OLD LOOK Home Depot is revising its traditional suburban format for city sites. (Photo by Tudor Hampton for ENR)
In typical tongue-in-cheek style, Home Depot likes to brag that it sells about 100 million gallons of paint each yearenough to cover the surface of Manhattan Island "with one good coat and still have enough left over to touch up the graffiti in the Bronx." That statement appears beside growth statistics on a company brochure decorated with its familiar white and orange, boxed-in logo. Though it may sound imperious to some, the notion of Home Depot painting the town orange is beginning to hit home for urban dwellers, as the mega-retailers construction program branches out from the 1,637 homogenized, "big box" stores sprawled across suburban America.
Hoping to reap profits from young professionals, rental-property owners, rehab do-it-yourselfers and local contractors, the company is moving to build stores with a sexier, new look, using what it calls an "urban neighborhood" prototype, first used in Brooklyn in 2002, Chicago this yearand coming soon to Manhattan.
Firms working with Atlanta-based Home Depot say the new prototype is refreshing. Scott Hindsley, principal of design firm Archideas Inc., Chicago, thinks the urban trend is tied to a re-emergence of downtown residential development. "We are seeing a lot more of these national retailers who want a presence there," he says. Rich Marshall, vice president of construction for the $58.2-billion-a-year retailer, freely admits that the program is driven by opportunistic goals. "Were in a very competitive world today," he says. "If we find inner-city opportunities, well pursue them."
Stock analysts call urban development a logical next-step for large-volume retailers. "As you continue to open more and more of the big-box stores, the ability to find real-estate and expand gets challenging," says Patrick Jeffrey, a New York-based corporate and government ratings director for Standard & Poors, which, like ENR, is part of McGraw-Hill Cos. Home Depots urban store format is "another way of entering newer markets," Jeffrey adds.
|UP SCALE Midtown Manhattan store within Bloomberg Tower is scheduled to open in 2004. (Photo by Guy Lawrence for ENR)|
With two pilot stores now complete and generating revenue, Home Depot has plans for deeper urban penetration. The mega-supplier is tackling Manhattan with two new stores, one measuring 83,000 sq ft inside a Midtown high-rise and another one at 108,000 sq ft inside a renovated Flatiron mid-rise. Both stores will have street-level entrances and multiple-level layouts. When the Manhattan stores are completed, the company says it will cover all five boroughs in New York City with 17 outlets, including one of its "Expo" design centers in Queens.
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Last April, Home Depot opened its second urban-format store in Chicagos densely populated, prestigious Lincoln Park district, on the citys north side. The four-story, mixed-use facility sports 100,000 sq ft of retail space on the first two floors, a 217-car parking garage stacked in two levels on top and 10,000 sq ft of additional office space. Sources say the design-build job cost roughly $16 million and took 12 months to complete. Marshall says the new urban stores cost three times more and take twice as long to build than larger outlets sited away from the inner-city.
Design firms and contractors eager for a piece of the action have a challenge. Home Depot and its construction demands are fierce, both in quality of work and scheduling. One general contractor says that of all the retailers, Home Depot is "a tough nut to crack."
|IN CHARGE Marshall leads retail companys national construction program. |
(Photo courtesy of the Home Depot Inc. )
Home Depot prequalifies its contractors annually and firms are invited to bid when a construction opportunity arises. Marshall says his company has been biding contracts using e-auctions for the last two years and the lowest bidder for the lump-sum contract wins. Such reverse auctions are a contentious issue among general contractors (ENR 11/3 p. 11). But the retailer will sometimes negotiate. "Occasionally, we will do negotiated deals where it makes sense financially and time-wise," says Marshall. This results in a cost-plus contract with a guaranteed maximum price, he explains.
Home Depot has a group of in-house project managers and typically uses two design firms to handle most of the interior and exterior. WD Partners Inc., Columbus, Ohio, does exterior design and siting work and Greenberg Farrow, Atlanta, designs and specifies interiors, floor slabs and electrical requirements.
After a contractor is selected, Home Depot will purchase and deliver all materials for the store. The owner, ranked 45 on ENRs list of Top Owners, will not tell the contractor how to build the project, but to construct it with these materials, says Marshall.
Home Depots store starts have remained steady through the economic downturn. Bob Nardelli, who in 2000 was named Home Depots chairman, president and CEO, has prioritized store openings to about 200 each year. But the business still experienced lower-than-expected sales in 2002, and reports indicate that Home Depot spent 31% less on construction at $724 million.
Marshall claims that this number is more representative of "efficiencies" in Home Depots construction pro-cess and does not reflect pure store growth. Earlier this year, the company announced it would spend $4 billion on store openings, takeovers from other retailers, relocations and remodelings.
Home Depots new urban push may be coming just in time for builders, as other retailers cut back on their construction by as much as 20%. "Theres a lot of interest," says William C. Thomas, project manager with McShane Construction Corp., Rosemont, Ill. Thomas worked with Hindsley and site developer JDL Development Corp. in a design-build joint venture on the Lincoln Park complex in Chicago.
These stores dont fit into Home Depots typical format. Inner-city logic dictates a smaller store than the usual 150,000-sq-ft concrete box, as well as a more aesthetic interior, free from the cracked, dusty floors and low-level lighting of some older stores.
Ironically, many of the rough-looking warehouse features of older Home Depot properties were part of the companys original marketing objective. In earlier years, Home Depot lured do-it-yourselfers and small contractors by making them feel as if they were in a warehouse serving "professional contractors." In reality, professionals only make up about one-third of total sales, although the company says it is trying to attract more with special services.
The gimmick paid off in billions, but one competitor, Lowes, Wilkesboro, N.C., is closing in with annual revenue of $26.5 billion and shoppers are flocking to buildings that are navigable, organized and well-maintained. "The customers today arent looking for skidmarks and sawdust anymore, theyre looking for a bright, clean store," says Marshall.
|NEW LOOK Precast concrete and glass facade gives a less-boxy look to new Chicago store. (Photo by Tudor Hampton for ENR)|
In terms of design and engineering, the Chicago store is unique and the Manhattan stores will follow the trend. For example, Lincoln Parks precast-concrete facade contains 10,500 sq ft of glass and aluminum curtainwall. For improved stability and site runoff, respectively, the building sits atop 88 caissons, 2 to 4 ft in dia, and has a water-detention system located under the parking ramp at the buildings south end. Inside, the lower concrete slab, measuring 12 in. thick, is rated at 650 psf, while the second-story slab, a 12-in.-thick, hollow-core design with a 4-in. topping, supports 400 psf, says Thomas.
"We affectionately called the reduced-size format Home-Depot Light," Hindsley says. "It challenges some of the architectural standards of the street. Its big, but its sensitive at the same time." The retailer owns the Chicago complex and leases the Manhattan properties.
Home Depot says its regular interior architect, Greenberg Farrow, which designed the Chicago interior, also is working on the Manhattan stores. They are slated to open next summer.