For top tier assets, base and effective rents are up by 3.1 percent and 5.2 percent, respectively, since 2023. Base and effective rents for Class B/C office buildings have dropped by 5.7 percent and 1.2 percent.

CBRE analyzed 4,350 new lease comparables across the Atlanta, Boston, Chicago, Dallas-Fort Worth, Denver, Houston, Los Angeles, Manhattan, Philadelphia, San Francisco, Seattle and Washington, D.C., markets.

READ ALSO: Net Effective Office Costs Edge Up

Top-quality, amenity-laden office buildings in prime locations are in limited supply and high demand. The report showed a growing rent base and fewer concessions for these properties’ tenants last year. Incentives include rent-free months and landlord-funded office space improvements.

“We expect those owners of prime buildings to continue to dial back concessions over the next 24 months, especially given the dwindling supply of premium office space coupled with a lack of new construction,” Mike Watts, CBRE president of Americas investor leasing, told Commercial Property Executive.

Top-tier buildings are commanding a premium, especially given that landlords are offering tenant-improvement allowances to accommodate high-quality fit-outs.

A bifurcated office market

Meanwhile, effective rents for lower-tier office buildings are slipping steadily. CBRE showed that landlords kept base rents relatively flat until the second half of 2024. At that point, financing requirements came into play in order to maintain property values.

Landlord concession packages topped out in 2023; however, they are still greater than in 2019.

For the lower-tiered offices, the tenants have the upper hand, given the high volume of available assets. Conversely, owners of the highest-quality buildings in the most sought-after locations are in great bargaining shape, given the flight-to-quality trend and diminishing new supply.

Last month, CommercialEdge reported that office prices have retreated and discounts are plentiful. The average price fell 11 percent year-over-year due to uncertainty and the continued domination of remote and hybrid work schedules, according to its February report.

In 2023, prices fell by 24 percent and since 2019, office values have dropped by 37 percent.

The post Office Owners Scale Back Concessions appeared first on Commercial Property Executive.

Despite advances in sustainable technologies and renewables, energy efficiency remains the primary goal for property owners and an increasing challenge as overall demand rises. That was a key theme at NYU Schack’s Annual Conference on Sustainable Real Estate, which gathered public- and private-sector executives and academics to discuss progress and aspirations for the future.

Brookfield, for example, has averaged a reduction of about 5 percent electricity usage over five years, said Michael Daschle, senior vice president of sustainability for the company. And, while it is not anticipating energy demand increases at the property level, it is “definitely factoring in” higher energy expenditures because of increased capacity and greater demand for electricity over time. “The budgets are increasing even as the usage is different,” he said.

READ ALSO: Power Tools for CRE Energy Eficiency

Hines is also focused on keeping its demand low while introducing innovations into the market, according to Benjamin Rodney, vice president of construction at Hines. The developer has installed solar at multifamily projects in jurisdictions that offer incentives, for example, and in New York City, it is pioneering the use of a geothermal energy network to power 345 Hudson St., which was recently renovated by Hines and partners Trinity Church Wall Street and Norges Bank Investment Management, and 555 Greenwich St., a ground-up development that abuts 345 Hudson.

Rodney said developers “are their own worst enemy” when it comes to energy pricing because they add to demand growth for the utility when they add square footage to the grid.  “The question is can I figure out a way to harness the energy coming in and reuse more of it before I have to ask for more,” he said.

In the case of some redevelopments, however, developers are significantly reducing demand. Daschle noted. After a renovation at 5 Manhattan West, Brookfield has improved the property’s performance by 40 percent on the energy consumption side, and at 660 Fifth Ave. the company installed “a complete new system”—and a new facade—to bring the building from 80 percent electric and 20 percent steam down to 95 percent electric and 5 percent steam,

“The performance of these redeveloped assets is much, much better and you kind of trend towards more electric over time,” Daschle said. “Then you’re also improving the climate emissions performance of the properties.” 

Waste not, want not

Both Hines and Brookfield have partnered with the New York State Energy Research and Development Authority’s Empire Building Challenge to help finance their energy efficiency projects.

Michael Reed, acting head of large buildings at NYSERDA, said that every real estate owner and operator he has worked with has identified a lot of waste heat and is interested in capturing it and re-utilizing it. He pointed to Hines’ Hudson Square properties as an example of a developer who is realizing the possibilities. At 555 Greenwich, there are 68 pile-ons in the foundation that store excess energy that would otherwise be wasted.

“And then,” Reed added, “once you start talking about how do we connect a building’s excess heat to a nearby building’s need for heat, I think you are really into an interesting paradigm, but that is a long-term play for sure,”

The post NYU Schack Special Report: Energy Efficiency Still Key appeared first on Commercial Property Executive.

After years of accelerated expansion, the U.S. industrial sector is now moving toward a more sustainable growth pace. Although the macroeconomic context could pose challenges, specific markets will likely continue to outperform.

One such market is Dallas-Fort Worth, which had 18.9 million square feet of industrial space underway as of December, second only to Phoenix with 22.4 million square feet under construction, a recent CommercialEdge report shows.

The metro was also among the country’s top markets for industrial deliveries in 2024. Demand for such assets in North Texas is mainly supported by the surge in population, steady job creation and the more affordable cost of living compared to other parts of the country.

Commercial real estate investment and development firm Holt Lunsford Commercial has been active in this area since 1993. Recently, the company completed Gateway Crossing Logistics Park, a 127-acre project in Forney, Texas, developed in partnership with Principal Asset Management. The three-building campus encompasses almost 1.8 million square feet of leasable space. Commercial Property Executive asked Managing Principal Canon Shoults his views on the prospects for industrial in north Texas.

READ ALSO: Industrial Real Estate’s Future Depends on Adaptability

How is the demand for industrial properties in Dallas-Fort Worth reflected in your portfolio?

Shoults: The growth of Holt Lunsford Commercial’s Dallas-Fort Worth industrial leasing and property management business has been lockstep with the surge in the industrial market here. Since 2020, the asset class as a whole has been the benefactor of the perfect storm in the North Texas area. The region is also strategically located to service several parts of the U.S., which is only compounded with our major international airport and multiple intermodal rail locations for both BNSF and Union Pacific.

Which submarkets in the area are currently more in demand and why?

Shoults: North Fort Worth and South Dallas represent the two submarkets with the majority of the bulk product. Subsequently, these two submarkets represented almost 70 percent of the overall market-wide lease absorption. Both offer access to key distribution routes, labor markets and rail intermodals. While still a very healthy overall industrial market, 2024 saw a decline in market-wide leasing activity. Much of this situation can be attributed to tenant uncertainty throughout the year related to the presidential election and interest rates. 

Considering the current economic climate, how do you expect the industrial market in north Texas to evolve?

Shoults: Forecasting into 2025, we expect the overall Dallas-Fort Worth industrial market to remain in demand, albeit at historical norms rather than unprecedented growth. However, rent growth is expected to slow or stall in some pockets due to current vacancy from recent deliveries. Manufacturing tenants, foreign companies and 3PL users will continue to be among the key drivers of absorption, as the region’s strategic location and transportation infrastructure continue to attract a diverse mix of businesses.

Despite the pre-COVID-19 normalization, we expect the region to outperform other parts of the country in 2025 as it continues to be the biggest benefactor of population growth, a favorable business climate and large-scale relocation efforts into the market.

What do prospective tenants look for when they choose to lease space at industrial facilities?

Shoults: In today’s market, understanding the tenant’s requirements is a must. This includes understanding their power needs, clear height, racking, office finish and parking needs.

For example, the Dallas-Fort Worth market is attracting more manufacturing-oriented tenants that need heavy power. There are important time and cost factors to discuss in those cases. In 2025, there will be increased demand from foreign companies and manufacturers. Tenants will continue to value Dallas-Fort Worth’s robust workforce availability and labor pools.

Tell us more about the industrial portfolio you manage and the ways you differentiate your properties in this competitive market.

Shoults: My team operates with a unique service philosophy that we’ve coined as our “10 Commandments of Industrial Leasing.” These principles guide every decision and help us create value for our clients. These “commandments” anchor how we operate and cover everything from how to make a standout first impression to what meaningful client follow-up looks like.

Another principle we follow is to ask thoughtful questions. We dig deep to understand the tenant’s needs and to thoughtfully sell the space. One of those key questions is: What are the drivers in selecting the right location? Details matter when helping a prospective tenant envision their future in your space. Understanding the details allows a brokerage team to maximize the value of the listing and formulate the best recommendation for the building owner for a shot at winning the deal. 

READ ALSO: Dallas Industrial Sales Take the Lead

How do you plan to expand your industrial footprint?

Shoults: HLC is doubling down on our relationships with key institutional owners. There is no shortage of institutional capital in today’s market, and the provider that can best service the market and create opportunities for the capital will continue to experience growth.

Development opportunities will continue to drive our business and identifying growing areas to build more industrial product is a priority. Additionally, identifying development opportunities allows us to partner with our clients and provide them opportunities to also expand their footprints.

What’s your outlook on the industrial sector for 2025 and beyond? Are there any emerging trends you’re keeping an eye on?

Shoults: As the Dallas-Fort Worth industrial market continues to evolve, we are seeing tenant needs and profiles change. Our market is evolving to attract more manufacturing uses and growing beyond just a distribution market. This also means that tenant needs are changing and in the coming years we anticipate access to power and fully climate-controlled facilities. A focus on functional industrial facilities will become a key factor when a tenant identifies a new facility.

The post Q&A: What’s Driving North Texas Industrial Demand? appeared first on Commercial Property Executive.

Pinkard’s 2 million square feet of office, flex/office, warehouse/industrial and retail space in the Maryland region have been added to MCB’s nationwide portfolio of operating assets totaling about 15 million square feet.

Pinkard co-founder Katharine Pinkard has been named senior managing director of property management for MCB Real Estate. MCB noted that its current property management division leader, Marty Lastner, recently announced plans to retire.

The acquisition boosts the number of MCB personnel in asset and property management from about 36 to about 50, an MCB spokesperson told Commercial Property Executive.

READ ALSO: CRE Compensation, Hiring Trends

MCB noted that it has in recent months acquired several varied assets that are widely separated geographically.

For example, this past September the company purchased a 368,000-square-foot Class A industrial facility in Howell Township, N.J., for $69.9 million. The seller of the newly completed Howell 1 was Active Acquisitions. MCB also signed a 15-year, full-building lease with a third-party logistics company.

The same month, a joint venture of MCB and a fund managed by DRA Advisors acquired Falcon Ridge Town Center, a fully leased 273,424-square-foot retail center in Fontana, Calif., for $64.7 million.

Given this steady growth, MCB President Gina Baker Chambers emphasized in a prepared statement the Pinkard acquisition’s importance in beefing up the company’s internal team.

Last June, Baker Chambers spoke at length with CPE about the challenges of development projects that are financially sound, environmentally sustainable and responsive to community needs.

Family history

Interestingly, the acquisition represents a kind of marriage between notable families with a historical connection. The Pinkard tradition began in 1922 with one W.C. Pinkard, whose grandson Walter Pinkard Jr. was in charge by the 1970s. Katherine Pinkard and her father, Greg Pinkard, founded Pinkard Properties in 2012, continuing the multi-generational tradition.

But here’s the twist. One of Greg’s brothers, Peter Pinkard, in 2007 was a co-founder of MCB Real Estate; he remains there as a managing partner.

Pinkard Properties’ Greg Pinkard meanwhile will serve MCB Real Estate in an advisory role.

Jarnell Swecker, managing director/marketing at MCB Real Estate, told CPE that while there hasn’t been any formal collaboration between the two companies (until now), “Baltimore is a close-knit market where everyone knows everyone … and Pinkard Partners, with their breadth of experience, matched up as the perfect partner for what MCB wanted to accomplish.”

The post MCB Real Estate Acquires Pinkard Properties appeared first on Commercial Property Executive.

The coworking sector is set for a dynamic 2025 due to further adoption of hybrid work models and more businesses embracing in-person work. But this doesn’t mean there won’t be any bumps along the way as the sector cannot operate in a vacuum.

“The worst of commercial office real estate is not past us, so while coworking may offer an opportunity, the underlying headwinds that commercial office real estate faces—expensive capital and stagnant physical occupancy—persist,” said CommercialEdge Associate Director Peter Kolaczynski.

To adapt to these unceasing challenges, office operators have been right-sizing their portfolios to include more flex offerings. This has not only transformed the physical environment of traditional offices, but also altered lease terms, as tenants today expect more flexibility in how and when they use their space.

Key trends in the coworking space

High demand for flexible offerings and mounting return-to-office mandates are two of the most prominent trends in the sector today. A recent WeWork survey found that 59 percent of companies plan to adopt flexible solutions over traditional offices to expand their workspaces over the next two years. Notably, 95 percent of remote companies looking to increase their office space favor flexible options.

LISTEN TO: Step Into My Office: CBRE’s Take on Rethinking Office Space and the Future of Flexibility

“We are continuing to see very strong demand off the back of this shift toward flexibility and that’s why we’re seeing our network grow at its fastest-ever rates,” said Mark Dixon, CEO of International Workplace Group. Over the past year, the company added nearly 900 new locations globally under its Regus, Spaces, HQ and Signature brands. Most expansions were in suburban and community-focused markets such as the Red Bank borough in New Jersey, but also in Milwaukee, and Boca Raton, Fla.

Until now, although 80 percent of organizations have return-to-office policies put in place, only 17 percent of them really enforce them, CBRE’s research found. But that number is anticipated to increase going forward.

“The biggest shift I expect to see is companies following the lead of recent RTO mandates and deciding to increase the amount of time they spend in-office, with more opting to go full-time,” said WeWork Vice President & Head of USC Sales Luke Robinson. “This will require flexible space providers to offer an ample variety of workspaces that can accommodate employees up to five days a week.”

More employees in the office means more conference rooms, communal areas and private phone booths, among others. Operators are already making changes to their office layouts as the focus rapidly shifts from where employees work to how they work.

“In 2025, we anticipate an evolution of business priorities with the conversation moving beyond the physical location of employees with companies requiring everyone to be in a single building to the productivity of workers and retention of talent instead,” said Dixon.

To respond to the increased demand for specific amenities and services that support teamwork and collaboration, operators are increasingly adding spaces that foster connection.

“(Employers) want workspaces that bring people together and they need amenities like technology-powered meeting rooms, flexible spaces designed to support diverse workstyles and event programming to help achieve that goal,” Robinson said.

Private offices, smaller conference rooms and virtual mailboxes are also increasingly popular, catering to businesses that seek professional environments without long-term commitments, according to Jason Anderson, president of Vast Coworking Group. Additionally, assistant services such as customizable call answering services allow business owners to focus less on admin work and more on their growth and customers, all while keeping that human element.

Shifting business models

To cater to the increasing number of clients, coworking operators have also been adapting their business models while keeping their focus on providing flexible, scalable and customer-centric solutions. Over the past few years, they have been more open to collaboration and networking. WeWork launched Coworking Partner Network, a partnership with Vast Coworking Group that allows tenants to access spaces across both brands.

“Our partnership with WeWork has been an industry first,” said Anderson. “I look at it as the beginning of a change in global coworking operations, modeled like the Oneworld Alliance in the airline industry.”

This strategic approach further reinforces the idea that operators need to leverage each other’s strengths to provide members with access to a broader number of locations and services. By combining suburban-focused partners with WeWork’s urban stronghold, these networks create more opportunities for hybrid and distributed teams, reflecting the sector’s pivot toward greater accessibility and choice.

“Franchising is the vehicle driving our expansion and we have always focused our growth on underserved suburban markets instead of hyper-growth CBDs, which complemented WeWork’s portfolio and solidified our partnership,” Anderson added.

Another way coworking operators have been catering to members’ latest needs is by adapting their membership options. For example, WeWork launched two digital products: WeWork All Access and WeWork On Demand. The first one provides access to 450 locations worldwide, whereas the second one has a pay-as-you-go model that allows tenants to book spaces and meeting rooms at 300 locations instantly.

On the leasing side, coworking operators have been embracing non-traditional agreements to provide companies with more control over their office footprint. From shorter lease terms to flexible capacity models, these changes are helping businesses remain agile in uncertain times.

“We had a tech company who designed their workplace strategy with 100 All Access passes and WeWork Workplace instead of a traditional private office, supporting their commitment to flexible work while giving employees the ability to access in-person space as they need it,” Robinson said.

As of November, Manhattan, Chicago and Los Angeles were the top metros for coworking space, with the latter emerging as the largest market for locations, with 277 spaces, CommercialEdge data shows. International Workplace Group’s Regus and HQ brands were the top operators, followed by WeWork, Industrious and Spaces.

Vast Coworking Group was one of the companies that expanded significantly in 2024. After acquiring Intelligent Office and adding 54 locations across the U.S. and Canada, Vast later opened 19 new locations across its franchise brands. International Workplace Group also added to its network, signing 200 new locations across the country. Industrious—which was recently acquired by CBRE—expanded its portfolio in major markets, adding two locations in Los Angeles: a 19,000-square-foot space in Century City, Calif., and a 20,752-square-foot space in Westwood, Calif. The company also doubled its lease at 860 Broadway in Manhattan.

What’s next?

Collaborations, portfolio expansions and the wider adoption of hybrid work models reflect the coworking sector’s resilience. Last year, most operators saw improvements across several metrics. After emerging from bankruptcy, WeWork registered a 9 percent annual increase for on-demand bookings as of October, while International Workplace Group recorded the highest revenue in the company’s 35-year history.

As operators continue to prioritize bringing offices closer to employees, particularly in high-demand suburban markets, Kolaczynski expects continued coworking growth in these areas. Meanwhile, traditional office owners in business districts will look to adopt more flexible options, either by creating their in-house coworking brands or by entering into partnerships with experienced operators.

READ ALSO: Elevating the Coworking Experience

“I predict that flexibility will remain key in 2025,” Robinson said. “This year’s return-to-office mandates have shown that companies see the office as critical to their success, but they have not made final decisions on how many days they will be in person.”

Besides partnering with each other more often, coworking providers must keep innovating to support evolving workstyles, and offer solutions that cater to both individual employees and large teams.

“Occupancy should increase given the recent consolidation by operators,” said JLL Head of Property Sectors Research for the Americas Scott Homa. “Management agreements will remain popular given capital constraints and the high cost of interior construction. We could see continued M&A activity and more franchising.”

The post Where’s the Coworking Sector Headed? appeared first on Commercial Property Executive.

Central business districts across many U.S. cities are not what they used to be. A once-in-a-century pandemic and its subsequent effects on work, travel and shopping habits has fueled an urban exodus that has yet to be fully reversed in cities of all shapes and sizes across the nation. In some cities, the roots of retreating businesses and residents go back further. Think auto-plant closures in Detroit and Hurricane Katrina in New Orleans.

According to data from the University of Toronto’s School of Cities, the median rate of change in foot traffic across many cities across the nation from May 2023 through May 2024 was negative 3.1 percent, with 33 of the 54 surveyed cities recording downward-trending levels.

Hybrid work and widespread layoffs in the tech industries share some of the blame, but their effects alone don’t account for the absence of people on streets. In the minds of many urban planners, it all boils down to perception. Downtown simply being a place to work is no longer a good enough reason to consistently spend one’s time and money there, especially amid longstanding safety concerns in urban cores such as Chicago and San Francisco.

The remedies to these urban ailments may look entirely different from city to city, but the general thesis is the same: They need to become places where people go of their own volition, where accessibility and experiences are equally as important as having the shiniest buildings. If developers and urban planners get this right, higher property values and tax revenues will follow.

Problems of perception

Pandemic or not, many of these declines can be attributed to the ways that urban cores across the U.S. have been built. They are biased toward the office sector. A report from Cushman & Wakefield, titled “Reimagining Cities: Disrupting the Urban Doom Loop,” found that 69.7 percent of space in regionally significant walkable urban areas is devoted to office, government or educational facilities. In contrast, living and playing spaces make up a respective 15.9 and 14.5 percent of space downtown.

“They’re all purpose-built around homogeneity,” said Brian Jencek, HOK’s director of planning and landscape architecture. “We tended to build our cities like bento boxes, where everything is compartmentalized by use. And many downtowns don’t offer midtown walkability or depth of experiences.”

And high office vacancy rates don’t help. “If people aren’t coming back and a building doesn’t have enough people in, say, the office part, they’re not using the retail,” observed Mark Rose, CEO of Avison Young, which, in a recent office utilization report, found office properties to be 60.8 percent as busy in 2024 as they were in 2019. In turn, empty ground-floor retail, or any inactivated urban space for that matter, elicits safety concerns from residents.

“The feeling that downtown is less safe than it used to be is probably because there are less people downtown,” said Michael Edwards, CEO of the Chicago Loop Alliance, a local business organization that supports the construction and preservation of walkable plazas, museums and entertainment, all backboned by a near constant schedule of public events.

Low-hanging fruit: walkability

Recent urban renewal initiatives emphasize aesthetically appealing lines of sight and event-filled streetscapes. Active corner restaurants, event spaces, quality landscaping and art installations all dovetail into appealing to as broad a population as possible, be it families, tourists or office tenants. The hope is that residential life may renew enthusiasm for living downtown.

“Yes, there are wonderful places to dine, but we stopped paying attention to the actual quality of the surface we are walking on, the trees that we are sitting under,” noted Jencek.

Even the lobbies of office buildings make a world of difference for passersby. Jencek’s firm oversaw the repositioning of JPMorgan Chase Tower in downtown Houston, which included the addition of an exterior plaza complete with trellises, synthetic lawns and a Louvre-style glass pyramid covering the building’s entrance. A once-lonely Joan Miró sculpture is flanked by an outdoor garden that feeds directly into the Theater District.

“If there are people on the street, it means that people are living and working there. Regardless of everything else, somebody is doing something right from a policy perspective.”

— Sheryl Schulze, Co-Managing Director & Building
Transformation & Adaptive Reuse Leader, Gensler

Additionally, accessibility through multiple footpaths alongside integrations with public transportation provides ease of access for otherwise reluctant pedestrians or employees seeking shorter commutes.
In a collaboration with New York City’s Fifth Avenue Association, FXCollaborative unveiled a design for reducing the number of traffic lanes from five to three, easing access to places like Museum Mile and Grand Central Station. “In the public realm, we need to reclaim and rebalance our streets to create more of an uplifting environment,” observed Dan Kaplan, a senior partner at the firm, which has also been involved in pedestrian-centric redesigns at Penn Station, as well as the lobby of 3 Times Square. “These are places where the cities and populations mix.”

For Hilary Bertsch, a principal & executive director at Perkins Eastman, which designed The Wharf, a 24-acre, 3.2 million-square-foot infill mixed-use district located along the Potomac River in Washington, D.C., the focus was “on the public realm and the podium,” even before a single construction worker started on the site back in 2014.

At a formerly decrepit fish market district, a mix of restaurants, retailers and residences line a one-mile pedestrian pathway. “From the fish market to waterfront park, there was an intentionality about the design for the public programs both on the outside as well as the tenanting on the inside of the ground floor,” Bertsch detailed. “It’s appropriate for all sorts of people, (from) someone during lunch at their office to families coming down there on the weekends.” With 6 percent vacancy, the Wharf’s office fundamentals provide proof of concept when compared to downtown D.C.’s vacancy rate of 21.1 percent, which is 170 basis points above the national average.

Edwards is a fan of the walkability and transit-adjacent accessibility strategy, and sees value in allowing pedestrians to do everything that could possibly be of interest upon exiting the Chicago Loop. “(The Loop) is a concentrated place, encircled by public transit system trains,” he pointed out. “You are standing in front of the Chicago theater, you can see where food row is, you can see where the park is going down to the lake. Once you are down there, you can walk to everything.”

Activation is everything

Having the nicest landscaping and most walkable urban centers means little if they aren’t lively and activated. When designing new projects, Smith Group, for instance, will often ask: “Is there a way to integrate daytime and nighttime functions?” according to Dan Kinkead, a senior principal & director of urban design at the firm. “Those are things we tend to look at with clients and developers.”

