Developers of Commercial Properties Diversify
Commercial real estate developers have been diversifying their operations to cope with the downturn that has clobbered commercial properties.
With high vacancy rates, low rental rates, low unit prices and lack of demand for space in the commercial sector, several commercial property developers have been turning to diversification to be able to maintain their cash flow, pay their employees, pay their construction loans and avoid loan defaults and foreclosures.
Frank L. Blum Construction Co. has added construction of public school buildings to its projects. It is currently renovating rooms at Ashley Elementary School in Winston-Salem and will do other projects for schools in the Winston-Salem and Forsyth County area.
Engineering company Cavanaugh & Associates has been helping local water systems find and stop leaks. According to Steve Cavanaugh, his firm has to diversify because there are no longer large projects to undertake.
During normal times, commercial real estate businesses choose a niche, develop it, excel in it and then promote it so they can win projects. Now they have to enter niches that they were not considering before.
Cavanaugh said his firm is fortunate it did not have to start a niche from scratch. He said his company has been identifying water leaks as a sideline since 2000, and now his firm is focusing on it. His workers, now only ten out of an original number of 18, use acoustic monitoring systems to find water leaks.
Cavanaugh added that leak detection is a profitable niche during the recession because it helps local governments cut their budgets. He explained that water audits can cost up to $50,000 and repairs cost around $150,000, but once the water systems are free of leaks, local governments can save huge amounts per year.
According to Cavanaugh, his firm has done audits in Morganton, Myrtle Beach and Burlington. The one thing that is challenging him now is the hesitation of some local municipalities in allotting the money needed to undertake the audits and the repairs because of the current downturn.
Meanwhile, commercial real property broker Triad Commercial Properties switched from sales to property management. It now manages over 2.1 million square feet of spaces, an increase from the 500,000 square feet it managed in 2008.
According to Mark Dunnagan, the preconstruction services manager at Blum Construction, his firm will return to its traditional markets when the economy recovers, but it will develop the public school construction niche that it is pursuing now.
