Since 2000, Alex Getelman has presided over Aragon Construction, an interior construction management and general contracting company that specializes in construction jobs for the hospitality, legal and financial services industries. Mr. Getelman, 38, talked last week about what he perceives as a mild uptick in development projects this year and problems with the construction industry.
The Commercial Observer: Earlier this month, the Lehr Construction Corp. and its leadership were charged with overbilling its customers to the tune of $30 million. Is bill-padding at construction firms a widespread problem or is this an isolated case?
Mr. Getelman: From what I’m reading I think it’s more specific to that firm. I don’t know if that’s an industry-wide thing. I know that we don’t run our operation that way—nor have we ever.
It’s a pretty simple business. We’re here to manage the subs that we hire on behalf of our clients, so I really can’t speak to it other than the way that I run the business, which goes back to my beginnings 20 years ago. You’re reading what I’m reading, so I can’t speak about someone else. I don’t understand the whole process. We act on a client’s behalf to hire the best subcontractors that we can, and with that they get quality, cost and schedule. To me, the process is simple.
Speaking of schedules, is the time frame for construction projects shrinking?
For us, my focus now is how we’re now being forced to turn these jobs out much more quickly. Where 12 weeks used to be the norm to build a 25,000-square-foot space, now it’s eight weeks. The norm used to be a 12-week build-out and now, because the leases are taking longer to get executed because people have more time on their hands to negotiate with landlords, the window that they’re leaving to get the space built and the drawings completed by the architect is much shorter.
So the norm of the 12-week build-out has gone down to eight or 10 weeks, and so we have more to figure out in a shorter time frame. It’s gotten a lot shorter all the sudden.
Are the prices for construction materials still as expensive as they were two years ago?
When these big industries got crushed in 2008 and 2009, a lot of people stopped stocking items anymore—light fixtures, carpeting, stone—all the specialty material. I mean, anyone can obtain sheetrock, but when you get into the specialty materials you need to be on top of your game from day one to source those materials to make sure it fits within the shorter time frame. And if something is not being shelved anymore, and it’s basically custom-ordered, you have to pay close attention to that.
Why aren’t those specialty items being stocked anymore?
It’s the cost. People’s credit lines got pulled. Big manufacturers that had billions of dollars in revenue, their lines all got called as well.
So they have to be smart, and if the demand is no longer there for those items, the manufacturers are not going to produce that amount of inventory on the assumption that it might be ordered. But across the board everything is more expensive-from copper to carpeting.
Are you seeing more construction and development projects this year?
The year was off to a very aggressive start, but it’s gotten a little more flat as of recently. But, speaking to broker friends and friends in real estate, it sounds like there are more deals getting done, which means the architects will start drawing them and we’ll see an abundance of jobs within the next few weeks. We’re steady right now, and we haven’t had to lay anybody off during any of the tough times.
But we’ve been very fortunate to have some great clients, and they’ve been keeping us busy. A lot of the larger Fortune 500 companies still haven’t started to spend the way they once had, but I know it’s in the process. The law firms too, they’re in preparation so whether that means three months or six months, it’s all coming.
What kind of projects are you taking on this year? I know that the hospitality industry is seeing a boom in construction, or at least that’s what many people are saying.
We were involved with some hospitality work, but that’s gotten shelved. We were knee-deep in a few projects that were shelved at the end of 2009 and leading into 2010—and I still haven’t seen them come back. I know there are a few hospitality deals that are being designed as we speak and will hopefully come out by the fourth quarter of this year. Tourism is on the increase and with that amount of volume you do need to either renovate or build new.
Fortunately for Aragon, though, we still do between 120 and 150 projects a year, and that’s why we didn’t get hurt during this downturn. It’s because the work is coming from so many different avenues. If one sector is very slow, another sector could be moving upward. So it hasn’t been bad.
How many projects have you taken on so far this year?
We’ve been very fortunate in the hedge fund or the investment community, both of which are tight communities. They all talk to one another, so we have a very nice niche within that community. We’ve been building anywhere from 10,000- to 200,000-foot projects for these guys. We’ve worked with all the large shops, but the hedge fund shops, which are already very lucrative, are continuing to grow.
What’s the most lavish request you’ve gotten from a hedge fund?
We did a 100-linear-foot stainless steel wall with pivoting panels so that they can get behind it to clean the thing. When a client or an architect has a vision, it’s our responsibility to make sure that it can physically be constructed and that, at the end of the day, it actually operates. So what looks good on paper doesn’t always work.