Flexibility is important, too. Seasonal retailers and food and beverage offerings give downtown character. “They’re no longer the restaurants or the museums you’ve been to 100 times,” said Jencek.

Biederman Redevelopment Ventures, a placemaking consulting firm, took this to heart in its curation of Midtown Manhattan’s Bryant Park. Be it for employees at Salesforce Tower or tourists from across the world, “you have a choice of getting food with movable seats, and then the other options are things that are there all day long—a reading room, pingpong and shuffle board,” detailed Dan Biederman, the company’s founder & CEO. Seasonal events include tours, a skating rink and classes in everything from beekeeping to birding.

Programming a space also creates a positive feedback loop, particularly for developers. Bertsch noted that while people have always visited the Wharf for various events, over time, the opportunities and momentum of the offerings have grown.

Above all else, Kinkead strongly advises urban planners and commercial real estate developers to “understand the context of the community itself.”

The “live” in live-work-play

In cities with blocks worth of vacant space, conversions to multifamily or more mixed-use space may seem to be the ideal solution, especially if the housing component is affordable for most residents. But from architectural, financial and even sustainability perspectives, this is often easier said than done. San Francisco, which is dealing with a rush of post-pandemic vacancies, for example, has almost no office-to-residential conversions on deck due to building code challenges as well as high development costs, according to Julie Whelan, CBRE’s global head of occupier research.

The best candidates are those with tighter floor-plate dimensions and window patterns that best suit apartment living, Kinkead said, with the Northeast being chock full of prime candidates.

But according to CBRE, Cleveland is currently leading the country in office-to-residential conversions with 3.5 million square feet of projects underway. “They have really done their best to remove the red tape around zoning, permitting and creating certainties around their process,” Whelan said.

For Sheryl Schulze, comanaging director & building transformation & adaptive reuse leader at Gensler, a healthy urban core boils down to sound policy—both from stakeholders and public entities. Schulze oversees the firm’s office in Ohio and has witnessed the apartment conversions firsthand. “If there are people on the street, it means that people are living and working there.” Schulze said. “Regardless of everything else, somebody is doing something right from a policy perspective.”

Read the February 2025 issue of CPE.

The post CBDs Get New Life appeared first on Commercial Property Executive.

In preparing the report, the law firm analyzed more than 950 purchase and sale agreements and over 500 property management agreements—data from the volume of transactions that DLA Piper handles in major U.S. markets. Overall, the company noted, deal volume in acquisitions and dispositions, including joint ventures, was robust in 2024, despite the still-elevated cost of capital.

Investors were particularly interested in downtown and metro areas in major markets such as Washington, D.C., New York City and Chicago. Among the states, there was “significant transaction volume” in urban and suburban areas across California and Texas, DLA Piper found.

Among non-residential property types, industrial still represented the highest percentage of 2024 investment deals in the data set analyzed in the report, but just barely at 12 percent, down sharply from 21 percent in 2023 and 20 percent in 2022. Office investment ticked up from 8 percent in 2023 to 11 percent in 2024, showing that the sector isn’t completely kaput.

Investment in retail assets was stable at 9 percent of the total in 2024, the same as the year before, and hotels dropped from 4 percent to 1 percent over the same period, the report found.

The steepest year-over-year rise in investment, however, was in data centers. As recently as 2020 and ’21, none of DLA Piper clients were acquiring data centers, and only 1 percent were in 2022. By 2023, 4 percent of the deals involved data centers, and by 2024 the volume had swelled to 9 percent.

READ ALSO: CBRE Survey Indicates Optimism by Investors

Despite these movements in investor interest, the fact of the matter is that residential properties totaled the most: 40 percent of all the 2024 transactions studied by the report, a figure that hasn’t changed much since the pandemic (though only 15 percent of investors acquired multifamily in 2019).

Financial contingencies up slightly

The report also covered financial contingencies among the universe of transactions handled by the company, finding a slight increase in the total percentage of transactions in which financing contingencies were present, up from 10.71 percent in 2023 to 11.11 percent in 2024.

“We saw a more noticeable shift between contingencies for loan assumptions versus contingencies for new loans,” the report explained.

Of the 11.11 percent of transactions where a financing contingency was part of the deal, the percentage of loan assumption contingencies rose from 7.14 to 8.64 percent between 2023 and ’24, while the percentage of new financing contingencies dropped from 3.57 percent to 2.47 percent over the same period.

The report chalked up those movements to the fact that, while interest rates dropped somewhat in 2024, in many cases a buyer can still obtain a better rate by assuming existing financing, which tends to date from the period before the anti-inflation hike in rates.

The report also found that the most common survival period for representations and warranties continued to be 270 days, a period common to 46 percent of the transactions DLA Piper handled in 2024. The number-two most popular survival period was 180 days, which had a 28 percent frequency.

Penalties for breach of representations and warranties didn’t change much between 2023 and ’24, the report noted, especially those deals with purchase prices below $125 million. Larger deals saw more movement to increase average liability caps, especially those of more than $300 million.

Property management trends

Property management fees continued to be toward the middle of the range, the DLA Piper report found, with most coming in between 2 percent and 5 percent of rent, with an increase in fixed fee arrangements.

The clustering of property management fees in the middle range was especially noticeable in the residential sector, where (for example) about two-thirds of fees for apartments came in between 3 percent and 4 percent, with a similar range for student housing and manufactured housing. Senior housing fees were higher, however, three-quarters of which were above 5 percent.

Among non-residential property types, fees were more widely spread. For industrial, 35.9 percent of managers charged 5 percent or more, while the rest charged anything from less than 1 percent to as much as 5 percent. Office and data centers likewise were scattered across the range of fees.

Construction management fees across property types didn’t change much in 2024, the report noted. Most residential management fees are higher than 5 percent, with senior housing an exception at between 2 percent and 3 percent. For industrial, 41.8 percent of construction fees totaled 5 percent or more, but nearly a third of such fees came in between 2 percent and 3 percent.

The post Which Asset Classes Stole the Spotlight in 2024? appeared first on Commercial Property Executive.

We’re ready to honor your achievements!

The 2025 CPE Influence Awards recognize the commercial real estate industry’s most noteworthy properties, projects and transactions. Does your office have unique design elements that attract tenants? Are you the top broker at your firm? Were you able to successfully reposition a property? We want to celebrate your successes.

Entries are due by 6/6.

We will be offering an early bird pricing until 3/28 of $275 for the first entry and $225 for each additional entry. After that, the first entry will be $325 and additional entries will be $275.

Explore our categories:

• Best Amenities
• Broker of the Year
• Brokerage Office of the Year
• Most Innovative Corporate Strategy
• Most Effective DEI Program
• Best Design
  • Data Centers
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Best Development
  • Data Centers
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Development Company of the Year
• Best ESG Program
• Executive of the Year
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Best Financing
• Humanitarian Award
• Interior Design
• Best Investment Transaction: Portfolio
• Best Investment Transaction: Single Property
• Best Lease
• Most Effective Property Management Program
• Property Manager of the Year
• Most Effective Repositioning/Redevelopment Plan
• Rising Star
• Top CRE Social Media Influencer
• Most Innovative Technology
• Unbuilt

The 2025 winners will be selected by a panel of judges representing expertise across all commercial disciplines. Interested in being considered for the judging panel? Email Jessica Fiur.

Winners will be announced and honored later in the year.

Questions? Contact Editor-in-Chief Jessica Fiur.

The post Enter the 2025 CPE Influence Awards appeared first on Commercial Property Executive.

The talent management and strategic advisory firm added that executive hiring increased “substantially” during the last two months of 2024, its latest real estate compensation and hiring pulse survey showed.

These results came from Ferguson’s data collection between October and November last year regarding 170 public and private real estate companies.

The results indicated modest salary increases of between 3.2 percent and 3.4 percent across employee levels and limited changes to bonus pools. Some 80 percent of public companies expect to raise salaries, while 54 percent expect to increase salaries for executive management. Mid- to junior-level positions will receive the most increases.

Those promoted are anticipated to average an 8.7 percent boost in salary.

The office and industrial sectors are forecast to perform worst in hiring and salary increases among all sectors.

‘Undeniable resilience’ in hiring market

“Today’s hiring market is robust, and its resilience is undeniable,” Lisa Flicker, senior managing partner, Jackson Lucas, told Commercial Property Executive.

“We are seeing confidence and certainty in the market that was truly missing last year,” Flicker said. She added that the boost has been driven largely by the relief that the election is over, and investors feel the shaky ground has steadied. Combined with a gangbuster December jobs report and the favorable dynamics across other sectors, real estate is poised for a great 2025.

“Our real estate executive talent advisory practice sees strong hiring plans in particular realms. Although borrowing rates remain stubbornly high, sellers have adjusted their expectations, and demand for top development and acquisition leaders has made a comeback.”

While hiring for C-suite and leadership roles continues to be extremely selective, Flicker sees many opportunities in investments and operations opening. “Overall, there’s a very positive outlook for the hiring market, and the story just keeps getting better.”

READ ALSO: For REITs, More Bright Spots Ahead in ’25

For example, Open Impact Real Estate said it plans to expand its team by 15 percent this year.

Open Impact Real Estate uses a salary bonus model in an otherwise commission-driven industry “to build a diverse team driven by excellence and passion for impact,” Stephen Powers, its co-founder, told CPE.

Crexi continues to invest in research and development to offer customers high-value solutions.

“We are hiring engineers to drive innovation and enhance our product offerings,” said Suzanne Harrison, head of talent acquisition at Crexi.

Crexi is hiring account executives to help scale its customer base and grow in new markets.

“With more account executives, we can increase our reach, build stronger customer relationships, and ensure sustainable growth,” Harrison added.

Blanca Real Estate has upped its hiring to bring more diversity to its service lines.

“We offer competitive salaries and compensation packages aligned with experience and performance,” Tere Blanca, founder & CEO of Blanca Real Estate, told CPE.

“We also offer attractive benefits, bonus and incentives programs for employees and brokers,” Blanca said. “I take great pride in the team that we have built and recognize that everyone plays a role in our collective success and therefore believe in rewarding our team both financially and through career growth opportunities.”

Real estate amenity supplier WithMe said it is increasing its workforce by 30 percent to match its growing demand, offering a 5 percent average compensation increase to reflect CPI growth, according to its CEO, Jonathan Treble.

The post CRE Compensation, Hiring Trends: What to Expect This Year appeared first on Commercial Property Executive.

As the corporate landscape continues to evolve in response to new realities, the office sector is undergoing a significant transformation that reflects the changing dynamics of the workforce and tenant expectations.

The hybrid work model has firmly taken root, prompting organizations to reevaluate their approaches to office space utilization.

“One can pull different data points to highlight stats they want to focus on, but my point would be that space demand is different and the market will need to adjust,” observed Peter Kolaczynski, associate director at CommercialEdge. This underscores the urgent need for adaptability in an environment marked by fluctuating occupancy rates and diverse employee needs.

The evolution goes beyond merely addressing immediate challenges. It signals a profound reimagining of office spaces, merging functionality with an emphasis on employee wellbeing and collaboration. As stakeholders look ahead, they recognize that today’s tenants prioritize not just location but also engaging, experience-rich environments.

Employers are increasingly favoring buildings with unique characters, reflecting a shift toward spaces that inspire creativity and foster connections among employees, according to Ted Koltis, head of real estate at Columbia Property Trust.

Key forces at play in 2024

In 2024, the office sector underwent multiple changes, largely driven by evolving workplace policies and persistent vacancy rates. Koltis noticed a marked push toward return-to-office mandates among large corporations, fostering a gradual uptick in office demand.

“Top companies realize the benefit of having their teams together in person. And, in response, employers recognize the importance of creating spaces where their employees want to be day in and day out,” Koltis said.

READ ALSO: Creating the Ultimate Employee Experience

However, challenges persist. Physical office occupancy remained stagnant at around 50-55 percent throughout the year, reflecting the enduring influence of hybrid work, according to Kolaczynski. “Our relationship with the office has fundamentally changed,” he told Commercial Property Executive, suggesting a need for long-term adaptations.

High vacancy rates, exceeding 17 percent in November, coupled with negative net absorption, were among the highlights for 2024 for Doug Ressler, manager of business intelligence at Yardi Matrix, who attributed this to an oversupply of new space. As a result, last year saw firms repurposing underutilized buildings into residential units, a trend linked to available financing and shifting space demands, though Ressler believes that conversions are not a complete solution.

On a more optimistic note, Ariel Bentata, founder & managing partner at Accesso, commented on the emergence of speculative leasing, with tenants increasingly favoring move-in-ready spaces as uncertainty looms. He also observed tenant expansions in response to enforced return-to-office policies, marking an encouraging shift compared to recent years.

Meanwhile, capital markets have been giving off mixed signals. Although the Federal Reserve’s rate cut in September spurred some investment activity, capital availability remains limited. Bentata explained that while the CMBS market is gradually improving, restrictive terms are curbing broader refinancing opportunities.

Altogether, the office market’s path forward was and remains complex, marked by the interplay of policy-driven demand increases, lingering hybrid models and regional disparities.

“While some markets, particularly in Florida and South Carolina, showed signs of recovery with increased rents and new developments, other regions continued to struggle with high vacancies and low preleasing commitments. These shifts reflect the ongoing transformation in how and where work is conducted, influenced by economic conditions, technological advancements and changing employee expectations,” Ressler noted.

The future of office stays flex

As the office sector heads into 2025, its evolution will continue to be shaped by the hybrid work model, demanding flexibility and adaptability across markets. Koltis anticipates a “pendulum swing” back toward growth in office demand, particularly as companies expand in sectors like law and finance. He is even positive about previously challenged markets, noting that Columbia’s 650 California Street property in San Francisco’s Financial District has surged to nearly 90 percent occupancy. This trend is echoed in the tech sector, with AI company Harvey doubling its footprint in New York City shortly after establishing a presence.

While growth is expected, flexibility remains a central theme. The rising demand for flexible workspaces, with hot-desking and hoteling systems allowing companies to adapt to hybrid work without needing a full desk-per-employee layout, enables employees to access office space as needed, making traditional office arrangements more efficient and minimizing unused areas, Ressler believes.

“There was a lot of talk in the early days of return-to-office that real estate footprints could be trimmed because of staggered hybrid attendance. We are not seeing this play out,” said Ressler. “Many organizations are choosing specific days for everyone to be present, and while strategies exist to manage peak demand, significant savings are largely not being achieved.”

So offices are evolving, with many organizations moving away from 1:1 desk assignments and embracing more focus spaces and collaboration areas, according to John Capobianco, creative director & senior principal of client solutions at office space workplace strategist, design and construction firm Unispace.

READ ALSO: Flexible Design for CRE Success

Today, the focus is on adaptable environments and team spaces. Many office designs are gravitating toward “plaza” and “park” models, creating collaborative zones and event spaces to foster interaction. This aligns with a broader emphasis on technology integration, with smart building solutions and cloud-based tools helping manage space usage and streamline operations for a hybrid workforce, Ressler noted.

And as workplace needs evolve, Class A spaces are expected to remain in high demand due to their amenity-rich setups. Bentata expects that hybrid models will push smaller and midsized tenants to expand their footprints more actively, while larger corporations will continue assessing their long-term space needs.

“It will be interesting to see if employer return-to-office mandates significantly impact office occupancy rates. While some companies are calling employees back to the office, others are aiming to attract talent by offering remote work options—yet enforcing these mandates continues to be a challenge. The overall outcome remains uncertain,” according to Damon Juha, real estate practice vice chair of law firm Saul Ewing.

2025 office trends and predictions

The office sector is poised to navigate a rapidly shifting landscape as companies strive to adapt to new realities and changing workforce needs. Flexible workspaces that prioritize open, collaborative areas rather than traditional fixed desks will better serve companies aiming to cultivate a dynamic office environment.

Chip Clarke, chief revenue officer at Transwestern, describes this as the industry’s transition from the “flight to quality” to a “flight to experience,” positioning office environments as rich in amenities but also rich in activities and human interaction.

Tenants are no longer just looking for high-quality buildings. They seek spaces that offer meaningful experiences and foster personal connections.

“Office tenants are increasingly focusing on location and amenities to encourage their employees to return to the office,” said Scott Sherman, founder & principal of Torose Equities. “Consequently, Class A office spaces are expected to outperform older Class B and C properties, especially in areas where the office market is struggling. Property owners which proactively invest in enhancing common areas will likely see significantly better performance compared to those who do not.”

And as office owners continue to modernize their buildings to appeal to more users, committing to green building practices to achieve long-term cost efficiency is also a huge focus. Ressler identified an increase in sustainable office practices as a top trend, expecting energy-efficient buildings, green certifications and eco-friendly materials to become standard.

Technological advancements will also transform the office landscape, with smart building solutions and AI-driven management systems optimizing operations and enhancing employee experience. This technological shift will help create more efficient and adaptable work environments, experts agree.

At the same time, recent research from Unispace found that among employees whose organizations have implemented AI, 49 percent report an increase in collaboration, while 34 percent indicate a decrease. While keeping pace with the effects of emerging technologies on the workforce can often feel like a continuous challenge, Capobianco underscores the need for flexibility and adaptability in design.

Geographic shifts will also influence market dynamics as companies consider satellite offices in suburban or rural areas to bring the workplace closer to employees’ homes. Bentata suggests that a favorable interest rate environment will attract capital back into the sector, enabling companies to address new demands and grow into larger spaces.

As the office sector evolves, creativity in space utilization will also gain traction. Kolaczynski notes a growing acceptance of office conversions as a viable option, driven by declining office values and increasing government incentives. This trend suggests that more buildings will pursue adaptive-reuse strategies. Additionally, coworking spaces are expected to take on a more prominent role as businesses refocus and adapt to new demands.

READ ALSO: Additional CRE Trends for 2025

Kolaczynski anticipates a rebound in construction, particularly for boutique or “jewel box” high-end office spaces with smaller footprints located in highly desirable areas, indicating a market where these ventures can be financially sustainable.

Strategic priorities for CRE stakeholders

Commercial real estate investors are adopting a variety of strategies to navigate the changing office sector landscape going forward. Priorities include creating hospitality-rich spaces, boosting inclusivity and strengthening environmental commitments.

Key to this transformation is Clarke’s “flight to experience,” prompting owners to ask, “How can we create the best workplace experience for our people?” To that end, Transwestern has introduced a director of hospitality to ensure office spaces deliver engaging, client-focused environments, reflecting an industry-wide commitment to transforming the traditional office model into something more dynamic and people-centric.

“All data points suggest workplaces must prioritize connection, enablement and adaptability, striking a balance between concentration, connection, variety and choice. As an industry, we have been speaking about the ‘inclusive’ workplace for some time, but there is a real effort to understand what inclusion actually means beyond providing an all-gender restroom. It has a real impact on talent recruitment, brand perception and an employee’s wellbeing,” Capobianco noted.

Thus, creating a compelling workplace culture will be crucial. Companies will emphasize diversity, equity and inclusion initiatives to attract and retain talent. The office will be seen as a hub for fostering community and collaboration, Ressler believes.

Ressler also pointed out that many investors are diversifying their portfolios by decreasing their exposure to traditional office spaces and increasing investments in alternative sectors, including industrial properties, multifamily housing and life sciences. These sectors are viewed as more resilient and capable of delivering better returns in the current market environment.

Investors are also increasingly adopting property technology solutions, leveraging AI, cloud-based systems and smart building technologies to enhance the management of commercial properties. Such technologies are instrumental in reducing operational costs and addressing the evolving needs of tenants.

In light of ongoing economic uncertainty, a focus on optimizing cash flows has become crucial for investors. Many are utilizing AI-informed financial management systems to ensure liquidity and position themselves to seize market opportunities when asset prices decline.

Furthermore, geographic diversification is becoming a priority, with investors targeting markets that exhibit signs of recovery and growth, particularly in regions like Florida and South Carolina. Collectively, these strategies reflect a proactive approach to addressing the challenges and capitalizing on opportunities within the commercial real estate sector.

“The three-word mantra of commercial real estate has long been location, location, location. But now it’s evolving into location, quality, experience. Owners, buildings and asset service providers who fully understand and embrace this shift will be best positioned for success as we move through 2025,” Clarke concluded.

Read the January 2025 issue of CPE.

The post What’s Defining Office in 2025? appeared first on Commercial Property Executive.

10. Warner Bros. Sells Burbank Studios for $375M

The entertainment company continues to occupy space at the property as primary tenant.

9. CRE Sentiment Index Hits All-Time High

The Fed’s easing of interest rates and the likelihood of an economic soft landing are key drivers behind this optimism, according to CREFC’s survey.

8. Top Projects That Will Reshape Seattle

From ground-up developments to neighborhood revitalizations, here are some of the projects that will redraw the metro’s skyline.

7. Top Commercial Property Management Companies of 2024

Find out which firms made CPE’s annual ranking of leading service providers.

6. Top Destinations for Corporate Relocations

CPE identified eight metros that are the biggest draws for company headquarters. Here’s where, how and why.

5. Meta Reveals Pick for $800M Project Site

Operations at the 700,000-square-foot data center campus will start in 2026.

4. 2024 Top Commercial Real Estate Developers

Find out which firms made CPE’s annual list of industry leaders.

3. AI Is Changing the Game for Data Centers: JLL

What this tectonic shift in the sector means for demand, development and investment.

2. What’s Next for Industrial Real Estate?

A deep dive into the sector’s trends, challenges and priorities.

1. 2024 Top CRE Brokerage Firms

CPE unveils the 20 leading firms overall—plus the top performers for investment and leasing—in our latest annual ranking.

The post Top Posts of 2024: Readers’ Choice appeared first on Commercial Property Executive.

International private equity firm Cabot Properties has selected Kidder Mathews Asset Services to manage an industrial portfolio of eight properties totaling 984,218 square feet in the Greater Seattle area.

The portfolio is a key assignment for Kidder Mathews because of its quality assets and scale and the fact that large portfolios in the 1 million-square-foot range rarely come to market for third-party management. The selection of Kidder Mathews expands the commercial real estate firm’s footprint in the market and its reputation for managing high-profile properties in the Western U.S. like Starbucks’ Seattle headquarters.  

According to a company statement, Kidder Mathews has built a strong relationship with Boston-based Cabot Properties through its brokerage division. Extending the collaboration into property management highlights the synergy between the firm’s divisions.

READ ALSO: Industrial Demand Slips, But Avoids a Slump

Kidder Mathews Senior Vice President & Market Leader Shelley Ryan will oversee the portfolio with Senior Property Manager Lorna Faxon.

The properties in the portfolio are:

• 4156 B Place NW, Auburn, Wash., 17,630 square feet;
• 875 A St. Auburn, 31,210 square feet;
• 25811 74th Ave. S., Kent, Wash., 32,064 square feet;
• 4620 B St. NW, Auburn, 65,555 square feet;
• 2606 16th St. NW, Puyallup, Wash., 170,592 square feet;
• 4417 192nd E., Tacoma, Wash., 281,181 square feet;
• 3941 and 3703 I St., Auburn, Wash., 385,986 square feet.

More management roles

Kidder Mathews Asset Services had its highest revenue to date in the last year and now manages more than 57 million square feet of space across 800 assets. In July, Lift Partners appointed Kidder Mathews to manage 530,384 square feet of property in Northern California. Kidder Mathews now manages about 1.2 million square feet of industrial space for the San Francisco-based company. That assignment added four assets in San Francisco and one each in Menlo Park, Calif., Mountain View, Calif., and Burlingame, Calif.

Logistics-focused fund

The management deal comes nearly a year after Cabot closed Value Fund VII with a total of $1.57 billion in equity commitments. The vehicle, including leverage, is being used to acquire, develop and redevelop $3.5 billion of logistics assets in the U.S., Europe and Asia Pacific, with most of the capital being deployed in the U.S.

