The Importance of Design-Build on Industrial Projects

Interview with Tom Beres, Regional Vice President – Industrial

The Importance of Design-Build on Industrial Projects

Hear from Tom Beres on the importance of McShane’s design-build approach on industrial construction projects. Our design-build approach has been key to our 40 years of industrial project success.

The Importance of Design-Build on Industrial Projects
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Contact Tom Beres to Learn More About our Design-Build Process

Tom Beres
Regional Vice President – Industrial
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2023 Top Contractors

The McShane Companies ranks #79 on the Top Contractors listing published by Engineering News-Record. Additionally, we ranked #3 in Multi-Unit Residential, #40 in General Building and #46 in Domestic Building. First appearing on the Top General Contractors ranking in 1991, McShane has been consistently recognized as one of the top construction firms in the nation for 40 years. Offering multiple service options for a variety of market sectors all over the country, McShane has enjoyed steady growth throughout its years in business.

Find Us in Music City

It is with great excitement that I share the opening of our Nashville Regional Office. Over the past 10 years, we have experienced substantial growth in the Southeast, and the addition of a Nashville office will help us better serve both new and existing clients in the region.

In my 21-year tenure at McShane, I have had the privilege of watching the company grow substantially, and it is an honor to be part of yet another significant moment in company history. I am thrilled to build upon McShane’s success in the Southeast and look forward to expanding in the region and creating new relationships.

Nashville is a robust and growing market that holds a lot of potential for our company and the construction industry as a whole. With a balance of healthcare, corporate operations, manufacturing and supply chain management, Nashville is one of the country’s most attractive growth centers. We see this as an excellent opportunity to focus our expertise on multi-family construction in the region.

We are currently underway with two multi-family projects in the Nashville area: Avenida Indian Lake, a 138-unit active senior living residence in Hendersonville and Novel Harpeth Heights, a 322-unit development in Nashville. Additionally, we recently completed the construction of Parc at Murfreesboro, a 359-unit complex in Murfreesboro.

I am grateful for the support I have received from our clients, partners and friends, and I look forward to the journey ahead.

Garden-Style Apartment Construction on the Rise

As America’s suburbs grow, garden-style apartments have become increasingly popular. But what exactly is causing this shift, and what is so appealing about garden-style complexes?

What are Garden-Style Apartments?

A cluster of low-rise buildings, typically two or three stories high, in smaller cities and suburban areas characterizes garden-style apartment complexes. Open areas with lawns, landscaping and pathways connect the buildings, and most complexes are centered around a clubhouse with amenities such as a fitness center and pool.

Trends Affecting Garden-Style Apartments

Over the past few years, there has been an increase in migration from major cities into secondary and tertiary markets. The pandemic has accelerated this trend even further, as many people want to leave cities for lower-density living. Additionally, the pandemic has enabled many to work from home, with 29% of the adult workforce employed in remote-friendly occupations. These people no longer have to worry about living close to their office in favor of a shorter commute.

Why Garden-Style?

For those who want to live in more suburban areas but do not wish to own a house, garden-style apartments are a great solution. Their lower density allows for better social distancing, and they offer open-air amenities and more overall space at a lower cost.

Benefits to Developers

Garden-style apartments do not just provide advantages for their residents; they also benefit developers. Flexible site layouts can accommodate virtually any land site, and suburban areas have larger tracts of land for purchase. Most of these sites are greenfield, eliminating the need for environmental remediation, thereby lowering the cost of construction and shortening the schedule.

Expertise in Garden-Style Construction

We possess extensive experience building garden-style complexes at McShane and are currently underway with 12 developments across the country. Implementing a sequenced turnover of individual buildings enables the owner to begin leasing before the project is fully complete.

Eight Key Demand Drivers for Industrial Development

With 2021 underway, it’s time to narrow down the vision for 2022 – and beyond. Industrial development is very strong for one key reason: a lack of available space due to increased demand for distribution. Industrial vacancy rates across the country are at or near all-time lows, and the demand for warehouse options continues to increase. In this article, we’re going to discuss eight key drivers impacting this increased demand.

Increased need for temperature-controlled environments with a wide range of temperature capabilities. Pharma products require a wide range of temperatures, while produce typically requires 34 to 45 degrees, with some specialty items as low as 35 degrees below zero. You may be thinking, no one deals with such a wide temperature spread, but some food service companies have been doing this for years. The difference today is that both the requirement and technology available for tracking and maintaining these temperatures has increased, therefore holding companies responsible to maintain temperatures throughout the supply chain process.

Last mile. How long will we highlight the term “last mile?” The increased volume of immediate delivery continues to drive the demand for readily available products. Concurrently, the number of available land options for warehouse space near densely populated areas continues to diminish.

