Raising the Roof on Industrial Buildings | Marty Shiff, Rooflifters

Marty Shiff00:00:31

Excellent. Thanks for the opportunity.

Marty Shiff00:00:57

Yeah, absolutely. Um I'd say, listen if it's since 2019, so a lot has changed uh, you know COVID hit 2020 um e -commerce really took off after that. So, um, that really had an impact on our business, uh because we boomed uh, just in terms of inquiries, cause everyone wanted last mile. So last mile is in the cities. So, especially the older cities whether it's LA whether it's, you know, Northern California Jersey, Chicago Boston, and those older established cities and areas that had a lot of product you know, at that last mile. And we're all built many years ago and obviously at the obsolete heights. So it really took off, you know, for us through COVID. it. That being said taking off for us really means a huge amount of additional inquiries, okay? Cost, timing everything like that. A lot of things really need to fall in place for them to become projects, right? So first and foremost, we'll get a call on something and it's a very quick discussion. This is how much it's going to cost. This is the range. This is how long it's going to take. This is how what, how it's going to impact the existing building operations, et cetera. Is that even close to penciling or making sense? And at that point it'll be oh yeah, you know, that that'll work or just no. So it's a pretty, at the end of the day, this conversation gets pretty quick. Um, but I mean, there's been a big Delta in rents and values of buildings since 2019 as well okay, as a reflection of how inexpensive money was, price of buildings going up, cap rates know, things like that. So, you know everybody was flying, you know from, you know probably till 2022, 23. I'm not sure exactly when, you know, you'll probably have a better handle on that as to when things really started slowing down a little bit.

Marty Shiff00:03:04

For us, it really hasn't stopped, you know and the inquiries have probably stayed, you know as many as there were, if not more, because we've also branched out, um just again, based of, based on cost of construction of building new versus lifting. So it's not only industrial, a lot of retail old retail conversions especially in California, we've done a lot of, um conversions to rock climbing facilities and and kids' play centers and all sorts of stuff like that up and down the coast. And then a lot of self-storage too. So, you know we've gone from industrial to kind of retail and self-storage. So that's helped with different types of projects.

Marty Shiff00:03:51

But again, now we're at a point where money is more expensive. Some of those initial cap rates that were established a few years ago were based on a certain value of the purchase and everything else. And some of those are not making as much sense as they used to. So, um, so it's, it's for sure challenging time for a lot of developers and, and, and owners. Um and, and now especially, so our cost is pretty much stayed the same, know steel's gone up considerably, you know, just the purchase of it over the last little while. Uh, but the overall costs, you know, between lifting the steel work, you know in filling in the gaps and all that hasn't really changed that much. What has gone up is the cost of construction. So the spread between building new, what we do continues to get farther. The spread continues to be bigger, which is making lifting more sets. That being said the one main driver of our projects these days is when you lift a building, um and in California there's different parameters. Um most of it if once you if you're within allowable zoning heights, right. And you're not at any, any gross floor area it usually qual you know, will qualify as a renovation, which avoids a lot of, you know site plan, water retention, energy issues, um setbacks have changed so that you know development charges so that's really made the lifting you know that much more uh interesting of an option but again a lot of things need to fall in place for them to become to become projects for sure

Marty Shiff00:06:45

yeah i guess in what respect from the actual process of how we do it or just the sequence of of um you know from initial call to uh determine

Marty Shiff00:07:07

So I'd say yeah, one, one big difference is you know, since we last spoke is we're pricing a lot of stuff and let's say Inland Empire where buildings are already 32 feet. We're pricing some large buildings that are competing with the newer product that are 40 and 42. So we're pricing some 32 to 40 and 42. 42, some big 700,000 square footers, million square footers.

