Concrete Flooring Options and Their Impact

Written by: Charlie Stone, Vice President & Regional Manager and Ed Rodriguez, Director of Project Management

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.

Molly McShane Named CEO of The McShane Companies

National real estate development and construction services provider The McShane Companies announced that its Board of Directors has appointed Molly McShane as Chief Executive Officer effective October 1, 2020. Ms. McShane previously held the position of Chief Operating Officer.

“During this time of transformation, there is no better person to lead The McShane Companies than Molly,” said Jim McShane, company Founder and Chairman of the Board. “Molly is a proven leader with a clear business vision and the ability to bring people together. Her vision for growth and diversification is exactly what The McShane Companies needs as we enter our next chapter.”

Since joining the company in 2002, Molly has spearheaded major strategic initiatives across its portfolio of services, most notably its expansion into new geographic markets and a conscious effort to create a diverse workplace. During her tenure as Chief Operating Officer, the organization posted record growth. Before serving as COO, Molly was Chief Investment Officer – and the first woman to rise to the c-suite leadership level in the firm’s history.

“It is a privilege to be part of an organization that delivers high-quality services and innovative solutions to the best clients. We are committed to developing the most talented professionals into leaders, and we will do our part to improve and give back to the communities in which we operate,” said Ms. McShane. “I am truly honored to have been elected as The McShane Companies’ next CEO and am committed to upholding the principles of ethics and service that have gotten us to where we are today.”

A trailblazer in the construction and commercial real estate industries, Molly was named NAIOP Chicago’s first female President in 2018. She was also a founding co-chair of WLI Chicago’s executive board. Several organizations and publications have recognized her accomplishments. Crain’s Chicago Business has included her on their lists of Notable Women in Construction and Notable Women in Commercial Real Estate. She was also named to GlobeSt.’s Women of Influence Hall of Fame and received Connect Media’s Women in Real Estate Award.

Molly received an undergraduate degree in marketing from Boston College and an MBA from Northwestern University’s Kellogg School of Management.

Three Ways McShane Maintains Your Budget Throughout Pre-Construction

As a developer, imagine you are nearing the end of the pre-construction process on your latest development. Construction documents have been completed and your general contractor is pricing the final round of the project to go to contract. You receive their final price, and it’s $5 million higher than the budget they provided in the schematic design pricing! How could this have happened? What is your lender going to say? The development was underwritten at a much lower cost than you anticipated. Unfortunately, this is all too common in our industry. Many general contractors don’t have the ability to price conceptual plans which makes it difficult for them to hold their budget throughout the pre-construction process, resulting in huge price gaps when you’re ready to get into the ground.

Our pre-construction process was designed to eliminate these surprises. We possess the ability to accurately price conceptual plans at the early stages of the project, leading to more price certainty. We strive to build long-term partnerships with our clients and believe transparency is important in achieving this. As a result, over 75% of our business comes from repeat clients. McShane’s differentiator over typical general contractors involves three main characteristics:

We think like a developer. Originally established as a design-build contractor, McShane is accustomed to single-source responsibility and ultimate accountability for bringing a project through a successful design, construction, schedule and cost conclusion. We’ve worked in this capacity with several developers over the last 35 years and know what it takes to hold your proforma throughout the budget process.

Honest, accurate real-time schematic pricing. As one of the most active contractors in the region, we’re constantly pricing new projects and have developed excellent market data. We are continually honing this process for each new project we price, further benefiting our clients. This helps us provide a fair and accurate budget from the onset that will serve as a target throughout design development and construction documents.

Collaboration is key. Our process facilitates a team effort between the Owner, Architect and McShane. All three parties need to work together to ensure project success starting early in the process. We invest the time up front and are continually involved throughout the entire pre-construction process by being proactive rather than reactive. This includes our involvement in Owner, Architect and Contractor (OAC) meetings and providing valuable feedback to steer the overall budget alignment with input from all three parties. Each checkpoint will have its deviations from the original budget and it’s important to tweak these items as we go to maintain your needs and design intent. These collaborative real-time checks help avoid last-minute design changes, facilitating budget adherence without any surprises.

As an organization founded on the principles of honesty and integrity, transparency and collaboration are in our DNA. With McShane, you’ll always know where you stand.

Lumber Prices Are on the Rise—but Why?

Lumber prices have been on a sharp incline during the pandemic and hit an all-time high this month. From its 2020 low point back in April, the commodity has risen to over $800 per 1,000 board feet, which is an increase of over 130%.