The use of autonomous cars and trucks is going to increase. Developers must consider this point when engaging the architect to ensure their building remains up-to-date. This applies to both large distribution centers as well smaller urban facilities. New construction should incorporate this in the design by positioning conduits in case there is an increased desire or requirement for electric car parking. Future warehouses will need to have the same offering for tractors.

Refrigerated trailers. These have long had the capability to operate at warehouses by utilizing “house” or electric current. The expectation for this option will increase as companies move from trailers powered by diesel to electric batteries.

Personnel shortages continue to be a major concern for operators of facilities. It has always been challenging to hire people willing to work the evening and night shifts for 24-hour operations. Now, a shortage of labor along with increased labor costs, including increasing minimum wage and benefits, is driving more companies to consider automation. New construction must be designed to handle automation from a structural and electrical standpoint.

Ongoing shortage of truck drivers. Drivers of the past were away from their families for weeks at a time as they drove cross-country. Today’s drivers focus on spending more time at home more and driving less miles. This trend has existed for years, but with the creation of box van deliveries, i.e. UPS and Amazon, there are many options for these once potential long-haul driver candidates to consider. Long-haul driver needs will diminish as the general population starts to accept driverless trucks and as companies purchase the unmanned tractors.

SKU reduction to focus on biggest movers has regained attention. Key drivers of this trend include limited warehouse space and greater attention to the inventory costs associated with having many slow-moving items in a warehouse.

Technology utilization. This will continue to increase for temperature monitoring within facilities, as well as during unloading, loading and transport. The same applies to warehouse and manufacturing production.

As one of the top-ranked distribution contractors in the nation, we’re well-versed in building attributes that are in high demand by both developers and end-users. We encourage developers to consider these aspects to ensure that their facilities will meet the needs of consumers for years to come.

Rising Steel Prices Mean Higher Costs for Big-Box Industrial Developments

Steel pricing has risen exponentially since early December and is now at a 12-year high. The US HRC Index has increased over 30% during this time, resulting in prices of over $1,000 per steel ton, a level not seen since 2008.

There are a few factors contributing to the spike in pricing. With several pandemic-related production shutdowns in 2020, steel producers cut supply. As steel end-users restarted operations later in the year, mills struggled to keep up with demand as it ticks back toward pre-pandemic levels. At the end of 2020, US raw steel utilization was 72%, a year-over-year decrease of almost 12%. Additional factors include rising raw material costs and the lack of import backstop to ease supply constraints.

This is creating implications for industrial construction, specifically for big box developments. The roof deck and joists utilize hot and cold roll steel, which comprise the majority of the steel needed to construct this facility type. The material cost alone can account for approximately 8% of the total cost to construct the building. Our projects in California and Arizona typically include a composite wood roof deck instead of steel, but with lumber commodity prices doubling since last summer, we aren’t experiencing much relief with the different construction material.

When will steel prices flatten? Experts believe that Q1 2021 will be the peak in terms of supply tightness. As mills continue to increase production to meet current demand, we should see pricing begin to fall in early summer, with levels back to normal in the second half of 2021.

At McShane, we are keeping a close eye on the situation and maintaining frequent contact with our steel suppliers to offer guidance to our clients and partners.

Screenside Chats: Mat Dougherty & Jeff Raday

As our new President, Mathew Dougherty, P.E., takes the reins at McShane Construction, he sits down with recently retired president Jeff Raday for a “Screenside Chat” to talk about leadership, mentorship, significant projects and relationships forged over the years.

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‘The Busiest That I’ve Been’: McShane Construction Starts Eighth Multifamily Project in Phoenix

Commercial construction firm McShane Construction expects to soon break ground on the eighth apartment complex it would have underway in Phoenix, a striking illustration of the boom in multifamily development in the city.

Developer Crescent Communities has hired McShane to build Novel Val Vista, a 317-unit apartment complex at 1727 East Pecos Road in Gilbert, a southeastern suburb of Phoenix. It’s the latest project McShane is building in the region that were planned before the coronavirus pandemic and are moving forward as scheduled, Jim Kurtzman, senior vice president at McShane, told CoStar News in an interview.

“This is the busiest that I’ve been in this market since the early ‘90s,” Kurtzman said. “I don’t remember a time when the multifamily market was busier.”

Phoenix is increasingly an attractive relocation option for city dwellers who had been paying a high premium for amenities they couldn’t access for the majority of 2020 because of the coronavirus pandemic.

It is one of the nation’s strongest multifamily markets in part because of its lower costs   of living and strong employment growth. By November 2020, the city had recovered around 80% of the 200,000 jobs it lost during the early months of the coronavirus pandemic, according to CoStar research. The city has long been a destination for workers in dense, pricier cities who see Phoenix as an affordable option with a strong quality of life.

“A rise in remote work will entice more people to move to Phoenix as an affordable option to California or East Coast markets,” Jessica Morin, director of market analytics at CoStar Group, wrote in a recent report on the city’s apartment market.

