Renovating Your Business's Location
Editor's note: This article was excerpted from The Great Big Book on Real Estate Investing. You can learn more about the book in our bookstore.
For people who don't work with buildings for a living, the physical interrelationships among the components of a building can be somewhat mysterious. But whether you're leasing or purchasing a location for your business, it's a good idea to understand these components. Once you have been through the nuts and bolts, then we'll discuss the people who can help you with demolishing, rearranging, and/or rebuilding these components.
Putting the Pieces Together
In general, I like to take people through the component parts of a building in the order in which it would be constructed so that it makes sense logically. When creating a building, the architect/designer has to go through the same steps, in the same order, to "build" it on paper. The only difference between doing it on paper and doing it on the ground is that the architect first designs it from an exterior perspective and a floor plan so that he or she knows how to construct it on paper, starting with the structural design and foundations, while the contractor starts with site preparation, utilities and then foundations.
- Information gathering. Before starting on any building, a designer needs information about the ground on which the building is to be built. This is gathered through a survey, a topographic map and a soil test. The survey contains data showing the size and shape of the land parcel, the utilities that are available to the site, and their location. The topographic map shows the contours of the land. In addition, a soils engineer has tested the ground and designed the soil compaction requirements for the foundations. From that starting point, the project can be designed and built.
- Site preparation and utilities. The site for any building must be prepared for it. This means grading and compacting the ground to receive it and bringing the necessary utilities to the building pad, or the area prepared and ready to build on. This process is known as rough grading. Once the building is completed, the site will be fine graded prior to receiving curbs, gutters, landscaping and paving.
- Foundations. Foundations are composed of compacted soil, footings, and foundation walls. This is a rather simplistic explanation, as footings and foundations come in a variety of shapes and configurations, depending on the soil bearing capacity and the requirements of the building. It is enough that you know the basics, as the experts will determine what you need to hold the building up.
Another component of the foundation is the on-grade slab. "On-grade" means that the slab is resting on prepared ground rather than suspended over a basement. The slab serves two purposes: it pulls the footings and structural components together and it serves as the underlying floor for the ground floor of the building.
Attached to the footings and other foundation elements is the building's structure. A structure can be of many different types. In housing, there are two basic types of structure: perimeter load-bearing walls and post and beam. Commercial structures, due to their size, are generally a combination of the two or, in the case of mid- and high-rise structures, a steel skeleton on which the rest of the building is hung.
- Post and beam. Post-and-beam construction is a system that uses walls and columns tied together to form the structure of a building. The side-to-side bracing that protects a building from wind or seismic events is provided by the material that connects the structural components. This element provides the shear component of the structure. In post-and-beam structures, you need to consult the architect or engineer before removing any walls.
- Load-bearing outer walls. Perimeter load-bearing walls are used to provide the ultimate flexibility for the building's interior. With this structural system, you can demolish all the interior walls with impunity, as they do not contribute to the structural integrity of the building. Most new buildings today are constructed with load-bearing outer walls. In commercial buildings designed to accommodate a changing mix of tenants, this is also a popular approach. They are said to be "clear span" buildings. The roof and any upper floors are held up by prefabricated trusses that span from one load-bearing wall to another.
Roof Design and Construction
Roofs may take many shapes, from flat to peaked and everything in between. They can be angular, rounded or almost any shape imaginable. The support component is generally trusses, but may be as exotic as cables. It all depends on the designer and the shape. The roof is composed of the underlying structure of trusses and wood or steel panels to support the roofing material. The roof itself is then constructed of traditional shingles or built-up roofing, composed of felts, tar and a wearing surface. Modern flat roofs are now also offered in sprayed-on foam with a watertight membrane over the foam. Shingles vary from the traditional asphalt to wood, concrete, clay and slate. Another alternate for peaked roofs is a metal roof, as simple as the old corrugated roofing to prefinished standing-seam metal roofs, constructed of interlocking panels that run vertically from the ridge to the eave, with the seam where two panels interlock raised to channel water away without seeping between panels.
Interiors are generally divided by non-load-bearing walls. In post-and-beam structures, some of the walls are permanent and load bearing and the rest can be moved around. There are different types of walls in commercial structures, serving different purposes, such as tenant separation and interior design. All walls are constructed from two components: studs (uprights, either wood or steel) and sheetrock or other wallboards. Insulation within the wall is optional. The finish is then applied to the surface of the wallboard.
