Construction Firms Rely on Grocery Chains

FORT LAUDERDALE, FL-As commercial real estate contruction jobs have dwindled over the last couple of years, firms like Deerfield Beach-based SIKON Construction Co. are doing more grocery store construction, as a proportion of their work than in the past, says Dale E. Scott, senior executive vice president at the company. At the same time, SIKON is trying to diversify, seeking out work related to senior housing, student housing and medical office buildings.

Scott says that as his customers try to diversify, SIKON is also trying to broaden its horizons. “If you were a real estate developer doing mostly retail, you are doing other types of product today,” he says. Still, Scott acknowledges, it is hard to get around the fact that construction opportunites have dramatically diminished.

“What we’ve seen in the last year or 18 months,” says Karen M. Scott, a Stuart-based retail consultant, no relation to Dale Scott, is lots of renovation of existing grocery properties. “It is a prime time to renovate stores because labor costs are down and grocery stores, who usually depend on landlords to develop new shopping centers, put their own money into renovations,” she says. If they are going to do that, it is less costly to do that now than in the past, says Scott.

But there is some new construction going on. Competition is heating up among grocery chains in South Florida and elsewhere in the state, says Dale Scott. Fresh Market and Whole Foods are expanding and Publix is building replacement stores on the same sites as existing ones, he says. The company has found that replacing a store is not any more expensive than remodeling one, says Scott.

Recently, SIKON announced that it had started work on a $5 million 30,907 square-foot Publix, a freestanding, 1,300-square-foot Starbuck’s and other retail at the Galleria Mall in Ft. Lauderdale. The Publix will replace an existing Publix at the site.

As for completely new stores, SIKON is working on a $7 million, 84,000-square foot Fresh Market store and parking garage in South Beach in Miami Beach, which is scheduled for completion in November, 2010.

SIKON is also remodeling eight South Florida Target stores, converting them to Target’s P-Fresh concept stores, which will offer many of the products available in Super Target stores. Because Target doesn’t have the financing to build new stores, it is redefining its existing stores to compete with grocery chains, says Dale Scott. Target, like a lot of retail chains, has put its new store program on hold, but is using internal funds to upgrade existing stores, he says.

Meanwhile, SIKON is pursuing alternatives to grocery-store construction. “Currently, we are in pre-construction services as part of the development team for student housing and senior housing,” he says. “We do a lot of work on budgeting, planning and design.” Some of these projects will be done with the help of government funding, which takes a long time, says Dale Scott. But the good news is that government funding is available today, and, at “good terms,” unlike in the private sector.