Retail Development

Reducing Construction Costs: What Does It Take?

Reducing Construction Costs: What Does It Take? 1440 428 ASG

In commercial retail construction, costs can quickly become a headache, posing challenges for businesses seeking to bring their visions to life. To navigate this challenging landscape, it’s critical to maintain a clear project scope, engage an experienced store planning and construction team, foster open communication, and stay well-informed about industry trends, economic shifts, and local regulations.

Rapid changes in store planning and construction over recent years have slowed projects down once they leave the design phase. We sat down with Elizabeth Seitz, Jenn Crawford, and Trevor Boyle from the ASG Store Planning and Construction team to explore how they prevent projects from hemorrhaging when confronted by rising construction costs, labor issues, and sourcing/logistics concerns.

“It’s gritty, it hurts, it bleeds. That’s our job: to figure out how to keep us from bleeding so much.”
– Trevor Boyle, ASG

What are the first things to do when trying to reduce construction costs?

Elizabeth: It’s all about planning. You want to be involved early in the process with the details of the deal. What are you building? Where are you building it? Are we shipping internationally, cross-country, or locally? Are we using trucks, ships, planes, or trains? Logistics in various countries and regions can drive up costs. We procure and plan early enough to know all those details so you can bring them to light with the client. Then, together, we set priorities for the rest of the project.

Jenn: I start looking at what we can reuse within the space. Can we reuse the bathroom or keep the electricity in the same spot? What can we reuse that will help us reduce work down the road? Some clients want you to reuse everything; some clients want the space updated to their vision.

Trevor: When it comes to building, you have three primary points: scope, schedule, and budget. You have three ways you can approach all three together or one at a time: good, fast, or cheap. You can choose two out of the three, and the other WILL affect your outcome. What is your priority? If you do something good and fast, it won’t be cheap—which in turn affects your budget, scope, then schedule. You must establish very early on the quality of standard expected by your client and go from there.

So how do you balance client expectations with reality? How can you educate, guide, and make their dreams a reality?

Trevor: It’s my job to guide them into their lane. And sometimes that means informing them that what they need is different than what they want—what’s necessity versus wish list.

Elizabeth: It’s all about communication. “I want X, but save me money,” is what we hear a lot. Every client has needs and wants, so you must dig down into the why.

Jenn: For example, do your bathrooms really need to be super fancy? Especially if they’re tucked away in the BOH?

Trevor: Besides the fact that you think it’d be nice, it sometimes doesn’t translate.

In what ways has sourcing evolved over the past few years? What do you look for now when sourcing? What are your priorities and how have they changed recently?

Elizabeth: Sourcing has become so much more important these days. These conversations need to happen VERY early. If you are trying to source something (especially custom), there is a minimum time to get through the process. You need to plan all that before documents go out so that GCs [General Contractors] can bid correctly and get subcontractors for the work. It all goes back to planning because the last thing you want to do is say you’re over budget on week two—by then it’s too late. You must plan upfront with multiple options for value engineering to avoid all of these roadblocks.

Trevor: People get stuck on the idea that they must use a specific material or item. You could give people two items that are two identical items, ask them to say which is worse, and every time they’ll pick a different one. We often deal with the illusion of quality and encourage our clients to consider a difference in materiality. If it’s a prominent feature, then yeah, sometimes it has to be THAT material.

Elizabeth: Luxury brands might prioritize the differences when substituting materials. To Trevor’s point, they get in their mind that they want Carrera marble, so our job is to find other cost-effective methods. To some, taste equals expense. The illusion of expense equating to quality, however, can be enough to make customers feel better about spending more at fancy store.

With there being shortages in skilled labor, are there often long lead times or delays with preferred GCs and how do you navigate them?

Trevor: The last thing you want to do is replace subcontractors on a project. If you do it, you can get backcharged by the secondary sub for the work that was already finished by the first. It’s hard to find people to help because they’re so busy.

We never plan supplementation. We qualify bids by looking at each one. What did they miss, what are they not including, are they trying to buy the job? Will they really perform? Their bids should cover all labor needed without the need for supplementation. Supplementation comes in during the process if they need help.

Elizabeth: The contractors have to understand what we’re asking them to build. Qualification of bids takes more upfront. If we have rollout programs, we start up front, looking at how we plan out the construction schedule so that we can keep GCs that understand the build, moving from project to project, and growing with the account over time. We are trying to build relationships with General Contractors for the long haul. There is a shortage of skilled labor right now, and if we can build those relationships an establish a good work flow, we can keep them busy. There is a lot of competition for the smaller labor force out there right now.

Emerging Market Trends in Retail

Emerging Market Trends in Retail 1440 428 ASG

“Location, location, location” may be a cliché, but “what is the ideal location for my brand?” is the burning question behind every retail strategy. The “right” location is not always where you think it is. Opening a retail location in the right spot can increase foot traffic, boost sales, and give the brand the exposure it needs. Conversely, a poor location can slow sales and even result in bankruptcy.

