SPACE UPGRADERS
Tenant Improvement Contractors Hold Their Own, Thanks to Mortgage Companies
By MATHEW PADILLA
The 10 largest tenant improvement contractors working in Orange County generated $187 million in revenue here last year.
That’s according to the Business Journal’s first list of tenant improvement contractors. The list includes contractors based here or elsewhere that did work at OC office, industrial and other buildings in 2002.
Contractors primarily doing tenant improvement work make up the list. It includes a couple of builders that have sizable tenant improvement practices but doesn’t include builders that do just some tenant improvements.
The list captures the major tenant improvement players here. As with any first effort, though, we may have missed some contractors that should be on the list.
One omission is Orange-based Asher Industries Inc., which we believe should be on the list but we couldn’t get data as of late last week.
We look forward to getting feedback and bolstering next year’s list.
The dollar value of OC work last year by the contractors on the list was about even with 2001’s $186 million.
The contractors did 7.2 million square feet of improvements here last year, up slightly from 2001’s 7 million square feet.
Like everyone else in commercial real estate, tenant improvement contractors got a boost last year from expanding home mortgage companies.
Subprime lenders Ameriquest Mortgage Co. of Orange, H & R; Block Inc.’s Option One Mortgage Corp. in Irvine and others have kept tenant improvement contractors busy for nearly two years.
That’s helped sustain revenue for contractors when it otherwise would have fallen, industry sources said.
With low interest rates and the region’s booming housing market, mortgage companies leased more than 1.5 million square feet of OC office space in the past year, according to Royce Sharf, senior vice president with the Irvine office of Julien J. Studley.
Long Beach-based Turelk Inc., which has an Irvine office, topped the list with $43.8 million in OC revenue last year, up 16% from $37.7 million in 2001. Turelk did nearly 1.2 million square feet of tenant improvement work here, up 15% from 1 million square feet the prior year.
Among Turelk’s clients: Ameriquest Mortgage Co., Newport Beach-based The Irvine Company and Pacific Life Insurance Co., also of Newport Beach.
“We feel we have been the market leader probably for 10 years in Orange County,” said Michael Turi, Turelk’s president.
Along with mortgage companies, law firms are driving business, Turi said.
At No. 2 is Irvine-based Ticon General Contractors with a Business Journal estimate of $30 million in 2002 OC revenue.
According to Ticon, the company did 1.5 million square feet of work here last year, up 20% from 2001’s 1.25 million square feet.
Customers include Chicago-based Equity Office Properties Trust, Houston-based Transwestern Commercial Services and The Offices of South Coast Plaza in Costa Mesa.
Irvine-based DBAC Inc. landed at No. 3 with $29.6 million in OC revenue, a drop of 22% from a year earlier. In 2001, DBAC did 1.5 million square feet of work here, versus 2002’s 1 million square feet. Customers include Option One and the local operation of Pfizer Inc.
Rounding out the top five: No. 4 Brea-based KPRS Construction Services Inc., a builder with a sizable tenant improvement practice and $25.8 million in OC revenue last year, which was flat, and No. 5 Johnston & Associates Inc., with $18 million in OC revenue last year, which was down 8%.
No. 6 Glendale-based Howard Building Corp., which has a Costa Mesa office, saw its OC revenue drop by half to $15.5 million in 2002 from a year earlier.
Howard spokeswoman Megan McMorrow blamed the decline on lackluster demand among tenants other than mortgage companies and law firms. 2003 should be better, she said, with a pickup in business and stepped up marketing efforts.
No. 7 San Diego-based Roel Construction Co., another builder with a tenant improvement business, saw its OC revenue jump from $1.6 million in 2001 to $11 million last year.
The gain was due in part to Roel’s opening of an Irvine office in December 2001.
Roel had handled OC from San Diego, according to Pete Sara, who heads the Irvine office.
Another factor in Roel’s growth: auto dealers.
Several of them have sought to improve their dealerships recently, according to Roel. Among Roel’s customers are Ray Fladeboe’s Honda and Volkswagen dealerships in Irvine.
Landlords are a mainstay for several of the contractors on the list. With high office vacancies and low rents, landlords have upped tenant improvement allowances as a carrot for new tenants or renewing ones, sources said.
