Gone are the days when a metal building was a plain steel box on a farm.
Today the opportunities for new designs and applications for steel buildings are virtually endless. Taking advantage of the options, the share of metal buildings in the light commercial market has been growing rapidly.
Before jumping into this growing market, however, builders must ask themselves a few questions:
• What are the requirements for success in light commercial construction versus residential or agricultural?
• What are the market’s benefits and drawbacks?
• And once the decision is made to solicit light commercial projects, how do builders market their services and secure new projects?
Same questions, different answers
Two metal builders offer different perspectives and advice. Steve Thorson is owner of TNT Building Systems in Manhattan, Mont. With more than 15 years of experience in building everything from veterinary hospitals to retail buildings,
Thorson is currently working on two fire stations.
“We sell and erect steel buildings, as well as kits to general contractors,” he says, “and we’ve done it places from Oregon and Wyoming to Hawaii and Alaska.”
On the opposite side of the country, Hugh Carr owns and operates HN Carr Inc. in Clinton, N.C.
“We’re general contractors specializing in commercial and light industrial construction, but we also take on design/build projects,” he relates. “Working in a town of 10,000 people in a county of only 55,000 people, I have to be versatile.”
His own experience encompasses both new construction and renovation on a wide range of projects including self-storage, retail, warehouses, manufacturing, churches and offices.
Though Thorson and Carr share an interest in light commercial projects, their markets can be quite different. For example, Carr reports that in rural North Carolina “construction activity is bit slow because of the economy. So although our work is exclusively commercial, we’re taking a variety of jobs.”
On the other side of the counry, Thorson reports that in Montana “the light commercial market is pretty strong. The economy here hasn’t been that bad, and people out here are catching on to the many style options for metal buildings.”
No longer boxed in by limited designs, Thorson and Carr have found that offering metal buildings in a variety of finishes gives them a selling advantage.
Thorson explains, “One of the big issues in the past was the way steel buildings looked. My customers didn’t want a boxy warehouse look, so we switched to offering elements like extended eaves. In fact, we haven’t found a material that we couldn’t incorporate into our designs.”
Though customers might be initially drawn to steel buildings because of their durability and functionality, Thorson can often “seal the deal” when he introduces them to aesthetic options they had not considered.
“The thing people are looking for is flexibility in design,” he reports. “They want different finishes for the exterior as well as the interior. So we’ve come up with some unique designs.”
Metal building design trends in Montana include stone wainscots for sidewalls and a pre-weather look for siding and roofing.
“There’s such a huge variety of steel siding finishes, and we’ve even used wood siding on a metal building,” Thorson says. “There are even a few projects that where people didn’t know it was a steel building. Once we send a potential customer to see such a building, they’re sold.”
Carr agrees, “There are stereotypes that exist about metal buildings. For a number of people we encounter, all they see in their minds is the standard metal box. But show them photos to illustrate the versatility. When you show the options, they have no problem choosing the option of a steel building. They just need to be exposed to the possibilities.”
Something for every taste
While customers in Montana maybe drawn to the rustic look, North Carolinians tend to go for more traditional styles.
“The style reflects the personal taste of the building’s owner as well as the type of building,” Carr says. “We can dress up just the front or all the way around. In our area, the preference is toward mason exterior walls and incorporating glass and split-face concrete block. But we’ve also used stucco.”
While many buyers from coast to coast are concerned about the ecology and thir buildings, their interest levels vary.
As an added selling point, Thorson says, “People are aware of the idea of green building. But most have never considered the fact that steel is not only recyclable, but many times it has already been recycled before being made into the material for a metal building.”
By way of contrast, he cites a recent study that found it takes 75 mature trees — or seven recycled junk cars — to build a 2,500-square-foot home.
For his part, Carr sees metal buildings as a win-win proposition that is “green” for the Earth and also puts some extra green in the pocket.
“Steel buildings are finding their way into a growing number of segments in the commercial market,” he says, “because the industry is finding new applications for steel buildings that weren’t there before.”
In one recent job, for example, “We did a medical facility and had a combination of traditional materials for the walls but with pre-engineered construction and a standing seam roof.
“The customers got many of the advantages of metal building systems, plus a good price,” Carr recalls.
And steel buildings bring desirable structural qualities to the light commercial market. “The biggest advantage is the quality of construction,” he contends, “and unlike wood, steel is noncombustible and doesn’t rot or get eaten by pests, and the roof has a very long life.”
Weathering the storms
Carr has seen a surge in the growth of steel buildings for the agricultural community due to a devastating storm that hit the area in which he lives.
“We’ve had hurricanes hit and the stick buildings didn’t fare as well,” he observes. “Now potential customers are lending a keener ear to the advantages of steel construction because of its ability to withstand storms. A lot of the pre-engineered building systems we do are for agricultural applications.”
And since structural walls and supports are not required inside the building,” Carr continues, “owners have the flexibility to design layouts without worrying about load-bearing walls or columns.”
That same flexibility comes into play if the owner ever decides to modify or change the interior layout in the future. Moreover, if the owner decides to sell the building, potential buyers know they can alter the layout to suit their needs, giving the buildings and their owners market advantages over competing properties.
As Thorson points out, in addition to steel’s structural qualities — no warping, rotting, splitting, mold growth, or insects — owners may get a break on insurance rates because steel buildings are fire retardant.
