expertise to think beyond what’s on paper, look for the pitfalls, price accordingly and then transparently share that information. Here are a few reasons to start with a real, well thought out value.
Inflated values that cover any and every contingency can kill a deal unnecessarily. Beware of round number $/sf estimates that show little or no thought.
Lenders are wary of price creep. They want to see detailed estimates and contractor credentials to build confidence and prevent the need to add large contingencies of their own. With interest rates rising, this issue is compounded.
The amount and timing of cash outlay has become more critical. Long lead-times mean purchasing as early as possible, sometimes spending well in advance of the project’s physical start to assure materials are on hand when needed.
Change orders are no one’s friend. A realistic price helps keep unexpected change orders in check.
Determining a Realistic Timeline
The “how much” is only half the battle. When will it start and how long will it take are key factors that owners need their contractors to get right. As with price, getting into the details and having experience with all of the project elements is essential to making accurate timing predictions. Everything is taking longer, from permitting to inspections to material acquisition and labor. No one wants to hear how long it is taking to execute work these days, but banking on an unrealistic date has some negative consequences. Here are a few reasons to start with the right schedule.
The construction delivery schedule has a lot of other elements that wrap around it: moving; IT; product stocking; and other transitions that need to take place in conjunction with construction completion.
In rental situations many hold-over provisions can be punitive. These can often be negotiated in advance to the benefit of both landlord and tenant.
Knowing when a revenue stream will start is incredibly vital to any new venture or expansion.
Getting timing accurate will help owners manage the expectation so third parties like lenders, their clients and suppliers have a realistic expectation from the start.
Will your contractor take the time to come up with realistic answers or tell you what you want to hear? We believe that being informed and transparent, even if it includes bad news, is the best approach. This is a time for contractors to be fully disclosing information to clients, making them aware of the uncertainties and working together to solve the problems. This fits well with KasCon’s approach as it’s always the way we behave. We would rather lose an opportunity than win it and be unable to meet expectations. In our experience the successful client wants to hear it all, good, bad or indifferent and the relationship now more than ever requires us to be in the same boat rowing in the same direction.
/wp-content/uploads/2019/03/kascon_logo.png00Jeff Kassman/wp-content/uploads/2019/03/kascon_logo.pngJeff Kassman2022-03-28 15:56:502023-05-09 19:53:10Why You Want Your Contractor to Tell You the Truth, Even When It’s Not What You Want to Hear
Whether it is simply pent-up demand or a shift in thinking, physicians and medical groups are showing greater interest in licensing and building private Ambulatory Surgery Centers as part of their practices. Ambulatory Surgery Centers, or ASCs, have been popular for some time as they offer a lower cost alternative to performing procedures and operations in hospital settings. Insurance companies often favor this approach. ASCs offer increased convenience for patients and the centers help generate revenue for physicians that may receive smaller reimbursements for routine services. The ASC licensing, certification and construction pose many challenges. The elements an ASC may need to contain tend to drive up construction costs in an already price inflated market.
Partner with a Surgical Consultant Specializing in ASCs
Before a single screw should be turned, or for that matter, a single line drawn, we recommend doctors contact a specialty surgical consultant like Tina DiMarino of Custom Surgical Consultants www.customsurgicalconsultants.com. Consultants are experienced at listening to the needs and desires of the physician and assessing the viability of the project quickly. These surgical consultants can handle tasks such as determining the proper level ASC, navigating the rules and regulations, obtaining accreditation, and in some instances, proving medical necessity (Certificate of Need). It’s hard to deal with such daunting tasks without a pro at your side. Engaging a surgical consultant is a vital first step towards a successful project.
Create a Comprehensive Design and Construction Team from the Beginning
KasCon uses a “Design-Build” approach, meaning that the design team (architect and engineer) are joined with the contractor at inception to insure a consistent value driven product with single point accountability. We lead the RFP process for design team selection and contract these services directly or simply facilitate and have the medical group hold the design contract. Whatever the preference, the key is to have architect, engineers and contractor work together up front. This group, in conjunction with the surgical consultant, will work to determine the best fit and most accurate preliminary construction cost so informed decisions can be made.
