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Thursday, Jun 20, 2024

TI Firms Diversify Business, Offset Office Losses

Orange County’s roster of tenant-improvement firms continue to diversify their business lines as contracts from the office sector dwindle even further, with healthcare, electric vehicle and aerospace employers keeping contractors busy in the post-pandemic market.

The 26 largest tenant-improvement firms in OC reported an 8.5% increase in local billings last year to nearly $1.4 billion.

Companies appear to be paying more across the board; though the dollar value of local work grew, the square footage of work completed here last year is roughly flat at 17.3 million square feet.

Moving up two slots to become the county’s largest tenant-improvement contractor is Concord-based Swinerton Inc., which operates locally out of Santa Ana. The firm nearly doubled the square footage of TI work handled in OC last year, sending its local billings up 6.3% to $170 million.

It swapped places with Howard Building Corp., which saw billings fall 19% to $156 million.

“The office market has really died off since the pandemic, which has had a large impact on the industry,” Corrina Thompson, the client relations manager at Ram Construction LLC, told the Business Journal.

The firm, No. 4 on this year’s list, reported an 88% boost in local work to $143 million, in part because of its diversification efforts.

“We’re very active in the healthcare and life science sectors locally,” with several recently completed projects in the sector including a Hoag facility in Dana Point and the Hoag Digestive Health Institute in Newport Beach.

The aerospace and automotive sectors have also bolstered work for Ram, with local clients including Rivian Automotive Inc. (Nasdaq: RIVN) and Terran Orbital Corp. (NYSE: LLAP), both of which have been heavy on the expansion front in Irvine.

“It’s been a great time to take advantage of diversifying our portfolio,” Thompson said.

“We’ve kept our eyes and ears open to a variety of projects.”

Growth Mode

One local TI firm seeing a post-pandemic boost in revenue is Lake Forest-based Smith and Severson Builders, which saw local billings jump 63% last year to $41.5 million.

It was the first revenue bump in two years for the company, which saw revenue drop in 2020 and 2021 due to decreased demand during the pandemic.

It regained those losses “and then some” last year from the industrial sector, and from increased demand for electric vehicle charging stations, according to President David Smith.

“With Amazon pulling back in March of 2022, the demand for industrial has greatly decreased, but areas to accommodate EV charging and tractor/trailer storage has increased,” Smith said.

A newcomer to this year’s list, Stanton-based AGI General Contracting, saw local revenue jump 90% to $11.8 million as a result of increased business in the county.

“We were lucky enough to have a large portion of our work located in Orange County last year,” the company told the Business Journal.

Office Investors

Of the office clients that are spending money on tenant improvements, contractors are seeing an increase in the value invested.

“Companies are typically taking less space but spending more on a per-square-foot basis to upgrade their offices,” Ram’s Thompson said.

The company was involved in the renovation of the new headquarters for 5.11 Tactical in Costa Mesa (see story, page 27). The design of the nearly 40,000-square-foot office was a recipient of the 35th annual Calibre Design Awards.

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