What’s causing this exponential rise in material cost? Several factors are contributing to the situation, all of which involve supply and demand. Mills closed this past spring due to pandemic measures enacted by state and local governments (i.e. stay-at-home orders, social distancing requirements). Lumber prices actually fell early in the COVID-19 pandemic and seeing this, mills anticipated a large drop in demand. As a result, those mills that remained operational significantly reduced production. To put numbers on it, we’ve experienced one billion less board feet produced year-to-date versus last year, equivalent to 37,000 truckloads of lumber.

On the demand side, housing construction ended up weathering the storm, and the anticipated drop in demand lasted less than 30 days. Simultaneously, heightened demand from do-it-yourselfers and big box retailers increased dramatically during the pandemic, further stressing the supply chain.

The normal lumber supply and demand relationship has been turned on its head. Demand for lumber is very high and COVID related production issues have created problems in getting product to market. This is a supply issue, and once the pipeline gets satisfied, pricing will ease.

At McShane, we are closely monitoring this situation and offering our clients guidance, as we have throughout our extensive history of multi-family construction. Of the 20,700 units we’ve built, over 80% have been wood frame structures. With over 6,000 units currently under construction – and a healthy pipeline of multi-family work through 2021 – we are in frequent contact with our subcontractors and suppliers. We are watching new developments in commodity pricing and analyzing their implications.

Urbanization and its Implications on Industrial Development

Viable land sites are increasingly scarce throughout California, and those that are available are being sold at a premium. As a result, many developers are left scrambling to find affordable dirt for their industrial developments. This poses challenges, as most of these sites have complicated geotechnical and environmental issues, such as liquefaction potential, differential settlement potential, expansive soils and contaminated soils that need to be addressed prior to the site become usable.

It is important to select a general contractor early in the development process that possesses the knowledge and experience in assembling ground improvement experts necessary to guarantee the success of the project. McShane offers unique expertise in this area by understanding these assignments from a developer’s perspective and offering our extensive experience with design-build projects.

We are accustomed to managing the due diligence process by bringing in geotechnical, civil and structural consultants. Our team works to identify the problem areas, then offers multiple engineering options as potential solutions. We work collaboratively with the developer and consultants to customize a solution that will fit the needs of the project in terms of budget and schedule.

Working with the right team of experts often results in creative strategies that will bring a development to life. On a recent project in the Bay Area, the site selected for development was located in a flood plain and the most viable solution was to raise the entire 32-acre site 11 feet off the bay. Currently, we are underway with construction on a complex site that had both liquefaction potential and differential settlement potential. A custom-catered solution included wick drains and deep dynamic compaction to mitigate any potential geological issues.

Ground improvements require complex engineering solutions and extensive coordination effort. It is imperative to work with a collaborative general contractor with experience assembling a team of experts who have local knowledge throughout California and can provide multiple solutions tailored to fit your budget and schedule.

Safety on the Frontlines of COVID-19

As a business on the frontlines of the COVID-19 pandemic, it was imperative for us to quickly adapt our safety measures and practices on our construction sites across the country. As a general contractor, we were tasked with not only keeping our employees, workers and partners safe, but also promoting health and safety in the communities surrounding our projects. This necessitated a strong network of communication so that information could travel quickly and efficiently from our company’s leaders to our superintendents, field staff and subcontractors.

McShane’s motto is, “Safety First, Last and Always,” and while this is true at all times, pandemic or not, it has been especially important over the past four months.

Our team worked diligently to implement precautionary parameters on all of our sites. In addition to our normal safety program, the following protocols were put in place:

  • Six-foot social distancing requirement
  • 100% face covering requirement
  • Hand washing required before entering the construction trailer
  • Isolation of trade crews to avoid multiple teams working in the same area
  • Employees required to report any signs of illness to on-site personnel
  • Temperature checks with contactless thermometers
  • Social-distanced outdoor or virtual meetings

We are grateful to all of our employees, subcontractors, clients and partners who have showed continued support and dedication to the success of our projects throughout this time. We’re especially grateful to our superintendents and other field staff who worked tirelessly to uphold our safety protocols while keeping our projects moving.