Where is retail happening right now and why? What markets are thriving? In this emerging market report, we’ll look at how some retailers are making a big splash outside the typical retail hot spots and why it might be beneficial to consider opening a retail location in these areas.

“Consumers want and crave variety, diversity, and choice. You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive,” says Carrie Barclay, president and CEO of ASG.

Data, Data, and More Data

Data analytics is crucial to understanding retail location strategy. The most critical factor in choosing a retail location is understanding your target consumer. Insight into consumer behavior is essential. And that’s the rub, because consumers have dramatically changed their behavior post-pandemic. Anything retailers knew about their shopper from before the pandemic no longer is relevant.

Finding the right location in this shifting landscape requires access and understanding, says Doug Tilson, head of tenant representation for ASG. “It’s critical to understand how markets develop and how they’re changing. That can only happen when you have access to up-to-date, comprehensive data,” he says. “Using accurate data to drive decision-making and working with a trusted tenant rep partner can help you determine what’s possible in a retail real estate landscape that is constantly evolving.”

The Big Location Shift

Consumers are shopping closer to home, and they are seeking unique and memorable experiences when shopping in person. These factors are shifting location strategies for retailers, leading to store openings outside of the typical launch areas.

“While virtual and digital experiences still matter, the in-store experience is returning to prominence, and 94% of retailers are focused on enhancing it for their business overall.”SquareUp

New location opportunities can lead to different format opportunities. Because consumers are sticking closer to home to shop, retailers—both big brands and a resurgence of mom-and-pop retailers—are opening smaller stores that allow them to fit more locations into neighborhoods and suburbs. Some retailers are even opening strategic locations on college campuses.

“Consumers want and crave variety, diversity, and choice. You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive,” says Carrie Barclay, president and CEO of ASG.

Meeting customers where they are and where they want to be is part of a smart retail strategy. And that means an opportunity for retailers—both big brands and mom-and-pop retailers—who can’t afford big-city lease prices and large-format shopping environments.

“Retailers can tailor these small-format stores to target a specific demographic, create a personalized shopping experience, or experiment with a new brand direction. Small-format stores can also serve as fulfillment centers for click-and-pay shopping and as a location for returns, all while fostering brand awareness and customer engagement. And thanks to their smaller size, these stores can help companies expand their reach in urban centers and other highly-priced real estate markets while lowering overhead costs.”

Using data to determine where and how retailers can best position themselves to attract consumers is essential to future success in today’s retail industry.

“Right-sizing helps in the long run: less labor, less inventory (“showroom” stores), less build-out costs, less energy spend, better online fulfillment and return options, as well as the big one since 2020—better accessibility.”RetailWire

“For the first time in a long time, retail growth is outside of the top 20 cities. You’re looking at tier two or tier three cities, which suggests that the redistribution post-Covid is shifting. We know that it will shift again as people move past the Covid experience.”

-Carrie Barclay, CEO ASG

Emerging Markets

According to PWC, almost all of this year’s survey of top-ranked real estate markets are in faster-growing southern and western regions and away from the coasts.

• Nashville was once again the top-rated metro area
• The Dallas/Fort Worth area jumped five spots from a year ago to become the number two-ranked market
• The Atlanta metro area scored higher in this year’s survey, jumping to the number three-ranked spot from number eight last year

In addition to Nashville, Dallas-Fort Worth, and Atlanta, ASG is seeing opportunity in Seattle,
Austin, Charlotte, and Louisville.

3 Reasons to Consider Retail Development in Nashville

1. Nashville has been focused on economic development coming out of the pandemic and offers a variety of opportunities in mixed-use spaces that are reasonably priced compared to larger cities.
2. Nashville is an international tourist destination, bringing in people from around the world every year.
3. The city is investing in infrastructure, including public transportation, to support the growth.

For more, see these seven reasons why retailers should consider Nashville.

Nashville shops offer something for everyone: records by local musicians, rare musical instruments, vintage items, artisanal sweets and drinks, and items crafted by local makers and fashion designers. Music City is home to several shopping districts including 12South, East Nashville, Hillsboro Village, Green Hills, and Downtown.

The Nashville region is defined by a diverse economy, a low cost of living and doing business, a creative culture, and a well-educated population. Nashville’s growth is spurring a wide variety of new businesses, making it attractive for retailers. Nashville is a strategic location for retailers, but as more brands discover the opportunity, prices will rise. Retailers whose consumers will respond to a Nashville location should be planning now.

3 Reasons to Consider Retail Development in Dallas-Fort Worth

1. Dallas/Fort Worth is experiencing significant population, attracting people to the area with promising job opportunities and affordable housing in comparison to other areas of the country.
2. DFW and Texas in general have business-friendly tax policies, including dedicated support for small business owners, incentives to locate or launch businesses in the area, and has a 0% local tax rate as well as low property tax rates.
3. The region has made substantial investments in infrastructure development, including transportation, commercial real estate, and retail spaces.