Fund VII focuses on acquiring, developing and redeveloping high-quality infill industrial assets in dynamic supply-constrained markets across top logistics markets. The fund will target investments mainly in multi-tenant buildings between 50,000 and 250,000 square feet. When the fund closed in February, it had already closed or committed $1.2 billion of capital across 30 markets, including Seattle, Chicago, Atlanta, Amsterdam and Sydney.

The post Kidder Mathews to Manage 1 MSF Industrial Portfolio appeared first on Commercial Property Executive.

The holiday shopping season is in full swing and managing the increased foot traffic in shopping malls around this time of the year can be challenging, but Nick LeMasters knows exactly how to maximize success. He’s the CEO of Cherry Creek North, a walkable open-air shopping and lifestyle district close to downtown Denver, and has decades of experience in the retail real estate industry.

Commercial Property Executive talked to LeMasters about shopping mall safety during the busiest time of the year, what it takes to manage the influx of shoppers, as well as trends he’s seeing in the retail real estate space.

Beyond special deals and offers, what matters most to shoppers and how are retail managers responding?

LeMasters: Let’s begin with the basics: the blocking and tackling of retail real estate. Owners and property managers have an obligation to ensure the safety and convenience of the retail shopper and their tenants. Without these two fundamental conditions in place, it will be very difficult to attract customers. Properties that carry negative perceptions regarding personal safety will be challenged. Convenience takes the form of abundant parking and pedestrian access.

READ ALSO: Shopping Changed Dramatically. Retail Design Is One Step Ahead.

How have retailers and landlords prepared for the increase in foot traffic across their physical stores? 

LeMasters: Preparations for increased foot traffic are centered on two primary activities: inventory and sales help. Both activities need to be carefully balanced. Inventory levels should reflect current purchasing trends that customers have exhibited. Are there specific fashions, brands, colors, or other factors that will help to increase gross margins and minimize seasonal markdowns? No one wants to see a customer walk away disappointed that they were unable to secure the item(s) that they had intended to purchase.

In this current economic environment, workforce issues are a significant concern for retailers. Locating and hiring qualified staff has long been a priority for the retail community but the challenge has become greater given a limited supply of qualified applicants.

Are there any lessons from previous holiday seasons that retailers can successfully apply this year? What common pitfalls should they avoid?

LeMasters: Experienced retailers are constantly learning from previous holiday seasons. Those that are successful have learned to refine their offering and stay in touch with their customers’ wants and needs. The most common pitfall that retailers must be aware of is to ensure the proper training of their sales staff. The holiday season becomes all-consuming for retail managers. Despite the demands of the season, managers must make time to train staff members and provide guidance and clear expectations. A well-trained staff will go a long way to ensuring a successful and profitable holiday season.

In-store versus online shopping this holiday season—what will be the balance?

LeMasters: Despite the perceived threat that online shopping has become, one thing has proven to be true: The death of brick-and-mortar retail has been highly exaggerated. In today’s retail environment, online and brick-and-mortar retail have seamlessly coexisted. Online shopping will continue to grow but not at the expense of the physical retail store.

Customers have proven to be resilient and loyal to their favorite retail store. The social engagement and touch and feel of the merchandise cannot be replicated online. The best and brightest of retailers have learned that they no longer must choose between these two formats. They have adopted both and have found ways to satisfy the customers’ needs regardless of the format that they have chosen.

How much will experiential retail drive business success this holiday season?

LeMasters: Experiential retail—while growing in its importance—should not be expected to drive retail success in 2024. Landlords will continue to identify and place attractive experiential concepts in their properties—and they should. Apparel, jewelry, electronics, toys and other traditional gift items should be expected to carry the day for most retailers.

What are your expectations for retail real estate performance when it comes to urban versus suburban assets?

LeMasters: Landlords evaluate performance on a property by property level in every market in which they have a presence. Many central business districts throughout the country continue to experience challenges related to slow return-to-office policies thus reducing daytime foot traffic. Additionally, many of these same CBDs continue to be challenged with vagrancy, homelessness and perceived safety concerns. Urban centers that have effectively addressed these societal issues should be fine. Those that have not or have been unsuccessful may see continued challenges. In those markets, customers may prefer the suburban experience even though it may require a longer drive.

How can retailers leverage data analytics to improve their holiday season strategies?

LeMasters: Data analytics can be a useful tool in evaluating holiday season strategies. Analytics—when properly applied—can inform retailers on several levels. For example, the use of technologies like Placer.ai can reveal demographic information that is useful in targeting customers in specific zip codes and neighborhoods that fit the profile of those the retailer believes can be attractive and potentially profitable.

To what extent could shopping trends this holiday season impact retail real estate in 2025?

LeMasters: Shopping trends that emerge from the 2024 holiday season will undoubtedly affect retail real estate decisions in the coming year. Owners, managers and brokers will maintain a keen eye on emerging and existing retail concepts that are performing well. These concepts will be targeted for expansion into new markets or additional store locations within an existing metro area.

What final advice would you give to retailers looking to maximize their success during this holiday season and beyond?

LeMasters: To maximize success during this holiday season, retailers should focus on a few key actions. Hiring and training qualified staff is essential. Consider bringing on regular customers who already trust the brand and can speak from experience. Effective communication with customers is also crucial, leveraging social media platforms with engaging content, especially videos.

Creating a welcoming store environment with friendly staff, refreshments, music and activities can help engage customers for longer periods. Beyond the season, retailers should continue to evaluate their location and determine if it best fits their needs and that of their customer.

The post Unwrapping Holiday Retail Trends: Insights From a Denver Mall CEO appeared first on Commercial Property Executive.

On the massive exhibit floors of New York City’s Javits Center, there was plenty of buzz this week about one of retail real estate’s most pressing issues: how to find elbow room for retailers in one of the tightest markets in recent memory.

As retail’s postpandemic rebound continues on multiple fronts, the challenge is to find space that’s not only available, but helps retailers expand strategically, said professionals during ICSC’s annual New York City dealmaking show.

In some respects, one of the biggest challenges is a good one to have. Continuing its rebound, demand is climbing across categories. Overall non-mall occupancy is at 97 percent, a 20-year high.

READ ALSO: Shopping Changed Dramatically. Retail Design Is One Step Ahead.

“The reason there’s not much absorption is because there’s not a lot of available space,” said James Breeze, vice president of global industrial and retail research at CBRE. “We’re coming up to a point where rent growth is going to start to accelerate next year.”

The roster of prospective retailers angling for expansion is varied. A diverse group of foreign companies in apparel, food and beverage and experiential retail is in the mix, reported Barrie Scardina, president of Americas retail services at Cushman & Wakefield.

“Some are well-financed and ready for gateway cities,” she noted. Others are less experienced, and better off starting out in attractive secondary markets, such as Nashville, Tenn., Charleston, S.C., and Naples, Fla.

READ ALSO: Adapting Retail Real Estate to New Consumer Demands

The widespread supply-demand imbalance is prompting retailers to bypass conventional formats. Companies must sometimes be willing to depart from their generic prototypes; if the standard space is 50,000 square feet, then 20,000 square feet available in a good location may be the best choice, said Anjee Solanki, national head of Colliers’ retail services and practice groups.

New options for retail locations

Untraditional retail centers can sometimes be the best places to grow. Some brands that normally set up shop in regional malls or open-air lifestyle centers will find space in neighborhood shopping centers. Show attendees pointed to that trend as a sign of increased willingness to meet customers where they are.

More answers to retail’s space squeeze may emerge from downsizing plans, such as Walgreens’ announced intention to close 1,200 stores over the next three years. Solanki suggested that the sizes of those stores might make some of them attractive to expansion-minded grocers. In March, one such firm, Aldi, announced a five-year plan to open 800 new stores.

Another sign of consumer interest and the strength of brick-and-mortar is the planned return of several recently defunct brands to physical stores, under new ownership and in new formats, noted Kristin Mueller, president of retail property management at JLL. Bed Bath & Beyond, for example, is on track to return to stores in 2025, in spaces showcased by The Container Store.

Competition for space, and the high stakes of expansion, call for an intentional mindset. Those priorities are placing consulting services at a premium. “We’re definitely seeing retailer look to us for how they can continue to grow,” Scardina reported. Decisions about when and where to expand must be highly strategic and draw on sophisticated analytics. As a result, she added, “That advisory work is more important than ever.”

The post ICSC Special Report: Retail’s Big Space Race appeared first on Commercial Property Executive.

Can going to an office give you the same feeling as going to a hotel on vacation? Some commercial real estate players certainly believe so.

The rise of this hospitality-centric approach in CRE has been an ongoing conversation lately, especially in the office market, reflecting a shift to more experience-driven spaces. By incorporating high-quality services and touches, along with certain amenities and flexible layouts, work environments can support the work-life balance and cater to landlords’ need to attract tenants.

Presidio Bay Ventures, an investment and development firm with a CRE portfolio totaling 5.8 million square feet, is capitalizing on this approach. The San Francisco-based company is active in markets where there’s a walkable, bikeable community and where there’s density to support that, said Founder & Managing Principal Cyrus Sanandaji. One of the firm’s core initiatives is to create greater flexibility and incorporate more hotel-like amenities in its office space offerings. In this interview with Commercial Property Executive, Sanandaji shares his views on this growing trend.

READ ALSO: You Bought an Office Building. Now What?

Tell us about your current portfolio and how it reflects your approach to real estate development and investment.

Sanandaji: We’re focused primarily on larger mixed-use developments that often include a combination of high-density housing and commercial space, whether that’s office, R&D or retail, and a lot of public and gathering spaces, both public and private. We then layer on our management and experiential elements once the projects are built.

That’s been our primary key focus in the last five to six years as a company and that’s primarily driven by what’s happening in California and throughout the country, which is that we’re facing a severe housing shortage. We’ve reimagined how people commute and interact with work, postpandemic. And by doing so, emphasized a complete community in terms of being able to live, work and play all in the same area rather than having to rely on sitting in a car or bus or train and so on for hours of a day which takes people away from that work-life balance.

Our ethos is hospitable thinking. We’re trying to tap into this desire, this need that we’re seeing among our residents, our guests, our customers. They’re all yearning for experience and something differentiated.

This hospitable thinking, the more hospitality-focused approach in CRE, is a growing trend. How do you integrate it in your projects?

Sanandaji: I think that the early adopters who were leaning into this trend are going to see success. Our view is that today, when tenants have a tremendous amount of choice because of how much vacancy there is, are going to seek out unique experiences.

Real estate is not just an object. It’s an active partner helping our tenants run their companies, enhance the wellness, health and overall satisfaction of their teams. It plays a huge role in the employee-employer dynamic.

If we can create not just beautiful spaces, but functional ones that deliver a memorable experience, that changes the mindset. To us, it’s all about the people who occupy those spaces and how we make them feel about being there. If you can give them what they need and want, it will really make a difference.

What we’re calling flight-to-experience as opposed to flight-to-quality is our signature. We’re in the process of trademarking that now as the tagline of our management company, The Main Post.

READ ALSO: How Flight-to-Quality Is Leading the Flex Office Evolution

How have your tenants responded so far to hospitable thinking?

Sanandaji: You know, Springline is probably our most marketed project and has resonated in the industry and among tenants. When you look at that project and you speak to the tenants there, it’s obvious that our hospitable thinking is exactly what drove them to want to come and lease space in that building. It’s been our ethos for a long time, well before the pandemic. But the pandemic made it such that it was obvious that the human element is the most important factor in everything we do in real estate.

To what extent does this approach contribute to tenant retention and satisfaction, particularly in competitive commercial real estate markets?

Sanandaji: The retention component is yet to be seen because leases on the commercial side are at least 10 to 12 years long. On the residential side, we’re seeing it every day with a lot more renewals, as residential leases are one year long. The average in the market is about 50 percent of your building is going to turn over every year, which means the average stay is about two years. What we’re noticing is that average tenancy extends significantly longer and we believe it’s directly because of this.

The reason that the tenants are staying is explicitly because they don’t have alternatives in the market. Meaning that they’re excited about being there because it’s a unique offering. And even if a lot of other buildings and new construction start to do this, our view is that’s because buildings aren’t static, they’re a dynamic ecosystem.

Do you think you’ll soon see the same result as in multifamily, considering that commercial is typically a bit more volatile?

Sanandaji: When you look at lease absorption and the rental rates that we’re achieving in the office sector, it’s obvious that flight-to-experience is a significant factor in driving lease absorption. So our ability to fill up a building when the rest of the market is almost 40 percent vacant, in San Francisco for example, is significant. We also do extensive tenant surveys to gauge their sentiment and those have shown that the general satisfaction across a bunch of different variables is substantially higher than in the market.

Buildings where residents and tenants are experiencing this type of management are seeing substantially higher positive readings in terms of intent to renew. A lot can change in 10 years, but if we continue and regularly check back in with these surveys and have direct interactions with our tenants, and maintain that level of service, a renewal is certainly more likely.

READ ALSO: Growth in Office Tenant Costs Moderates

What are some specific features that make a commercial real estate space feel more hospitality-centered?

Sanandaji: Every building needs to be contextual and the design needs to be responsive to its surroundings. Ultimately, that means we must evaluate what offerings exist in and around the building and figure out what’s in demand, which is more of an art than a science. It’s figuring out what the community, the neighborhood and future target tenants are seeking.

Once we identify what that is, we start to incorporate the programming, so the actual amenity design, the layouts and also the service offering. It has to do with the design of the space itself, the furniture selection, the color palettes. It has to do with all the physical aspects, but the physical must be designed to be able to support the operations that are intended.

We generally look at these things in three categories. The first is community events engagement, that component of human connection. The next bucket is health, wellness and sustainability. Finally, there’s productivity. I say productivity is the last of the three in terms of importance because if you have the first and second, it’s guaranteed that you’re going to have a very productive and happy workforce.

Based on these three premises you mentioned, could you give us some examples of amenities you like to include in your projects?

Sanandaji: For productivity, we found that a lot of companies grow fast. They may not know what they’re going to look like in two or three years, what their headcount will be, what type of work they’re going to do. So, providing a flex offering is extremely important because it gives them the comfort that they can commit to signing a lease in the building. As their work and business evolve, they’re not hindered or stuck with that existing footprint that they’ve leased, they can flex up and down in other components of the building, whether that’s overflowing into a coworking space or leveraging a conference center.

On the health, wellness and sustainability side, there’s a lot of focus now in society on your health, whether it’s mental health or physical health, and tracking that is important. We have implemented a series of technologies into our buildings including smart sensors that measure indoor air quality, carbon monoxide levels, temperature levels, humidity levels, all the things that actually could affect people—especially if you consider living in Northern California, where wildfires are unfortunately a thing we have to deal with.

READ ALSO: The Office of the Future

We also have custom apps for the projects, where tenants and their employees can look and see the power consumption in their space, the water consumption, or how much solar we’ve generated that day. It’s giving our tenants the ability to see their actual impact on the environment and the impact of the building on their health, as well. Another more obvious example is that we have a full spa and fitness offering to make it feel like you’re at a hotel or a nice country club.

On the community side, we’re looking to bring not just the tenants within the building together, but also people from the area, vendors and partners, and create unique experiences. We have speaker series, like TEDx-type talks, product launches and beer and wine tastings with featured partners of ours. We also bring in a mobile pet grooming truck and we tell everyone to bring their dogs to work. Things like that give people a sense of community.

And last but not least, what’s next for Presidio Bay?

Sanandaji: Now we have a great opportunity to buy distressed and existing buildings or projects below replacement cost. We’re being very aggressive and buying these assets and implementing this strategy in the long term. At the same time, we’re also spending the time entitling and designing a lot of these projects and that’s allowing us to have a lot of projects shovel-ready for when the economy does come back and development is once again viable.

We have an opportunity here to essentially fill our pipeline for the next five to 10 years by doing this. To me, that’s the focus and that’s going to be our focus for the next two to three years. Thereafter, we’re going to buy or invest in development and ground-up development.

The post When Office Meets Hospitality: A Love Story appeared first on Commercial Property Executive.

Office visits in October this year were compared to October 2019. While traffic numbers continue to play catch-up, the latest data is the highest recorded since February 2020. And we all know what happened after that.

The firm’s index analyzes foot traffic data from over 700 commercial office buildings in key markets, including Miami, New York City, Atlanta, Dallas, Washington, D.C., Boston, Chicago, Denver, Los Angeles, Houston and San Francisco. It includes those with retail (such as a coffee shop) on the first floor. Mixed-use buildings are not included.

New York City was the most active market, with October visits at 86.2 percent of October 2019’s levels, followed by Miami at 82.6 percent.

“Office attendance in NYC has picked up, but nowhere near 86.2 percent of October 2019’s levels. Even on the best of days, you still see noticeably fewer people on the subway, picking up lunch, etc., than pre-pandemic,” Pierre Debbas, co-founder of Romer Debbas, New York, told Commercial Property Executive.

“We have likely hit a new norm in office attendance given that the major corporations who planned on enacting mandates have already done so, and small businesses continue to reduce their office exposure or continue with the flexibility of their workforce,” Debbas added.

READ ALSO: Innovative Solutions for Return-to-Office Challenges

South Florida continues to lead the nation in return-to-work, according to Matthew Schnur of the Fort Lauderdale Downtown Development Authority. Fort Lauderdale employees have returned to the office at a rate 20 points higher than the national average for the past four years.

From Fortune 500 headquarters to major professional services firms, downtown Fort Lauderdale’s offices remain buzzing with activity and have added more than 3,000 new jobs over the past year. 

“Cities like Fort Lauderdale provide a roadmap for how major employment hubs can bounce back in the post-pandemic era,” Schnur said. “With over $350 million of investment in public spaces underway, thousands of new apartments, 50 new restaurants and multiple cultural venues opening over the past four years, we’ve built a dynamic downtown full of new experiences.”

Markets with significant return momentum include Washington, D.C. (16.4 percent), Boston (15.6 percent) and Atlanta (13.8 percent).

One-third mandate in-office, full-week

More companies are requiring employees to work in the office full-time. About 33 percent of U.S. employers mandate full-time in-office work, which is expected to rise slightly in 2025, according to Doug Ressler, business manager at CommercialEdge.

He told CPE that hybrid models remain popular despite the push for more in-office work. Many organizations balance remote and in-office work to accommodate employee preferences and operational needs.

There’s a growing trend of employees finding ways to navigate these mandates, such as “coffee badging,” where they briefly show up at the office before working remotely.

HR leaders are increasingly caught between executive demands for in-office work and a workforce that prefers flexibility. This tension will continue, requiring HR to enhance their data tracking and policy enforcement skills.

“More companies are expected to reconfigure their operating models by leveraging freelancers and contractors, supported by AI and automation,” Ressler said. “This approach is anticipated to grow from 27 percent to 33 percent of organizations globally by 2025.”

According to Ressler, the conversation is shifting from where employees work to how they work. “Embracing AI, flexible talent strategies, and hybrid work will be crucial for success in the evolving macroeconomic environment. These trends highlight the dynamic nature of the workplace and the need for employers and employees to be flexible and adaptable,” he added.

In September, Inspired by Somerset Development, the firm behind Bell Works in New Jersey, announced more than 75,000 square feet of new and extended office leases. These deals have brought the property to a 98 percent occupancy rate, according to Ralph Zucker, the firm’s CEO.

“We’ve seen consistent year-over-year growth in daily employees returning to the office at the highest levels since 2020. This further underscores our metroburb model, which encourages employees to be in person,” Zucker said.

Food lures employees, makes them happy

In Grace Hill’s KingsleySurveys, tenants were asked about their in-office policies. The three categories of in-office policies included required full return to office, mandatory partial office attendance and optional office attendance. Optional office attendance declined by 3 percent from 2023 to 2024, while mandatory partial office attendance and required, full return to office increased by 2 percent each.

“If you’re trying to keep your tenants satisfied when they’re in the office, we highly recommend focusing your efforts on food amenities,” Jen Tindle, vice president of Strategic Insights at Grace Hill, told CPE.

Grace Hill’s KingsleySurveys also asked tenants for their top three amenities requests. Based on hundreds of thousands of responses, seven of the top 25 were related to food.

Guckenheimer for instance focuses on workplace dining programs.

“We’ve seen client employees leveraging on-site food at or above pre-pandemic levels on Tuesday, Wednesday and Thursday, with “shoulder days” Monday and Friday at about 50 percent,” said Guckenheimer CEO Paul Fairhead.

“That reflects what is becoming the standard in hybrid work models. We have also found participation on shoulder days is directly related to commutation—if someone’s commute is an easy suburban drive, the numbers are up,” he observed. If the commute is longer and more arduous, the drop in population is even more prominent.

“Through entertaining activities, agility in labor solutions and space programming, as well as creative menu-ing, however, we’re building a little FOMO among client employees and gradually driving greater participation on the shoulder days while remaining cost-neutral compared to the rest of the week.”

More in-office days for tech workers

“We continue to see increasing occupancy trends within the technology sector,” Robert Kolar, division president, technology, JLL Work Dynamics, told CPE. He added that many tech companies are putting forth more specific return-to-office policies and measuring show-up rates differently now than a year ago. Furthermore, employees are also more acutely aware that time in the office is noticed and, in some cases, tracked more closely, which is influencing behaviors.

In JLL’s 2024 Future of Work Survey, 43 percent of technology respondents expect the number of in-office days to increase between now and 2030.

“Gateway cities see the strongest trends of increased office attendance, such as New York City, where numbers are closing in on pre-pandemic levels,” Kolar said.

“Office activity further supports retail, hotels and restaurants, creating a more vibrant local economy in the places where activity levels are improving. The upward trend in 2024 will continue into 2025 as employer expectations are more clearly communicated and employees adapt to those expectations.”

Return to office boosting economies nearby

The increase in foot traffic is seemingly due to the push for return-to-office across industries, according to Robert Sandler, real estate + leasing partner with Farrell Fritz, New York.

“This, in turn, creates a more active and healthy commercial office leasing market, but there are some caveats to that,” Sandler said. “The Class A and higher amenity buildings continue to outweigh older buildings, as many struggle. Clients who invest and upgrade their properties fill their offices at higher occupancy rates.”

Major employers have slowly been mandating more frequent in-office days for employees, according to Todd Monahan, executive vice president & managing director of WCRE/CORFAC International.

“Once reluctant to force a return to the office for fear of losing valuable employees, employers now insist on at least two or three days in the office each week,” Monahan said. Downtowns and central business districts are noticeably more populated, especially on Tuesday, Wednesday and Thursday.

Employees who changed jobs once or twice since 2020 are now reluctant to move simply due to the ability to work remotely, Monahan observed. “Especially now that those options are slowly evaporating, given that most employers are mandating a return to office.”

READ ALSO: Why Slow Return-to-Office Doesn’t Threaten Office REITs Now

In San Francisco, downtown’s high-rise office district is seeing a gradual return of office workers boosting ground-floor retail and dining. But this doesn’t capture the full picture of the city’s rebounding strong economy, according to Ali McEvoy at Maven Commercial.

“Many of the city’s neighborhood corridors are thriving, with vacancy rates below 10 percent—and sometimes under 5 percent. Cafés and nightlife are buzzing again, thanks to a mix of tourism and residents, and, yes, a growing portion of returning office workers.”

People are returning to the workplace in San Francisco, confirms Ed Del Beccaro, executive vice president & San Francisco Bay Area regional manager at TRI Commercial Real Estate Services/CORFAC International. More employers are demanding it, as are some co-workers, he added. However, as leases come up for renewal, some tenants are downsizing their office space, generating higher vacancy rates.

“We see more people on Tuesday, Wednesday and Thursday and less on Monday and Friday. So, adjoining retail sites still are not getting pre-pandemic foot traffic. But good news: Back to work.”

Flight to quality wins the day

The office sector’s flight to quality positively impacts office traffic trends in markets such as Salt Lake City, where the average office rental rates are up from last year, according to Tim Helgeson, senior vice president at KBS and asset manager for Millrock Park.

“With companies like Amazon and Starbucks encouraging employees to return to the office five days a week, the trend is clearly on the rise,” Helgeson said.

