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After Slow 2020, TI Firms See Business Return

After more than a year of headwinds caused by a shaky office sector and shelter-in-place orders, tenant-improvement contractors are finally starting to see demand return.

“It was one of our most challenging years, but in the past few months there’s been a significant pickup in business,” said Todd Layman, president of Coastline Development, No. 14 on this week’s list, which ranks companies by the dollar value of their work done in Orange County last year.

Indicative of the tough business climate in 2020, Coastline’s ranking moved up two spots from a year ago, despite seeing a decline in business.

In total, Orange County’s top 23 tenant contractors saw a nearly 12% decline in business last year, reporting $1.2 billion in total billings in 2020.

Compare that with 2019, which brought a nearly 30% jump in business over 2018.

Not all companies saw declines last year, however.

“We had our best year since 2007,” said Vincent Mason, whose Huntington Beach firm VR Mason, No. 21, saw an 8.7% jump in business to $9.6 million.

Medical Sector

VR Mason was one of just seven firms to report an increase in billings last year.

Los Angeles-based Howard Building Corp. saw a 49% boost in business out of its Costa Mesa office, snagging the top spot on the list, replacing the Santa Ana office of Swinerton.

It was the largest increase reported on this year’s list.

For VR Mason, last year’s gains were bolstered by the company’s work with hospitals and medical offices, the lattter being a sector that outperformed other office product types during the pandemic.

Orange County office sales volume dropped from north of $3 billion in 2017 to about $1.6 billion in 2020, according to research from CoStar Group Inc.

During that same time, sales volume for medical office properties rose from about $300 million to nearly $480 million.

“That sector gave us quite a bit of work last year,” Mason said. “A lot of our clients were buying new buildings, while other clients were doing refurbishments, such as doctor’s offices.”

Sanitation Stays

For the traditional office sector, contractors are staying busy by retrofitting spaces in the wake of COVID-19 as employees return to the office.

Work varies from increasing an office’s share of outdoor space to renovating common areas with sanitation-friendly materials.

“For one client we are redoing their break room with stone and glass surfaces, so everything is easier to clean,” said Gary Mason of Coastal Pacific Construction, No. 18 on the list. “There’s a lot more thought going into cleanliness.”

Office Layout 

While some design trends implemented in the early days of the pandemic have fallen to the wayside, some are here to stay.

This includes open-floor plans, collaborative spaces and indoor-outdoor connectivity.

“Some companies are looking to add more functional windows to increase outdoor space and add to air flow,” said Mason, whose Coastal Pacific operates out of Irvine.

One of Irvine’s newer office properties highlights this trend: Innovation Office Park. 

Irvine Co. implemented rollup doors that lead to private patios as a new design feature at the first 300,000-square-foot phase of the low-rise campus in the wake of the pandemic.

Hybrid

Some office brokers have suggested the pandemic may lead to a downsizing for certain offices, and tenant contractors such as Layman have seen evidence as of late.

“Many offices are reducing their footprint as employers adapt to a more hybrid work force.”

An example of a local company buying into the hybrid model is American Advisors Group, which recently consolidated and relocated its Orange headquarters to the Irvine Towers high-rise office complex while simultaneously growing its employee headcount.

Headwinds 

Tenant contractors are experiencing headwinds that largely mirror those seen by the construction industry: looming inflation, rising costs for construction materials and labor shortages.

Still, firms are optimistic for the remainder of 2021, as employers relocate to new offices and others look to retrofit their existing space.

“Demand is definitely picking up, especially as employers rethink their space to help get employees back in the office,” said Coastal Pacific’s Mason.

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