Renovation business framing a doorway to recovery

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Ashley Fritz, project engineer for G.E. Johnson Construction, works with general foreman Brad Williams on the remodeling of 1460 Garden of the Gods Road, which is the future home of Goodwill Industries. Local contractors are depending on remodeling jobs to pull them out of hard times.

The local commercial construction market is emerging from dark days, thanks in large part to remodeling and renovation projects.

While projects are nowhere near the volume they were in 2007 and 2008, commercial contractors are breathing deep sighs of relief because their phones are ringing again.

“We’re probably a $400-million-a-year-company,” said G.E. Johnson CEO Jim Johnson. “I think we bottomed out last year around $240 million and this year we’ve come back up to about $300 million.”

That agrees with what most area contractors have said about the states of their businesses — it’s not good, but it does seem to be improving.

While building permits for new commercial construction projects are down almost 80 percent from what they were year-to-date during their peak in 2007, there are more permits for commercial alteration projects than there were in 2007, according to data from the Pikes Peak Regional Building Authority.

“Locally, most of the work we’re doing is tenant finish,” said David Brinker, president of Peak Professional Contractors.

Peak Professional is doing most of the work at University Village, which is helping the contractor to stay busy, Brinker said.

The company is finishing up the new Johannes Hunter location and recently completed expansion construction on the Veda Salon and Panera Bread Company locations at University Village. It will start construction on a new Petco in the center and is building a new HuHot Mongolian Grill near Powers and Constitution, Brinker said.

“We had a really slow beginning of the year,” he said. “Last year was pretty much the worst we’ve ever had, but now we’re pretty much at capacity, doing as much as we usually do.”

The biggest difference is in the type of projects the company is completing, Brinker said.

Most of the work includes renovations and remodels with very little ground-up work, which is the better-paying and longer-lasting work.

Jim Pagano, director of business development for Nunn Construction, said he’s experiencing the same thing. Most of the contractor’s current work includes remodel and renovation work.

“It’s absolutely slower than it was before the economy,” Pagano said. “It would be a great quantity if each one of those $2 million or $3 million jobs was $20 million to $30 million. We’re just missing a zero.”

He said he’s found that the price he can command for work is lower today than it was when business was booming and the sizes of the projects are much smaller now than they were in 2006, 2007 and 2008.

“The renovation portion of our business is probably the hottest,” he said. “Though, I hate to say ‘hot’ because it’s still not good.”

He said most of the demand for renovation projects is coming from the public sector. Nunn is working on the Lake George Charter School, a renovation of an old house on the University of Colorado at Colorado Springs campus and the El Paso County Sheriff’s Office expansion into the former county administration offices at Vermijo Avenue and Tejon Street downtown.

“It’s just not big work either,” Pagano said. “Most of what we’re doing is probably in the $1 million range, which is more geared to smaller contractors.”

Wayne DeCosta, CEO of Great West Construction, is pretty happy with some of those smaller jobs. He just opened his company in 2004 and is preparing to have a record year this year.

“It helps that we started small,” DeCosta said.

Like the other contractors, he’s finding that there is not a lot of ground-up construction work available.

“Probably 99 percent of what we’re doing is remodels and additions,” DeCosta said.

The company is working on a church remodel and completed the tenant finish work for Bird Dog BBQ in the Shops at Briargate and Fountain. It’s also developing a reputation for completing remodel work while the tenant stays put and continues to operate a business out of the space.

Great West has also done some remodeling work at City Hall and in the mayor’s office, DeCosta said.

What has really helped Great West to grow, however, is a willingness to travel for the job. The company is licensed in Colorado, New Mexico and Arizona and has been traveling out of state regularly.

“We’ve kind of been going where the work is,” DeCosta said.

Great West is not the only company reaching out of the immediate area for more and bigger projects.

Eric Swanson, director of operations for Elder Construction, said his company expanded into the Denver market and opened an office in Loveland last year, the company’s worst year.

But the move is proving to be a good one.

“Last year, pretty much as expected, we lost money,” Swanson said. “This year, we’ve added three people up there and we’ll be breaking a profit.”

GE Johnson also works outside of the Colorado Springs area. The company has offices in Denver and Jackson Hole, Wyo. And works all over the country.

Nunn has been doing some work in Texas and Peak Professional has worked in Kansas during the last year.

“2011 has definitely been better than 2010,” Swanson said. “There’s no question.”

But it’s still a recovery year. There’s enough work to stay busy, but it’s not as if Elder will tell clients they have to wait or that there is a backlog.

The work is fast and it’s a great environment for cash investors, Swanson said. And that’s who is starting to come back into the market.

“Cash money is coming in and I think that’s the smart money,” he said. “I think the people out there making decisions know we’ve hit the bottom and we’re coming back up now.”

Commercial construction permits
Year New construction Commercial alterations
2011 388 4,876
2010 414 4,426
2009 677 4,025
2008 1,434 4,972
2007 1,690 4,519
2006 1,638 3,931
Source: Pikes Peak Regional Building Authority