Since January 2023, KBS has signed 106,912 square feet of new, renewal and expansion leases at Millrock Park, a four-building, 494,289-square-foot Class A office park in Holladay, one of Salt Lake City’s most desirable submarkets.

“This continued leasing momentum at Millrock exemplifies the overall appeal of best-in-class office space in key markets throughout the country,” he said.

According to Colliers, Salt Lake City’s average asking rates for office leases have steadily increased, particularly downtown.

“Some industries are not only maintaining their current office footprints but also expanding them, such as professional service firms,” Helgeson observed. “Many of these companies are attracted to well-located, highly amenitized office properties as they seek ways to attract and retain top talent.”

Hybrid model is ‘the norm’

Companies are walking a fine line with employees when dealing with returning to the office or working from home, according to Robert Martinek, director at EisnerAmper.

There are still a vast number of employees who want to work remotely indefinitely, he added, but the hybrid model is now the new norm. “This allows flexibility for everyone in the company. After the pandemic forced many workers to work from home, we see people slowly trickling back into the office.”  

The vast majority of respondents say there are benefits to having employees in the office versus working from home, according to Martinek. Business leaders cite improved communication, creativity, productivity and company culture. Additionally, some companies offer incentives for employees to return, including catered meals, commuter benefits and higher pay, he added. Younger staff often go into the office seeking interaction and guidance.

“Some people indicate they will leave their jobs if a strict return to office is implemented. However, I suspect as the labor market loosens and fewer jobs become available, more people will return to the office regularly.”

More productivity when employees show up

When businesses in the same industry compare themselves to their competitors who are back to the office versus their remote policy, remote office revenue is not as high, their culture is less dynamic, and their ability to retain and attract talent is not as strong, according to Gordon Ogden, executive managing director in the New York office at Bradford Allen.

“Mandates are being won by businesses who show up in person versus a Zoom call. In-office is recognized as better from top to bottom and bottom to top,” Ogden said. Executives believe their businesses are more productive when everyone is in at least four days per week and, ideally, five unless there are employees who have commutes over two hours each way, in which case four days per week is acceptable.

“Employees have found that social interaction is welcome, and amenity-laden offices have benefits not found at home. Many employees appreciate the energy of colleagues, synergies created to accomplish tasks, and the change of scenery between home and office.”

Ogden said most businesses have found that technology solves the mechanics of remote work. However, most workers require in-person social interaction to advance business goals and objectives, he observed.

And while the return-to-office trends are not unique, according to Philip Metzger, senior designer at IA Interior Architects’ Denver studio, the city’s mile-high goals bring unique challenges.

“Finding the right location is essential for brands and teams,” he said. “Still, the real catalyst is the need for intentional, high-functioning spaces as committed to impactful design as those who use them. The best workplaces are purpose-driven, embracing thoughtful amenities and designs that foster genuine connections and echo our region’s active, adventure-driven spirit.”

Office culture is undoubtedly returning in Denver, Metzger told CPE. “Still, at the same time, we are blazing new trails, with brands and people drawn by the unique opportunity to be in the heart of the country and combine vibrant urban life with the Rocky Mountain experience.”

The post Return-to-Office Traffic Reaches Record Level appeared first on Commercial Property Executive.

The message put forth by panelists across CREtech New York 2024’s second day was clear: using technology for nearly every aspect of operations may seem appealing, but it only truly makes sense when it aligns with the specific goals, resources and tenant bases that the stakeholders are serving.

These sentiments were seen the most in discussions about retrofitting properties to be more energy-efficient, sifting out practical uses of artificial intelligence when it may be unnecessary, as well as in discussions about the most practical investments for climate-concerned venture capitalists.  

Myths and facts

On the decarbonization front, a panel of sustainability leaders debunked myths around the high costs and feasibility of retrofitting office and multifamily buildings, with a focus on New York City.

Jonathan Lemmond, senior director of sustainable operations at JLL, pointed to regulations such as Local Law 97, as well as grants from New York State’s Energy Research & Development Authority as creating the perfect opportunity for retrofitting mechanical systems and implementing clean energy-focused technologies. “The capex invested in these actions results in lower operational costs, higher energy security, as well as regulatory resiliency and improved employee attraction,” Lemmond said.

LISTEN TO: Sustainability Street: Inside CRE’s Flood Insurance Quandary

But a lot of these high costs can be avoided if owners and operators are able to accurately monitor their energy consumption. “The reality is that this myth of it being expensive and complex can easily become a truth unless teams are using a data-informed process to make strategic decisions,” said Jennifer Chalos, a senior sustainability consultant at Arup. At the same time, Chalos advises stakeholders to do the best they can, acknowledging the difficulties of replacing a gas boiler with expensive and heavy heat pumps. “It’s a journey, it can be implemented over time, and it doesn’t have to be all or nothing,” Chalos said.

In fact, retrofits may not be a choice for some owners and operators, given that two-thirds of Fortune 500 companies have significant decarbonization goals, according to Lemmond. To this end, Lemmond sees some decarbonization initiatives as stemming more from the energy consumption habits of landlords and tenants than a particular BMS or the installation of heat pumps. “These changes may not be a tech-solvable issue,” he said.

Climate tech investors share many of these views, seeing adaptability and speed to market as the most promising aspects of a start-up, especially as the country has already exceeded its 1.5 degree Celsius worldwide average temperature increase. Now the focus is shifting from prevention to adaptation. “We’ll blow past 2 degrees; we not only need to be thinking about how we need to reduce carbon emissions, we also need to be thinking about adaptive technologies,” advised Raj Singh, managing partner at JLL Spark. “Some of these strategies are quite risky, and I really hope that we can avoid some of them,” he said.

AI: sifting through the hype

Another area where panelists were more sober-minded than sales-oriented was in the investment and implantation of artificial intelligence platforms across operations.

Scott Rednor, managing partner at Red Bear Capital sees artificial intelligence as being best suited for augmenting existing technologies and facilitating the analysis of data akin to that mentioned by Chalos, rather than an outright replacement for them. “Our products and services that we are building in the ecosystem are for working with real estate companies, not trying to displace them” he said.

This extends the brokerage side, where the panelists advise making AI more of an improvement and a way of combining for Microsoft or Google productivity programs and CRMs, or as Cushman & Wakefield’s Jason Greenstone put it, “making it a cohesive product vs. a Band-Aid.”

To determine if an AI platform is the right fit, Greenstone suggests sorting possible solutions into one or two platforms: nice to have and need to have. “Solving a permitting problem is a need to have if you’re McDonald’s and opening stores, but a CRM is something that you likely already have,” he said.

Where AI becomes more of the latter, however, is in more competitive tasks such as foot traffic monitoring. “For instance, if someone would ask for traffic counts, we would place four people on different corners of the street,” Greenstone said. Now, operators can just use Placer.ai.

In the end, the technologies’ rapid evolution may lead to uses of AI becoming the deciding factor for the adoptions of certain proptech solutions over others. “It will happen the minute someone walks into a pitch and loses it because a client says, ‘we picked them because of the AI technology’,” Greenstone predicted.

The post CREtech Special Report: Practical Tech in Tough Times appeared first on Commercial Property Executive.

Americans’ appetite for eating out is not going anywhere, with many of them spending more time and money dining out.

The average household allocated more than 53 percent of its food budget in 2023 to meals away from home, according to the U.S. Agriculture Department’s Economic Research Service. This record-high rate marked a 10 percent increase since 2003, and generated a 5.4 percent growth in sales for restaurants, as reported by the National Restaurant Association. This surge in dining out is not only boosting restaurant revenue, but also transforming commercial real estate.

DJM Capital, a California-based firm with more than 3 million square feet of retail assets in its portfolio, is one of the companies capitalizing on this trend. Chief Creative Officer Chad Cress told Commercial Property Executive that DJM’s lifestyle centers such as Bella Terra in Huntington Beach, Calif., and Lido Marina Village in Newport Beach, Calif., have seen significant increases in visitor numbers due to the opening of popular restaurants. But beyond dining, consumers are also increasingly seeking memorable social experiences, a shift reshaping spending patterns and, simultaneously, the future of retail.

In the interview below, Cress talks about the growing emphasis on restaurants in the retail mix and how Americans’ eating habits are impacting the sector.

READ ALSO: Underserved Areas Are Grabbing Retail Investors’ Attention. Here’s Why.

In your opinion, what key factors are driving the increase in spending at restaurants?

Cress: The pandemic changed how people live and want to spend their money. Now consumers are looking for dining experiences more than ever. Additionally, with more people working from home, it cuts commuting time which has been reallocated to experiences such as dining.

And how do you see this shift in consumer behavior affecting the retail real estate industry overall?

Cress: I think we’ve seen the percentage of food and beverage in relation to the entire merchandising mix at retail projects continue to increase, as well as the rise of entertainment-based retail. Consumers are pickier about where they spend their money, but when a retail project puts placemaking first, customers will visit. This has put more emphasis on design and how we think about placemaking.

Has your vision for lifestyle centers changed as a result of these shifts?

Cress: Having an experiential and placemaking mindset has always been part of the DNA of what we do and we’ve been doing this since before this type of thinking became the norm. Part of the reason for that is being located in California, where outdoor walkable centers are everywhere, so creating something special for the customers and tenants has become important to differentiate.

We’ve also increased our attention on marketing and events over the years. In the past, landlords merely collected rent and operated a center. Today, landlords like us find it important to come alongside the tenants and actively work to drive foot traffic to the center. We’ve been successful at this through increased food and beverage, and a focus on events and activations.

Have there been any challenges in accommodating the growing demand for food and beverage tenants?

Cress: We are seeing the desire for smaller restaurant spaces so in some cases—like at Village Del Amo in Torrance, Calif.—we have created several smaller restaurants from bigger restaurant vacancies and have created a more robust dining district.

Additionally, while restaurant sales and foot traffic trend upward at our centers, restaurants across California are having a harder time due to rising costs and labor. We have seen an increased need for second-generation space and more landlord contribution. 

And are there any specific types of dining establishments you’re looking to bring into your shopping centers?

Cress: It really depends on what categories we still need at the center or the DNA of the center itself. In Hollywood, Calif., for example, we have focused on bringing more local flavor and chef-driven concepts in order to help message to the market that the project is evolving and not only attract tourists, but locals as well.

To what extent has adding more restaurants led to an increase in visitor numbers at Bella Terra, for example?

Cress: Property visits are now up nearly 10 percent year-over-year and nearly 30 percent from three years ago—a result driven by the improvement of tenants through new leasing, a redesigned public space that has led to increased marketing activations and two additional hot restaurants coming to the property.

Since having acquired it in 2005, DJM has transformed the shopping center into a vibrant community hub by curating a diverse array of dining, retail and entertainment options. In 2023, before the two new restaurants came to the property, Bella Terra only saw a 1 percent increase in visitors year-over-year, showcasing the importance of these tenants to the community.

READ ALSO: Mixed-Use Malls and the 15-Minute Neighborhood

How do you see the rise in food and beverage-driven traffic influencing the broader retail landscape in the long run?

Cress: I think that restaurants reflect the desire for experience and retail has been evolving across the industry to incorporate more emphasis on experiential. This has been going on for a while, but as customers spend more time and money on experiences, brands in other sectors need to also raise the bar on customer experience and the ability for customers to interact with them across all channels—physical and digital.

And how are you positioning your properties to stay in fashion?

Cress: I think restaurants have become the new anchor in projects and the attention on getting the right names to our centers helps unlock and attract other quality tenants.

The post How Dining Trends Are Reshaping Shopping Centers appeared first on Commercial Property Executive.

The health-care industry is as strong as ever, with demand for both elective and non-elective outpatient care and employment increasing substantially during the past several years. According to a September report from Savills, outpatient volumes are expected to increase by more than one-quarter in the next 10 years, while health-care related employment is expected to grow by 12 percent through 2028.

However, with this growth comes a need for an intense focus on managing these specialized facilities. While the most in-demand medical specialties vary considerably by location, some best practices apply across the board.

Mastering maintenance

Strategies for keeping patients healthy and doctors happy all usually flow from a central function: maintenance and cleanliness procedures. They both are a double-edged sword; they leave a lasting mental impression on the doctors, nurses, staff and patients, but also have the potential to impact the quality of the treatments.

Justin McKanna, an associate director at Hiffman National, believes that this applies especially to janitorial services, generally considered to be the most important aspect of day-to-day maintenance. For instance, an unkempt space may not only spread disease, but cause patients to think twice about getting a procedure done there.

“That’s the first impression patients get when they walk into that clinic or surgery center,” McKanna told Commercial Property Executive. “You want that building to reflect the same quality of care that tenants expect to receive.”

Crucial to meeting these goals is choosing a medical office cleaning company, ideally one experienced in medical waste handling, as well as in medical-grade disinfection and hygiene.

In practice, this might mean spending up to 30 percent more than a traditional office operator on those services, but McKanna sees it as necessary. “We can get a bid from any janitorial company and the cost is probably going to come cheaper than you would from dealing with the medical office janitorial company, but you’re not going to get that same service and quality that tenants expect,” he said.

Besides surface cleaning, the spaces require more duct cleaning and dust control, which are often especially important for hermetic operating rooms.

This same specialized approach governs HVAC maintenance, as attention to heating, cooling, humidity and airflow is vital for preventing the spread of disease. These considerations not only impact the working conditions, but also the quality of the treatment provided. As a rule of thumb, “If somebody says it’s 72 degrees and it’s too warm, then we say, ‘OK, 72 degrees is definitely too warm for you, and we’ll adjust it,” said Margaret Gaca, vice president of property management at HSA PrimeCare.

READ ALSO: Getting in the Heads of MOB Tenants

Medical office property managers also think of maintenance in the future tense, especially as they build out spaces for new, specialized tenants. Top of mind is HVAC needs, which vary widely.

“When new equipment comes in, we ask, ‘What does it require? Do (they) require additional heating or cooling?'”, Gaca observed. “If we don’t build it out right, then they are not going to operate properly.”

A final consideration is accessibility and Americans with Disabilities Act compliance, alongside making sure that wheelchair access, wayfinding signage and parking spaces all facilitate patient mobility. McKanna advises working with specialized architects and contractors, regardless of whether it’s a ground-up project or a redevelopment.

Above and beyond

Medical offices that truly stand out not only meet the highest standards for maintenance and cleanliness, but also offer personalized experience to tenants and patients.

“(For) any of us who manage high-rise buildings, we are used to having staff that is there 12 hours a day handling everything, and your typical suburban building did not have that level of onsite staff on a daily basis,” said Patty Nooney, principal director of real estate management services at Avison Young.

Property managers like to focus on the minutiae of the buildings, as well as the personnel they choose to manage them. For Gaca, placing a doctor’s name on a door sign and key fob, choosing the right wall paint color or furniture speak volumes about the property management team’s level of commitment.

Such considerations also play a role in the mental wellbeing of patients. Along with aesthetically appealing offices, waiting areas and exam rooms, exteriors can also differentiate a property. “Patients’ mental health is better if they can view green space out of a window, or, if someone has to go for regular treatment, they can go into some kind of garden or patio area,” Nooney said.

Offering a concierge-like level of service is equally important to the quality of the space. Traditional communication and hospitality skills, alongside attention to real-time feedback, may sound like clichés, but they are definitely noticed by patients and the tenant’s team. Whether the patient is coming in for a dialysis appointment or banged up with a pickleball injury, it’s an expectation that building staff are not only attentive, but welcoming. “Our product is our people,” McKanna concluded.

The post Property Management Success: Healthy Medical Office Spaces appeared first on Commercial Property Executive.

As the nation’s coworking space demand and supply show no sign of slowing down, the sector is more clearly refining itself. From color schemes and space configurations to food and beverage offerings, business models throughout the sector are beginning to resemble the hospitality and fast-casual dining industries.

Some operators are leaning into this idea, offering different types of spaces under separate, yet consolidated networks and brand offerings, akin to IHG Hotels or Dunkin. In October of last year, CoWorks, a coworking franchiser operating three separate brands, rebranded to become Vast Coworking Group. The franchise operates three distinct brands across more than 190 locations in 31 states and 10 Canadian cities.

And the results speak for themselves. Three of the five largest coworking operators work under a network offering, owned by Switzerland-headquartered International Workplace Group. Combined, they opened 465 new locations globally this year alone. According to Mark Dixon, the company’s CEO, 95 percent of IWG’s global location openings in 2024 were with local property owners and investors.

The consistency and revenue-generating reliability of the coworking networks not only benefit users and brands, but space operators as well. However, making these franchise models work is not without challenges.

A hotel for offices

The two biggest trends motivating the use of a network model are the omnipresence of hybrid work, as well as large companies’ plans to move their employees to flexible spaces. Given the sheer amount of diversity that these changes entail, from corporate satellite offices to suburban hybrid workers looking to break with the 9-to-5 routine, it doesn’t make sense to offer a one-size-fits-all brand offering for coworking spaces.

Christine Wyckoff, head of Americas flexible office services at Cushman & Wakefield, emphasizes that location decisions depend on where the occupiers are actually looking to work. “The hybrid worker has influenced where new coworking locations are opening, as they are choosing to work closer to home to avoid lengthy commutes,” Wyckoff told Commercial Property Executive.

Jason Anderson, president of Vast Coworking, compared this strategy to observations that Marriott and Hilton made with their hotels in the 1980s. “There may be instances where you’re going on a honeymoon and want luxury 5-star experiences, and there are others where you are going on a corporate meeting or you’re a consultant with a place to stay,” Anderson said. “It would not make sense to put a 5-star St. Regis (hotel) in a suburban area where you would put a Courtyard, but that does not mean that Courtyard is any better or worse. It’s a different product for a different crowd.”

For their part, Vast’s offerings include Intelligent Office, which provides a more customizable experience with private offices and conference rooms alongside business services including reception and mail services. These could appeal to companies expanding out of a satellite office. Venture X is the most traditional of the pack, combining a mix of private workspaces and collaboration areas, giving both individual employees and companies some versatility in how they utilize the space. Office Evolution is a mix of the two, offering scalable spaces within suburban locations, a favorite of individual office workers seeking shorter commutes.

READ ALSO: Coworking Spaces Surge Amid Changing Demand

IWG’s Dixon believes that part of this appeal is the result of greater autonomy on the part of employees and their higher-ups, relative to the teams that sign 10-to-15-year leases at downtown office buildings. “The decision about a company’s real estate needs is no longer solely a question for the real estate directors of organizations,” Dixon noted.

Plug-and-play

In addition to the operations element, coworking networks can also streamline the ability to open new locations at scale. Vast and IWG may have the technology, marketing, buying power and employee training to operate across the nation, but it’s the local entrepreneurs who get the businesses off the ground. Opening a new coworking space is just as much, if not more, of an investment for the local operator than it is for the franchiser.

The process is simple. IWG or Vast will research the area demographics, alongside office sector fundamentals such as pricing, rents, demand and occupancy. These determine the right type of space to build, as well as the optimal layouts and service offerings.

The day-to-day operations, management and ownership are left in the hands of the franchisees, who give the spaces the more personal, local feel in their interactions with tenants and customers, event programming and even decorations. Some may have previously been mom-and-pop coworking operators whose spaces could not compete with a network. “They know the building, they know the demand and they may even be clients of their own space,” Anderson said.

At the same time, franchising gives the local operators a leg up in setup, saving them both time and money, minus the risk of employee downturn or competition with other established brands. A franchise fee often covers many startup and employee training costs, while the franchisees will have immediate access to IWG’s or Vast’s space design and software offerings. All that is left to do is work with a landlord and broker for approving the space’s final build-outs. Just this month, a partnership between Vast and WeWork brought WeWork’s booking software to more than 75 Vast locations across 50 markets in the U.S. and Canada.

Compare this with a local operator’s struggles to get off the ground. “You don’t have to start from scratch,” Anderson said. “If you do, you have to build a logo, you have to convince the landlord to work with you when you have never done it before, you have to call all the furniture vendors to figure out which ones are the best, you have to organize the software, you have to build your own website, doing all of this without any accountability.”

All of this occurs while the location is not generating any revenue, while needing to build up a brand name. And this is all below marketing costs. “Our organizations give 2 to 3 percent of their revenue as a marketing fee, but a mom-and-pop may spend up to 20 percent,” Anderson said.

And it’s not even one location that the local operator has to compete with. “We offer greater flexibility and the choice to work where and when they wish, which is in stark contrast to other operators who only have a very small footprint,” Dixon said.

“At an Office Evolution, your key fob should work at the front door of every Office Evolution,” Anderson said. “If you’re a mom-and-pop, how do you compete with Anytime Fitness or Planet Fitness, which allows me to have access to every gym in the entire country at the same price that I could your gym?”

Often, a new Vast location opening is the result of a previous closure and sale.

Too good to be true?

In assuming much of the responsibility for operating a coworking space, franchisees often also take on much of the risk. While Spaces or HQ attach their brand name to a property, it’s up to the local operators to ensure that the location is consistently occupied.

But Anderson sees this as a net benefit, as a franchisee has a far deeper personal interest in a location’s success than employees of, say, a REIT. “A general rule of thumb in franchising is, who is going to do a better job, an employee or a franchisee?” he asked. “The franchisee who is pulling money out of their 401k or investing in a small business loan; they’re going to work very diligently to make sure that that location is successful.”

The post Are Coworking Networks the Future of Office? appeared first on Commercial Property Executive.

Roughly six months after emerging from bankruptcy, WeWork has announced the launch of its Coworking Partner Network, an affiliate program with third-party operators that will allow existing users to access new spaces in markets across the U.S. and Canada.

The linchpin of the network is a partnership with Vast Coworking Group, a franchiser that operates more than 190 locations across 31 states and 10 Canadian cities. Vast’s existing franchisees, operated under brand names Venture X, Office Evolution and Intelligent Office, will be available through the network to be managed under Yardi’s Kube coworking software.

Additionally, users of WeWork Workplace, the company’s proprietary space management software, will gain access to 75 Vast locations across 50 markets in the U.S. and Canada through the app. WeWork intends on expanding the network across more markets in the future.

In April of this year, Yardi assumed a 60 percent ownership stake in WeWork after the company contributed $337 million of a needed $450 million bankruptcy exit. WeWork emerged from bankruptcy the following month, shedding 170 locations. The company’s current offerings total 600 locations across 37 countries.

Powering the partnership

The Coworking Partner Network is the result of observing trends from both the office and larger coworking sectors, as well as an asset-light approach to operating the spaces, according to Will Sandford, Yardi’s director of coworking. One key motivator was corporate entities in need of flexible space who may not be as concerned with brand preferences as individual users. “(They) expect a large network of high-quality space and are more brand-agnostic than retail customers,” Sandford told Commercial Property Executive.

A WeWork spokesperson pointed to data from a recent user survey showing that of the 72 percent of companies planning to expand their office footprints in the next two years, 59 percent intend to do so through a coworking space.

READ ALSO: Flex Office Is Becoming Synonymous With Office, Says Workbox CEO

Sandford believes that partnerships resembling the Coworking Partner Network allow operators to more seamlessly integrate their spaces into office buildings than the more traditional models used in the 2010s. “The lease arbitrage coworking model of the 2010s is not feasible at scale,” Sandford said.

Conditions like revenue sharing agreements and internal management really drive the partnerships home, in Sandford’s view: “These expansion models will better align the coworking operator with the building owner and provide customers with more location options.”

In addition to the franchising and management structure, WeWork was also attracted to Vast’s suburban spaces, which complement the company’s more urban-centric approach. This year alone, the U.S. added roughly 9 million square feet of suburban coworking space to its existing stock, according to CommercialEdge data.

The post WeWork Expands Network With Third-Party Partnership appeared first on Commercial Property Executive.

According to a CBRE global data center trends report, in the first quarter of 2024 the national data center inventory grew 24.4 percent on a year-over-year basis. During the same period, vacancy rates hit new lows across the major data center markets—Northern Virginia, Dallas-Fort Worth, Chicago and Silicon Valley.