Marty Shiff00:07:33

So that's something that never really happened, you know, many years ago. But in terms of the process so really, well let's take it from an initial call, right? You have a client that you want to tee up, you know to Marty someone's inquiring, you know, what would be the process. So again, we jump on a call, we'd go through, let's call it a hundred thousand square foot building going from, you know 14 to, you know, 28 or 32. So on something like that, I'd go through my list of previous projects in that area and I'd say, okay, on that size, roof lift steel, know, to actually lift the roof infill all the new steel, install a new insulated metal panel or you know, any kind of infill would probably be around the, you know, let's call it a $20 a square foot range. Okay. Then we'd factor in, okay, is the building sprinklered? Okay. Okay can we take up the existing sprinkler system or should we budget ESFR sprinkler system? Okay, another four or five bucks a square foot. Lighting, HVAC roofing. So on that quick call between me, you, and a potential client, we can come up with a high level number. Okay, let's say at 35 bucks whatever that turns out to be. Then we, you know, from that point, kind of delve into a little more into some preliminary engineering making sure there's no surprises checking slab thickness, because again, you know you've got to make sure the capacity of the slab works if you're going to rack at 32 feet versus where it is right now. So these are some things that we kind of cross off the list. Yeah, right off the bat, make sure there's no surprises in any of those budget numbers. Then it's the permit process you know drawings, permit you know construction. So, you know you'd probably be between drawings and permits probably five, six months, um depending on the you know, some cities will get a permanent a week. Sometimes we've been four to six months, right? So, um, to be safe, I'll tell a client you know, five six months on the front end and on that size project about probably five months for the work. So it's not only the, the the cost that needs to make sense. It's that, that timing as well.

Marty Shiff00:09:51

Um, and, uh and again, once all those, that's why a lot of things need to fall in place because it's the cost of timing, all that stuff. And then if that's still working, then we start, you know kind of really getting into it.

Marty Shiff00:10:28

yeah i've become kind of the guy who points out all the negatives they're going to come into play and if we can tick off the boxes they they just keep moving

Marty Shiff00:11:41

Yeah, it's all about that delta between the value of where it is now at 32 and what a similar new building would be at 40 or 42 and Delta in the rents. I mean, so our number on a million square feet, you know is going to be, could be as low as 15 bucks, you know, a square foot. But are you going to get another, you know in California terms, another 10 15 cents a square foot to justify that. So it really just, yeah. So, I mean so really just it is a quick exercise in you know, the numbers at the end of the day. But some interesting projects that we've done recently is where you know, it's pretty straightforward to look at a building that's got the proper you know, size loading, you know and things like that. But what's really interesting is when people come to us where the building works location -wise everything else but there's not enough of, let's call it, not enough loading or not enough of a truck court. So we did one not too long ago up in San Leandro where location was great. The height was low.

Marty Shiff00:12:56

And we've been doing this a lot is really cutting off a section of the building. uh, create new loading, create new loading, uh you know, that uh, that truck court. Um, so it's it's really that's really repositioning a building where so, you know it's, it's really people that are getting creative uh, that, that this is, this has been really working for.

Marty Shiff00:13:29

you're also chopping off part of the building so all of a sudden you've you've owned something that's 200 000 square feet in order for this to work you got to cut off 20 000 square feet let's say right so you're so again it it really just comes down to the math

Marty Shiff00:13:47

it better be worth it yeah yeah and again over the across the country people have overpaid And you know, there's a lot of people that really overpaid for, not overpaid, but that was the rate in that market at that time based on cap rates and things like that. Interest rates have gone up. Demand maybe in some areas has come down. So all those buildings are not worth, you know as much as they were at some point. To your point about the manufacturing were some buildings high some buildings low? So we've been doing a lot of work where you know, they're they're bringing their manufacturing back into their specific cities and buildings. So instead of lifting the whole building is where you know, they're keeping the manufacturing portion of it low and now we're just lifting a portion of it for storage. So we're seeing seeing a lot more of that lately as well.

Marty Shiff00:14:47

Because you don't have to lift the whole building.

