Former retail giants such as Sears and Toys R Us may be gone, but their vacant stores and warehouses remain. In Sacramento, California, Headwaters Construction is using its years of tilt-up construction experience to renew these structures for today’s developing businesses, and give them a new purpose.
The company’s story begins with its parent, Headwaters Development. With previous success in developing and building industrial parks, the owner of Headwaters Development intended to add an in-house construction unit – at which point Norman Marshall joined the company to lead this division in 2002.
Bringing nearly thirty years of previous construction experience to Headwaters Construction, Marshall, as President and CEO, would take the company independent in 2015. Today, Headwaters is celebrating its fourth year of steady independent growth, and expects to clear $20 million in revenue by the end of this year.
In its early days, the company established itself building office complexes, light industrial warehouses, and restaurants, gaining valuable experience in the tilt-up construction methods that would become its trademark. In particular, during this time Headwaters built over fifty small pizza restaurants for national chains such as Little Caesar’s and Domino’s. “They were easy jobs,” Marshall recalls, with the company able to complete them in a few weeks and on a basic budget.
However, around 2007 when the recession hit, Headwaters was forced to move into “survival mode,” as Marshall put it. “We were just trying to keep the payroll going, the doors open, keep all the employees we had.” Fortunately, while many of Headwaters’ competitors were forced to close their doors, Marshall managed to keep Headwaters afloat by clinging to the company’s reliable restaurant contracts. The company took on small jobs for lower prices to remain solvent.
Headwaters had weathered the recession, but found it could no longer get by on its existing roster of clients, some of whom could no longer afford Headwaters’ now necessarily higher rates. Marshall relates how the company, evolved its strategy, moving from a focus on small restaurants to a new, expanded business model. “We kind of morphed into a tenant-improvement retail/restaurant/tilt-up company,” he recalls, “knowing there weren’t any tilt-ups being built in that period of time.”
While still occasionally accepting restaurant jobs – Headwaters recently started construction on a 5,000 square-foot seafood restaurant in the Sacramento suburb of Folsom – the company is now moving to repurpose existing tilt-up infrastructure. With retail Big Box stores such as Sears and Toys R Us going out of business, Headwaters is able to take the existing concrete framework and repurpose it for multi-use by several clients, thereby ensuring new business development on a lower Brown-Field budget.
The rise of multi-use
A recent example of this trend is in Oroville, 70 miles north of Sacramento. Working with a long-time partner and third-party developer, Headwaters converted an old Walmart to mixed commercial use. The building’s new clients include a supermarket, a hardware store, clothing store, and gym. The same developer also purchased an old Sears building in Vancouver, Washington. Headwaters has already received a $5.9 million contract for the building shell, and the developer plans to contract the company to renovate the building to include a Hobby Lobby on the first floor and a combination restaurant and bowling alley on the second.
Other examples of a similar nature are another Walmart, in the northern California town of Red Bluff, outside Redding, and a renovated Toys R Us in Chico. Both embody Headwaters’ new business model of renovating tilt-up concrete construction, giving these large building frames a new purpose beyond their previous role housing big box retailers.
Marshall pays tribute with pride to the dependability and professionalism of his company’s people, and their role in maintaining the growth of the company. “Our employees that stayed with us during that four- or five-year recession are still with us today. We’re not only loyal to our customers, our employees are loyal to our effort here.” Annual incentives, medical benefits and 401(k) plans all help with long-term employee retention in an era in which job hopping is the norm.
But although Headwaters enjoys long employee retention, Marshall knows even the most talented workers must someday retire. “We are always looking for younger folks.” He says that the company also uses its strong pension and benefit plans to recruit employees who are talented and young and eyeing a career in construction.
Headwaters currently operates a recruitment program through Sacramento State University, and is currently floating plans to work with University of California at Davis, and Chico State University. Marshall is hesitant to say more than “we’re thinking about a lot of things.”
At a time when other employers are cutting long-term benefits for budgetary reasons, Headwaters’ old-fashioned notions are effectively enhancing employee recruitment and retention.
In addition, Headwaters is constantly active in the Sacramento community, which Marshall views as more effective than any advertising. “We encourage all of our people to get involved in non-profits,” he says, and many apparently do so. Marshall leads by example, having served in the Sacramento Rotary Club for over twenty years. He also sits on the boards of the local chapters of Habitat for Humanity and a K-8 charter school.
This community activism, while rewarding for its own sake, has the added benefit of being free publicity for Headwaters, and the company has reaped the benefits. “If you’re active in the community… you’re going to get repeat customers,” Marshall says, “and that’s what a lot of our business is – repeat.” Some of Headwaters’ repeat clients include Rhino Investments, out of Livermore; Fitness Evolution, Sacramento-based Ethan Conrad Properties; and ROIC, or Retail Opportunity Investment Trust, which owns over 100 shopping centers out West. “We take care of all of their centers above Bakersfield,” Marshall says.
Relationships and marketing
While Headwaters’ community activism has brought it additional business, the company also markets itself in a more traditional sense. These marketing and advertising efforts, combined with its growing tilt-up renovation portfolio, have brought many clients to Headwaters. Marshall also describes Headwaters as “relationship-oriented,” able to recruit repeat clients through positive relationships and intense interaction. But above all, he says, “We give a fair price, we get the jobs done when we say we’re going to get them done, we’re reliable.”
A heady benefit of these strong relationships, Headwaters has found, is that it has managed to expand its client base far beyond the Sacramento area. “We establish a relationship with them,” Marshall says, “and all of a sudden, we’re doing all their stuff on the West Coast.”
Finally, Headwaters works as closely as possible with local people. Marshall says the company gives preference to Sacramento-based suppliers, and is not lured by ostensibly cheaper alternatives out of state. To him, this comes back to the company’s philosophy of relationship-based business. “We might be able to save a little bit of money doing that, but service is really important to us.”
Marshall has ambitious plans for the company’s future. “We would like to triple in size again,” he says. “We’ve made in-roads with some large developers. Because we started out as tilt-up building contractors, we still have that in our heart.” In addition to expanding into a new generation of warehouse development, Headwaters also intends to obtain licenses in New Mexico and Wyoming – adding two to its current range of Oregon, Washington, and California.
Marshall unequivocally sees a future in the present trend of repurposing existing tilt-up concrete construction for re-use. As a construction man of skill and wide experience, Marshall stands against the theory that online shopping will render brick-and-mortar obsolete. “I think there’s always going to be a place… where people can go and congregate, whether they’re buying or eating.
“There’s no doubt that online buying is easy,” he says, using clothes shopping as an example, “but there are people that still want to go out and see the clothes. These Walmarts and Sears stores that are being bought by developers and converted into multi-use, I think there’s a future in that. I think that’ll always be around.”
With its long experience in tilt-up construction, Headwaters is poised to expand this trend throughout the West Coast and beyond.