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Swinerton Building Onto Century-Old Legacy

BY LAUREN RAE BRIMMER

Not many companies in California can claim the distinction of a century-old reputation, but Swinerton Inc. can.

Founded in 1888 and holding California contractor license No. 92, the company became established as a major builder in the San Francisco Bay Area by helping to rebuild the region after the 1906 earthquake.

Swinerton has construction offices throughout the West as well as a national presence in construction services such as pre-build consulting.

“Eighty-five percent of our work is done in the private sector,” said Don Adair, the vice president and division manager of the San Diego office, which opened in 1993.

Swinerton’s local division has earned a solid reputation in the construction industry.

“They are a very capable company,” said Smith Consulting Architects’ Jon Ohlson, the lead architect on a project that his San Diego-based firm worked on with Swinerton.

While offices in San Francisco and Los Angeles are larger, Swinerton’s San Diego operation contributed $155 million of the firm’s $1.8 billion in 2005 project revenue. Local revenue is expected to grow to $185 million in 2006.

Work on the $120 million Omni San Diego Hotel, which opened in 2004, is the local office’s largest project to date.

Beginning primarily as an office builder, the San Diego division has expanded into the markets of tenant improvement and renovations with projects such as the Hotel del Coronado’s three-year capital plan, as well as interior build-outs for small and large offices.


Green Building

In San Diego, Adair leads 93 full-time employees in their mission to be “the premier builder in the West.”

“The biggest obstacle we’ve had lately is restricting our growth,” Adair said. “We’ve had to be disciplined about not outgrowing our capabilities.”

Swinerton’s capabilities include project planning and management that takes a total cost view of the client’s project, including integration of green building techniques that can reduce long-term ownership costs.

“We do a lot of green work,” Adair said of buildings that are energy efficient. “The best opportunity to achieve green success is early involvement. We have 33 LEED certified professionals and there’s a lot we can do upfront to help achieve success.”

The LEED (leadership in energy and environmental design) Green Building Rating System is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings sponsored by the U.S. Green Building Council.

Swinerton’s San Francisco headquarters is certified LEED Gold-EB, the highest efficiency level for existing buildings.

“The biggest obstacle is not evaluating early enough to get the benefits that can be captured for no additional cost (such as) building orientation, day lighting and site usage,” Adair said.

But he wasn’t always a believer in green building.

“I was one of the people who thought it was just more expensive,” he admitted. “(But) this is one of the things you just have to find a way to get on board or you’ll be left behind.”

According to Adair, as energy costs increase, green building costs are becoming moderate compared with standard building materials, often resulting in availability of green materials at comparable costs.

Citing ongoing price escalation and shortages of qualified subcontractors, Adair noted that some building types are being hit harder than others.

“Every product type has seen (price) escalation,” said Adair, because of significant increases in concrete, steel, aluminum and materials used for plumbing and conduit. “High-rise offices with glass and aluminum shells have probably escalated more,” he explained. “The big question is whether the new rents will justify the increased construction cost.”


‘Flawed’ System

Adair is correct in questioning whether construction cost increases can be passed on in the form of rents, says David Marino, a principal at Irving Hughes Group, Inc., the leading commercial real estate tenant representation company in San Diego, according to its Web site.

“San Diego tenants are traditionally more value-oriented,” said Marino, noting that tenants tend to be privately held or venture funded companies sensitive to rent levels.

Noting that cost increases have hit both new construction and tenant improvements to build out the interiors, Marino says the widely held belief system that landlords can pass through construction costs to tenants is flawed, “and may be fatally flawed.”

“Landlords are having to pay more tenant improvements and not necessarily getting more rents,” he said, adding that the fact that commercial rents are still escalating even as building availability has gone up is a market anomaly caused by real estate brokers working to support landlords and by uninformed tenants. “Often tenants are signing deals they shouldn’t be signing and don’t have to be signing,” Marino said.

In Carlsbad, Marino noted that office space is staying on the market an average of 19 months. Flex space (that could be built out to light industrial or combined with offices) averages 17 months, and industrial space averages nine months on the market.

Availability rates (including all sublease space and space under construction) are 22 percent for office space, 30 percent for flex space, and 10 percent for industrial space with 357,156 square feet of sublease space available in Carlsbad alone, according to statistics compiled May 1 at the Irving Hughes Group.

Smith Consulting’s Ohlson further quantified the increases, citing a phase I project built in 1999 for $12 million, compared with a similar phase II project now in the estimation stage at a preliminary $18 million. Ohlson noted that not only construction costs, but also municipal fees have increased markedly.


Award-Winning Firm

Should commercial construction slow, Adair says the breadth of past projects Swinerton has undertaken will be a strength that will help sustain business. “Here in San Diego, we have a diverse work backlog, and also our experience is broad,” said Adair, whose office has won the Associated General Contractors’ Excellence in Project Management award and has been honored for its contribution to the community.

“Clients are realizing that getting the right people is key to the success of the project. We have a solid group who have nearly all been with us for a while,” he added.

Employee ownership helps too. “We’re not reporting to Wall Street, and the only people we answer to are our own board,” he said. “(We) can make decisions very quickly.”

Twenty percent of the company is held within the employee stock ownership plan, which is available to all its workers.

“Once the company feels you have a long-term commitment, your ownership grows,” said Adair. The result is “everyone cares about our reputation and how we’re conducting business.”

Adair cites the commitment of his staff as his greatest source of pride within Swinerton. “We have some excellent people who have done great things for clients, and it shows when clients come back a second and third time, asking for specific people.”

Perhaps that will be Swinerton’s legacy for the next hundred years.


Lauren Rae Brimmer is a freelance writer living in Fallbrook.

– – –

Company: Swinerton Inc.

San Diego division manager: Don Adair.

Address: 17140 Bernardo Centre Drive, Suite 216, San Diego 92128.

2005 revenues: $155 million from San Diego division; $1.8 billion total.

Number of employees: 93 full-time in San Diego; 1,300 total.

Year founded: 1888.

Web site: www.swinerton.com.

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