Marty Shiff00:15:54

we'll take them we'll take them

Marty Shiff00:16:13

hmm i mean a lot more developers now than they're you know when the business started you know the business is almost 40 years old so it was originally owner users because they could justify the cost and everything else. Now that spread between now obviously the developers and the big, you know I mean, the industrial, a lot of, you know your dad, you know, might've had a company manufactured, you know, sponges or something, you know, it's got out of that business and still had a 50,000 square foot building somewhere that he just kept in the family and kept leasing out. So it was a lot, a lot of opportunities back then for one -off owners. Now, I mean some of the institutions have really been buying up, you know a lot of that stuff. So still a lot of owner users, but a lot more like I mean, now we're dealing with some of the largest industrial landlords pretty much in the country, in the world that are really looking at you know, at some of these buildings because they've also acquired a lot of older portfolios. so they you know they might have gone after a few of the key buildings in that portfolio but okay if you're taking these you know 20 buildings you're gonna have to take a couple of these other ones you know so uh so they're looking at you know whereas at one point they were just set on building brand new big bombers you know now you know it's something that a lot of the the bigger developers are looking at uh you know as well um and then a lot of again a lot of the industrial uh so the the retail clients so a lot of the big um mall owners and power center owners are looking at these two for these new kid you know kid concepts and and things like that to bring people back into the malls

Marty Shiff00:18:08

yeah yeah so every every 11 feet or so gets you a a level of self-storage so they're taking you know so i know about 100,000 square feet is a sweet spot for self-storage seems to be so they'll take a 50,000 square foot building and raise it to 22 or 30, you know, 30,000 or so and raise it to 33 to generate that three floors. Um, and then you know, we just did one uh on, on the entertainment side, Aliso Viejo. Uh, you know we did a 10,000 square foot, uh, they raised it for a rock climbing facility. Uh, you know one up in Santa Barbara, we got one coming up down in and I think Thousand Oaks. So those are yeah, a lot of that, a lot of those conversions also. So smaller areas for sure. We've been doing these 4,000 square foot lifts for some of the other smaller kids places as well.

Marty Shiff00:19:43

um art yeah our process is pretty much the same, you know and the guys are doing this. It's only my crews that travel the country and doing the lifting. So some of the other trade work will work with local GCs or, you know help owners wrap you know, and help them. So basically we'll help. We're involved from start to finish, whether we're just doing the lifting or helping some of the sub trade work as well. And some of those kind of technologies have gotten better just, you know in terms of let's say insulated metal panels and things like that have come down in price. So the technologies have helped with the pricing. But in terms of our system this is our second iteration. We used to sleeve our columns and now we have a separate independent lifting system. Our synchronization has gotten quicker just with the technology and some laser monitoring of our lifts. But for the most part, the setup, the bracing, things like that, I don't really think we can get much, much better with that. We're in possession of, you know, we'll do 150,000 square feet, let's say in one phase. So, you know you've got a building that's gone from 12 to 40 feet up in the air. and so the system that we have is very proven and so we're pretty happy with that. Again synchronization the monitoring things like that that technology has but the actual lifting system has pretty much stayed the same and it's by far the most cost -effective way to do it. So we haven't seen a need to really change much.

Marty Shiff00:21:49

Yeah, we had one that a hurricane came through, but 80 mile an hour winds. So, I mean as part of our roof lift design, we're designing for that in those areas anyway. You've got to design for hurricanes and things like that. So, but again very, very challenging and sleepless night when you know that's happening. But I mean the lift itself that's the quickest process. You know, we're lifting, you know five feet a day or so. So if we're monitoring the weather with some pretty sophisticated like a weather company that we subscribe to. So we're not going to lift it if we think that there's any bad weather coming. but we've had some where we've had 80 kilometer an hour winds coming through. The good thing about it is is once we lifted, the walls are open. So the, you know, everything's coming, coming through. So that hasn't been a huge issue. We had one where it was a major, they had like three or four feet of snow dump on the roof, right? Which, and that was a 700,000 square foot lift we were doing in phases.

