Landscape Management, October 2010

THE INDUSTRY PULSE Commercial value Contractors try to uncover true value in commercial maintenance work as clients force price reductions PHOTO TREASURE ISLAND LAS VEGAS D K LANDSCAPE KRISTI ATKINSON A s Brian Golembiewski describes the state of the commercial market one can only picture a vast vacant Western movie street with just the hint of wind and the slightest bits of tumbleweed rolling across the dusty quiet space There is such a huge amount of availability of commercial property right now but nobody is buying says the president of Tempe AZ based Paramount Landscape There are a ton of empty buildings out there that are just waiting for things to turn around But contractors didnt feel these effects right away The recession hit the commercial market one to two years after it hit the residential market Bob Grovers commercial customers started cutting back in mid 2009 Some customers came to us and said their tenants needed rate relief and to fi nd a way to reduce expenses says the president of Hillsboro OR based Pacifi c Landscape Management We also saw our work put out to bid more and had more customers just fl at out ask if we can cut our rates Even for contractors like Golembiewski who had developer clients decide to fi nish projects they had TAKE AWAYS 2010 Commercial Client Setbacks 1 Price bid wars 2 Oversupply of facilities high vacancy 3 Weak demand for space 4 Decline in commercial property values 2011 Commercial Client Goals 1 Continue to build customer relationships 2 Pursue commercial property types less affected by the recession 3 Focus on smart negotiation of prices and services ensure profi t by improving internal effi ciencies or reducing service offerings on the job to meet client needs and requested price adjustments LANDSCAPEMANAGEMENT NET OCTOBER 2010 S18 already started despite the economys effects the work has been drying up These contractors are not alone Spending on nonresidential construction is likely to fall more than 20 this year before recovering slightly in 2011 according to an American Institute of Architects survey Looking at specifi c facility types construction spending on hotels will drop more than 43 this year construction of offi ce buildings will decline almost 30 and retail and industrial categories will be down more than 20 the AIA says It forecasts smaller declines for institutional categories like amusement space educational and religious facilities and health care buildings The AIA cites an oversupply of facilities weak demand for space continuing declines in commercial property values and real estate lenders reluctance to provide credit as the reasons for decreases A Society of Industrial and Offi ce Realtors study concurs showing vacancy rates are beginning to level but rents remain depressed and subleasing space is high The data also shows commercial real estate development remains stagnant in all regions with low investment activity 88 of survey respondents say its virtually nonexistent in their markets This is one reason in addition to price slashing Christy Webber is cutting back on her commercial