Prepare for ASC-Specific Complexities
The complexity of ASC construction doesn’t end at the licensing and certification issues. These facilities offer a number of building challenges that all must be considered. ASCs require additional space, not only for the operatory or procedure rooms, but for required ancillary functions like pre-op, post-op, and clean and dirty segregated areas. Access is important: can the facility be accessed at grade or will an elevator be needed? If an elevator, is it large enough? What about power? Will a battery back-up system suffice, or will a generator be required? An ASC has HVAC and plumbing demands that exceed those of a medical office. Also, the ability to sanitize floor and wall surfaces require products that may differ from a typical medical office. Other aspects such as fire separation, use of medical gases and the need for automatic doors – just to name a few – must be considered and accounted for in both design and pricing. There will be fewer surprises when you are working with an informed contractor and design team, experienced in ASC projects.
The private ASC offers some great advantages for both physician and patient. The key to making the build process pleasant and cost effective is to gather the right team and allow them to guide you through the challenges, as well as provide information and options for consideration, so the physician can focus on the medical practice.
/wp-content/uploads/2019/03/kascon_logo.png00Jeff Kassman/wp-content/uploads/2019/03/kascon_logo.pngJeff Kassman2021-04-12 16:38:412023-05-09 19:53:26Tips to Building a Successful Ambulatory Surgery Center Project
Succeeding in Today’s Challenging Commercial Real Estate & Construction Climate
Today’s commercial construction and real estate industry has been significantly changed by the post-pandemic economic realities. These realities require thoughtful new approaches to ensure success. Stronger partnerships between owners and their GCs are at the center of an important market shift occurring to manage this new commercial real estate reality.
Today’s Challenges:
Owners’ clearly need the lowest possible construction prices to make their numbers work. Conventional wisdom seems to suggest that creating hard bidding competition can reduce prices, but the best approach to success is to engage a GC partner upfront. Partnering much earlier in the cycle, with a qualified contractor that provides enhanced services and adds value, while making a fair and reasonable profit is critical to succeeding in this difficult climate.
How Partnership-Focused General Contractors Meet these New Challenges:
Not all GCs are focused on the success of the project and the owner. Those that are take a partnership approach and meet the market challenges with extra effort and attention. For example:
These new strategies place great stress on GC firms not accustomed to delivering these value-added services. At KasCon, we have always believed in careful planning, partnership and creative problem solving and have seamlessly added these services to our standard offerings to better serve our clients.
The world has changed and with it, so has the commercial real estate and construction industry. This new reality may be with us for a long time, possibly indefinitely. With these changes, success will depend upon innovating and reacting to the new challenges in a proactive and thoughtful manner.
Why You Want Your Contractor to Tell You the Truth, Even When It’s Not What You Want to Hear
Today’s construction environment is nothing short of crazy. Inflation, supply chain problems, labor shortages. you name it. But work still needs to go on and projects continue to move forward at a fever pace. Figuring out what a project will ultimately cost and how long it will take to design and construct has always been essential to clients during the early concept stages. In today’s world, this is much more difficult, and not all contractors will take the time to do it right. Clients looking to hire a general contractor should use this initial process to evaluate their potential partner for overall approach, attention to detail and willingness to tell it like it is, even if it may be hard to hear.
Projecting a Realistic Cost
No one wants their project’s cost to be more than their budget will allow. An experienced contractor can take limited conceptual information available in a preliminary stage and use their knowledge to read between the lines and extrapolate to the eventual project. The issue is most often not what is on the concept drawing or space plan, it’s what isn’t on the drawing. Owners should be able to rely on a general contractor’s expertise to think beyond what’s on paper, look for the pitfalls, price accordingly and then transparently share that information. Here are a few reasons to start with a real, well thought out value.