With stiff competition and an extremely tight market, brokers have to be at the top of their game to get data center tenants what they want. But what exactly does this entail?

What’s changed

While many of the things data center tenants want have remained the same, others have significantly changed in recent years. Among those that have changed, power requirements is perhaps the biggest.

“If one of my clients was looking at space today versus 10 years ago, the requirement for power is considerably greater,” Bo Bond, executive managing director in Cushman & Wakefield’s Global Data Center Advisory Group, told Commercial Property Executive.

Another thing that has shifted is preferences, or risk tolerance, surrounding forms of power. Tenants today might accept a less distributed form of power, since platforms allow for more ways to backup systems and more redundancy tolerance. Previously, redundancy of mechanical and electrical systems was less distributed in nature, Bond mentioned.

Howard Berry, principal in charge of national data center solutions at Avison Young, similarly noted redundancy as a top concern as some applications require strict uptime guarantees.

“Tenants expect their data center providers to prioritize reliability and invest in robust infrastructure, often opting for N+1 configurations to ensure seamless operations,” he said.

READ ALSO: More Data Centers, Please!

Another recent shift, according to Berry, is tenants expecting that data center landlords or operators will negotiate tax incentives on their behalf.

“Historically, providers have not been directly involved in this process, but now users are seeking their assistance to secure these incentives upfront,” Berry noted, pointing out that tenants are seeking more comprehensive solutions from providers.

In addition to preserving their bottom line, more data center tenants are focusing on improved energy efficiency and furthering their ESG initiatives.

“Tenants are now prioritizing data centers that leverage renewable energy sources such as solar and wind to reduce their carbon footprint,” said Joseph Jemal, director of capital markets at KSR.

Recurring priorities

Location is still a top priority for data center companies. “Tenants prioritize proximity to transportation hubs, business centers and access to reliable power and fiber infrastructure,” Jemal said, adding that room for future expansion is also a key consideration.  

And of course, access to the cloud is more important than ever, Bond pointed out. With cloud companies—the Amazons and Googles and Microsofts of the world—continuing to grow, cloud access is more prolific than ever.

Then there are the physical space requirements, which also remain crucial. According to Berry, when it comes to selecting prime space, data center tenants mainly prioritize power per rack and cooling infrastructure.

“These critical components ensure the reliability and efficiency of their operations,” Berry said. “Furthermore, tenants seek data centers with flexible design capabilities, allowing them to adapt to their specific needs and workloads.”

Data center trends to watch

With the rise of technology, data centers are expected to grow exponentially, and the capital markets are continuing to invest significant amounts into the space.

For now, it’s no easy task finding availability for tenants in existing buildings and the same is true for those still in development, Bond said. As a result, data center owners have been afforded significant rent increases. He anticipates that on the supply side, these constraints are likely to continue.

READ ALSO: How AI Is Pushing Cloud Data Center Providers to Scale Up

“Right now the market in the U.S. is arguably anywhere from 5 to 2 percent vacancy,” Bond said. “It’s a landlord’s market. For that reason, many of the facilities coming out of the ground today are being preleased. There’s a significant supply constraint.”

Another factor to watch is the expanding role of AI within the data center space.

“As technology evolves, these functionalities will enhance the efficiency and effectiveness of data center operations,” Jemal noted.

But equally notable is the growing influence of local and state governments and power providers around such technologies, Berry mentioned.

“State governments are starting to introduce regulations around AI, with those that pioneer legislation likely to impact the growth of AI in their respective states,” he said. “Meanwhile, local governments that offer sales tax incentives or already have them in place for data center equipment are likely to attract hyperscale development.”

Advice for data center brokers

Jemal’s advice to anyone looking to earn respect in the data center brokerage industry is to master every aspect of it.

“To succeed in this sector, you need to truly understand the specifics of the business,” he said. “It’s not just about sharing every available opportunity with the client—it’s about knowing what makes a data center exceptional.”

For Berry, when it comes to getting in the heads of hyperscale tenants, its essential to focus on the financial implications of IT expenses.  

“With IT costs on the rise, hyperscale tenants are under pressure to optimize their data compute and storage strategies to avoid the high costs associated with cloud services,” he said. “By taking the time to understand the financial benefits of a well-planned data center strategy, brokers can help tenants develop a comprehensive plan that saves them millions of dollars.”

To do this a broker needs to conduct a deep dive into each tenant’s requirements. Only then can a broker provide tailored and informed solutions that drive real and impactful results.

Further, people may assume that all data centers are alike, Bond said, but that couldn’t be further from the truth. Just like a mom-and-pop barber has differing needs from a large department store hair salon, data centers are exponentially different in their needs as well, he pointed out. Brokers need to understand these different requirements to truly fulfill their role.

For Bond, it takes skills from multiple disciplines to be a great data center broker—from being a good land broker and understanding highly complex leases to learning varying degrees of scope and keeping up with new tech—you have to be able to do it all.

“What I thoroughly enjoy about this space is that technology changes so rapidly,” Bond said. “We have already seen so much change, and we all predict that there will continue to be change. It takes somebody that thrives off of the ever-evolving technological advancements in the world.”

The post Getting in the Heads of Data Center Tenants appeared first on Commercial Property Executive.

This challenges property managers in all asset classes to not only continuously be at the top of their game, but to add value for clients in such areas as net operating income and foot traffic. It’s crucial for service companies that want to break away from the competition and build relationships with owners and tenants.

Wanted: versatility

Ben Mandell, CEO of Tricera Capital, which launched a property management arm in August 2023, advocates for this approach, seeing a “core infrastructure” consisting of “boots on the ground” that constantly listen and adapt to the space-specific needs of tenants and owners.

In Mandell’s view, a local operation also gives tenants more individualized attention in the South Florida markets where his firm is active. “You can provide an institutional–(level) product with a boutique touch, and we have separated ourselves by doing that,” he said.

This can mean anything from curating on-site events with local businesses, to making sure that a tenant’s ground-floor retail space isn’t obstructed by a bench and bus stop enclosure. And Tricera has direct experience with the latter issue at a property in Miami’s Wynwood neighborhood. “It hindered their visibility and obstructed their traffic, and we used our relationships with the city to have (them) removed, which eased visibility,” Mandell said. “It’s a little bit above and beyond in our relationships, which are very regionally focused.”

READ ALSO: Property Management Success: Trends, Strategies, Innovations

Alongside a preference for a more local, nimble approach, some stakeholders also like to get all of their ancillary services in one place. “Experienced, one-stop commercial real estate services providers, those that offer full operational, construction management and leasing capabilities in-house, have a distinct advantage when it comes to winning new business,” said Erika Morasco, vice president of property management at Levin Management, which serves retail properties in the Northeast and Mid-Atlantic.

In practice, that requires some property managers, for example in retail, to take on a development role. In Morasco’s experience, this is because tenants “are looking for a turnkey delivery of space, which, simply put, is having us fully build out the store.”

Having in-house construction expertise is “paramount” for property managers to set themselves apart in a place where owners may otherwise hire multiple firms, leading to a more costly and time-consuming operation.

From this perspective, the best partners are those that can improve a property before they are brought on to manage it. “Façade improvements freshen up a space and make it more attractive to prospective tenants,” Morasco said. “In the past, this is something we may not have done until a tenant was signed to the space.”

Adding tangible and intangible value

Besides bringing local expertise and wearing multiple hats, property managers can set themselves apart. The ability to save owners and tenants money is a sure winner. “We look at where there may be opportunity to save, and then we go and provide the quote,” Mandell reported. “You (can) give them intel and knowledge that they would not have otherwise.”  

But what about repetitious, day-to-day tasks? The traditional communication skills associated with property management are often what tenants use to associate services with brands. “Most firms will offer similar versions of the same types of services,” noted Adam Parritz, director at Glenstar. “But someone is actually responsible for sending out those emails and planning those events.”

For event planning, a smaller, nimbler operation is often better able to curate experiences that make sense for specific occupiers, rather than provide blanket appeal to an entire building. Parritz recommends that approach, not only to cultivate long-lasting relationships, but to make the company’s services a reason to stay in a space long-term.

“All of our capabilities and all of our services that we provide are directly related to a tenant’s experience at the asset, and the likelihood that they are going to renew or expand their space,” Parritz said.

That mindset applies to the curation of the spaces. In life science markets as saturated as some of those on the West Coast, it’s often one of the deciding factors for owners in selecting a property management partner.

And at those facilities, it’s often not so much the appearance of the lab space, but what’s offered outside of it. “Our property managers recognize that their role goes beyond providing great lab buildings,” pointed out Tracy Perrelle, senior vice president of West Coast operations at BioMed Realty. “They know (that) they must foster work environments that meet and exceed client expectations with curated amenity programs and events that encourage innovation and the exchange of ideas.”

Additionally, technology is becoming even more of a game-changer, with real-time monitoring applications such as Placer.ai giving operators “crucial insights into market trends and consumer patterns,” according to Morasco. All-in-one financial dashboards and integrated work order platforms also ease up tenants’ clerical experiences. These tools are comparable to the preference for all-in-one offerings of project and property management services.

Get the word out

Of course, the best, most responsive services mean nothing if one’s prospects don’t know about them. Trade shows, industry events, web and email marketing all have a place, but for service companies, the best form of advertising is a good reputation.

As such, happy tenants are likely to sell a company’s services more effectively than any brochure could. “Word-of-mouth referrals have always been, and will continue to be, the best and most gratifying introduction to new business prospects,” Morasco advised.

That positive feedback can be at least as valuable to property managers as upward-trending web analytics.

“If it comes from that type of source where they are happy and referring us, it’s because the service was of a certain class,” Mandell noted. “(It’s) giving live examples of what we have done for clients and getting in touch with the owners to give that to them directly.”

The post Property Management Success: Winning the Competition for Clients appeared first on Commercial Property Executive.

As the Southeast recovers from the devastation brought by Hurricane Helene, experts are beginning to weigh its effects on insurance costs.

Hurricane Helene is not a reinsurance event, so it is unlikely to significantly impact insurance premium rates, according to Mike Chapman, national director of commercial markets for HUB International.

“This is a heavily uninsured event, so there will be big economic losses, Chapman told Commercial Property Executive, “but less so on the insured side.”

Moody’s Analytics estimates Hurricane Helene’s total property damage at between $15 billion and $26 billion, a number that could be further refined to reach an industry loss estimate.

READ ALSO: Why Resilience Strategies Are a Must

Chapman said Helene will not be calculated into his firm’s 2024 hurricane forecast.

“We still legitimately have two weeks left, and some activity is happening in the Atlantic,” he said. “We don’t really give new predictions. We compare actual to what we projected.”

Climbing insurance rates have been far more predictable than most hurricane seasons for commercial real estate owners and operators. According to a recent report from Aon, costs rose for 27 consecutive quarters.

However, Aon’s latest property market dynamics report shows a shift. That streak ended in the second quarter of 2024, as the property year-over-year rate change decreased from +3.4 percent in the first quarter to -0.94 percent in the second quarter.

Additionally, Aon’s report said that there will continue to be rate differentiation:

• A -10 percent to flat rate adjustment for desirable accounts/occupancies and primarily Nat-Cat exposed accounts (excluding Florida);
• Flat to 5 percent rate increases for loss-challenged or less desirable occupancies;
• Flat to 10 percent or higher rate increases for Florida-only accounts or those with significant Nat-Cat exposure in Florida.

Vincent Flood, U.S. property practice leader for Aon, said the rates fell due to shifts in supply and demand.

CRE owners and operators renew their annual policies throughout the year, so the timing of the renewal date could affect their renewal rates. Aon said 70 percent of policies are renewed in the first six months of the year, with the second quarter being the busiest and the third quarter seeing the fewest renewal instances.

“In 2023, the insurers were profitable,” Flood said. “Reductions began in March and have accelerated since.”

The hurricane season ends Nov. 30. Flood said he’s “cautiously optimistic” that this season will be less eventful than anticipated. “But we have a long way to go,” he added. “Remember, Super Storm Sandy occurred at the end of October.”

Aon said it is too soon to assess Hurricane Helene’s impact.

Some see rate reductions

Patrick McGinley, Vestar president of management services, told CPE that prior to Hurricane Helene, the firm’s annual insurance rates had decreased by over 3 percent compared to last year.

“By maintaining high maintenance standards and adopting a proactive risk mitigation mindset, we have successfully reduced the trend of claims over the past five years, which, along with increased competition in the market, allowed for the decrease. We are committed to continuing these practices to ensure a safe and cost-effective environment in the future.”

Insurance industry confronts climate change more quickly

Ben Bailey, managing director & head of JLL’s work dynamics insurance business, said that, operationally, insurance companies are exposed to the same severe weather risks as many other financial or professional service sectors.

“The increasing severity and frequency of climate-driven events is forcing all industries to reinforce their business continuity focus and facility response plans,” he said.

According to Bailey, what makes insurance unique is the exposure companies have to claims resulting from these weather events and the corresponding premium adjustments to cover those claims. “The fact that insurance companies are being forced to confront the effects of climate change more quickly than other industries also motivates them to focus on proactively managing their own carbon emissions to avoid reputational risk,” Bailey said.

JLL has partnered with several across the industry to develop a baseline for reporting and disclosure purposes. In some instances, this helped them formulate a comprehensive portfolio strategy to achieve their carbon reduction targets.

Aon’s report also said clients could expect an aggressive underwriting approach for shared and layered accounts with desirable occupancy classes and profitable historical loss ratios, with or without heavy Nat-Cat exposures.

The post Will Helene Impact CRE Insurance Premiums? appeared first on Commercial Property Executive.

One day after Labor Day, and the unofficial end to summer, REBNY issued its latest monthly analysis of Placer.ai location data in 350 Manhattan office buildings for July. For the full month, Manhattan office buildings had an average visitation rate of 72 percent of the 2019 levels. The first week of July had only 55 percent visitation rates. When the week of the Fourth of July holiday was excluded, the data showed the final three weeks of July had an average visitation rate of 78 percent, 1 percentage point higher than June’s average of 77 percent. June had set a post-pandemic record.

The Placer.ai report tracks mobile data of office tenants and their employees. It also reflects office visitors and retail customers and employees within buildings with retail space. The properties analyzed include a representative sample of various types of office buildings. Those that were not completed by 2019 were not factored into the report or in the 2023 average visitation rates.

A national report by Placer.ai also found office visits in June were continuing an upward climb back to pre-pandemic levels with visits down 29.4 percent compared to June 2019. In that survey, Miami fared the best with its visits down by 9.8 percent compared to June 2019. The national report stated New York City visits were down 14.2 percent.

“October is the next key month to look at as it will not include any significant holiday weeks. We are curious to see if visitations will reach a new peak then,” Keith DeCoster, vice president of research at REBNY, told Commercial Property Executive.

DeCoster said when the Fourth of July week was excluded, Manhattan office buildings maintained June’s momentum. He noted that newly constructed or renovated properties, as well as some Class B buildings with prime access to transit, continued to outperform.

READ ALSO: Here’s a Surprising Shift in Remote Work’s Appeal

The report found average building visitations in the highest quality Class A+ buildings reached 86 percent in July, down from 91 percent in June, but up 9 percentage points year-over-year. Class A/A- visitations declined by 4 percentage points from June to 71 percent, but were well above the 63 percent level recorded in July 2023. Class B and C buildings included in the survey saw a month-over-month decline from 75 percent to 69 percent as of July, while being up 1 percent year-over-year.

There has been steady improvement throughout the year at Manhattan office assets. Data showed there were 15.2 million total device visits in July, a 10 percent increase over the 13.9 million total device visits in July 2023.

“Even though it may not always feel like it, the COVID-19 pandemic was quite some time ago. It’s becoming more the norm for occupiers to expect office workers to come in three to four times a week,” DeCoster told CPE. “While there was substantial progress in visitation rates through 2023, during the first half of the year, return-to-office policies were still not as defined.”

A recent survey from CBRE found about 80 percent of organizations have a return-to-office policy, but only 17 percent actively enforce it. Despite the low enforcement rate, one-third of corporate real estate executives told CBRE they wanted more in-office attendance.

Markets vary as Midtown rules

The report breaks Manhattan down into three submarkets—Midtown, Midtown South and Downtown. All three submarkets were up year-over-year but down 5 to 6 percentage points from the June average. Midtown buildings tracked by Placer.ai continued to attract the highest average visitations, reaching 75 percent of pre-pandemic baselines in July.

The Midtown rate was just above Midtown South’s July visitation rate of 72 percent and well above Downtown’s visitation rate of 64 percent. It was the fifth straight month Midtown has had the highest rate.

In Midtown, the average July visitation rate was up from 69 percent the previous year. In Midtown South, the average July visitation rate was down from 78 percent in June but up from 67 percent in July 2023. Although there was a dip from 69 percent in June to 64 percent in July for Downtown, the average visitation rate was up from 58 percent in July 2023.

Asked about the Lower Downtown average visitation rates, DeCoster acknowledged there were fewer A+ buildings in that submarket than in Midtown and Midtown South. But he said there are “some that are performing great” in Downtown Manhattan.

“A more significant issue for downtown visitation rates is distance to regional transportation hubs like Grand Central and Penn Station,” DeCoster said.

The post Manhattan Office Visits Up Year-Over-Year: REBNY appeared first on Commercial Property Executive.

The firm’s data center report findings for 2024 indicated that the booming demand showed no sign of slowing down at midyear as vacancy set a record low of 3 percent, and occupancy has increased at a 30 percent compound annual growth rate since 2020.

Given that asking rents increased between 13 percent and 37 percent year-over-year, depending on the lease size, “There appears to be no ceiling for how high this data center demand is going to reach,” Andy Cvengros, managing director, co-lead of U.S. Data Center Markets, JLL, said in the report.

Now, the challenge is to find skilled workers to employ. An estimated 10 percent of data center roles at existing facilities are unfilled, more than twice the national average across all industries.

Given the technical nature of data centers, only about 15 percent of applicants meet the minimum job qualifications, and positions can take 60 days or more to fill.

Johnathan Meade, CEO of Meade Engineering, told Commercial Property Executive that “quality” labor is a key ingredient to the success of any company operating in the data center industry.

“Although a challenge, it is a solvable problem for the best companies,” Meade said. “As an industry, it’s our responsibility to create career pathways that appeal to a broad range of candidates. Looking beyond the traditional background and resumes is critical to the long-term success of our industry.”

“It’s also important to focus on the growth and development of talent within our organizations. Hiring is just the beginning. Targeted training programs, the ability to move between departments, and clear career paths make it easier for candidates to understand the opportunity.”

READ ALSO: First-Half Investor Darlings

Lisa Flicker, senior managing partner & head of the Real Estate group at Jackson Lucas, echoed to CPE: “The demand for talent in the data center sector is at an all-time high, yet the supply is struggling to keep pace. The war for talent is driving compensation up, and we’re seeing more unconventional hires, such as bringing in senior leaders from adjacent industries like energy or telecommunications.”

She said the core need is the skill to navigate the complexities of power management and infrastructure development.

“This cross-industry expertise is proving invaluable as data centers grapple with power constraints, fierce competition for top talent, and the rapid pace of technological advancement.”

Data center development is also expanding into rural areas with limited labor pools, presenting a unique set of staffing challenges, according to the report.

Attrition rates, especially among younger workers, also remain an issue; 33 percent of the technical workforce is at or nearing retirement age, and this number is likely to double due to demographic trends, according to the report.

Raising awareness for data center jobs

Matt Landek, managing director and U.S. Data Center Work Dynamics and Project Development and Services Lead at JLL, told CPE that until recently, many individuals were unaware of data centers and their associated career opportunities.

“With attention to data centers growing due to the AI movement, data center careers are becoming more widely known,” he said.

“If we invest the time to educate about data center career paths in school like we do others, we will see others pursue this field immediately coming out of school as we seek to staff the industry longer term,” he added.

According to Landek, employers must provide positive employee experiences and implement new approaches to solving staffing challenges while navigating fierce competition for talent and employee burnout.

READ ALSO: How to Become a Leading Data Center Market

“At the same time, the industry needs to expand the labor pool through secondary education exposure, technical development programs and outreach to underrepresented population segments,” Landek also told CPE.

He said firms should develop training programs to convert traditional technicians from other asset classes.

“Given data centers is a growing area with significant career and compensation opportunities, JLL and other organizations can look to hire individuals with foundational solid skill sets and abilities to overcome learning curves quickly from different asset classes, such as hospitals, retail, Class A properties and more.”

He suggested putting them through a defined training program that fills in the gaps between their existing skills and those needed to operate in a data center.

Add amenities and fringe benefits

Additionally, enhancing the employee experience by offering high-quality amenities and fringe benefits is necessary to attract and retain workers, as the culture of work changes and employees expect their employers to provide for them as whole people and not just employees.

“This not only includes a competitive wage, as all employees expect but also providing things that support their physical well-being, like healthy meals or meal vouchers and access to fitness centers, for example.”

Landek said partnering with trade schools and veteran employment agencies will be critical to keeping up with the demand for talent.

“There are not currently enough qualified people to fill the number of jobs open—and jobs that continue to open up—and trade schools and veteran organizations provide opportunities to recruit employees with transferrable skills and put them through the training programs to upskill,” he said.

“Building a community of practice for shared learning, including investing in continuing education and leadership development, is also necessary to keep up with changes in data center processes as technology evolves,” Landek added.

The post Data Center Labor Shortages Take Center Stage: JLL appeared first on Commercial Property Executive.

Contrary to common assumptions, Lincoln’s latest study on what employees value most showed that a majority of U.S. workers prefer to be in the office. More than half of U.S. employees expressed interest in working in-office four to five days a week, while less than 20 percent expressed interest in working remotely.

Lincoln partnered with Big Village to survey 1,008 full-time employed U.S. adults ages 21 and older who work outside the home in an office setting or only remotely. The survey was live from June 11 to June 17.

The value generations place on amenities in modern workplace design, comparing popular work/play amenities with more traditional work motivations, including dedicated/private workspaces, increased compensation and shorter commute times are factors, according to the report.

The report findings show that an employee’s career stage significantly influences their preference for in-office work. The part of the country also plays a role.

The survey found that shared spaces, high-end amenities, catered lunches and modern outdoor spaces don’t always align with features and resources that many employees value.

Across generations, dedicated seats and private offices emerged as the most desired motivators, indicating a preference for productivity, efficiency and a sense of belonging—even among Gen Z respondents, the most likely of all surveyed cohorts to value work/play amenities.

Generation X counterparts have a stronger preference for in-office work, with Millennials (46 percent) and Generation X (49 percent) expressing interest in working in-office four to five days a week. Early-stage career employees value a hybrid environment, with 55 percent of Generation Z respondents wishing to work in the office one to three days per week.

By contrast, Baby Boomers had the strongest preference for remote work, representing the highest percentage of fully remote workers (19 percent) and the strongest desire for full-time remote work (23 percent).

According to the report, all cohorts value shorter commutes; however, employees tend to be more idealistic than realistic. Approximately three-quarters of respondents (73 percent) say they would not consider going into the office if their commute was longer than 45 minutes roundtrip. Travel times this short are tough to find, with roundtrips averaging more than 50 minutes nationally and more than 65 minutes across the 15 largest office markets.

READ ALSO: What’s Your Wellness Action Plan?

Lincoln Property Co. said there is no one-size-fits-all approach to creating a compelling in-office work environment.

“The best way to make smart decisions that encourage office attendance is deceptively simple: ask your employees what they value,” according to the report.

Savvy occupiers seek to understand how their employees prefer to work within the office setting and assess whether changing that environment can better support their key business objectives.

“When considering property size and amenities, solve for the present workforce while refining your equation for the future workforce you desire,” Lincoln advises in its report.

People are a company’s most valuable asset

Industry analysts and operators backed that up.

Mike McDonald, senior managing director & office group leader, told Commercial Property Executive that across the portfolio represented by JLL, there’s been a significant increase in employees returning to the office three to five days a week, with most recent employer mandates closer to four to five days a week.

