Duke was able to make client Lenovo’s three-building campus project “more modern to be something that suited the corporate image they were trying to identify with,” Drew Fredrick says.

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Subcontractors often have to wait for a number of issues between the general contractor and the owner to be worked out before they get paid for their work. But Duke Construction , which is the contracting division of Duke Realty Corp., pays its subs as soon as possible since it is the owner on 90 percent of its projects and the prime contractor on any project it undertakes.

“Since we are the owner and the contractor, we have no financial contingencies,” says Drew Fredrick, vice president of Duke’s Raleigh, N.C., construction office. “We go out of our way so that the contractors are getting paid on time, which goes a long way for dealing with the kind of volume we have.”

Duke Construction was founded in 1972 in Indianapolis, operating as a real estate investment trust. Today, Duke Realty Corp. is the largest publicly traded office and industrial property developer in the United States, with more than 142 million rentable square feet of property owned, managed or under development. The company also controls more than 7,700 acres of land that can accommodate future development of more than 113 million square feet.

Duke Construction builds projects for Duke Realty as a design/builder, construction manager or general contractor. Through its Raleigh office, Duke Construction manages one distribution facility, seven office buildings and one office tower that total more than 1 million square feet.

Fredrick took time to speak with Construction Today recently about changes at the company, the evolving market in North Carolina and the Lenovo project.

Construction Today: Have there been any recent company developments?
Drew Fredrick: We recently expanded into New Jersey by tearing down an old General Motors automotive factory, performing some site work and starting a brownfield development and environmental remediation. One of the areas we’re focusing on now is looking at ports and intermodal projects, which are fueled by the import and export business.

CT: How does the company work with subcontractors in the Raleigh area?
DF: We deal with a lot of the same contractors because of the design/build process. We have five contractors we regularly use in each trade. Everybody passed the prequalification stage and are quality contractors. It is not a public bid scenario where we have to wonder, “Who is this guy?” Our regular contractors take care of us, so we in turn take care of them.

CT: How is the local market changing?
DF: As the economy is slowing, there is slower job growth, so hiring has flattened out. The Raleigh area dodged most of the impact of the slowing economy, but one of the problems we’re having is housing sales have slowed. So, people are not able to sell their houses and move here.

Companies that are paying for their employees to relocate are incurring more costs due to the softer real estate markets from which they came. Overall in the tight residential market, Raleigh has fared much better than other markets. Job growth is the key to the commercial real estate business.

CT: What distinguishes the company’s work from that of competitors?
DF: We are able to bring product to market faster because of the design/build process and with higher quality than any other contractor in the area.

The big differentiator that we have is, there are other good contractors in the area, but we’re really the only one of our kind that builds our own work. When the timing of construction starts, we’re doing things like the selection of materials. We’re able to work on all that in-house.  

CT:What is your vision of the future for your division?
DF: We want to make sure that we’re supporting our development team, giving tenants good value and quality products and keep renewing tenants. The construction group is a big part of making sure customers are happy with the space.  

CT: Tell us about a recent project.
DF: Lenovo is a three-building campus with 520,000 square feet in Morrisville, N.C. The first phase has a 380,000-square-foot structure delivered in December 2006, and the second phase, with a 140,000-square-foot structure, will be delivered in December 2008.

It cost $58 million excluding the land and other soft costs.    With this project, we were able to meet Lenovo’s aggressive schedule, provide a quality building and be able to have them keep us on the building for the [project’s] second phase.

They could have optioned out if they wanted to, but they were a happy client. That project demonstrated the capabilities Duke Construction has.

We hadn’t done a project of that magnitude in Raleigh, but we were able to go up against the top developers in Raleigh, come out with a win and complete the project on time.

CT: What set this apart from other jobs Duke has handled?
DF: One of the things we did as part of the fast-track was work with Lenovo to change the entire building.

We were able to make it more modern to be something that suited the corporate image they were trying to identify with.

Throughout the process, we changed the skin of the building without any costs and not disrupting the schedule. They are attractive buildings, and we were able to make those changes on the fly with no impact to the schedule or price.