Building Nevada - April 2004

Tenant Improvements Look to Future

High-Tech, Open Spaces Popular Trends

by Allen Grant

From new fiber-optic ready and open-space configurations in office plans to specially designed layouts for medical facilities, tenant improvements race into the future as construction and interior design companies try to meet client requests.

"Companies are still concentrating on economics," said Sheila Merrill, CPE, group manager at Roel Construction in Las Vegas. "They’re spending more wisely on tenant improvements, focusing on areas that are going to give them the best return on investment."

Norm Dianda, president and owner of Sparks-based Q&D Construction, said he believes the economy is helping spur construction efforts. "Right now, the economy is picking up, so clients are upgrading their facilities," he said. "And we’re seeing lots of tenant-improvement activity. They are not getting overly extravagant, but not everyone wants a plain vanilla box. Some want it with sprinkles, and some want it with sprinkles and hot fudge."

According to Rob Smith, project manager for Reno general contractor Pinecrest Construction, open-space office designs offer companies more decorating options. Companies are putting an emphasis on more open designs, according to Smith, and utilizing additional help from interior designers and space planners. "More flexibility with furniture options and open-space designs is becoming increasingly popular," he stated.

Northern Nevada companies typically allot between $25 and $30 per square foot for tenant improvements, according to Smith. But, he reports seeing companies spend up to $45 per square foot lately. "(Companies) are starting to spend more on tenant improvements," he said.

A Trend Toward High-Tech

Several Nevada industry experts said they are handling many technology-based tenant improvement projects in both medical and office settings. "We’re seeing a rise in voice data demands, computer sites and even special security features," said Jeff Manning, business development manager at PENTA Building Group in Las Vegas. "From improved security features to fiber optic lighting in the walls, tenant improvements are really going high-tech, with interactive facilities being built." PENTA recently completed a tenant improvement project at Margaritaville, a 27,000-square-foot restaurant/bar at The Flamingo Casino Hotel on Las Vegas Boulevard, as well as a retail project inside The Fashion Show Mall.

"We handle quite a few tenant-improvement projects involving retail, restaurants, nightclubs and projects inside gaming facilities," said Manning. "The key is specializing in disrupting their operations as little as possible. By pre-planning with clients, we can usually keep them open (during our construction)."

Q&D’s Dianda said his company is also seeing technology-related tenant improvement requests. "We’re seeing lots of smart systems in recent projects with lots of technological upgrades, especially in wireless computer links," he said. "Everyone wants the latest features."

Las Vegas-based Parker Scaggiari Interior Design (PSID) handles full-service interior design planning and specializes in commercial interiors, programming and space planning for interior design space. According to owner Derrell Parker, technology is a hot area in the tenant-improvement market. "Changes in automation and computers in the workplace are impacting tenant improvements," said Parker. "And those technological changes impact the design and confirmation of office space."

PSID has been designing commercial and office buildings for nearly five years in the Las Vegas Valley and is currently working on the Southern Hills Medical Center off Interstate 215 in southwest Las Vegas. "Tenant improvements are evolving as technology and Las Vegas evolve," Parker said. "We’re seeing a tremendous amount of tenant-improvement projects involving medical offices. It’s the evolution of the market. As more and more technology and medical facilities build here, they’re going to need specific high-tech tenant improvements."

Merrill of Roel Construction agrees. "We’re seeing more high-tech improvements because of the type of companies coming here to the Las Vegas area," she said. "There are more high-tech features now like fiber-optic options and wireless stations and security options. As the economy picks up, there’s more entrepreneurial spirit, bringing different types of businesses like life-sciences companies here. They’re looking for high-tech and medically-related tenant improvements to eliminate the possibility of any equipment down time," said Merrill.

Serving the Reno area since 1991, Pinecrest Construction recently completed a 32,000-square-foot project for the law offices of Hale Lane and a 40,000-square-foot remodel for Covance, Inc., a biopharmaceutical development services company. Smith said both projects demanded high-tech features. Many companies also opt for computer rooms with fire-protection technology. "We’re seeing lots of demands for CAT5 and CAT6 data communication lines and high-tech phone systems," he said. "Fiber-optic technology is becoming a necessity in many Class A projects."

Improved Public Area Design, Image and Lighting

Industry experts said a trend toward improved public areas, better imaging and improved lighting are all popular tenant improvements. "Better lighting and ceiling fixtures really add to the design of the room," said Q&D’s Dianda. "Several clients are moving in that direction."

Founded in 1964, Q&D’s recent tenant-improvement responsibilities include a remodeling project at the law firm of MacDonald, Carano, Wilson, LLP in downtown Reno, as well as projects for clients at auto dealerships, body shops and insurance offices. According to Dianda, tenant improvements will account for nearly 15 percent of his business this year, up a few points from 2003.

He said Q&D has also had several clients request "higher-end finishes on walls and flooring, upgraded doors and fancier tile and ceiling fixtures" to improve their corporate public image by sprucing up the spaces most visible to visitors and clients.

According to industry experts, indirect lighting is a popular tenant improvement in Nevada. Designed to reflect light both up and down, indirect-lighting features distribute and reflect light, making it easier on the eyes.

"Clients are continuing to upgrade new and existing tenant improvements," Pinecrest’s Smith said. "We’re also seeing a few raised-floor computer rooms to provide a more upscale look. Everyone is creating themes and using lots of colors and indirect lighting."

Roel’s Merrill said clients are requesting improved lighting and similar trends in public areas. "We’re also seeing improved lighting features," she said. "Once established, companies are interested in tenant improvements in public areas to promote an upscale appearance to clients or potential investors, with improved wall coverings, flooring improvements and finishes."

With upcoming projects including CENTRA Property’s CENTRA Point complex in southwest Las Vegas and The Shops at Green Valley Ranch, PSID’s Parker said he’s also seeing a move toward contemporary designs with more effective use of public space. "Design work in commercial and public areas is changing," he said. "We’re seeing less (permanent) walls and more portable walls, as companies ask for furniture that’s more interchangeable and user-friendly."

Smith said Reno-area clients are even looking for more stone fixtures. "Even in public areas, we’re seeing more natural stone like granite and marble, and wall coverings are becoming more and more popular," he said.

A High-Tech Future?

Several industry experts predict high-tech tenant improvements to be the wave of the near future, including more fiber-optic and wireless features. PENTA’s Manning said he believes the construction trend is toward landlords and tenants both wanting to create a "Vegas-type experience" utilizing more technologically-advanced, engineered tenant-improvement features.

"With more fiber-optic technology and wireless data communication systems, the options keep getting more and more advanced," he said. "Tenant improvements are moving towards a more ‘experience-based’ product, whether it’s a restaurant showcasing a new feature or high-tech conformations in a medical office."

Parker of PSID agrees. "As technology changes, those types of tenant improvements will continue to grow," he said. "Right now, it’s in the early stages, as owners are a little hesitant to added expensive improvements, but we expect to continue seeing clients ask for fiber optics and wireless offices."