“The most valuable asset in an office building is its people,” McDonald said. “We believe that it will take two more bonus periods for employees to fully grasp the benefits of being in the office, and we are just six to nine months away from the second period.”

According to McDonald, the balance between employers and employees is shifting, with the employer gaining more influence. “Our data from leasing and management supports the claim that office occupancies are rapidly increasing, and we expect this trend to continue over the next 12 to 18 months. This shift is crucial for companies to thrive and employees to feel valued and succeed in their careers. Corporate America has sent a clear message, and the workforce embraces it.”

WATCH NOW: Brace Yourselves for a Full Return to the Office by 2028

Albert DePlazaola, senior principal, Strategy, Americas at Unispace Group, told CPE that employees are feeling more productive and doing more focused work in the office this year when compared with last year, according to Unispace’s forthcoming 2024 global workplace insights survey. This underlines the importance of flexible design that caters to various working styles, from individual to collaborative.

“Many global employees say they are satisfied with their current working arrangement, which shows that employers are actually listening to what employees want,” DePlazaola said. “By addressing space challenges in the workplace, leaning into flexibility and meeting the modern needs of the workforce, businesses can create high-performance workplaces that make employees actually want to come into the office.”

Attention to environmental issues makes a difference

Brian Haines, chief strategy officer for FM:Systems, told CPE that “the companies that are winning at the’ future of work’ can deliver workplace experiences that are not only responsive to their employees’ evolving needs and preferences but also themselves and the environment.”

He added that the best way to achieve this involves regularly collecting cold, hard, accurate data that provides rich insights into workplace occupancy, utilization, energy consumption and occupant comfort.

Haines said an office’s location, size and design elements can also have a big impact on making it a productive and inspiring place where people want to work.

In May, Haines’ company relocated and downsized its dated and underutilized Raleigh FM:Systems headquarters to a mixed-use development with walkable amenities like coffee shops, restaurants, fitness studios and outdoor spaces.

With the help of Little, an architecture and design partner, and JLL project management, an office was created that was designed for flexibility. It features several collaborative spaces, including huddle rooms, conference rooms and movable furniture—all of which can be reserved.

“Ultimately, the most successful workplaces are those that continuously evolve based on data-driven insights, creating high-performing offices that are healthy for the people who use them and the planet,” Haines said.

R-Zero CEO Jennifer Nuckles told CPE that owners and operators must continue to find effective ways to improve overall building performance and incentivize employees to return to the office—ideally, at the same time.

“We’re seeing a flight to quality among employers today to agile workspaces that offer better and healthier environments, with employee comfort and wellness top of mind. Improving various measurements of Indoor Air Quality (IAQ) and Indoor Environment Quality (IEQ) contribute greatly to higher employee satisfaction and performance in the workplace,” she said.

Workers thrive through socialization

Tere Blanca, founder, chairman & CEO of Blanca Commercial Real Estate, told CPE there’s a continued trend of large companies relocating to top Class A office projects that offer experiences and amenities easily accessible on-site, such as tenant lounges, lobbies with cafes and ample Wi-Fi-connected seating areas, gyms with and a variety of fitness classes, on-site and nearby restaurants and in-demand childcare facilities.

“This motivates employees to return to the office. Employees appreciate the ability to walk to quality restaurants during lunch breaks, have convenient access to coffee or snacks throughout the day, and even enjoy shopping or fitness facilities within their office building,” she said. “When companies offer these conveniences and comfort, workers are more inclined to work in-person, allowing them to focus on what truly matters—collaboration and delivering their best work.”

Pierre Debbas, Esq., co-founder of Romer Debbas LLP, told CPE that remote work has declined over the past year, “but the hybrid model is here to stay. Employees enjoy flexibility, but the socialization component, collaboration, training and company culture are all compromised in a predominant remote workforce. Luckily, the workforce is finally coming to realize this which is helping increase office attendance.”

READ ALSO: Creating the Ultimate Employee Experience

An estimated 80 percent of companies have adopted the hybrid work style, illustrating that employees still value in-person work, according to Justin Bedecarre, co-founder & CEO of Raise Commercial Real Estate. He told CPE that deeper factors like belonging, community and leadership proximity drive this preference beyond surface-level benefits.

“Comfortable and highly amenitized offices offer focus and reduced cognitive load,” he said. “In-person work accelerates projects through real-time collaboration and spontaneous interactions, boosting efficiency and decision-making.”

After all, “People crave social interaction, collaboration and the chemical balance that goes along with human interaction,” Alexis Krisay, owner of Serendipit Consulting, told CPE. “Virtual meetings and video calls cannot fully replicate the spontaneous conversations and brainstorming sessions that often lead to innovative ideas and problem-solving.”

She added that “being virtual also tends to mess with human emotions because we lack the observance of non-verbal communication, which plays a significant role in how messages are perceived and affect our feelings. Solely relying on written communication can be daunting.”

According to Krisay, many younger employees want to visit the office for proper mentorship and guidance. “These employees missed years of in-person collaboration in college and are craving the endorphins and oxytocin release that face-to-face interactions stimulate.”

She added that oxytocin is known as the “bonding hormone,” and it is associated with feelings of trust, empathy and social bonding.

It’s all about the working space

Ralph Zucker, the founder & CEO of Bell Works Chicagoland and Bell Works NJ, told CPE that “rather than confining employees within solid office walls, creating light and airy spaces using glass allows them to sense others walking around them, get insight into what is going on outside of the room they are in, and feel connected to the bustling activity outside.”

Grant Bollman, senior associate, Lee & Associates of Illinois, told CPE, the largest factor driving attendance and satisfaction in a post-COVID office environment is the ability to work in communion with peers with the option to isolate at key times from sound and distraction.

“The building absolutely matters,” Bollman said. “The two core denominators are the presence of space to focus and a communal outlet surrounding their work.”

“It’s crucial not to overlook the social dimensions of the workplace, especially for Millennials and subsequent generations who are still shaping their lives. While Gen X and older employees value the flexibility of hybrid work, younger employees miss out on the social interactions that come with commuting to an office and engaging in spontaneous encounters. This shift has also impacted their finances, as they compensate for lost social opportunities with gym memberships, social club memberships, dining out and more.”

Ricardo Nabholz, managing associate, Studio Creative Director, TPG Architecture, told CPE that landlords are increasingly investing in building amenities, creating more upscale spaces where tenants can work out, socialize or relax.

READ ALSO: As Office Pipeline Shrinks, Existing Class A Buildings Should Benefit

“As employees return to the office, there’s a growing demand across all generations for spaces to step away from their open workstations,” he said. “This has led to a rise in small rooms designed for two to three people, providing spaces for calls or focused work.”

Samantha McCormack, managing executive, TPG Architecture, told CPE that “people are eager to come to the office for mentorship in a more natural, osmosis-like way. They love learning from each other just by being in the same room rather than setting up Zoom calls.”

“While some of our senior staff have recognized this for a while, everyone is starting to appreciate it more now. Creating spaces where people can focus in an open environment, combined with smaller spaces and cozy spots for one-on-one mentoring, will help meet this need,” she added.

Sonnet Hui, vice president and Los Angeles general manager, Project Management Advisors Inc., told CPE that food options are the top draw in her office.

“Having different food options at and around the office was critical,” Hui said. “We buy lunch for the office on Fridays, and that is the day we usually get a full house. Our office also offers a variety of healthy drinks and snack options.”

The post Here’s a Surprising Shift in Remote Work’s Appeal appeared first on Commercial Property Executive.

Property managers are on the front lines of preventing intrusions, and, at times, mitigating their impact.

Avenues of attack

Part of the complexity of shoring up CRE cybersecurity lies in the number of targets and attack vectors. Ransomware attacks, which are increasing in frequency and cost, can hit CRE’s vast quantity of local and externally hosted financial data. Anything from social engineering attempts to passwords sold on the dark web can easily access this information.

Add to this the fact that stakeholders at office and industrial properties often have their own separately managed tech stacks, access control programs and IoT-connected building sensors. The result is no shortage of opportunities for data theft and system-wide disruptions.

Office buildings face higher risks due to “extensive networks and numerous connected devices,” according to Chris Barns, vice president at R&K Solutions. Industrial buildings, with their digitized mechanical and control systems, are subject to risks to people and property. In the retail sector, credit card fraud often serves as a lever for ransomware attackers.

Even sophisticated investors don’t necessarily have all the coverage they need in this area. “Institutional investors who run pension funds … will probably have a cyber policy that covers its employees, data usage and everything,” noted Nick Wright, global head of digital solutions at CBRE Property Management. “What we are finding is that they do not have a cyber policy that relates to the assets they own or invest in.”

READ ALSO: Best Practices for AI and Data Integration: CRE Leaders Weigh In

This all happens as attackers are getting more sophisticated, while data stewards have seen their vulnerabilities multiply. According to John Price, founder of SubRosa Cyber, a cybersecurity consulting firm with a focus on CRE, attackers are only getting more creative, particularly in the phishing realm. They are now even using free trials of DocuSign to snatch valuable user data.

For Price, this predicament is made worse because many owners and property managers have satellite offices with direct access to mainframes. In theory, a hacker attacking a small satellite office can get all the way to corporate headquarters.

The increasing presence of automation and IoT-connected sensors adds to the recipe for trouble. “You open up your systems for disruption by just making so many entry points into your network,” Barns said.

The results? “They’ll cease to operate on the commercial side, and on the industrial side of things, they are susceptible to a software takeover that can have an impact on more than just the devices themselves,” Price added.

If a ransom is not paid, the effects can range from loss of sensitive data to equipment sabotage that endangers lives and property.

Last year, Clorox suffered a ransomware attack that took nearly all of its automated systems offline. In 2021, Colonial Pipeline was the target of Russian hacking group DarkSide, hitting its billing infrastructure which affected control systems. This hack, in turn, caused fuel shortages across the Eastern Seaboard.

And attackers may have motives that go beyond cash. It’s all too easy to imagine an adversary sabotaging the SCADA or HVAC systems at a chemical or pharmaceutical manufacturing plant in time of conflict. “Any compromised systems could endanger the safety of the tenants within those buildings,” Barns cautioned.

What’s at the root of risks

But this diverse array of vulnerabilities usually stems from the same root cause. “The weakest link in the security chain is not technology or infrastructure, but people,” said Chuck Briese, vice president of information security at Transwestern. “Ninety percent of breaches are still being created by phishing.”

Even out-of-the-box cybersecurity software can have unintentional weak spots. “Sometimes, the software or passwords are very low security and are quite easy to crack and get into,” according to Price. In 2021, security camera company Verkada suffered a breach of over 150,000 of its cameras, some of which monitored hospitals, schools, warehouses and factories. The cameras were accessed due to administrator credentials that Swiss hacker Maia Arson Crimew, formerly known as Tillie Kottmann, found as publicly available information on the internet.

In Briese’s experience, negligent cyber hygiene exists in the hardware realm, as well. “Some of these buildings that (we manage) are 30 to 40 years old and have passed through myriad property management firms,” he said. “They’ll tell us what they think they know, but they don’t realize that there is a 10-year-old, 4-port Netgear switch somewhere in the ceiling that is passing traffic to unknown places.” Upon assuming management duties at a property, Briese’s team will sometimes find a PC that’s turned on and plugged into the network. The situation is brought to the team’s attention through network scanning.

What’s more, external vendors have access to security systems, HVAC systems and the like, and supportive work is often done through a port that passes a firewall and is forwarded directly into a system. “(It’s) highly insecure, because we’re opening up that port in the firewall for anybody,” Briese observed.

Best practices for preparation

In an ideal world, an ounce of cybersecurity prevention is worth a pound of cure. Often, the simplest solutions are the most effective. “The practices need to be related to the importance of ensuring that passwords are updated, data is stored in the right place, software updates are completed in time and recorded,” Wright observed.

For third-party access control, Briese advises using a VPN, to make it harder for hackers to steal data. Even if they can get in, implementing a zero-trust security model makes it prohibitively difficult for a breach to spread, according to Barns.

Another area that doesn’t always come to mind, even for cybersecurity-minded property managers, is vendor selection. “Ensuring that those vendors have a good cybersecurity process in place to mitigate risks is probably one of the top priorities when investigating which vendor to go with,” Barns advised.

On the logistics front, Barns sees both a direct and third-party evaluation of systems as a valuable yet often overlooked protocol. A more objective analysis can not only help patch known points of vulnerability, but routers at the portfolio level. “If you don’t know all of the assets that you have on site, it’s really hard to manage them and keep them secure,” Barns pointed out.

Price advises managers who are updating employee training protocols to account for the latest threats. Regarding the format of training sessions, Price recommends meeting with smaller groups once a month for 15 to 30 minutes to help make information more digestible and current.

For mitigation, top of mind should be ensuring that breaches remain isolated to one machine or network, so that an attacker can’t simply “pivot from a small regional property management office to a corporate network,” according to Price.

Even though network segmentation may be the name of the game, this process is not without its difficulties, given the complexities associated with managing properties and systems with multiple stakeholders.

As Wright put it: “If there were a hack on a building today, a little bit like your laptop, how do you switch it off and switch it back on again, going through that process of who those multiple stakeholders and subcontractors are?”

For this reason, backups of vital systems and data are essential, as well as understanding that losses will come with any hack, however minor. “You want to make sure you’re using your latest backups to restore any of the affected systems in data to get your systems back operational as quickly as possible,” Barns advised.

The answer lies in the fundamentals of cyber hygiene. “It is still going to come down to the human elements,” Wright said, “and that is the biggest challenge: making sure that the people are doing what they are meant to do.”

The post Property Management Success: Shoring Up Cybersecurity appeared first on Commercial Property Executive.

Coworking is having a good year. Once a mere subset of office, the sector numbers more than 7,000 locations in the U.S. and increased 7 percent last quarter alone, according to a recent update from CoworkingCafe.

However, simply building out coworking suites, whether inside skyscrapers or old warehouses, will not automatically fill them up. The management strategy needs to account for the many types of coworking office workers, their specific wants and needs, as well as the importance of location, be it a WeWork in Manhattan or a Regus in Tulsa.

Meeting in the middle

Will Sandford, Yardi director of coworking, sees a distinct identity emerging from the ubiquity of hybrid work and the office being optional as a baseline for curating today’s coworking spaces.

“When coworking launched, it was very much an alternative to homes and cafes,” something exemplified by the nation now having “a more transient workforce than ever before,” Sandford told Commercial Property Executive.

READ ALSO: As Office Pipeline Shrinks, Existing Class A Buildings Should Benefit

So what makes up this transient workforce? In Sandford’s observations, these users vary widely, ranging from a visitor to a town needing a single day to companies allocating space for an A-team or a test space for a satellite office expansion.

As for location, operating spaces in the suburbs and smaller cities can prove a winning strategy now, seeing as the outskirts recorded an expansion of nearly 9 million square feet nationwide in the past year, according to CommercialEdge data.

“Folks working in Manhattan are now working out of Bozeman, Mont.; Charleston, S.C.; or Greenville, S.C.,” pointed out Chris Smith, chief revenue officer at THRIVE | Coworking, a firm whose footprint is focused around suburban markets in the South and Midwest.

Still, they all operate with a similar mindset; “This mass migration took place, and now, after people started working in their homes, (they) became lonely, they need human interaction and that’s what we provide,” Smith said.

As such, coworking spaces don’t only compete with each other but with the living room, as well.

The hotels of the office sector

When it comes to design, programming and amenities, the prevailing mindset is closer to hotels than office buildings. The often-shorter stays, diverse array of users and more streamlined working experiences, in contrast to single-tenant suites, give users a certain brand-based expectation. Think of Workbox and Quest Workspaces as more like Hilton vs. Marriott than JLL vs. Colliers.  

“As we have more people coming into the market and (putting) demand on capacity, they will start to create favorites, and those favorites will start to align with the original communities that would build for the permanent members in those spaces,” Sandford observed. As with a hotel, a positive experience with the spaces and staff can create a certain degree of brand loyalty.

To earn this loyalty, coworking property managers should seek to include a consistent array of on-site activities, events, and food and beverage offerings, akin to a hotel brand providing similar amenities at all locations. This contributes to the more intangible elements of the experience, such as the ability to communicate and collaborate with other users, that helps brands truly stand out. THRIVE | Coworking locations, for example, offer unlimited coffee and snacks for members.

“(It) creates that water cooler talk opportunity to just really get to know and collaborate,” Smith said. “Generally, the value that people find is they end up working with other members in our space. You need some legal work done? Yeah, we have a law firm down the line, with John that you just shared breakfast with the other day.”

For John Arenas, CEO of Serendipity Labs, the intangible upsides, namely the level of customer service, alongside the community element, help a brand stand apart as much as the amount of natural light.

“You can manage a location, but if you can’t generate demand and find new customers, then you are really not a brand, and the brands attract customers,” Arenas pointed out.

As for actual work experience, a versatility of space arrangements is key. Evan Fain, general manager at Industrious, underscored the importance of having the right ratio of individual and shared workspaces, alongside spaces to focus on either heads-down or creative work. Industrious both operates coworking spaces nationwide and manages tenant experience programs for office investors.

In fact, using booking software, coworking operators can measure how a given space arrangement, strategy or amenity offering is performing in real time, across a portfolio. “When we think about the operations of our space, we focus on it as a hospitality business; we are data- and metrics-driven about how we drive toward the customer experience,” Fain detailed.

Customer service: A host of challenges

As with hotels, coworking operators can have the best-curated and amenity-driven locations, but it means nothing without attentive and responsive on-site staff. Fain’s firm, for instance, operates with more than 100 different hospitality standards in place, and consistently monitors real-time foot traffic and event attendance from its booking software.

Here, ease of access is paramount, with the selling point of most coworking spaces being that they are essentially offices imagined as a commodity, or often an amenity of office buildings in their own right.

“(Tenants) don’t need to worry about really anything except for having access to the building,” Smith said. Secure, reliable internet, fast work order fulfillment and immediately implementing feedback into operations are a must, as users can simply pack up and go to a new space, rather than break a lease. Or just work remotely.

Customer service can also often involve more mundane elements of traditional property management, some of which are exacerbated by the fact that each individual space is often occupied by many different users. “(This) means that you have not just a single person as a receptionist out front checking people in but a team that is ensuring that experience across all those dimensions of safety and security compliance,” Arenas added. “That’s everything from member experience management checking and using the facilities—whether it’s meeting rooms, (the) booking system or booking tools for using the resources to access control—to check-in security.”

Meanwhile, operators and the owners they serve still have traditional office challenges. While most of the space’s revenue comes from short-term uses, many spaces are located inside larger office buildings and are subject to long-term leases.

“When you sign a long-term lease but you have short-term membership agreements, your revenue is short term. It tends to break over business cycles,” Arenas said.

In the end, it’s far more than enforcing a lease or conducting inspections. “This isn’t just pretty office space with friendly faces greeting you—it’s actually an outsourced workplace,” he concluded.

The post Managing Coworking: Building Brands, Building Experiences   appeared first on Commercial Property Executive.

At their best, wellness-focused endeavors seek to strike a balance. Physical fitness is a focus, but so is mental health. Lighting and design are important considerations, but so is measurable air quality. Spa-like amenities have become an option, but so has improving access to routine, but necessary, medical procedures. In short, the wellness space is getting more serious.

Facilitating medical access

Priority wellness should focus on “full wellness”, a balance between mental, physical and social well-being, according to Carrie Szarzynski, senior managing director & head of management services at property manager Hiffman National.

READ ALSO: Boosting Asset Value Through Fit Buildings

Hines offers things such as health screenings, on-site vaccinations, eye exams and mammograms at its properties, said Whitney Burns, senior vice president of Hines’ global client strategy team. The mammograms are made possible by bringing in a fully equipped bus. “They can come, they can park and that makes a big difference in people’s lives. It’s something that people put off, that they don’t really want to do—but if it comes to you, it’s hard to have an excuse.”

Health plans are, of course, the domain of people’s actual employers, but owners and property managers can also play a role, partnering with end users to make sure they can provide things that will make a difference to their tenants’ employees.

And it needn’t all be so serious. Hines also offers on-site manicures, and even Botox, at its properties. “If you do the flashy stuff, that’s great,” mentioned Burns. “But before you do the flashy, you need to make sure you’re doing the basics well so that people feel cared for.”

All aspects of physical fitness

In commercial, especially office buildings, gyms have existed as amenities for decades. And they’re often underused. However, facilities manned by operators tend to have better utilization rates, especially when there are group classes.

LISTEN TO: Dr. Matthew Trowbridge of the International WELL Building Institute

While properties can schedule fitness classes, tenants can book space for their own employee offerings, mentioned Samantha McCormack, managing executive at TPG Architecture. Having access to bookable space is a boon for a company that would otherwise need dedicated fitness space, allowing it to reduce its footprint.

Unique settings for classes are also a plus, meaning a property-run workout doesn’t necessarily need gym space. Lobbies, conference rooms and outdoor spots are often popular alternatives. Personal training offerings have long been popular, with sessions focusing on sports training and injury prevention becoming increasingly sought-after. Part of this is due to the advent of pickleball, said Szarzynski. “Everybody is looking for training that will prevent them from getting hurt. That’s really different.”

Staples such as basketball courts and pools remain major draws, but even the use of pools is being rethought, from more traditional water aerobics to paddleboarding.

The design behind the new breed of gyms is leading to the creation of a spa-like environment, pointed out McCormack, with Peloton bikes, yoga studios and the ability to bring in barre classes.

READ ALSO: When Healthy Buildings Take Center Stage

Beyond the concept of a gym, some Hines properties now aim to provide “recovery zones,” said Burns, offering therapeutic massage guns, compression sleeves and massage chairs. Physical trainers also help with stretching exercises. “I think we’re going to start seeing a lot more things such as infrared saunas and plunge pools coming on-site. I don’t know that the plunge pools will be as popular at office as with residential, but the infrared sauna is a relatively small investment for a really meaningful amenity.”

The new frontier of gym wellness isn’t likely to stop here, though.

Diet is also a component of the emphasis on physical fitness, McCormack added. “I would say the biggest features that we’re seeing are things that focus on whole-body being,” which she explained extends to healthy food at on-site eateries and partnerships with health food restaurants. Some properties even have experimented with onsite nutritional counseling and lunch-and-learns, where people can ask questions of a registered dietitian.

Psychologically focused offerings are also increasing in popularity. These include online zooms with mental health professionals, meditation, yoga and even sound baths and scenting.

The gift of time

Having an on-site fitness center is a major asset to commercial tenants, and not only by avoiding fees.

Research has shown that a healthier environment helps with hiring and retention, in turn making properties more attractive to investors, NAIOP, the Commercial Real Estate Development Association, has found.

“If people are coming to the office and if they have access to a free or subsidized fitness center, that saves them a lot of time and money of driving to a different fitness center and paying for another membership,” remarked Burns. “Saving people a lot of time and money adds value to the workplace.”

Time-saving wellness features are rarely flashy but can make a big difference in people’s work-life balance.

READ ALSO: Designing an Office Experience That Feels Like Home

“I’m a mom with two young kids, so while I would love to do the rooftop yoga and charcuterie, I also want to go home and see them,” pointed out Burns. “So, what adds value to me, personally, are these things that make me more efficient at the office, not just for work, but for life.”

This can range from gym access to grocery delivery. Hines recently partnered with Instacart to offer grocery deliveries to their tenants’ employees on-site.

Burns noted that one of Hines’ most popular on-site services is arranging TSA Global Entry interviews onsite.

“That’s not an Instagrammable moment, but boy, does it mean a lot to people, because it saves them a trip to the airport, the interviews right on site. Things like that I think of as wellness because it helps reduce stress. Anything you can do to reduce stress and quiet the noise is really meaningful for people’s mental health.”

App help

Wellness apps have completely changed the game. First, they help property managers keep people up to date on events at their properties without going through intermediaries.

“We now have this direct communication with the individual user, and we just really didn’t have that before,” said Burns. “A lot of the communication would go from our property management office to the facility manager of a tenant floor and then it would be dispersed from them.”

