Light Commercial Offers Challenges, Opportunities
Adding light commercial construction to a home builder’s portfolio can expand the builder’s client base and provide additional income after the project is built.
To introduce home builders to light commercial construction, NAHB’s National Commercial Builders Council (NCBC) is offering networking and education sessions at the 2008 Builders’ Show in Orlando next month.
“This is a great time to tap into the commercial market,” said Ed Feiler, of Metro Developers, Inc., a commercial builder from Savannah, Ga.
One reason light commercial construction can be a logical choice for home builders is that once a residential neighborhood is built, commercial developments need to follow for that community to thrive.
Defining Light Commercial Construction
According to NCBC, light commercial construction projects range in size from less than 7,500 square feet to 100,000 square feet and include banks, community centers, schools, houses of worship, restaurants, movie theaters, office buildings, mini-storage facilities and shopping centers.
Feiler began building homes in the late-1950s, but in 2000, his company focuses exclusively on commercial construction.
“Being involved or familiar with local politics can be a big help,” Feiler said. “This can convince planning commissions or city councils that what you are doing is going to add to the community or help you get your bank or lender to extend their terms. One of the biggest keys is to identify unused property that can be developed into retail.”
According to “Light Commercial Construction for Home Builders: A How-To Manual for Diversifying Your Business,” available from NCBC, novice commercial builders typically start with self-storage facilities as a personal investment because the buildings are easy-to-build, self-contained and primarily made of wood, though many are often sided with steel or masonry.
Strip shopping centers are also a good entry in to light commercial construction because they are generally one-story structures, relatively easy to build and typically use structural steel and other materials.
As builders gain confidence building small shopping centers, they can expand their portfolio to take on more complicated projects, such as multi-story office buildings, according to the manual.
Retail Development Requires A Long-Term Commitment
Building strip shopping centers, however, may require a long-term commitment.
“Retail development is a business based upon relationships and repeat business,” Feiler said. “The period from when you send a letter of intent through the actual build-out can take more time and money than you expect.”
Feiler also said those entering into light construction should first determine whether they are going to own the property, hire someone to manage it and determine who will lease it.
Between working with retail clients and determining what to eventually do with the property, Feiler said novices entering into light commercial construction should “plan to develop long-term commitments.”
A Different Language
Feiler also said home builders will have to learn the language of light commercial construction, which differs from residential construction, if they are to succeed in the business.
“There are special terms for the various stages of retail development that home builders may not be aware of,” Feiler said. “It can be tricky, but partnering with the right people can be a way to overcome that.”
Feiler developed a checklist that he uses when beginning a new project. The checklist, he said, can be very useful to novices getting into light construction.
- Select land.
- Make strategic choices.
- Sell or hold ― Will you own the project once it’s complete or sell it to another party?
- Retail or mixed-use ― Will you build offices or condos on top of ground-floor retail?
- Build a professional team ― This includes lenders, other investors and potentially other builders with whom to collaborate.
- Develop a network of mentors ― Rely on builders with experience that you can trust to show you the ropes.
- Leverage your resources ― Before finding new land, consider land you already have for commercial development.
- Start small ― Phase the development so you don’t become overwhelmed by the size.
NCBC 'Meet the Experts' Luncheon at IBS
NCBC will host a “Meet the Experts” luncheon from 11:30 a.m.-1:00 p.m. Thursday, Feb. 14 in the NCBC headquarters room, West 104 A, in the Orange County Convention Center.
Experts will discuss topics including getting started, shopping centers, mini-storage and other facets of light commercial construction. The luncheon is free.
Feiler said NCBC been vital to his success because, “it’s been invaluable for me to meet other commercial builders and share information and experience.”
NCBC Education at IBS
NCBC also is hosting four educational programs designed to introduce home builders to light commercial construction:
Wednesday, Feb. 13
- “Alternate Business Income for Builders”
Orange County Convention Center, South 320 E-H
The session explores build-to-own commercial opportunities such as mini-storage, strip malls and small office buildings that can provide a steady income stream into the retirement years as well as boost the bottom line.
- “Light Commercial Construction for Home Builders”
Orange County Convention Center, South 320 E-H
This program gives home builders an introduction to the many opportunities that exist in light commercial construction. Learn what it takes to build retail, mini-storage, small offices and schools.
- “Don't Give Up, Diversify…Financing Commercial Projects”
Orange County Convention Center, West 300
In the current residential building climate, light commercial construction may be the key to business survival. Learn how to obtain funding and take the fear factor out of the process from bankers and light commercial builders who will share their knowledge.
Friday, Feb. 15
- “Green Building for Light Commercial: Stay Ahead of the Curve”
Orange County Convention Center, West 314
Building green is one of the hottest topics in the construction industry. Learn how to incorporate green building into commercial projects and how the light commercial industry can light the path for all builders to build green.
NCBC’s “Light Commercial Construction for Home Builders: A How-To Manual for Diversifying Your Business” can be purchased at the Builder’s Show, or by calling Nick Lashinsky at NAHB at 800-368-5242 8455.