Determining a Realistic Timeline
The “how much” is only half the battle. When will it start and how long will it take are key factors that owners need their contractors to get right. As with price, getting into the details and having experience with all of the project elements is essential to making accurate timing predictions. Everything is taking longer, from permitting to inspections to material acquisition and labor. No one wants to hear how long it is taking to execute work these days, but banking on an unrealistic date has some negative consequences. Here are a few reasons to start with the right schedule.
Will your contractor take the time to come up with realistic answers or tell you what you want to hear? We believe that being informed and transparent, even if it includes bad news, is the best approach. This is a time for contractors to be fully disclosing information to clients, making them aware of the uncertainties and working together to solve the problems. This fits well with KasCon’s approach as it’s always the way we behave. We would rather lose an opportunity than win it and be unable to meet expectations. In our experience the successful client wants to hear it all, good, bad or indifferent and the relationship now more than ever requires us to be in the same boat rowing in the same direction.
Tips to Building a Successful Ambulatory Surgery Center Project
Whether it is simply pent-up demand or a shift in thinking, physicians and medical groups are showing greater interest in licensing and building private Ambulatory Surgery Centers as part of their practices. Ambulatory Surgery Centers, or ASCs, have been popular for some time as they offer a lower cost alternative to performing procedures and operations in hospital settings. Insurance companies often favor this approach. ASCs offer increased convenience for patients and the centers help generate revenue for physicians that may receive smaller reimbursements for routine services. The ASC licensing, certification and construction pose many challenges. The elements an ASC may need to contain tend to drive up construction costs in an already price inflated market.
Partner with a Surgical Consultant Specializing in ASCs
Before a single screw should be turned, or for that matter, a single line drawn, we recommend doctors contact a specialty surgical consultant like Tina DiMarino of Custom Surgical Consultants www.customsurgicalconsultants.com. Consultants are experienced at listening to the needs and desires of the physician and assessing the viability of the project quickly. These surgical consultants can handle tasks such as determining the proper level ASC, navigating the rules and regulations, obtaining accreditation, and in some instances, proving medical necessity (Certificate of Need). It’s hard to deal with such daunting tasks without a pro at your side. Engaging a surgical consultant is a vital first step towards a successful project.
Create a Comprehensive Design and Construction Team from the Beginning
KasCon uses a “Design-Build” approach, meaning that the design team (architect and engineer) are joined with the contractor at inception to insure a consistent value driven product with single point accountability. We lead the RFP process for design team selection and contract these services directly or simply facilitate and have the medical group hold the design contract. Whatever the preference, the key is to have architect, engineers and contractor work together up front. This group, in conjunction with the surgical consultant, will work to determine the best fit and most accurate preliminary construction cost so informed decisions can be made.
Prepare for ASC-Specific Complexities
The complexity of ASC construction doesn’t end at the licensing and certification issues. These facilities offer a number of building challenges that all must be considered. ASCs require additional space, not only for the operatory or procedure rooms, but for required ancillary functions like pre-op, post-op, and clean and dirty segregated areas. Access is important: can the facility be accessed at grade or will an elevator be needed? If an elevator, is it large enough? What about power? Will a battery back-up system suffice, or will a generator be required? An ASC has HVAC and plumbing demands that exceed those of a medical office. Also, the ability to sanitize floor and wall surfaces require products that may differ from a typical medical office. Other aspects such as fire separation, use of medical gases and the need for automatic doors – just to name a few – must be considered and accounted for in both design and pricing. There will be fewer surprises when you are working with an informed contractor and design team, experienced in ASC projects.
The private ASC offers some great advantages for both physician and patient. The key to making the build process pleasant and cost effective is to gather the right team and allow them to guide you through the challenges, as well as provide information and options for consideration, so the physician can focus on the medical practice.