Tilton Pacific Construction is in the process of expanding a mini-mall that was once a big-box retail store in Milpitas, Calif. The company says “second-generation” projects such as these are an emerging trend.

The term “second generation” does not refer only to the grandchildren of immigrants – it also can be a term used in real estate. “Our struggling economy has resulted in many developers refocusing their businesses,” observes Gregg Hall, executive vice president of operations for Tilton Pacific Construction Inc. about the Milpitas Retail Center in Milpitas, Calif. “I think that this product is being driven by the economy. You’ll hear the term ‘second-generation project’ used a lot these days. Second-generation projects are the new buzzword. Very few owners are building new because there’s so much space available out there. A lot of the developers are trying their best to capitalize on the existing spaces that are available.”

The Milpitas Retail Center is an example of this trend, Hall maintains. When Home Depot vacated one of its stores that was built in the mid-1980s, a developer decided to turn it into a mini-mall anchored by an Asian-themed grocery store named Seafood City. So, this second-generation retail development may be patronized by first-generation customers.

Tilton Pacific is expanding the original 100,000-square-foot building by demolishing the former 17,000-square-foot garden center of the store and building an enclosed addition in its place that is connected to the rest of the original building. This will create a mini-mall that is slated to have 35 smaller retail tenants besides the 34,000-square-foot grocery store all under one roof, with interior walls separating each tenant.

“All of the shop spaces around the perimeter need new glass storefront and an exit door to go to the outside walk,” Hall points out. “Imag­ine an existing Home Depot that has tilt-up concrete walls. They’re solid reinforced concrete, so before new openings can be cut in, they have to be reinforced from the inside. Specially engineered, surface-mounted steel frames were designed to be mounted to the inside of the wall. It’s not an easy thing to make such substantial structural modifications to a structure in such a short period of time.”

Speed Is of the Essence
The project was started in October 2009, and is scheduled for completion by February 2010. “That is a 17-week schedule (120 days) – it’s extremely aggressive,” Hall emphasizes. “The 120 days is for the shell work. That includes demolishing the existing garden center and demolishing additional canopy structures on all sides of the building exterior. Our scope of work includes modifying the existing shell, expanding the shell, constructing new tenant partition walls, installing all new utility services, as well as substantial on-site and off-site improvements. All of this is being done in an existing center that remains open for business.”

Tilton Pacific also has won the job to build the new Seafood City grocery store tenant improvement and hopes for more business from the mini-mall’s other retail tenants. The speed of this project is typical of most of the company’s present jobs, Hall declares. ”They’re all fast-track right now,” he asserts. “The market is such that the owners are anxious to capitalize on any opportunity to fill an empty space. In the case of our Milpitas project, 17 weeks is about as fast as this job can be built without acceleration costs.”

Grocery a Specialty
Tilton Pacific Construction was founded in 1989 by Jim and Stephanie Tilton. The general contractor specializes in site development, medical tenant improvement, auto dealerships, light industrial, retail and grocery stores. “I separate grocery from retail because it’s a specialty, and we’ve done a lot of grocery work,” Hall points out. “In fact, we just finished Safeway’s first LEED-certified project.

“A LEED-certified project has to start with a sustainable design, and takes a trained and unified construction team to achieve certification,” Hall explains. “This particular project was a new Safeway project in Santa Cruz, Calif., and virtually everyone on the construction team was LEED-accredited.

“Special consideration was given to the selection of building materials as well as to the design of the mechanical, refrigeration and electrical systems that operate the store,” Hall continues. “This means that many materials come from local sources, and favor is given to those that are high in recycled content.”

Economy Needs Strengthening
“Overall, the economy does not feel strong,” Hall reports. “Hopefully, it’s stabilizing. We are seeing a lot fewer large jobs but more second-generation projects and tenant improvement work. New construction is greatly reduced compared to what there’s been in years gone by.

“The most new construction that we’re seeing is in the public works sector,” he says. “As a result, more contractors are trying their hand at public jobs, and the competition is fierce. It is not uncommon to see 20 or more general contractors competing for the same project on a public bid. In the private sector, the average number of bidders used to be four. Now it’s common to see up to eight and sometimes more. We’re seeing double the bidders on bid lists whether it’s a public or private project.

“And as one might expect with the increased competition, we have seen a reduction in construction costs,” Hall adds. “Everybody is more aggressive with their pricing, so we’ve seen an overall drop in construction costs.”