Orange County’s tenant-improvement industry posted its strongest year in more than a decade last year, buoyed by a spate of new construction work in addition to plenty of renovations at existing properties.
The 26 largest companies reported $677 million in revenue from tenant-improvement work in OC last year, according to this week’s Business Journal list.
That marks a nearly 29% increase in revenue compared to last year’s list of 23 companies.
Those on this week’s list averaged 15% year-over-year gains in revenue, and their cumulative total is the highest on record since the Business Journal began tracking the industry with an annual list in 2002.
Gains were more pronounced at the top of the list. Fourteen companies, including eight of the top 10, reported an increase in revenue last year.
Eight companies experienced declines in revenue, including six of the nine smallest companies.
The remaining four companies had either flat revenue growth or were Business Journal estimates.
The list includes contractors that primarily do tenant-improvement work, as well as some general contractors that derive a sizable portion of their revenues from tenant-improvement work.
The amount of work performed by tenant-improvement contractors mirrored last year’s revenue gains. Companies on the list reported working on 20.5 million square feet of commercial real estate projects last year, a 15% increase from year-ago levels.
The average tenant-improvement project here cost about $33 per square foot, according to data companies provided to the Business Journal. That’s about $1 more per square foot than that reported a year ago.
The costs of tenant improvements vary greatly. Law firms and financial services companies sometimes spend upward of $100 per square foot building out high-end office space.
Improvements to large retail spaces, such as a fitness center, can cost $60 per square foot or more.
Tenants in older office buildings and warehouses often spend a fraction of that to get their office operations up and running.
Howard Repeats at Top
• The Costa Mesa office of Los Angeles-based Howard Building Corp. retained its No. 1 spot on the list after working on $128.3 million in tenant-improvement work here last year, a 73% increase.
The company reported working on the tenant improvements for the recently completed Newport Beach office tower built for Pacific Investment Management Co.
Tenant-improvement costs for the 380,000-square-foot Newport Center building, which is owned by Newport Beach-based Irvine Company, have been estimated to be in the $50 million range, on top of the $85 million it cost to build the 21-story building’s core and shell.
The tower’s interior includes a state-of-the-art broadcast studio, trading facilities, and an auditorium that seats more than 200 and serves as a central location for talks and meetings, drawing guests and Pimco employees from around the globe.
Other projects Howard worked on included office space for the Irvine office of DaVita HealthCare Partners Inc., a provider of kidney dialysis and other healthcare services, and for Irvine-based consumer electronics company Vizio Inc.
• Taking the second spot on the list was a new entry, Lexington, Ky.-based Gray Construction. The company’s Anaheim office reported $70.7 million in revenue, a 27% increase from year-ago levels.
Its corporate office is best known for ground-up construction work, but Gray’s OC office is focused more on retail-related tenant-improvement work, according to a company official.
Recent projects for Gray include tenant-improvement work for a 32,000-square-foot Walmart Neighborhood Market in Rancho Santa Margarita and a 31,000-square-foot Walmart Neighborhood Market in Huntington Beach.
• Rounding out the top five for the list were: No. 3, Turelk Inc., up 14% to $69.8 million; No. 4, Swinerton Builders, up 15% to $59.1 million; and No. 5, KPRS Construction Services Inc., down 5% to $57.4 million.
The top five tenant-improvement firms were responsible for about 57% of the total revenues on the list.
There were several notable entries outside of the top five:
• The Irvine office of S.D. Deacon posted a 135% jump in revenue to $8.6 million, good for the No. 15 spot. Besides Gray Construction, the company was the highest-ranked newcomer to the list.
S.D. Deacon’s recent projects include part of the $17 million renovation project at The Village at Nellie Gail Ranch in Laguna Hills.
The retail project, formerly known as the Moulton-La Paz shopping center, is headed by Los Angeles-based developer Vintage Real Estate. In addition to the upgrading and redesigning of the retail center, a new anchor tenant is being added to the site, a 20,000-square-foot Fresh Market grocery store.
• At No. 6, the Irvine office of construction company Snyder Langston reported handling some of the tenant-improvement work for the largest office to open in OC in the past year, the 469,000-square-foot Fountain Valley headquarters of Hyundai Motor America Inc.
Jobs Increase
Companies on the list reported employing 1,200 people, a 20% increase from year-ago levels.
The extra employees will be needed if some high-profile projects now on the drawing board make their way to the market.
This month, Aliso Viejo-based FivePoint Communities Management Inc., developers of the Great Park Neighborhoods in Irvine, filed plans for the first batch of commercial construction at the former El Toro Marine Corps air station.
The eight-building, 2-million-square-foot office park is designed to hold the headquarters and expanded operations of Irvine-based Broadcom Corp.
If it moves ahead, the Broadcom campus would be the largest office project proposed in OC in more than a decade. It would go up near the intersection of Barranca and Alton parkways near the Irvine train station.
All but one building at the campus would be between four and six stories tall, with the largest of the eight offices running 455,000 square feet.
Another big project that could soon move ahead is One Broadway Plaza, the 37-story, 612,000-square-foot tower long planned for downtown Santa Ana.
The project, which would be OC’s tallest building, is a development of Mike Harrah’s Caribou Industries Inc., whose tenant-improvement practice ranked No. 24 on the list.
Other office projects being considered include 17850 Von Karman, a nine-story, 242,000-square-foot office proposed for a spot near the intersection of Von Karman Avenue and Main Street; and a 508,000-square-foot low- and midrise office campus at the Tustin Legacy development.
Both projects are expected to emphasize creative-office features, which tend to be pricier tenant-improvement projects per square foot than traditional offices.
