Two sides of Capital Improvement


HOUSTON (July 11, 2016) — With 10-year interest rates hitting a record low and an abundance of empty office space, building owners have the opportunity to improve their assets and building tenants are asking, “Should I stay or should I go?” Enter the increasing demand for improving capital assests.

Arch-Con Construction’s new Vice President Scott Crain understands this unique demand. Crain spent 15 years on the owner-side of commercial real estate managing the Houston assets for Solvay, a global chemical company. Crain now leads capital improvement projects for Arch-Con, building on the success of projects such as renovating and upgrading the iconic One Riverway lobby and atruim.

“As building owners are budgeting for 2017 and beyond, the million dollar question is are they going to update their assets and, if so, how?” Crain said. “With overall prices trending down, now is the time but it is always a balance. Do you improve your property for the property’s sake or for retaining existing and attracting new tenants?”

Capital Improvements to Maintain Assets
As buildings age, new roofs, sealants and HVAC systems are in need of an update. Crain says he often sees owners not getting around to upgrading their HVAC systems to make them more energy efficient, which could be a huge cost savings with respect to operating expenses.

“Pursuing an Energy Star certification is one sensible way to improve an existing asset as the cost is in the labor and materials, not in the certification itself,” Crain said.

Capital Improvements for Tenant Retention
With an already soft Houston office market and nearly 10 million square feet of sublease space flooding the Houston inventory, building owners want to keep their current tenants happy and renew their leases. A simple refresh of new carpet, wall finishes and paint can be sufficient. However, many properties need total lobby renovations, public corridor upgrades and restrooms brought to ADA standards, Crain said.

Trends to maintain clients include new fitness centers in all classes of buildings, updating lobbies and new shared conference space for multi-tenant users. “Tenants do not want to pay for conference space that is not used on a regular basis,” Crain said.