While office properties, especially more exclusive ones, are often the focus when talking wellness, that needn’t necessarily be the case. “We don’t want this to just be a Class A office product, we want this to be a product for retail, medical, office, industrial and office buildings,” said Szarzynski. Hiffman’s wellness app, which launched in July, offers sudoku, a book club, online classes, desk exercises and walking challenges. Traveling tenants can even book desk or office space at the company’s properties in other cities.

Designing a healthy, sustainable workplace

A focus on wellness hasn’t transformed the property management business yet, though many companies are incrementally adapting along these lines, responding to demand.

Some small moves have become routine, including planting native plants that don’t need to be replaced annually and adding beehives to buildings. “Everybody’s doing that, that’s not new,” pointed out Szarzynski, though she predicted that wellness-centric demands will continue to accelerate. Property managers have also gotten on board with plentiful natural lighting and access to outdoor spaces.

More biophilia was found to create a 5.6 to 7.8 percent rent premium for offices in New York City, according to a 2022 report from the International WELL Building Institute. The same report noted there is a 5 to 6 percent rent premium for commercial spaces with high levels of daylight in New York City: “Windowless environments negatively affect workers’ productivity and sleep.”

And while biophilia is gaining ground, more subtle touches add to the feel-good whole. McCormack said: “I keep saying that everybody just wants a really big hug after the last four years, so we’re seeing shapes of furniture returned to things being softer curves—tables that, instead of being a rectangle with a sharp corner, starting to have a small radius angle, something that is softer, more approachable.”

READ ALSO: How Lifestyle Offices Are Redefining Work-Life Balance

There is a trend toward lounge settings and common areas with comfortable furniture, though these areas need to ensure they are equipped with sufficient electrical outlets. More textiles and soft materials are also being incorporated into furniture bases. Properties are seeking out furniture that is more sensory, tactile and soft, though durability remains a priority. “Because it’s in a corporate environment, it has to withstand people kicking in constantly.”

Air quality also remains vital, and while pursuing LEED or WELL certification is still valuable, McCormack noted that many companies are moving beyond a plaque when showcasing their green bona fides. Some properties even allow tenants to monitor indoor air quality and carbon dioxide levels on digital screens.

Read the August 2024 issue of CPE.

The post What’s Your Wellness Action Plan? appeared first on Commercial Property Executive.

Check out our coverage of BOMA International’s annual convention, which took place in Philadelphia. Panelists discussed the latest topics in commercial real estate, including the need for a return to office, why resilience strategies are a must, as well as the best ways to bridge the gap between property managers and asset managers.

BOMA 2024 Special Report: The US Needs CRE’s Power to Connect, Smerconish Says

A large-scale return to the office would benefit the nation’s social fabric, the commentator argued in his keynote address.

BOMA 2024 Special Report: Why Resilience Strategies Are a Must

Extreme weather is taking a huge toll, but owners have plenty of ways to address this, experts said.

BOMA 2024 Special Report: When Property Management and Asset Management Meet

What are the best ways to bridge the gap between the two professions?

The post BOMA 2024 Conference Highlights appeared first on Commercial Property Executive.

That question could sum up a central issue raised Tuesday on the final day of BOMA International’s annual conference in Philadelphia. During a lively town hall-style event led by Matt Lexow-Gray, vice president of data operations at Lobby CRE, professionals shared strategies for meeting the changing needs of asset managers and owners.

Thinking strategically has long been part of the property manager’s job description. That was clear from the session’s title: “The Future of Commercial Real Estate: We Are All Asset Managers.”

Yet property managers often feel that they are locked in a silo separate from asset managers, despite their common interest in property performance. For example, property managers often aren’t involved in the modeling and forecasting.

READ ALSO: Why Resilience Strategies Are a Must

Finding a seat at the table is the best way to understand those issues. In those cases, it’s up to the property manager to take the initiative. The goal, Lexow-Gray said: “Make your asset manager’s job easier. Find out what you can do for them.” He suggested framing the question to asset managers as, “We want to be better property managers for your assets. How can we do that?”

And if the asset managers still seem resistant, an audience member suggested initiating a conversation with the asset manager to find out why they’re reluctant.

Nuts-and-bolts management challenges

In addition to addressing the property manager-asset manager dynamic, session participants offered tips for working with tenants on nuts-and-bolts issues.

One consequence of tenants’ growing preference for shorter leases is that it complicates the timing and potential amortization of improvements, especially when those upgrades offer the tenant a benefit. The dilemma: Whether it’s better to make the investment soon, with the potential to amortize it to the tenant—or defer it, while also possibly losing the opportunity for amortization if the tenant leaves.

Moving forward can be a more attractive choice when the tenant has buy-in, participants suggested. Landscaping is a good example; it’s possible to amortize those improvements if the tenant sees a benefit to their business and knows what they’re getting. Involving the tenant in the discussions about upgrades can make it happen.

One concern that emerged from the audience is finding middle ground between shouldering the sole financial responsibility for upgrades, and asking for so much that the tenant is priced out of the market and leaves the property.

Decision-making in any aspect of managing assets is often a balancing act. When addressing issues, Lexow-Gray recommended adopting the four-step approach introduced by Col. John Boyd of the U.S. Air Force: observe, orient, decide, act (often called OODA).

The session leader also recommended that property managers stay current on four areas affecting asset management: operations, debt, equity and entity-level strategies. On the operations side, a snap survey showed that 95 percent of those at the session are more concerned about expenses than about revenue; as one audience member observed, revenue has failed to keep up with costs. Inflationary pressures are driving up expenses for maintenance, insurance, taxes and other areas.

The post BOMA 2024 Special Report: When Property Management and Asset Management Meet appeared first on Commercial Property Executive.

Lift Partners, of San Francisco, has appointed Kidder Mathews to manage 530,384 square feet of property in Northern California. The assignment brings Lift’s total square footage under Kidder Mathews management to 1.2 million.

Kidder Mathews has been managing properties for Lift in the Pacific Northwest since 2015 and in Northern California since 2023, starting with a 651,000-square-foot portfolio. Senior Vice President and Market Leader Lori Coleman and General Manager Bridget Kitzerow now handle property management for 18 Lift assets.

The newly added properties are:

READ ALSO: Property Management Success: Extreme Weather and Industrial Resiliency

According to Kidder Mathews, in the last year, its property management division has reached its highest revenue to date. One of the largest assignments involved 1 million square feet of office space at 555 Tower in downtown Bellevue, Wash., one of Seattle’s top developments.

Founded in 2015, Lift Partners focuses on repositioning and redevelopment of industrial and office properties along the West Coast. Since its inception, Lift has acquired 6 million square feet of industrial and office assets valued at $1 billion.

Steady business

Kidder Mathews is the largest independent commercial real estate firm on the West Coast, with more than 900 professionals in 19 offices across Washington, Oregon, California, Idaho, Nevada and Arizona. The firm averages north of $10 billion in transaction volume, manages more than 55 million square feet of space and conducts 2,600 appraisal, consulting, and cost segregation assignments annually.

In October 2022, Kidder Mathews picked up the assignment to manage a 1.2 million-square-foot mostly industrial portfolio in Southern California on behalf of Terreno Realty Corp. That deal brought a total of 2.8 million square feet of Terreno properties under Kidder Mathews’ management.

The post Kidder Mathews to Manage More NorCal Assets for Lift Partners appeared first on Commercial Property Executive.

Extreme weather events are creating any number of headaches for property owners and managers: higher insurance costs, more expensive operations, retrofitting cost and increased property wear and tear. To push back against the risks, experts at BOMA International’s conference in Philadelphia this week urged owners and managers to develop mitigation plans that can range from major structural upgrades to the use of heat-reducing coatings.

Pressure on owners and managers is emerging from multiple corners. “Investors want to see that we are able to assess risk and what strategies are in place to address it,” observed Kelly Vickers, vice president for ESG at Mill Creek Residential Trust. Early in this decade, the company began to supplement insurance data with climate risk modeling data. The company now fields multiple teams that engage with risk from a variety of perspectives.

READ ALSO: Extreme Weather and Industrial Resiliency

Insurance carriers expect higher standards for resilience, as well. “You have to have a mitigation plan, or you risk not having insurance at all,” noted Kim Pexton, vice president of sustainability for JBG SMITH. The panelists addressed the challenge of balancing the risks posed by large-scale, extreme events as opposed to more common hazards. “The things that show up in climate risk assessments are things that insurance companies are not covering,” Pexton said.

Yet she added that insurers are a valuable resource, calling them, along with engineering teams, “your greatest allies.” Carriers will often work with owners on an asset-by-asset basis. Step one, Pexton advised: check with your carrier to see whether they offer mitigation strategies.

Security against rising tides

When a severe weather incident comes up, investment upgrades go a long way to minimize damage and downtime. Lindsay Brugger, vice president of ULI’s urban resilience program and the panel’s moderator, cited the example of a Starbucks in Houston that was completed in 2016, the year before Hurricane Harvey.

Despite the store’s location in a flood plain, no flood insurance claims needed to be filed. The keys: three flood-proof doors that cost $10,000 apiece, plus a 2-foot, 8-inch membrane that protected the building’s concrete masonry. The store was in good condition that it could have opened the next day, Brugger said.

As part of the renovation of Commonwealth Pier, a historic urban campus on Boston Harbor, Arup designed a strategy that anticipates a nearly 2-foot rise in the harbor’s mean high tide by 2050. Highlights include a curb designed to mitigate wave impact, the elevation of critical equipment, continuous waterproofing and structural tie-downs to counteract buoyancy, reported Katie Wholey, the engineering firm’s Boston resilience leader.

Non-structural approaches to resilience can be effective, as well, Pexton noted. JBG SMITH used a coating product that still reduced pavement temperatures a year after it was applied. Another success was the use of window film, a category of product that, Pexton observed, leasing brokers often dislike because of its looks. But in this case, the company selected a product that is used for windshields, dries clear and reduces energy use by 3,000 British thermal units per square foot.

The post BOMA 2024 Special Report: Why Resilience Strategies Are a Must appeared first on Commercial Property Executive.

Looking at markets, Miami is closest to returning to 2019 figures as its visits were down by just 9.8 percent in June compared to June 2019. In New York City, visits were down 14.2 percent, driven by strict return-to-office policies on Wall Street.

Boston and Atlanta saw the biggest increase in visits on a year-over-year basis for June, with visits jumping 10.3 percent in Boston June and 10 percent in Atlanta.

San Francisco continues to lag among the 11 key cities Placer.ai measures, with visits down 49.2 percent during June compared to June 2019. The San Francisco Federal Reserve president recently urged tech companies to tighten their in-office policies.

READ ALSO: Top 5 Boston Submarkets for Office Construction

Placer.ai tracks 1,000 office buildings across the country, including commercial office buildings and commercial office buildings with retail offerings on the first floor. Other markets it tracks nationally are Dallas, Washington D.C., Chicago, Denver, Los Angeles and Houston.

Houston’s visits were hampered in May and June due to tropical storms and generally inclement weather conditions. Things have not improved much in Houston for July as Hurricane Beryl came on land this week.

Kastle Systems also tracks office traffic via its entrance systems in leading markets. For each of the three weeks prior to the July Fourth week, occupancy in its top 10 markets ranged from 51.1 percent to 51.8 percent. From July 1 to July 5, it fell to 45.8 percent due to the holiday.

The post Office Visits Continue to Improve appeared first on Commercial Property Executive.

As industrial demand and development continue their upward trajectory, so too has the complexity of their operations. From storage racks to semiconductors, these facilities depend on reliable transportation, location, energy and internet connectivity.

But with that complexity comes potential for disruption. Natural disasters increasingly pose hazards. According to the National Oceanic and Atmospheric Association’s National Centers for Environmental Information, there have been 11 confirmed severe weather events so far this year, which have caused more than $1 billion in damages. Such events, from hurricanes, tornadoes, wildfires, floods and cold waves have nearly doubled in frequency over the past two decades, a significant factor in driving up insurance costs.

The responsibility of ensuring that the facility’s contents and personnel remain safe is often largely on the shoulders of property managers. That underscores the need for strategies that can anticipate disruption as well as respond to it.

Perfect storms

The natural disasters that a facility is most likely to face is a matter of location. But as the effects of climate change evolve, so too have disruptions. Historically, facilities along coastal areas, particularly along the East Coast, were most at risk of hurricanes and floods, while those in the South, Midwest and West were susceptible to heat waves, tornadoes and wildfires.

Now, a shift in the locations and severity of these events appears to be underway. “Tornado Alley used to span between Texas and South Dakota, but this year Ohio had the highest number of tornados until mid-May,” noted Karen Whitt, president of real estate management services at Colliers. 

Others have observed a similar trend in the Northeast. “What we are most aware of is flooding, but we have raised and increased concerns due to heat waves,” said Edward Chandler, director of property management at Greek Real Estate Partners, which operates primarily in New Jersey. The fact that such areas are only beginning to experience such events as tornadoes, hurricanes, and extreme heat further increases risks to life safety and property.

Apart from the impact on buildings, the most severe damage often hits the power grid, in large part due to its age, fragility, and interconnected nature. A disruption in one area can often impact electricity services several states away, and even a minor outage can cause damage or contamination to an entire industrial facility. With this in mind, some managers have turned their focus to mitigating the impact of power disruptions. “When we speak of resiliency, that word pertains to how we are supplying power and energy to the facility, and what you can do to mitigate the risk of disruption,” commented Jay Balasubramanian, senior director of sustainability solutions at JLL.

Smart preparation

To prepare for these threats, a highly recommended tactic is to plan responses to events before they happen. Whitt advises property managers to consult individually with tenants and portfolio operators while monitoring the news.

“A robust warehousing and distribution customer may not even notice severe weather has started becoming more common in neighboring jurisdictions,” she said. “As their sites tend to be located outside of central business and residential districts, local news may not even mention what’s happened a few hundred miles away, but the next event could still impact them.”

But there is no substitute for thorough preparation: a consistent, on-the-ground presence that detects hazards and provides needed maintenance before a crisis. “In order to be properly doing your job as a property manager, you need to be present at the property, and for us that means more than swinging by in a car and taking a cursory glance,” Chandler said.

READ ALSO: The Case for Last-Mile Facilities

As an example, even a simple downpour can add too much weight to a roof that contains sophisticated mechanical equipment. Property managers should stay on top of such hazards by monitoring gutters and making sure that retention basins are unobstructed, Chandler advised.

At the personnel level, centralized portfolio management and cross-training are the name of the game, as they give property managers the skills necessary to deal with disruptions. As Whitt put it: “Managers need to get their eyes on as many properties as possible, as quickly as possible, so they can prioritize response items and ensure we’re using our resources as effectively as possible.”

Additionally, the most acute observations related to maintenance often come from tenants. “(They) are there more often than we are, and they are such an invaluable resource and wealth of knowledge as far as what takes place at the property,” Chandler noted. “They will let you know, once you establish that relationship with them, what is working properly, (and) what is not, in order to better prepare them for what is ahead.”

Technology’s tools and limitations

Beyond hiring the most capable personnel, the astute use of property technology is also a must for industrial property managers. Colliers preaches the use of hardware and software that aid resilience, from internet-of-things connected sensors to tenant experience applications.

At the property level, the firm uses sensors to get the jump on potential disruptions. “Rather than needing a manager on-site to check the lowest level of every property for water intrusion, an IoT sensor can automatically alert us,” Whitt explained. “(The) same goes for building management systems, electrical spikes, and cameras for monitoring everything from security to keeping an eye on problem areas.”

On the macro level, the firm uses a geospatial monitoring tool that reports on property vulnerabilities, in addition to suggesting site-specific resilience. “(It) paves the way for faster, more-informed decision-making,” Whitt noted.

At the same time, Whitt cautions against using these programs to replace on-site inspections and interventions. “It isn’t a replacement for an experienced management team with carefully planned out processes,” she added.

Outside of flashy computer screens, the firm also equips leadership with satellite phones, and parking RVs outside of regions that are expected to be hit the hardest.

To promote resilience after an event, some tenants are installing microgrids at their properties, following their success with keeping the lights on in parts of Manhattan, New Jersey and Maryland. “If you have the energy on site, it costs a lot less than what you are buying from the grid. The benefit is immediate, and it’s not only a resiliency solution, but it is also a sustainability solution,” JLL’s Balasubramanian observed.

The post Property Management Success: Extreme Weather and Industrial Resiliency appeared first on Commercial Property Executive.

A recent report from the Marsh McLennan Agency shows that the number of billion-dollar disasters in the U.S. nearly tripled in the past decade, boosted by severe storms and flooding. Meanwhile, bad weather and increased usage are also putting more strain on America’s aging infrastructure.

To stay competitive, effective risk management, contingency planning and insurance strategies should come into play. This means many industrial owners and operators will need to adjust strategies.

Kate Rutherford, senior vice president at Prologis, is on the front lines of developing an effective risk management strategy. Based on her 20 years of experience, Rutherford has no illusions about what lies ahead: “Extreme weather events are totally out of our control. What we can control is our preparation and our response.”

READ ALSO: Rising Insurance Costs and the Power of Risk Management

For Rutherford, preparation starts at the construction and development phase. “We’re in a lot of markets, so we experience all the different disasters such as earthquakes, windstorms and floods. This requires a proactive approach, assessing natural hazards and climate exposures, making sure that properties are built to withstand potential disasters.”

Maintenance, monitoring matter

But preparation isn’t enough. Regular maintenance is also required. Rutherford highlighted how seemingly trivial things such as checking the status of roof drains can prevent damage by making sure water doesn’t accumulate on rooftops during heavy rainstorms. She also mentioned the importance of keeping nearby trees trimmed, which can keep tree branches and other wind-borne debris from damaging buildings.

Rutherford also stressed the importance of active monitoring. In January 2023, a series of tornadoes occurred with no warning in Atlanta. For Prologis, monitoring kept a natural disaster from becoming a human tragedy.

READ ALSO: How to Protect CRE From Wildfires

“We have fire alarm monitoring at all our buildings. A few minutes before the incident, our property manager received a waterflow alarm notice. The fire department was dispatched to evacuate the building, and everyone took shelter. The customer called us shortly thereafter and while there was some damage to the building, there were no fatalities. Those kinds of positive actions reduce negative impact,” she said.

Contingency comms is key

Rutherford also emphasized the importance of a data-driven approach to contingency planning. This starts with communication. To maintain accurate contact information and protocols, Prologis turns to Archipelago, a productivity software platform that pairs data management with interactive analytics.

The data-driven approach allows Prologis to:

• Maintain accurate contact lists.
• Know when storms alerts go out to customers and vendors.
• Determine an appropriate response based on the information available, such as stopping construction or evacuating facilities.
• Keep risk and leadership teams in the loop.
• Connect quickly with disaster recovery partners vendors, across the country and across the globe and track their performance over time.

Vendor relations are critical

Preparation goes beyond facilities themselves. Having the right relationships in place before disaster hits is also critical. Not just to protect employes and customers, but also to maintain business continuity.

Toby Mink, CBRE executive vice president based out of Baltimore, helped lead the response when a container ship collided with the Francis Scott Key Bridge on March 26, 2024. The bridge collapsed, claiming the lives of motorists and construction workers, disrupted a major transportation route and blocked access to the port of Baltimore.

For operators working with CBRE, the harbor blockage could have also become a major business disruption.

Mink mentioned that many of the company’s commercial properties are industrial and warehouse, and are key entry points for regional and national fulfillment networks. When access to the port was shut down, clients had to find different paths because they couldn’t reach the inner harbor.

According to Mink, “it took about 30 days for the port to reopen, but because we had developed relationships with other ports and facilities in the region, our clients were able to redirect their traffic and avoid a major business disruption. If we hadn’t had those relationships in place, a lot of businesses probably wouldn’t have survived.”

Resilience today benefits tomorrow

With increasing industry losses brought by more frequent and severe natural hazards, owners and/or operators are likely to see increased prices and greater limits on the breadth of available insurance coverage. The Marsh McLennan report shows that as many as 68 percent of commercial properties are underinsured by 25 percent or more—and 19 percent are underinsured by 100 percent.

But Jeff Bray, head of global risk management for Prologis, as well as risk manager in residence at Florida State University’s College of Business, makes it clear that resilience and better risk management practices are the smarter option overall.

As Bray put it, “Although most insurance companies do not have a formal method for considering resilience in their underwriting today, the steps we take to prepare for and mitigate potential losses will be a differentiator for insurance buyers in the future.”

As insurers scrutinize risk management strategies when weighing their own risk, the owner/operator who has built resilience and risk management into their plans at the start will be better positioned.

All said and done, having a good risk management strategy is about more than dollars and cents. It also helps create a company culture of caring. In a tight labor market, this can help employers find and retain the talent they need to grow and stay competitive.

Here’s Mink’s example: “We were building a facility in Indianapolis, and we put in a tornado shelter. The landlord challenged us that not a lot of people were doing these, but we had recently seen a warehouse in the area that had been cut in half by a tornado. Hopefully, that room is never used. It could be a storage room for the next 20 years. But if I’m an employee there and I know I’m in an area where tornadoes are present, I think it’s nice to know that somebody has thought ahead about my safety.”

The post Navigating Risk When Disaster Strikes appeared first on Commercial Property Executive.

TK Elevator, a global leader in mobility solutions, presents EOX, a revolutionary elevator system tailored for 2 to 10-stop buildings. Designed with German engineering and assembled in North America, EOX represents a significant leap forward in the elevator industry, combining affordability, energy efficiency and advanced digital connectivity.

EOX: Elevating urban mobility

EOX is the result of TK Elevator’s commitment to enhancing building operations through innovative technology.

EOX is specifically engineered to meet the demands of modern urban structures, providing a reliable and efficient solution for low- to mid-rise buildings. With its simplified and efficient delivery and installation process, EOX offers unmatched quality and is tailored to each building’s specific needs, significantly improving the customer experience by increasing uptime and extending product lifespan.

Sustainable performance features

EOX is a smart, energy-efficient solution equipped with cutting-edge technology. The system boasts up to 45 percent energy savings compared to other low-to-mid-rise options, supported by digital connectivity through partnerships with leading tech giants such as Microsoft^® and NVIDIA^®. This integration allows for optimized performance and maintenance, ensuring a seamless and cost-effective operation.

EOX features its green credentials with a unique eco-mode that learns and adjusts to traffic patterns within the building. During periods of low use, the system optimizes its operations by reducing speed and acceleration, contributing to significant energy savings and extending the lifespan of the machinery. TK Elevator also offers the expertise of over 200 accredited LEED Green Associates and BREEAM Associate Experts to assist clients in achieving green building certifications.

Digital integration for user safety

EOX elevators are equipped with an infotainment-ready screen that is customizable, allowing building managers to choose between news updates to weather and more. The display highlights the cabin position and travel direction, along with essential service and utility icons.

Meeting projected expenses

EOX supports TK Elevator’s vision of ‘moving beyond’ by addressing the essential needs of modern construction projects. It safeguards project budgets and timelines through streamlined manufacturing and delivery processes. In addition, EOX provides buildings with reliable trip performance that enhances the quality of transport and user experience. EOX is also engineered to provide premium features at a competitive price point, making advanced technology accessible to a wider range of construction projects.

About TK Elevator

With customers in over 100 countries and served by more than 50,000 employees, TK Elevator provides global customer service from approximately 1,000 locations.

As one of the world’s leading elevator companies, TK Elevator’s extensive product portfolio includes not only elevators but also escalators, moving walks, passenger boarding bridges, and stair and platform lifts, backed by innovative cloud-based solutions like the MAX platform.

For further details about EOX and other offerings from TK Elevator, please visit https://info.na.tkelevator.com/EOX-Article.html.

The post EOX: The Game-Changing Elevator for Modern Buildings appeared first on Commercial Property Executive.

Hertz Investment Group has appointed Colliers to provide real estate management services at The Meridian, a 17-story office tower in Columbia, S.C.