According to the Q1 2023 Dallas-Fort Worth Retail Report, the Dallas-Fort Worth retail market continues to exhibit robust growth “characterized by robust leasing activity, sustained tenant demand, and redevelopment initiatives.” These conditions make the DFW area favorable for retail growth. Areas to watch in Dallas-Fort Worth include Lakeside and development near the Deep Ellum Rail Station at Swiss Avenue and Good-Latimer Expressway.

3 Reasons to Consider Retail Development in Atlanta

1. Like DFW, Atlanta is experiencing a rapid population growth, offering retailers a large consumer base supported by a strong economy with multiple industries including finance, tech, and logistics.
2. Atlanta is the home base of several Fortune 500s and is also a cultural and entertainment hub, providing a rich and diverse local and visiting customer base for retailers to attract.
3. Atlanta has invested in significant real estate development, including the construction of new shopping centers, mixed-use developments, and revitalized neighborhoods, including Centennial Yards and Medley.

“With the growth of jobs in the city, Atlanta and its 21-county surrounding region has seen a population boom, with more growth on the way. As of April 2023, the surrounding metro has an estimated population of 6.1 million people, and the Atlanta Regional Commission expects this number to grow to 8.6 million by 2050. The current annual household income growth is also outpacing the U.S. average, as well. This extra income growth is to the benefit of retailers.”REBusiness Online

3 Reasons to Consider Retail Development in Seattle

1. Seattle is consistently rated among the top 10 cities to live in the United States. It boasts an above average median income for its residents with companies like, Boeing Commercial Airplanes, Microsoft Corporation, Starbucks Coffee Company, Costco, Weyerhaeuser, Nordstrom, REI, Alaska Airlines, and The Bill & Melinda Gates Foundation. In the 2022 America’s Best Cities report, Seattle ranked #12, and household income was found to be the sixth highest nationally.
2. Seattle’s transportation infrastructure is impressive. The city has two airports, bus, light rail, and ferries providing extensive public transportation offerings.
3. Seattle start-ups accumulated over $3.2 billion in venture capital in 2020 and have a roster of 25 start-up accelerators and incubators.

While Seattle has seen a slight downturn from the tech industry decline, the city still offers an enormous opportunity for retail, especially for retailers seeking to add small stores in some of the exceptional neighborhood’s Seattle features. In 2022, Nike opened an 8,800-square-foot space in Seattle’s eastside Bellevue neighborhood. Bloomingdale’s is making its entry into Seattle retail with their new small format stores in 2023.

3 Reasons to Consider Retail Development in Austin

1. Austin is one of the fastest-growing regions in the country, attracting high-end talent to the area that makes it ideal for growing retail brands.
2. The Opportunity Austin initiative has helped to create 637,400 jobs that contribute to a diverse economy where talent is abundant.
3. Austin was named the No. 2 best-performing city by the Milken Institute in economic growth and access to opportunities, crediting its strength to its high-tech sector driving rapid job and wage growth.

Retail opportunities abound in Austin. In 2023, the seven-building East Riverside Gateway complex mixed-use development was announced and will provide two million sf of office, retail, and residential space that will emphasize the pedestrian experience. The Domain complex, opened in 2023, includes 20 full-service and fast-casual dining options, 100+ retail stores and around 5,000 residential units in the area.

3 Reasons to Consider Retail Development in Charlotte

1. One of the biggest advantages for retailers in Charlotte is the low taxes. It was named a “Top 10 State for Best Business Tax Climate” by U.S. News and World Report in 2020.
2. Charlotte was named one of the best places to live in the U.S. in 2023-2024 by U.S News & World Report.
3. North Carolina is ranked No. 1 in America’s top states for business with the nation’s strongest economy.

Charlotte has many development and retail opportunities. In 2023, developers announced plans to turn the Mallard Pointe Shopping Center on North Tryon Street into a student gathering place with businesses tailored to the University of North Carolina Charlotte. Food and fitness retail are the fastest growth areas, and while vacancies are nearing record lows, new mixed-use development opportunities continue to evolve.

3 Reasons to Consider Retail Development in Louisville

1. Louisville has worked to increase infrastructure, including adding direct flights to LA and Boston as well as 35 other cities.
2. Louisville attracts talent in a variety of industries, including healthcare, high-tech, and manufacturing, building a population of higher-than-average income workers who are ready to shop.
3. Louisville was named a Top 5 U.S. Metro for economic development by Site Selection Magazine.

The opportunities in Louisville are limitless, with both downtown and the suburbs seeing a huge spurt of new development. Oxmoor Center has become a tourist attraction with retailers vying for the location. Nike recently opened a store there. Shelby Park is also seeing a rise in development, and Wawa recently announced plans to open in the east end.

Location as Retail Strategy

Meeting customers where they are and where they want to be is smart retail strategy. And that means opportunity for retailers—both big brands and mom and pop retailers—who can’t afford big-city lease prices and large-format shopping environments. These emerging markets represent some of the hottest areas in the country for retailers, whether a brand is launching a flagship store or wants to engage customers close to home with a small footprint neighborhood shop.

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