- Demising walls. Demising walls are so-called because they separate the demised (transferred temporarily, leased) premises of adjacent tenants. These walls usually go from the floor to the underside of the roof or the floor above. This serves three purposes: security, HVAC (heating, ventilation and air-conditioning) separation, and acoustical separation. There are several different designs for demising walls, but the staggered stud seems to be the most popular; when insulated, it provides good acoustical separation.
- Acoustic walls. In areas within a tenant's premises, there is sometimes a need for acoustical privacy. The wall that is generally used, other than a demising wall, is one that penetrates the ceiling. Most simple interior walls stop at the ceiling. In fact, the ceiling grid is customarily installed prior to installing these simple partition walls. The acoustical wall extends above the ceiling, is fully insulated, and has a sound blanket draped over the top of the wall, extending at least four feet on either side of the wall. The resulting sound dampening is not as good as that obtained by a demising wall, but it is generally enough for the tenant's uses.
- Room-dividing walls. These walls are merely partitions that divide up the workspace. They can be moved around at will.
A building's services are provided by its mechanical systems, composed of electricity, water, sewer, gas, telephone, cable TV, data distribution and HVAC. These systems are installed in a building before the walls are finished, so that these systems are concealed. In renovation projects, you will need to demolish the wall surface to modify or remove any of them.
- Electricity. Electricity is distributed throughout a building by a system that consists of a main power distribution panel, perhaps some subpanels, and then individual circuits designed to handle the anticipated loads take the electricity wherever it is needed. Before attempting an extensive add-on project in a building, check with your electrical contractor or electrical engineer to determine whether the existing electrical service can accommodate the additional circuits needed for the addition. Commercial buildings generally have a large main panel and subpanels for each tenant. Most new buildings provide for individual metering of power for each tenant to control the operating costs of the building.
- Plumbing. The plumbing is very straightforward: water in and sewer out. Modern structures are using new materials for the waste lines, but most incoming water lines are still built with copper pipe. In older buildings, hot water was provided by a central boiler or water heater, but now builders can choose point-of-use water heaters, greatly simplifying the water distribution process. The utility distribution within a building is installed before the walls are finished so that these mechanical services are concealed from sight. In renovation projects, you will need to demolish the wall surface to move any of these service lines.
- HVAC. Modern commercial structures are climate-controlled. The building codes establish criteria for this, defined in number of air changes per hour to ranges of acceptable temperature differential between the inside and the outside of the structure. These mechanical systems can be separated, so that one heats and another cools, and some systems combine both. They all use electricity and gas. heating oil or a combination of all three. In some climates, primarily those with winter weather, boilers are still in use, but in parts of the country where the temperatures are more moderate, a combination unit known as a heat exchanger or heat pump is used. The air is heated and/or cooled in an air-handling unit and distributed throughout the building by ducts within the walls, floors and ceilings.
- Windows, doors, hardware, and finishes. Once the interior and exterior walls are completed and the utilities are covered up, windows and doors are installed. There is an infinite variety of choices for these units, limited only by your imagination and budget. The last touch is provided by applying the finishes, paint, wallpaper, etc., inside and outside the structure. Then, the building is complete.
- Landscaping and site work. The finishing touch to any building is the site landscaping. There are many elements to the site, such as driveways, parking, walks and vegetation. These can be done by you or your landscaper or designed and executed by a landscape architect. Essentially, you must think of landscaping as dressing up the building. Obviously, high-rise buildings are only peripherally impacted by landscaping, once you rise above the street level, but a combination of softscape, like living plants and hardscape, such as wood, concrete, brick and stone, can sell any building.
Consultants and Contractors
It takes many people to put it all together, starting with the consultants who collect information and design and ending with the tradespeople who do the physical work. Each specialized professional has a specific function in any project. You will get to know them if you are going to remodel your building.
The consultants who gather information and design the buildings are engineers, architects, planners and designers.
- Engineers. The engineering professionals are broken down into the following categories: civil, structural, mechanical and electrical.