Marty Shiff00:22:59

so snow is pretty heavy right so i guess we're concerned about you know all that extra weight so okay and so we're figuring out how do we shovel off you know all this size and then uh what landed up happening is someone came up with the idea to bring a helicopter in so they rented a helicopter for i don't even know what it was three four grand for and this thing hovered over the building and you see the snow flying, you know, all around. So, um yeah, some, some we've had some pretty crazy crazy stories, uh you know, over the years. I got my own guys that are standing under these roofs. So we're, we're pretty cautious and try to avoid any, any any war stories like that.

Marty Shiff00:24:08

yeah a lot of things so as these things progress uh there's a whole initial analysis that we'll do on the buildings to eliminate you know any surprises so it's uh you know So soil underneath a you know, under a building contamination again, sprinklers a big one. You know, once we install this sure, it's great to, you know we'll need to install an ESFR sprinkler system but is there enough pressure from the street? Are we budgeting another 100 grand for a pump? You know, things like that. So really what people are committing to is a stage, you know, let's say if we, if we say a lift is going to be $20 on a hundred thousand square feet, no one's committing to $2 million to start. It's like, okay let's, let's come out there. Let's do some core samples. Let's expose a footing, some foundations. Let's get some contractors involved. So, you know it's a step process just by the time we've this, you know by the time everyone's committing, we've really eliminated any of the surprises. There's only five or six different trades and things that can come into play with these things. So we eliminate those surprises as quick as possible.

Marty Shiff00:25:32

no because that just would be a line item to to pull out that slab and replace it so you can replace them you can top them up like in California we've done projects where we've just added to the slab um it's going to affect you know the the you know the man doors in some areas and the dock doors. So sometimes we'll pull it back one bay to create that slope. But yeah, each. So once we evaluate that that slab is not sufficient for a 40 foot load or level then we'll evaluate, okay can we just top it up? Is that going to make sense? Or we've got to factor in X amount of dollars extra in cost to pull that out and pour a new slab. But they're just really line items. All of these things are just line items to see if, you know, and at the bottom, if the circle, if it all adds up, then they keep moving.

Marty Shiff00:26:35

Where's the solution? It's just a cost. It's just a number. It's just a number. That's it, you know? But yeah, the biggest thing that's, that's happened over the last few years is that real Delta, you know in the rents like there's some markets where an existing building was getting you know, $6 a square foot you know, it's a 14, 16 foot high building. They're putting you know repositioning this whole building you know, call it, you know again, call it 30, 40 bucks a square foot. And now the rents are 15 $16 right? So you're talking a $10 difference in rents with a $40 investment right? So the projects either are no brainers, right? In terms of the ROI questionable, or they just don't make sense.

Marty Shiff00:28:24

yeah one thing also that's that's changed is the column spacing on the older buildings versus a newer one So you know, ideal column spacing is 50 by 50 52 by 50 you know, whatever that number is right now. So, and a lot of these older buildings have 30 by 30 grids.

Marty Shiff00:28:42

And we've looked at some Northern California and you know basically across the country. So we're pricing out now, basically taking out every second column. So we can convert a building that's 25 by 25 grid or 30 by 30 to 30 by 60 or even 60 by 60. So you want to stay in the parameters of that bay, but you can take out every second column. And again, just you know, however many columns, it's going to be X amount of dollars per column. Right. So, uh, and then in a lot of those cases, um, to take out every second column in a building gets expensive. What the real push is for at the speed bays, they want to create a 50 or 60 foot speed bay. So a lot of those that we're looking at to take out a number of interior columns ultimately result in just taking them out near the docks and creating that 50 or 60 foot speed bay. They worked the racking around the existing columns but at the ends, we're taking out a lot of those columns to create those speed bays.