Most of McShane’s apartment projects in Phoenix are scattered in relatively wealthy, suburban areas just on the periphery of the city’s core. The company, based just outside Chicago, is currently building one apartment in Mesa, two apartments in north Phoenix, two in the northwest suburb of Scottsdale and three in Gilbert, Kurtzman said.

That move mirrors a national trend in the multifamily space, too, as more young professionals are foregoing the once-traditional route of buying a house in the suburbs and instead renting an apartment in neighborhoods closer to their city’s downtown core.

The company is working with a wide array of developers, too. Charlotte, North Carolina- based Crescent, for instance, is a national multifamily development firm that has so far built 59 apartment communities since it was founded in 1963, according to its website.

McShane is also building projects in Phoenix for Birmingham-based Liv Development, Dallas-based Leon Capital Group and Continental Properties, a multifamily development firm based in Menomonee Falls, Wisconsin.

The company is also building a wide array of multifamily properties, too. They include styles as varied as garden-style apartment properties and podium-style apartments, which is the construction style more commonly used in luxury or high-end developments.

“We’re pretty much doing everything,” Kurtzman said.

This article was originally published in CoStar News with contribution by McShane Construction Senior Vice President, Jim Kurtzman. Click here to view the original article.

What Housing Developers Need to Know About HUD Financing for Their Next Deal

As construction lenders continue to be more selective on multi-family deals, more developers are pursuing HUD 221(d)(4) financing for their next apartment property. These non-recourse loans are provided by third-party lenders and are backed by the U.S. Department of Housing and Urban Development (HUD). Since HUD guarantees these loans, they are closely involved in every step of the planning, construction and closeout process.

It’s important to note that projects involving HUD financing are not necessarily affordable housing. At McShane, we’ve worked with multiple developers on a variety of product types utilizing HUD 221(d)(4) financing, including market rate, workforce housing and affordable deals.

The approach for HUD-financed projects differs from traditionally funded developments, so we’re going to outline the entire process, from concept to turnover.

When a developer has a project where they want to pursue HUD financing, they begin by selecting their lender. This firm is also going to help them underwrite the project and guide them through the HUD process. There are a handful of companies across the country that specialize in this.

The developer then provides their initial submittal to HUD, which involves a concept meeting followed by a submittal. If HUD likes the concept, they’ll issue a formal Letter of Invitation. This is where the heavy lifting starts. Drawings need to be created and firm pricing from a general contractor is required. A third-party cost analyst gets involved and there are several underwriting standards that the general contractor must go through. HUD prefers to work with contractors that have a successful track record delivering HUD-financed properties.

The design and underwriting process can take 8 to 12 months to complete the necessary due diligence. It’s important that the developer works closely with the general contractor throughout this process and sticks to the drawings as the HUD procedures are not very flexible once construction is underway. Upon completion, the developer submits their firm application. Once approved, they are on a 60-day clock to close.

As construction commences, HUD hires a third-party inspector who visits the jobsite once a month to check compliance with both the drawings and Davis Bacon prevailing wages. Specific HUD forms are required for all payment applications during construction.

The HUD turnover procedure is also unique. Once inspections have been completed, a Permission to Occupy (PTO) form must be executed by HUD in order for tenants to occupy the residence. It’s important for developers to time this requirement properly, as the HUD representative is only onsite once a month to sign off on the PTO form.

As a seasoned HUD contractor, McShane is well-versed in the details and execution of HUD 221(d)(4) projects and will leverage this experience on your next housing deal.

Concrete Flooring Options and Their Impact on Your Development

The construction success of a distribution center relies on its most critical component, the concrete floor slab. Concrete floors are taking on increased weight-bearing demands as racking capacities expand. Even the slightest imperfection can negatively impact warehouse operations and maintenance. We’re going to discuss the most commonly-used flooring types along with the best ways to mitigate future issues on newly poured concrete slabs.

Across the U.S., a 7” slab-on-grade represents today’s market standard. This option is great for speculative industrial properties when the developer has no client lined up to dictate the design and the load requirements of the facility are unknown. This is the most widely-used option and comes in at the lowest up-front cost.

Build-to-suit developments frequently require a different approach due to customization based on racking systems and the desire for longevity with minimal maintenance. Shrinkage compensating floors are used in many of these cases as they include fewer floor joints, increased density and durability, and virtually no shrinking or curling.

One example of this was used on a large BTS development in California where we used Ductilcrete to handle extreme loads in the warehouse. This option is composed of fiber reinforced concrete which results in reduced thickness of slab and reduced number of control joints. Another option we’ve used on food distribution facilities is a specialty reinforced concrete floor comprised of type K concrete to allow seamless slabs up to 25,000 square feet. We’ve also engaged Fricks, which has a proprietary shrinkage-compensating blend.

