Retroactive sprinkler ordinance
may be dampening real estate market
Brookfield’s ordinance requiring the retroactive installation of fire protection sprinklers could be altered later this summer after discussions between property owners and city officials.
The code in question is a 1997 addition to Brookfield’s Fire Protection and Life Safety Code, which required that existing commercial-use buildings of more than 6,000 square feet be sprinkled by 2007.
Brookfield’s code may be the most stringent sprinkler ordinance in the state, according to local real estate experts.
The sprinklers were already required for new commercial construction projects exceeding 6,500 square feet in Brookfield.
Although adding sprinklers to an existing building in which plumbing is not exposed is an expensive undertaking, more than 5 million square feet of space in the city have been sprinkled to meet the code, Brookfield Fire Chief John Dahms said.
After talks with building owners and industry representatives, however, Dahms has recommended the city remove the sunset clause requiring comprehensive compliance by 2007.
The regulatory rollback would not include life safety structures, such as daycare centers, hospitals, nursing homes, churches and other buildings that house large numbers of people.
However, some building owners and their association representatives are not satisfied with the concession Dahms has recommended. The code, they say, would still pull buildings into the sprinkler requirement when they are sold or when as little as 25% of a structure is remodeled or expanded. Retrofitting would also be required when the use of a building changes.
"This is the most onerous sprinkler code in southeast Wisconsin, and it has to be repealed," said Christopher Ruditys, Commercial Association of Realtors executive vice president. "It just costs too much money. And because buildings have to be sprinkled before they are sold, it reduces the value of our members’ property."
Jim Glynn, vice president of real estate for Waukesha-based builder and developer Gerald Nell Inc., said the cost for sprinkling existing buildings is prohibitive – even before factoring in the cost for upsizing water mains to accommodate the increased flow.
"One of our affected buildings is 250,000 square feet," said Glynn, whose firm manages 2.5 million square feet of space in Wauwatosa, Brookfield, Menomonee Falls, New Berlin and Pewaukee. "The numbers we got suggest it will cost about $3 a foot on the retrofit to sprinkler them."
The $3 per square foot figure is consistently cited by Brookfield building owners.
"We started out getting quotes when we first heard of the ordinance," Larry Kreiter of SR Sales said. "We initially were hearing $2.50 to $3 per square foot. Now, they’re talking about $3.50 per square foot."
For Kreiter’s 30-employee firm, which distributes repair parts for construction machinery, the $350,000 it could cost to sprinkler its 100,000-square-foot Brookfield warehouse would be a real hardship. The company also has facilities in Pewaukee.
"This would be a substantial cost to us in terms of percentage of revenue," Kreiter said. "We’ve been here for 40 years, and no one worried about us having a fire before. It’s not like we have a lot of flammable materials stored here. The worst thing we have is the cardboard that some of this stuff is packaged in."
Michael Chmurski, corporate counsel for Megal Development Corp. in Brookfield, also is concerned about the costs that would be incurred to retrofit the three properties the company owns in Brookfield and another it manages.
For Chmurski, direct cost is only one issue.
"The cost is one part, and the inconvenience is another," Chmurski said. "It is one thing to put a sprinkler in it when it is built. It is another when it is occupied and you have people in your facility, moving your equipment, moving your inventory and the downtime associated with that."
"In the case of multi-tenant or office/warehouse buildings, you now you have to disrupt the tenant," Glynn said. "If you are sitting in an office building, would you want someone on a ladder above you digging a hole in the ceiling?"
Multifamily building owners also are affected by the retro code.
Mark Regal’s Regal Crest Village project has incorporated sprinklers since they were required in new construction in 1986.
"I’m not planning to sell, so the only thing that would trigger it for me would be the 2007 clause," Regal said. "We think this is outrageous, and we are trying to repeal a number of these amendments. It is going to be a fight, but I believe the new administration is coming forward to communicate with the business owners. It is going to be interesting to see what happens in the next few months."
Like the other building owners lobbying for a change in the code, Regal, who also owns property in Colorado, is experiencing sticker shock.
"We are looking at a cost of $1.4 million right now," Regal said. "We just finished up our last phase, but we are always putting money aside for improvements. This code obviously puts a damper on that from that end. We are finding out that people aren’t paying extra for fire sprinklers anyway. It is something you cannot pay for because people will just rent somewhere else."