Some win-win factors
According to Thorson, advantages also accrue to the builder.
“From a construction standpoint,” he explains, “steel is reliably straight with no crowning. So there’s less scrap and less waste, which means less wasted money for us. Every piece is engineered to be the same as another. When you order a kit there’s virtually no waste.
“But with stick-building you generally expect 20 to 30 percent waste,” he says.
Although the cost-per-job to build with steel is about the same as traditional building methods, Thorson believes, profit margins are higher.
“We can get in and out quicker when we do metal buildings,” he reasons, “and so we can schedule more jobs and, over the course of the year, do better financially.”
Though Thorson is content with his niche, Carr is mulling the possibility of going a step further. The advantages of metal building systems — from a cost, construction, and marketing perspective — open up the possibility of some day going into development. If owners can be sold on metal buildings, then they can likely be sold on a land-and-building package.
“We have a hope and desire to do development at some point,” Carr says. “It’s just not worked out for us yet, but we’re actively thinking about it.”
Getting into the game
Before entering the light commercial market, metal builders should first scope it out. Thorson jumped into the market after building custom homes, while Carr has always worked exclusively on the commercial side of the construction business. Both offer perspectives and advice on how to be successful.
“We chose to make the switch to steel buildings from custom homes in 2001,” relates Thorson. “A few of the reasons to get into light commercial are that it can take less capital and there is a quicker and easier turnaround time.”
On the other hand, Carr cautions, “More capital is required for light commercial building, compared to residential, in our particular market. Since residential jobs are owner-paid, the contractor doesn’t have carry costs on a month-to-month basis. Residential contractors usually get paid every one to two weeks. But for our commercial jobs, we invoice monthly.”
For Thorson’s TNT Building Systems, the switch from custom homes to commercial metal buildings required learning new construction methods.
“The big difference for a builder comes from the change in materials. Going from wood to steel takes some getting used to,” he relates. Training can come through a supplier, but on-the-job experience is how Thorson mastered the art.
“You have to not only have a change in tools, but also a change in mindset,” he observes. “We went from building new homes and remodeling work to exclusively steel building.”
The mindset also changes as a builder serves a new customer base, although in Thorson’s case, the change was positive.
“Commercial customers are easier to work with,” he says. “With residential projects the punch lists seemed endless. People who are interested in steel seem easier to work with — and give me fewer evening phone calls, too.”
Though Carr has only had experience with commercial building customers, he believes, “The main difference I can see is that, with residential clients, it’s more personal. It’s their own personal money and so it affects them more. They have more specific things to meet their exact needs, like ‘this’ flooring or ‘that’ countertop. On the commercial side, those details tend not to be as big a deal. But I can imagine that custom homebuilders spend more time interfacing with clients on nights or weekends.”
Consider all factors
In some markets competition for residential jobs can be fierce, since the barriers to entry are low—sometimes just a pickup truck and some tools. But in the light commercial market, Thorson reports, “There’s still room to cross over and expand.” Whether to make the move gradually or all at once, however, depends on market conditions. “The price of steel has really affected our margins,” he says, “and in the beginning of the year, customers were more hesitant. But things are picking up again now.”
In his market, Carr reports, “We’re located in a more rural area. So we have less of a rolling economy and feel the impact of any slowdown a lot sooner. Also, increases in the price of steel caused a project or two not to be done, that otherwise would have been built.”
Peaks and valleys happen in any construction market, including light commercial. “In general the phones have gone quiet,” Carr continues. “We’re not even getting inquiries because people just don’t have building on their mind lately.”
Metal builders interested in pursuing light commercial projects must also be aware of the relevant building codes and regulations, which vary by state and locality. “If you’re coming from agricultural building into the light commercial market, the rules can be intimidating,” Thorson says. “Commercial building can be quite a bit different because of the permitting and codes.”
Builders with backgrounds in residential construction must also be prepared to deal with new rules.
“Commercial permits are different than residential,” Thorson continues, “Here in Montana commercial jobs require a state permit, while residential work needs more local permits from the city and county.”
Nevertheless, metal building systems make things easier. “Since they’re pre-engineered, permitting is a matter of submitting forms. It’s less complicated than working with an architect for a custom home,” Thorson adds.
Builders in North Carolina, Carr explains, can obtain two types of licenses.
“A residential license is only good for that type of work,” he points out. “So you’d have to change your license in order to get into light commercial building. But if you have a commercial license, you can also build residential.”
A craftsman at heart, Carr would “rather focus on construction than worry about money. But with any business, you have to use sound business practices and look after the money end as well as the other parts. Estimating is a key factor in commercial. You have to be very accurate. Commercial jobs aren’t as easy to price per square foot.”
Do your homework first
Speaking from personal experience, Thorson says, “I would caution builders to do their homework. Then approach your projects from a regional aspect. Don’t buy a kit from Florida if you operate in Montana. Whenever possible, buy your materials locally or regionally, and understand what the weather conditions in your area affect your projects.”
At the end of the day, Carr summarizes his advice to metal builders who are considering the commercial market: “Since it has different requirements than residential or agricultural, then I would advise starting with smaller renovation-type commercial projects before moving on to bigger jobs. You’re talking to a different customer when you go from residential or agricultural to commercial, and you should know what it takes to address those needs.”