When we started RockStep Capital, we were doing ground-up development. I’m talking about buying raw land, installing utilities such as water, wastewater, storm, electricity, and natural gas to the site, and then collaborating with architects and engineers to design a comprehensive shopping center. At that point, I was doing it myself. I’d work directly with a civil engineer and architect to get everything moving.
But as the business grew, it got to a point where I couldn’t do it all. There were too many projects, too many moving parts. It became so much that we had to have construction management.
Now, our in-house construction management team plays a central role in almost everything we do. From getting tenants into existing spaces to building brand-new spaces, they ensure the job gets done right, on time, and budget. And honestly, I think it’s one of the biggest reasons we’re able to execute as effectively as we do.
And I’ll tell you—having construction in-house is one of the best decisions we’ve made.
What Our Construction Team Actually Does
Construction management usually starts with a letter of intent from the tenant. That letter outlines something we call “landlord’s work,” which is our responsibility to prepare the space.
If it’s second-generation space, we often have to overhaul it to meet the tenant’s prototype completely. This can include redoing the façade, raising ceiling heights, replacing the HVAC system, updating the flooring and lighting, and reworking the plumbing. We’re asking questions like, “How many bathrooms do you need? Where is the stockroom wall? What kind of electric service do you need?”
Once we know what’s needed, the construction manager must put a price on it. A construction manager must price out the work and, in some cases, assist the leasing manager in negotiating with the landlord.
From there, we assess whether the economics still make sense. If they do, we proceed to lease execution, and then the real work begins—coordinating with the tenant’s construction team, resolving outstanding items, and ensuring that space is delivered.
And I’ll tell you this: oftentimes, the more national the tenant, the more difficult and challenging that construction management piece is. They’ve got specific requirements and strict standards, and you have to be on your game from start to finish.
Why We Keep It In-House
People ask me all the time why we keep this function in-house. The short answer is that it works better.
It’s faster and lower cost, and you can control quality better. That’s the biggest thing. You’re not waiting around for an outside firm that has its own priorities. You’re not getting billed for things that don’t make sense. You’ve got your own people on the project, focused solely on your portfolio, and creating the best results for your team.
If we didn’t have our own team, we’d be relying on someone else. It could be an architectural company with a construction management component, or a firm that specializes solely in construction management. They work for numerous real estate investment firms, but we have never found one that is the perfect fit for us, which is another reason we keep construction in-house.
With our own team, we own the process. We can anticipate issues, make adjustments quickly, and avoid the need to navigate multiple layers of communication to resolve a problem. And “if you own it, you have better control.” That applies across the board.
The Advantages Of Having Our Own Team
Keeping construction in-house gives us flexibility, speed, and alignment. Here’s what that actually looks like:
- It’s faster and at a lower cost: there’s no back-and-forth with outside vendors.
- You can control quality better: we don’t cut corners because it’s our asset.
- It’s our own money: that makes us more disciplined with spending.
- The client is RockStep: our team works exclusively for us across all our sites.
Coordinating Across Markets
We’ve got properties all over the place, so we deal with a wide range of city codes and permitting processes. Our properties are geographically diverse, and that adds a layer of complexity. You’re dealing with different city construction planning and permitting departments and different city codes.
That’s where the value of having our own people really shows. We can build relationships with local officials, learn what’s expected in each market, and adapt quickly. You have to make sure that you have good relationships with the city and that you adhere to all of the requirements of that city.
When you’re relying on third parties who don’t know the market or the players, you’re taking on unnecessary risk. We don’t do that.
What Happens When Things Go Wrong
Now look, we’ve made mistakes. We’re not perfect. At the tail end of the COVID-19 pandemic, we encountered significant issues with the supply chain. We ended up experiencing numerous cost and delivery overruns because we were unable to obtain key electrical, HVAC, and other critical materials. It created a mess. We were delayed in delivering several tenants their stores, and we have faced some penalties.
That wasn’t fun. However, we took the lessons and improved. It’s crucial for us to have good bandwidth, good people, and good systems.
At the end of the day, that’s how you recover from a bad situation. By improving your infrastructure and being prepared for the next challenge.
Creating Value At The Asset Level
We’ve seen firsthand how valuable this model is. As we have done numerous TJ Maxx and Ross redevelopment projects, our internal construction team, combined with some of our go-to general contractors, has been able to deliver cost-effective and high-quality tenant improvements that have helped us make our deals profitable.
When you’ve got control over construction, you can make smarter investment decisions. You know what it’s going to take to get a space ready. You understand the timing. And you can underwrite deals with more confidence.
Plus, we can be creative. We especially get creative on value-oriented deferred maintenance, especially on older assets. That creativity translates into savings, and that makes a real difference on the bottom line.
Representing RockStep In The Field
Our construction managers do more than manage jobs. They represent RockStep in the community. They need to communicate with lenders, city officials, and local investors. In other words, they need to live the RockSteps.
They’re also the ones protecting our interests. Leadership is protecting us in our negotiations with the tenant. A tenant will always try to shift the cost onto the landlord. Our team knows where to draw the line and how to stand firm. That kind of frontline presence is hard to outsource.
Speed, Adaptability, And Efficiency
Our team is also key to helping us modernize our portfolio. We’re always looking for opportunities to improve efficiency and lower costs.
For example, we’re currently examining a center in South Carolina that does not have LEDs. We have found that LED lighting is light-years more efficient than traditional lighting. You get more lumens at one-third less the electric usage, and your payback is often in two to three years.
Our in-house construction team also helps us adapt space for different uses. Being able to adapt space for all types of use is an important part of our go-to-market strategy. That includes medical, wellness, and other non-retail tenants who have very specific buildout needs.
And expectations are changing. Retailers, developers, and investors expect everything to happen faster, plain and simple. That means our construction team must respond quickly and accurately to leasing requests so we can negotiate letters of intent and finalize leases with confidence.
My Final Thoughts On In-House Construction Management
Every now and then, someone will ask if in-house construction still gives us a margin edge. My answer is absolutely.
There’s no doubt that having in-house construction management gives us an edge because somebody has got to manage the relationship between the tenant and the landlord.
That relationship is everything. You need someone who understands the deal, the property, the lease, the budget, and above all, knows how to deliver on all of it.
That’s what our team does. That’s why we built it. And that’s why we’ll keep it that way.
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