Marty Shiff00:29:54

right right so then we'll get their racking guys involved or anyone that we work with and say okay here's the layout they're looking for trying to generate this many pallet positions so we'll take as much work on the front end to you know try and make these things happen um because again if it's a one -off owner they're they're in their business they're locked in their business they don't know you know they don't have their own construction people that so we we really in order for a lot of these projects to happen, we really need to take the reins on these things and point out everything that's going to happen put a number to it, put a timeframe to it and really just present it. These days we're putting out proposals with AI renderings of what the building's going to look like. You know, we spit those out in 20 seconds. Like, you know I used to pay an architect to do a rendering. Now I can you know, we can doctor that up and show them what the buildings And those have been pretty impactful. So that's, yeah. So that's, we found we've been doing a lot more of that really a lot of handholding and walking people through the whole process. Because it's a daunting thing to think about right? If you're not you know, not in the business.

Marty Shiff00:31:20

right yeah correct correct yeah yeah yeah and a major investment this is a major investment that they've made you know uh so so they they just want to to get that comfort level um you know take some time for sure so you're a lot of a lot of hand -holding

Marty Shiff00:31:55

Yeah. So you're reinforcing the the two existing columns, the outside ones because now you're adding that, that half a load that was, and then, and you're installing either a 50 or 60 foot long uh, beam or a truss under the existing ones to take that full span.

Marty Shiff00:32:26

yeah and now i mean steel's gone up considerably uh availability of steel has has uh been challenged although a lot of the big data centers have tied up a lot of the uh the new steel right so and they're not running some sizes for, for, for months. So again, if you can reuse you know, it's it's, I compare it to a few years back when, uh, all the big e -commerce buildings were being put up and you couldn't buy joists, right? You couldn't find joists across the country. So that really helped with the uh, the lifting or the renovating and the same now with these these uh shortage of all these all the steel because really all we're all really replacing is mostly just existing columns or stubbing columns so not so most of that steel has been much more available than for some of the new builds

Marty Shiff00:33:31

yeah no we haven't we've looked at some over the years just because they bought buildings that are that are too low for even just as a data center kind of office but for the most part i think those are new those are mostly new buildings yeah

Marty Shiff00:34:47

Right. Yeah, okay. Yeah, sure. I mean, we basically state that we're probably anywhere from quarter to half the cost and time lifting a roof versus building new. um and also you can if you've got two facilities to call it hundred thousand square foot facilities that are both 16 feet or you know uh tall you can combine that into one hundred thousand square foot facility that's now 36 or 40 so you're eliminating that um and you can also um buy a smaller building and double or triple the cubic so that you're paying less on a per square footage basis rental basis, but yet, because until now, and I've been promoting this from day one, I'd like to see lease rates based on cubic footage not square footage right?

Marty Shiff00:35:42

So that's, you know, it's not it's, it's going that way a little bit, you know, with the uh, the, the difference between the heights, but not, not exactly per, per cubic foot, but that does give the opportunity to someone to scale back by your smaller building um, and raise that and create the same amount of pallet positions, if not more.

Marty Shiff00:36:10

Yeah, it just uh, you know the real estate industry is a big ship to turn. So, you know and the lifting part is only a small portion of the square footage costs and everything else. So, um, and it's only been the last, I don't know, I don't know how many years where the cubic footage has really started being a, been a big talking point.

Marty Shiff00:36:36

Yeah. And, and more so it seems.

Marty Shiff00:37:01

it's the automation and that's become pretty pretty sophisticated it's uh it's pretty impressive to watch we've been in some warehouses where there's actually they're dark so everything's kind of robotic and you know there's

Marty Shiff00:37:17

yeah well we saw one that was a hundred footer right and this was like you know there was no one working in the warehouse it's all robots are programming and it's pulling a box from up here and it's pretty fascinating the technology that's out there now

Marty Shiff00:37:33

it's for a coffee company

Marty Shiff00:37:37

yeah like a big chain of a car so they're pulling out a you know i need a box of this size cups and this size lids and and you know the trays and things like that so um but pretty pretty

Marty Shiff00:37:54

exactly exactly yeah but again you're talking uh you know it's pretty impressive to walk into building that's 80 or 100 feet.

Marty Shiff00:38:07

Yeah.