All of these options allow for fewer joints resulting in less linear feet to maintain and repair plus smoother movement for forklifts and pallet jacks. This translates to greater employee comfort, reductions in material handle equipment repairs, and less product damage by minimizing the bumps between sections of concrete.

How do we mitigate imperfections the slab? The quality starts before the pour. Our first step is to identify the team with the experience and knowledge for the specific project and location. As part of our quality control efforts, we ensure the soil underneath the slab is well-stabilized. Potential concrete subcontractors are extensively qualified in the bidding process and we typically view sample projects prior to their selection. Once the floors are ready to be installed, we control the size of the pours to ensure our quality control standards are met. It’s imperative this process is not rushed for long-lasting, low-maintenance floors.

With the right team in place, proper design, stable subgrade and well-placed concrete you will have a high-performance concrete floor with minimal cracking and joints for years to come.

Pandemic-Driven Trends in the Food & Beverage Industry

Over the past six months, we’ve witnessed the COVID-19 pandemic accelerate the seismic shift in consumer expectations, and more people are shopping online than ever before. The food and beverage industry is no different, with online grocery sales expected to grow by 40% in 2020. This is prompting companies to redefine their entire distribution strategy to meet heightened demand and compete with established e-commerce retailers.

With over 30 years of operations experience with three of the country’s largest food distributors, my unique perspective helps us achieve our clients’ desired results for their new facilities in terms of site and building design and process flow.

Understanding e-commerce needs. As consumer behavior continues to shift toward online ordering, last mile distribution facilities are more important than ever. Two critical factors for successful last mile operations are transportation and demographics. Transportation is a driver, whether it is to distribute goods or access labor. For demographics, end-users target areas with high population growth, skilled labor and a deep consumer base.

These locations often involve complex land sites that pose construction challenges. Our professionals have extensive experience designing and constructing these facilities and have recently delivered over two million square feet of e-commerce distribution space.

Trends in automation. Automation is an essential component of any distribution facility. It helps mitigate labor shortages and costs while improving productivity and employee health and wellness. Technology such as automatic storage and retrieval (ASRS), satellite pallet vehicles, automatic truck loaders, robotic palletizing and automatic guided vehicles (AGV) are becoming more common in the food and beverage industry.

Automation was essential in our recent delivery for Digi-Key’s new Product Distribution Center Expansion in northern Minnesota. The 2.2-million-square-foot multi-level distribution facility features an automatic storage system that uses robotic shuttles for retrieving products. The project also included a fastbox, pick and pack stations, and inter-facility connection, all supported by over 25 miles of conveyors.

Forming a strong partnership with a general contractor that understands the macroeconomic issues facing distribution with knowledge of current trends in the food and beverage industry is important. At McShane, we view things from an end-user’s perspective and can serve as a valuable resource on your next distribution investment.

HUD 221(d)(4) Financing Girds Workforce Housing Projects

As some capital sources pulled back on construction lending due to COVID-19, workforce housing developers and other builders have increasingly turned to HUD 221(d)(4) financing.

HUD 221(d)(4) insures mortgage loans to build new construction or substantially rehabilitate multifamily rental or cooperative housing, offering high-leverage, nonrecourse, fixed-rate loans with terms up to 40 years.

Calling it a “consistent and stable financing option,” Kimberly Gift, COO at Dwight Capital said she expects “the D4 program to increase in popularity” as the impacts of coronavirus continue.

Greystone Managing Director Shana Daby noted the firm had a “robust pipeline” of D4 loans for several years pre-pandemic but saw an increase as other capital providers limited lending.

“We’re looking to close $450 million of D4s this year, which would be a record for us, and we have $2.3 billion of D4s in the pipeline,” Daby said.

In August, Greystone provided a $49 million FHA construction loan to AMCAL Equities LLC under the D4 program to develop Katy Apartments, a 324-unit Texas multifamily community. Daby noted the D4 financing is helping AMCAL bring much-needed market-rate and workforce housing to the Houston region. The financing funded 85 percent of total project costs and was structured as a nonrecourse, fixed-rate construction loan that automatically converts to a 40-year, fully amortizing permanent loan upon stabilization.

“Conventional lenders don’t usually do 85 percent of cost,” Daby said.

Scott Hoppa, vice president of McShane Construction Co.’s Southeast region, said his company got more requests for information about D4 loan construction when the pandemic arrived from developers new to HUD-insured financing and those that had previously used it.

McShane recently completed Noble Vines at Braselton, a 248-unit property in Buford, Ga., for Claret Communities. He described the garden-style buildings, which received D4 financing, as market-rate apartments for moderate-income families. Hoppa said he has also seen the D4 loans “packaged into affordable housing as part of the capital stack.”

This article was originally published in Multi-Housing News with contribution by McShane Construction Senior Vice President, Scott Hoppa. Click here to view the original article.