Pipes too small
Many Brookfield property owners also face the additional cost and inconvenience of replacing the water laterals between buildings and water mains under the public right-of-way. Laterals installed before the sprinkler code was in place – and some installed after – are too narrow to accommodate the flow necessary to sprinkler a commercial building.
According to the City of Brookfield Department of Public Works, about 65% of the city is currently served by municipal water, with the remainder served by private wells. To get service, property owners pay for the water main, with the dollar figure determined by the number of linear feet of main necessary to cross the property. An additional assessment covers the cost of extending a lateral from the property line to the building.
The cost to install a lateral varies, depending upon whether a business is located on the side of the street the water main is. Prices for short-side laterals run from $1,200 to $1,300 for a 2-inch main or $1,600 to $1,700 for a 4-inch main.
A property owner would then have the additional expense of hiring an underground plumbing contractor to run a pipe from the lateral – which ends where the public right-of-way ends – to their building.
A smart business move?
While sprinkler proponents cite figures to suggest that retrofitting for sprinklers is a smart fiscal move, property owners are not buying the argument.
"There was a feeling among the aldermen that there would be a payback aspect to installing sprinkler system – lowered insurance," Megal’s Chmurski said. "That is just not the case. Given the maintenance fees associated with a sprinkler system, I don’t think you can even address the maintenance with reduced insurance."
Glynn cited the potential for water damage and flooding caused by freeze-ups as a potential hidden cost of sprinkler systems.
However, Dan Gengler, a Williams Bay-based regional manager for the National Fire Sprinkler Association, said fire sprinklers make good business sense for owners.
"It is emotional everywhere, primarily because they aren’t looking at what kind of fire protection they have," Gengler said. "These guys (firefighters) respond to medical emergencies. The fire department might be responding to another emergency somewhere else when you have a fire at your building."
With the threatened state cutbacks in shared revenue to local units of government, fire department budgets could be cut, putting unsprinkled properties at greater risk, he said.
That scenario should be a concern to lessees as well as owners, according to Gengler.
"They might have the best safety record, but their neighbor might not," Gengler said. "Approximately 80% of the businesses that experience a devastating fire do not reopen. Those kinds of issues can be monumental in the case of a strip mall."
Insurance rates should drop for property owners once sprinklers are installed, but Gengler said owners need to shop around to compare rates.
"They are not understanding that the insurance services organization offices develop ratings for communities as a whole," Gengler said. "If there is a sprinkler code and they comply with it, their insurance base scale goes lower. Then their insurance agent comes along, sees that the sprinkler system is in, and their rate goes down. And if once a sprinkler system is in and the rate does not seem to go down, you need to remember that insurance agents work on commission. Contact the home office, and you should be able to get a discount."
Fears of water damage from sprinklers also are unjustified, according to Gengler.
"People think that if you have a little fire that you will have water damage right away," Gengler said. "But they just don’t fail to the extent that the perception is there. It is only the sprinkler that is closest to the fire that goes off."
Moving out?
Building owners and commercial real estate officials contend the retroactive sprinkler code could be having a negative impact on Brookfield’s real estate market.
"There are plenty of communities in the area where tenants can go and not bear this financial burden," Glynn said. "Brookfield, in its infinite wisdom, has done something where they not only shun the business owners, but they shun the user. If you go to the tenant, the money isn’t there – nor is it sitting in the owner’s pocket… It has already deterred expansion and remodeling. They have gone to other communities."
Roger Siegel, executive vice president of The Polacheck Company Inc.’s Industrial Property Group, was hesitant to say there was a measurable exodus of businesses from Brookfield. However, Siegel identified regulation as a concern of businesses in choosing a location.
"I think that people do think about where they want to do business and how the regulations are and how friendly the regulations are," Siegel said. "While Waukesha County has been the preferred location, some of the regulations they have put in place are more severe, and people are starting to take notice."
According to Van Dyke, the retroactive provisions are problematic to small companies in hard times.
"I’ve seen some small guys who are hurting right now, and they can’t afford to put it in," Van Dyke said. "I have seen buildings where deals have fallen apart because of this sprinkler ordinance."
Aug. 30, 2002 Small Business Times, Milwaukee
