Five Questions For ICS – Layton’s Tenant Improvement Arm
Editor’s Note: This was the first Five Questions interview EDCUtah has conducted since the Stay Home, Stay Safe directive, and it was conducted virtually. We wish to continue providing our readers with interesting content on businesses in Utah despite the disruptions we are all experiencing. We would also like to thank Penn and Correy for agreeing to pilot our virtual approach.
Interior Construction Specialists (ICS) is part of Layton Construction’s corporate structure. ICS is the largest tenant improvement business in the Intermountain West. We caught up with Penn Owens, Executive Vice President of Preconstruction, and Correy Selden, Director of Preconstruction, to learn more about what ICS does and current trends in interior construction.
What function does ICS serve within the construction process?
Penn: A lot of people are familiar with Layton Construction and what they do, but less so with our role. The group was created by Dave Layton back in 2000 as the tenant improvement arm of the company. We work solely on interior construction buildouts. We’re not the ones building the core and shell of building, but rather the interior and customizing it for tenants. Our group has a real niche appeal and the majority of our sub-contractors also specialize on interior construction.
ICS is about 50 people in the Utah offices and that includes project managers, superintendents, estimators, and others. We don’t have any in-house architects, rather we partner with local talent.
What was the need Dave was addressing when he created ICS?
Penn: At the time, the market didn’t offer anything like this in Utah. On the coasts and in bigger markets there were companies already offering tenant improvement. Now, we are still among one of the few tenant improvement organizations in the state.
So back in 2000, Layton Construction didn’t really do interior construction and didn’t have a way to service clients after the main build was completed. We decided we needed a specialized team to do build-out right. Dave committed to having ICS stand-alone from the core business so ICS could really become specialists. From the beginning, we were truly unique to our market and still are. Our success comes from specializing, while others comingle their resources.
Correy: I would agree with that, the very clear delineation between what projects we at ICS and our subcontractors work on, and what Layton and its subcontractors work on, has helped to make us as successful as we are. We are competing against small and large companies for these projects, and our capabilities to be nimble and flexible to adapt to project needs stand out. To further illustrate that delineation we’ve been talking about, about 95 percent of the work we do is in projects that others have contracted.
How do you engage with clients throughout the construction process?
Penn: We specialize in client engagement. When site selectors or clients come out, we’re really good at evaluating the plus / minus of a given building. We can present them with information about the space to help them save a lot of money. Mechanical, seismic - we can flag those potential issues and provide a realistic picture of what needs to be repaired. We can write everything up into an observation report, which clients love to use in lease negotiation. It helps them avoid future surprises with hidden costs.
Correy: We invest heavily in partnering. Let’s say there’s a client looking at five potential sites for a new operation. We can come in and provide additional information on those locations and do what we can to add value to making a final decision.
We also try to engage early in the process. We’re members in many different professional organizations such as NAIOP and the Urban Land Institute. That exposes us to early-stage potential partnerships.
Penn: We also provide long-term support to our clients. For example, Fidelity came to the Utah market ten years ago and we helped them evaluate buildings at that time. Since then, we’ve been helping them with different spaces and other ongoing operations. *
What industries and types of companies comprise your client base?
Penn: The majority of our clients are Class A office users and range from financial firms to Nike customer service operations. What we see is an influx of resources here because of the favorable cost of land, lease rates, compensation. In other words, we’re seeing insourcing from the Bay Area and East Coast. We’re seeing a lot of tech-driven companies being interested in our services. We’ve done projects for Goldman Sachs, Morgan Stanley, Thumbtack, Pluralsight, Boeing, and L3.
What are some trends you’re seeing in the industry?
Penn: Ten years ago, about 80 percent of our jobs were from companies already in Utah. Five years ago, we were seeing a flood of call center projects. That is dying down, and now we are seeing our in-state projects account for 60 percent of our projects and the other 40 percent is from out-of-state companies. Projects are still highly focused on density and parking ratios.
Tenant improvement ten years ago cost $50 a square foot for half floor and now we are seeing $65 to $80 a square foot for full floors. The size of our projects has definitely grown over time. We are also seeing a shift from local owners managing the process to construction managers managing these projects. We do so much of this tenant improvement work, we can meet with a client who describes what they want (without any plans) and we can give them a 5% +/- budget.
Once the COVID 19 epidemic is over I’m sure there will be changes in how we socially use our public spaces from office, retail, and manufacturing. Design will have new ways of thinking and designing space. Think about how we use elevators, HVAC systems, open space vs enclosed space, restrooms, door handles, etc. I could also see construction having lessons learned on infection safety measures moving forward. It’s clear to that owners will be thinking differently on how they will use their spaces and we will need to provide solutions and insight.
Correy: We are seeing much more design-driven costs. Today offices are a recruiting tool. Companies see the end game; they need a space that speaks to who they are and that they care for employees. We are also seeing a mix of local and coastal designers. We have great local talent here and I would say that is a great spin-off benefit to the Utah economy.
For more information, visit http://icsbuilds.com
* Editor's note - Alan Rindlisbacher points out that Fidelity actually came to town in 1986 and subsequently expanded. "We old-timers worked diligently to land them, before EDCUtah was born!"