COVID-19 and the Building Market – Vol. 6

Much like last week, we continue to operate both of our construction businesses and our development business in a more stable environment. While we proceed to put current work in place, we are also focused on signing new work and maintaining a healthy backlog of business. Because of the long lead times necessary to build most buildings, the construction industry typically lags behind the rest of the economy. As a result, 2021’s numbers may show the adverse effects of Coronavirus more so than 2020. Our business was challenged this past week as some states, in our view, are prematurely opening up and putting our employees at a higher risk than we are comfortable with. We continue to respect CDC guidelines and are operating all of our job sites and offices nationwide within those recommendations. As I said last week, detailed planning is underway for how to open up safely when the right time comes.

Industrial development continues to be in a moment of pause. Although there have been some notable new e-commerce leases signed recently, non-e-commerce leasing is slow. Most sales of both land parcels and cash-flowing assets are on hold, as substantial discounts have not yet been presented, but more nuanced pricing in this new environment has not yet been triangulated. Underwritten lease-up time frames and rent growth are both becoming more conservative. Non-recourse lending seems to be less widely available in the short term. That said, industrial real estate is widely expected to be an eventual beneficiary of increased long-term demand. Those who time it well will come out of this successfully.

COVID-19 and the Building Market – Vol. 5

The shift in tone that I’ve witnessed over the last week has turned from triaging the current crisis to thoughtful planning for the future. Curves are flattening, guidelines for when people can go back to work are being discussed, protective measures for “the new normal” office life are being prepared, and some folks have started to receive funds from the government relief programs. In construction, our active jobs continue to progress, but we are also very busy supporting our clients in pre-development and pre-construction activities. With the increased stresses and uncertainties in deal underwriting, renewed emphasis is being put on feasibility analyses, systems analyses, and constructability reviews. We are busy pricing and repricing a variety of projects right now, and are seeing a mixture of both cost and schedule implications, depending on the jobs. We are focused on finding smart, strategic solutions to the challenges facing us.

The development world continues to see rent reduction requests, slower leasing activity, and a pause in new investment sales. New deals that were on the back burner are under discussion again. We expect that capital providers will re-focus on new investments once the flurry of activity surrounding the PPP loan program quiets down. We have spoken with groups who are developing post-COVID-19 investment strategies based on macro demographic shifts. Others are not planning to overhaul their approach in the wake of the crisis. On every new deal under consideration, the underwriting is being re-visited, with sensitivity analyses and downside scenarios taking a more central focus. Overall, planning for the future seems to be on the top of people’s minds, if not yet demonstrated by their activities.

COVID-19 and the Building Market – Vol. 4

This past week saw the construction industry continue to move forward in most markets, while maintaining intense focus on health and safety measures. Some officials are reporting increased public scrutiny of jobsite safety, as construction is a highly visible exclusion to the stay-at-home orders in place throughout the country. Thursday’s nationwide safety stand-down focused exclusively on precautions required in the current COVID-19 environment. You will see more masks and social distancing requirements strictly enforced in denser environments. According to reports, 90% of all Chicago area construction jobs are proceeding, and our business is seeing even higher numbers. As current projects continue to progress well, many in the industry are focused on the pace at which new business is being signed. It will come as little surprise that we are seeing a fair number of new deals postponed, although, as of yet, none of ours have been cancelled. One question that has recently been raised is whether construction costs will decrease as a result of a potentially diminished pipeline. Although it’s too early to make broad predictions, we have heard anecdotal evidence of some subcontractors aggressively pricing new work – presumably to shore up their backlog. We will see more clarity on that in the coming weeks.

As mentioned last week, development is facing a wide variety of challenges. Some public REITs have halted all new speculative development to focus on existing portfolios, and have redeployed “deal people” to asset management roles. We have witnessed some layoffs among private real estate companies, although it would be wrong to call it a pattern yet. Other players continue to push forward, seeing opportunity within the disruption. Many land buyers are taking this as a chance to renegotiate deals already under contract – requesting both extended DD periods and pricing reductions. Longer contract periods are more easily given, but, unsurprisingly, I have not heard of many price concessions yet. As both apartments and industrial are widely expected to survive the storm better than other product types, we see good reason to be optimistic in the medium term. Demographics, e-commerce adoption rates, and evolving supply chains will all sustain a decent level of demand for new product. The fundamentals going into the crisis were, on average, healthy. Many markets were supply-constrained, so the risk of an extended and catastrophic rise in vacancy rates seems unlikely. However, as is the case in many downturns, we are expecting a “flight to quality”— meaning robust leasing activity for the best locations and newer buildings will return first.