- Civil engineers. Civil engineers are concerned with land development and utilities. Part of that function involves gathering information; that specialty is surveying. This profession has become very sophisticated since the advent of the Global Positioning System (GPS), which allows more accuracy and speed in producing surveys and topographic maps (topos). Another specialty of civil and structural engineering is soil analysis and compaction design. A soils engineer tests the ground and makes recommendations for soil compaction and engineering for the structural engineer. Once the data is gathered, the civil engineer prepares a grading plan, a parking plan, a soil preparation plan, and a utility plan based on the desired location and proposed elevation of the new building. This plan is then forwarded to the structural engineer.
- Structural engineers. The structural engineer takes from the architect/designer the building's floor plan, size, shape and location and combines it with the civil engineer's grading plan and soils report and produces the foundation plan and the structural design.
- Architects and designers. Buildings are designed by architects and engineers. The architect prepares the detailed building plans and sends them to the mechanical engineers to add the required utilities.
- Planners. A cross between the architect and the civil engineer called a land planner has evolved into a specialty for large projects. Rather than taking the strictly numerical approach of the civil engineer, the land planner strives to design the site so that it maximizes not only the building but also the aesthetics and sales appeal. Personally, I like to start with a land planner and then move on to the architect and engineer; I find that I get better projects by doing it this way.
- Mechanical engineers. These engineers handle water plumbing, waste lines, elevators and people movers, and HVAC design. They take the architectural drawings and the civil drawings and distribute the required services throughout the project. Often, they advise the architect and the structural and civil engineers of special requirements, such as floor loads and stress counteraction requirements necessary for these building components. It is common that, in home design, the licensed subcontractors get involved in this process, as their day-to-day familiarity with the installation and operation of these components make them a logical choice for a design-build option.
- Electrical engineers. The electrical engineer ensures the supply and distribution of electricity to all other building systems as well as the tenants. He or she must gather all the requirements of the other professionals to make sure that the power supply is both adequate and efficient.
Contractors and Builders
Within each category, there are two types of contractors-general contractors and subcontractors. In general, commercial contractors are union. Whether residential or commercial, union or non-union, all contractors are required to be licensed.
- General contractors. The general contractor is licensed to oversee the construction of the projects. He or she may or may not provide labor for one or more of the subtrades. Typically, the general contractor provides a construction superintendent or foreman and hires specialty subcontractors to do the specific work. The licensing procedure is the same for union and non-union companies. Each company must have a qualifying party to have a license for the company's use. That party must take a test and meet the practical experience requirements to become licensed.
- Subcontractors. These companies represent many specialties, such as earth moving, underground, gas, steam fitting, plumbing, electrical, drywall, structural steel, framing, roofers, glazers, and equipment operators. All companies must have a qualifying party in order to be licensed.
Licensed vs. unlicensed, laws and liens.
The licensed contractor must post a bond to be placed into a recovery fund for the customers so that shoddy work or substandard materials can be replaced. There is a limit to what the recovery fund can pay on a single claim, so it is vital that you choose contractors, general and subcontractors alike, who are financially solvent, experienced and clearly qualified to do the work.
A licensed contractor with a signed contract can enforce payment for completed work through the lien process. If the contractor has not been paid in a timely fashion, he or she is allowed to record a mechanic's and materialman's lien on the property. This class of lien provides for people working on the property or supplying materials to the project. To perfect a lien, several things must happen.
First, the contractor must have a contract directly with the owner of the project or the contractor or supplier must send a pre-lien notice to the owner prior to starting the work stating that he or she is providing labor or materials to the project under a subcontract with the general contractor. Then, if the contractor or supplier is not paid on time, he or she may file the lien and, with the two notices, the lien is deemed "perfected." Just because the lien has been filed and perfected does not mean that payment is automatically owed or will be paid. The owner may dispute the lien in court and, if successful, the lien may be voided. This lien must be paid before the property can be sold with a clean title.
As you can see, the building and remodeling of a commercial location can be a complex venture. But with the right know-how and resources, you can make your business location exactly what you need it to be.
Stuart Leland Rider is a commercial real estate developer, commercial general contractor, lecturer and author. Over the past 30 years, he has successfully developed 785,000 square feet of commercial office space and 625,000 square feet of retail shopping center space, and currently has active projects totaling 350,000 square feet of retail space. He's the author of From Dirt to Dollars, an Entrepreneur's Guide to Commercial Real Estate Development, currently in use as a textbook for seminars in real estate development; The Complete Idiot's Guide to Investing in Real Estate; and The Complete Idiot's Guide to Investing in Fixer Uppers.