Senior Property Manager Cheryl Love and Assistant Property Manager Yelissa Motta will be joining several other Colliers professionals who currently handle building engineering, maintenance and brokerage services.

The existing team includes Vice President Tommy Johnson, who serves as the building’s brokerage representative, Lee Lane, the chief building engineer, and John Ciarcia, a maintenance technician.

A downtown Columbia office tower

The Meridian, a 335,085-square-foot office tower that came online in 2004, is the seventh tallest building in Columbia. Hertz Investment Group acquired the asset in 2015 for $65.6 million, according to CommercialEdge information.

The 17-story building has 22,000-square-foot floorplates and 10-foot ceilings. Presently, the property is 90 percent leased, home to a mix of tenants in the legal, financial services, engineering and insurance businesses.

READ ALSO: Law Firm Office Leasing Continues to Rise

Amenities include an eight-level parking garage, a fitness center and conferencing suite, as well as 2,500 square feet of retail which is home to Market on Main, a locally owned restaurant and event space.

Located at 1320 Main St., The Meridian is two blocks from the South Carolina state house and roughly half a mile from University of South Carolina’s main campus.

In the first quarter of this year, Columbia’s office market saw improvements across its construction pipeline and net absorption, according to a report from Colliers. Additionally, the vacancy rate of 13.2 percent was considerably below the national average. The report states that much of these positive trends are due to a renewed interest in the city’s central business district.

The post Colliers Expands Property Management Duties at South Carolina Office Tower appeared first on Commercial Property Executive.

Over the past several years, cold storage has become an increasingly heated industrial specialty. According to Grand View Research, the climate-controlled storage sector, worth $36.9 billion as of 2023, is expected to grow 17.5 percent annually by 2030.

Much of this demand is structural. In a recent CPE Viewpoint, David Greek of Greek Real Estate Partners cited increased consumer appetite for fresh food at home, restaurant dining and take-out orders. Expanded manufacturing and e-commerce are stepping up demand, as well.

READ ALSO: Q&A: How Will the Manufacturing Investment Boom Impact Industrial CRE?

But equally important to having a facility that’s equipped to meet the demand is proper management. Effective cold storage property management has distinct requirements, as well as some underlying similarities to managing conventional logistics facilities.

Low temperatures, high stakes

Because of the nature of the products kept in cold storage facilities, the rigor of maintenance must be dialed up to 11. Generally, food refrigeration standards call for constant temperatures of 40 degrees and below, while medicines are best stored at 59 to 77 degrees. Even the deviation of a few degrees can lead to food spoilage or render medicines unusable.

“(For) most cold storage facilities, the HVAC systems have to be running at their maximum ability, while we ensure that there are no environmental issues like mold growth which would be a critical concern for us,” said Michael Bodendorf, senior vice president of global operations at Realterm. “We go to the properties at a minimum of twice a year to do inspections,” Bodendorf added.

Resilience is another area of heightened focus, as even brief interruptions in power or coolant delivery can have damaging results. “It’s always a matter of ensuring that there is redundancy. You will see users more invested in generators, where if something happens to these properties, they are covered,” Bodendorf noted.

The ability to reliably control temperature depends on the types of items being stored. Regulation may prove difficult if a facility has multiple tenants. “The problem is that you often have to look for potential cross-contamination between different products, (because) each has a different storage, temperature and humidity rating,” said Gary Stevens, director of engineering at C&W Services.

These considerations apply to building structures, as well. A big concern is pressure, which is often controlled by smoke dampers and roof plenum space. The biggest avenue for spoilage can be a change in tenants and the requirements for a different set of products.

“It’s a matter of being sensitive to building the facility for the purpose, but when we change that purpose, we have to take all those considerations into account,” observed C&W’s David Auton.

On the flip side, a recent area of increased focus is freezer space that enables operators to meet varying temperature needs. According to Lukas Huberman, partner & director of acquisitions at BLT Enterprises, “It’s proving to be even more sought-after than refrigeration in today’s market, and the potential to lease a space to several different clients within one facility is lucrative as demand increases.”

Policies, processes and procedures

Like the technical aspects of cold storage management, the skills that make the best managers often represent specialized versions of their counterparts at conventional facilities. “The skill set is the same; it really comes down to an understanding and appreciation of the tenant’s needs,” Bodendorf said.

In practice, this translates to sector-specific technical acumen. “Get someone who is knowledgeable about the things that need to be monitored, observed and managed, and then find people capable of training in that specific skill set,” Auton advised. That could involve Good Manufacturing Practice certification or quality assurance programs, he added.

Along with certification, thorough knowledge of how cooling systems work, and staying on top of emerging technology, is vital to making sure that they operate reliably.

Given the minimal room for error in cold storage operations, abiding by site-specific or even suite-specific procedures is vital, no matter how long a team member has been on the job. “We have a lot of people with many years of experience who tend to get overconfident, but in a controlled environment you have to follow the procedures accurately and precisely,” Auton observed.

That advice goes all the way from the warehouse floor to the air handling units. As Huberman put it, following best practices to the letter makes the difference “between the relatively small cost of addressing any minor mishaps, or implementing strategic upgrades, and the exorbitant cost of replacing equipment.”

The post Property Management Success: Cool Heads for Cold Storage appeared first on Commercial Property Executive.

Blue Ridge Industrial has selected Stream Realty Partners as leasing agent for a 1.4 million-square-foot portfolio. Totaling 28 buildings, the assets are spread across North Carolina’s Triad area.

Stream’s Managing Director Jason Schnittger, alongside Senior Vice President Bradley Dunn and Associate Parker Byrd, will spearhead leasing at these Blue Ridge properties.

“Newly constructed facilities in the Carolinas typically cater to tenants larger than 75,000 square feet,” Dunn told Commercial Property Executive. “Blue Ridge Industrial is completing an extensive capital program at these second-generation properties that will include amenities like sprinklers, LED lights and new office areas that are characteristic of new buildings but at a price point and size range that is accessible to tenants with smaller footprints. This will allow the 2,000 to 50,000-square-foot tenant to access these important features.”

Dunn continued to explain that these improvements are key due to the majority of tenants in the area seeking this type of space in the market.

READ ALSO: Staying Busy When Industrial Momentum Hits the Breaks

In the first quarter of this year, industrial asking rates in Greensboro/Winston-Salem remained mostly flat, a recent Cushman & Wakefield report shows. Further, the vacancy rate was up 4.5 percent on a year-over-year basis.

One of the significant industrial projects in the market is Southeast 85 PowerPlex, a 1.5 million-square-foot master-planned complex in Greensboro, N.C., set for completion in 2025. Carroll Industrial Development appointed Cushman & Wakefield as its leasing agent earlier this month.

Portfolio specifics

Blue Ridge acquired the portfolio, which was 96.4 percent leased at the time, in October. An affiliate of Dogwood Industrial Properties sold the assets for $105 million.

Most of the buildings are part of the South Park Business Center in Kernersville, N.C., between Interstate 40 and Salem Parkway. Totaling 1.2 million square feet, the facilities have flexible, single-tenant and multi-tenant layouts. The properties are in between Greensboro and Winston-Salem, located approximately 24 miles and 5 miles away, respectively.

Included in the portfolio are mid-bay, shallow facilities such as 4300 and 4320 Greensboro Road in Winston Salem, N.C. Completed in 1980 and 1986, respectively, the properties encompass a total of 160,000 square feet.

Another second-generation mid-bay facility is in Kernersville at 1459 Brookford Road. The 48,860-square-foot building came online in 2001.

The post Stream Tapped to Lease 1.4 MSF Industrial Portfolio appeared first on Commercial Property Executive.

The 2024 CPE Influence Awards recognize the commercial real estate industry’s most noteworthy properties, projects and transactions. Does your office have amenities that attract new tenants? Are you the top broker at your firm? Were you able to successfully reposition a property? We want to celebrate your successes.

We will be accepting entries until 6/28.

READ ALSO: Entering the CPE Influence Awards? Try These 10 Tips

Explore our categories:

• Best Amenities
• Broker of the Year
• Most Innovative Corporate Strategy
• Most Effective DEI Program
• Best Design
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Best Development
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Development Company of the Year
• Best ESG Program
• Executive of the Year
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Best Financing
• Humanitarian Award
• Best Investment Transaction: Portfolio
• Best Investment Transaction: Single Property
• Best Lease
• Most Effective Property Management Program
• Property Manager of the Year
• Most Effective Repositioning/Redevelopment Plan
• Rising Star
• Most Innovative Technology
• Unbuilt

New for 2024:

• Brokerage Office of the Year
• Best Design: Data Centers
• Best Development: Data Centers
• Interior Design
• Top CRE Social Media Influencer

The 2024 winners will be selected by a panel of judges representing expertise across all commercial disciplines. Interested in being considered for the judging panel? Email Jessica Fiur.

Winners will be announced and honored later in the year. (Read about the 2023 winners.)

Questions? Contact Editor-in-Chief Jessica Fiur.

The post Deadline Extended: Enter the 2024 CPE Influence Awards appeared first on Commercial Property Executive.

A recurring theme and sentiment on the first day of RETCON 2024 was that the commercial real estate industry, for a long time a slow adopter of new technologies, has caught up to many other business sectors.

Much of this progress is owed to innovations in the realm of artificial intelligence, mindfulness toward employee and tenant feedback, as well as a more refined form of investment in tech startups.

For many panelists, what is equally important to which technologies to use in each tech stack are specific considerations around how they can maximize returns for their assets, the tenants within them, as well as the employees using them.  

As Nick Romito, CEO & co-founder of VTS, put it in a panel discussion, “The one thing we have gotten good at is the basics. We were 10 years behind every asset class, and now we have them down.”

Triumphs and challenges

But with this catch-up, however, comes a whole new set of considerations and challenges. Kicking off the conference was a discussion with Tal Kerret, president of Silverstein Properties. Demonstrating both how far the sector has come in the realm of innovation alongside the challenges it faces, Kerret highlighted his firm’s migration of employee badges to Apple’s Wallet application, giving employees wireless, contactless access to their office spaces owned and operated by Silverstein.

Kerret then contrasted these innovations with increasing cybersecurity vulnerabilities and underscored the importance of staying vigilant against hacking attempts. “Almost all of our tenants were hacked at one point or another, and these problems become more severe as hackers get more sophisticated,” he recounted.

Silverstein president’s thoughts on artificial intelligence tell a similar story. Despite its widespread adoption and potential to assist with many tasks from the leasing process to HVAC maintenance, Kerret sees automation as both “overhyped and underhyped,” a tool for both good and bad. AI gives companies the potential to increase their number of employees utilizing the technology, but at the same time an overreliance on it might lead to reducing headcount.

Such sentiments were echoed in a subsequent panel, which combed through the thoughts of some high-profile owners and operators. Panelists made note of the sheer volume of data surrounding nearly every metric of a property that is now coupled with artificial intelligence capable of forming corelated actionable insights.

READ ALSO: Where Innovation Drives CRE Demand

But actually gleaning the insights themselves is easier said than done. Panelists agreed that without both approval from executive leadership and the employees utilizing the technology, most of them amount to meaningless numbers on a spreadsheet. “Historically, industrial real estate has not been great at turning data into insights,” reflected Luke Petherbridge, CEO of Link Logistics, as he noted the yawning gap between investment in data collection and analytics platforms without having the personnel on hand to make the most of them.

Reflecting on his firm’s approach to the mitigating these problems, Petherbridge explained that “Not too many firms have data scientists,” but that “we have built at team at Link that is solely focused on providing these data-backed insights to our colleagues to help us make better decisions.”

For Petherbridge, solving these problems comes at the executive level. “You need the most senior people in your organization to say that data is important; if that starts rippling, everyone starts to focus on it throughout the firm,” the Link CEO explained.

Ultimately, investing in new technologies should aim at efficiency and simplicity for both owners and their tenants. “Tenants use multiple applications, and they have the same problems that we have,” Romito noted. “(The question is), how do we let the owner deliver to the tenant the tech that solves their own problems?”

The E in ESG: efficiency?

The answer to Romito’s question, and how it affects ESG initiatives, may lie in the way stakeholders talk to their building engineers, as well as to their tenants and business partners. Outside of regulations, the biggest incentives for stakeholders to implement all three tenets is a mix of secular investment trends, customer initiatives and the savings brought on by reduced energy usage, according to Yao Morin, chief technology officer at JLL. “In the next five years, there is going to be three times as much carbon-reduced office space supply,” in the same period where “two-thirds of the Fortune 500 actually have carbon reduction goals,” Morin detailed.

READ ALSO: The Rapidly Rising Role of ESG

In practice, however, ESG initiatives actually demonstrate many of the technology-analytics discrepancies highlighted by Petherbridge and other panelists. From this perspective, “the S and G are dead,” according to Tom Arnold, CEO & co-founder of Gridium, Inc.

Even sensors and the digital twins they serve have their limitations, especially if operators cannot access data from the tenants’ suites. “Occupancy data (which determines decisions around HVAC usage and lighting) is a bit of a mess; it’s one of the most challenging things to try to collect,” Arnold explained

Communication is key to solving these problems, be it through weekly e-mail surveys to tenants occupying buildings where they pay the utilities, according to Arnold.  “(They can) be an opportunity to save 10 to 20 grand a week; that kind of math gets people excited about lowering the utility bill.”

At the same time, it also works internally. “If you can’t look an engineer in the eye and say, if you have this tool and it will answer questions, you are not going to stick the landing unless you have support from the base of the account,” Arnold added.

Retail’s own tech boom

The tech strategies of several players in the retail sector demonstrate nearly all of the above trends, in both attracting and retaining tenants and boosting their own bottom lines.

The first similarity comes in the form of efficiency. In addition to using artificial intelligence to streamline the leasing process, the platforms also allow operators to select the right tenants and monitor, a boon given the sheer amount of competition for space, and the magnitude of revenue losses that sudden closures bring about. In using automation to select the right tenants and assist them with leasing and moving in, the end result is a faster, more “frictionless” process, according to Helane Stein, senior vice president & chief information officer at Brixmor Property Group.

But the tech integrations do not stop once a tenant moves in, however. Talia Fine, senior vice president of information technology at Tanger Outlets, sees a unique potential in using it to attract customers to the stores themselves. “For a loyalty program, you can market and cater to customers to give them a personalized shopping experience,” Fine explained.

Furthermore, Fine and Stein both take Petherbridge’s advice, particularly where cyber hygiene is concerned. “We feel that the best line of defense is our employees,” Fine concluded.

The post RETCON 2024: Steady Progress in the Tech Stack appeared first on Commercial Property Executive.

Nuveen Real Estate has appointed Cushman & Wakefield as property manager for One Boston Place and 501 Boylston St., totaling some 1.4 million square feet of office space in Boston.

As part of the deal, the brokerage firm hired 16 incumbent agents from the buildings’ management team led by Senior Managing Director Bruce Clifford and Associate Director James Russell.

The company also extended Cushman & Wakefield’s contract to deliver property management services for both 99 High St. and the Fort Point Portfolio, which together encompass more than 1 million square feet. The firm was hired in 2021 to provide its services for these properties.

Two renovated office buildings

Dating back to 1970, One Boston Place is a 41-story tower in downtown Boston. The property went through cosmetic renovations in 2002 and 2005. Located at 201 Washington St., the LEED Gold-certified high-rise features a café, 6,000 square feet of retail space, 18 passenger elevators and floorplates averaging almost 21,000 square feet.

Nuveen acquired the 805,588-square-foot asset in December 2002 for $259 million—or $321.5 per square foot—from Blackstone Group, according to CommercialEdge data. Tenants of the skyscraper include Wilson Sonsini Goodrich & Rosati, Crossharbor Capital Partners and TM Capital.

The 610,000-square-foot 501 Boylston St. rises 10 stories less than 2 miles from One Boston Place. The building is also within 3 miles from 290 Binney St., a life science project where BXP recently sold a 45 percent interest to Norges Bank Investment Management.

Built in 1940, the building went through a complete makeover in 2008. The property features 62,672-square-foot average floorplates, 12 passenger elevators and some 140,000 square feet of retail space. The LEED Gold-certified property’s roster includes Lego, Burson-Marsteller and PureTech.

Nuveen purchased the asset in 2007 for $370.5 million from Broadway Partners, the same source shows. In April 2016, the owner took out a $216.5 million loan held by Northwestern Mutual. Two years later, Norges Bank Investment Management acquired a 49.9 percent stake in the property for $290.9 million.

Recent office deals in Boston

As of February, Boston held the nation’s largest office development pipeline, with 14.5 million square feet underway, the latest CommercialEdge office report shows. More than two thirds of this space had life sciences as its main use type. The metro’s vacancy rate clocked in at 12.2 percent, marking a 240 basis-point year-over-year increase, but still below the 17.9 percent national average. At that point in time, Boston’s average listing rate stood at $45.6.

In March, an affiliate of Takeda Pharmaceutical Co. signed a 10-year lease extension at 75/125 Binney St. for 222,925 square feet. Alexandria Real Estate Equities Inc. owns the two-building life science property.

A month earlier, BPGbio committed to 70,000 square feet at Lincoln Property Co. and a MetLife Investment Management client’s 300 Third Ave. The company will relocate its headquarters to the 143,533-square-foot building by June next year.

The post Cushman & Wakefield to Manage 1.4 MSF Boston Office Portfolio appeared first on Commercial Property Executive.

The company is close to completing a strategy that focuses on a combination of amended leases, lease rejections and new management agreements. Since launching its initiative last fall, WeWork has reached solutions for about 90 percent of its global locations, according to the company.

The flexible space provider has been evaluating operations and rental costs at its 500 locations. To date, WeWork has completed some 150 lease amendment agreements and about 150 lease rejections or building exits. In 150 or so other locations, existing lease terms will support the company’s future business plan.

In another major step, WeWork has achieved a reduction of more than $8 billion in future rent commitments. The company also reached an agreement to eliminate more than $3 billion in prepetition secured debt obligations.

As WeWork restructures, several suitors have pursued proposals to acquire the business. Rentberry, a San Francisco-based home rental platform, announced in February its intentions of purchasing WeWork, a move that Rentberry said would complement its proprietary Flexible Living model. Late last month, former WeWork CEO Adam Neumann proposed to buy the company for upward of $500 million. But no deal so far.

The post WeWork Eyes Chapter 11 Exit appeared first on Commercial Property Executive.

A big part of the post-pandemic shift in office use is that workers often expect their spaces to provide many benefits of remote work, and then some. Amenity spaces, events, and food and beverage offerings all aim to outweigh the convenience of working from home.

The most appealing spaces should not be seen as a reflection of mandatory attendance, but as benefiting employees’ physical and mental well-being. The challenge of creating that atmosphere particularly applies to Generation Z, which is expected to make up 27 percent of the workforce by 2025.

What do Gen Z workers really want?

One theme of research and tenant feedback on Gen Z preferences is that these workers overwhelmingly want to be in the office, and their priorities are collaboration and professional development.

“I think that Gen Z are digital natives,” observed David Gise, senior vice president & head of hospitality and amenities at RXR. “They’re looking for integrations with tech and opportunities to connect. They’re well-educated, and (are looking for) programming geared towards professional development and opportunities to give back to the community.”

With these factors in the mix, many newly built and renovated office spaces are departing from the familiar model of rows of cubicles. At One Congress, a 1 million-square-foot downtown Boston trophy tower, Carr Properties is focusing on providing an experience akin to a hotel or luxury apartment building, and an environment that values workers’ physical and mental well-being as highly as the work they accomplish.

Carr approached developing the space with the mindset that “office has not been innovative, in terms of embracing hospitality, creating environments where people want to be,” Oliver Carr, the firm’s CEO, told Commercial Property Executive.

This strategy includes a hotel-inspired lobby, along with ample spaces for smaller meetings. “Our idea was to make the building not feel like an office building, and to create areas for people to have small meetings or work outside their office,” Carr said.

As an example, “if you are getting burned out working in your office all day, and you want to take your laptop to sit in a comfortable area without distractions, we have created so many spaces like that,” Carr added.

This means a coffee bar in the lobby, complete with ample seating areas for meetings, as well as restaurants and bars. Subsidized food and beverage offerings add to the appeal. “Many Gen Z office workers prefer open spaces that feel more like a coffee house (than) an office or cubicle,” noted Erin French, chief operations officer of asset services at Kidder Mathews.

READ ALSO: Has the Return-to-Office Trend Peaked?

But the hospitality-style touches go beyond the lobby into what Sage Realty CEO Jonathan Iger likes to call an experience that is “an extension of your work.” That takes the form of the Sage Experience amenity suite, which combines curated Oasis spaces, convenience services and site-specific programming, all connected through a proprietary app. To Iger, it’s a focus on “enriching the lives of people at work”—as opposed to merely offering the latest and greatest fitness center—that helps make in-person work more appealing.

For their part, the Oasis spaces, which are spread across three Midtown Manhattan buildings, combine a thematic focus with diverse seating areas, outdoor space, and options for social events and meetings. At the same time, the spaces include board rooms and conference centers. The goal is to provide an aesthetically pleasing space that gives employees freedom to work as they see fit.

In a similar approach, Kidder Mathews adopts what Executive Vice President Will Frame calls an “ecosystem that curates to the daily life of an employee.”

“For example, (there is) a lobby renovation including a café that has a relaxing work environment, a lunch option that colleagues or friends can routinely meet for a meal, and finally a bar/restaurant to host a client, friend or employee happy hour.”

Some operators take the hospitality approach even more literally. Fitness centers are another manifestation of the hospitality focus, though there’s some disagreement about what that looks like in practice. Bromley Cos. Vice President Peter Tong sees this as an interest of Gen Z, in part informed by the company’s student housing portfolio.

The fitness spaces at 122 Fifth Ave., a 300,000-square-foot mixed-use property in Manhattan’s Union Square that underwent a $100 million repositioning, include not only traditional weight rooms and cardio equipment, but cold plunges, saunas, hyperbaric chambers and “other things that have become part of (the Gen Z) lifestyle,” Tong reported. “Maybe you stop by as part of your routine, twice a week when you are coming to the office, and this is all part of improving and enhancing your physical condition.”

Activation is everything

Of course, having nice-looking spaces is only one piece of getting a consistent Gen Z presence at your properties. Programming, and opportunities for socializing and collaboration, are equally important. As RXR’s Gise put it, “You can build beautiful spaces, but you really want them to come to life.”

Gise does this by using surveys and a tenant engagement app to directly inform program optimization. Some tenants enjoy local farmers’ markets, while others may prefer building-wide mixers.

Defining the best event is often a moving target that arises from spontaneity— something that the pandemic may have taken away from Gen Z; “We pride ourselves on these moments where tenants might come in and there is a giveaway with tenants in the lobby and there is a marketplace that they were not expecting,” Gise said.

But this does not mean offering a weekly yoga or spinning class. Iger sees the best programming as a result of leaning into what tenants in different industries want, rather than what looks best in a brochure. In his view, operators often fall into the trap of attempting to create a community within their building with amenities and programming, despite the diversity of tenants’ preferences. Law firms may not want mani-pedis, and fashion designers may not be the biggest fans of group fitness. “Keep community out of the building,” Iger advised.

The post Property Management Success: Attracting and Retaining Gen Z Office Workers appeared first on Commercial Property Executive.

The property is between 52nd and 53rd Street and totals 1.7 million square feet. According to CommercialEdge data, it was completed in 1965 and renovated in 1989.

Paramount Group acquired the 45-story 1301 Avenue of the Americas in 2008 for nearly $1.5 billion, the same source shows. The owner refinanced the asset with a $500 million loan from Wells Fargo in 2021.

Office floorplates range from 30,000 to 68,000 square feet. It features an additional 30,000 square feet of retail space. Amenities in the LEED Gold Certified building include 24/7 security, a newly renovated lobby, in-building access to the Rockefeller Center and subway lines.

The owner plans to add a members only corporate club for its New York tenants, which will be located at 1301 Avenue of the Americas. Paramount Club is set to open in May.

Multiple subway and bus lines are within a couple of blocks of the asset offering easy transportation access throughout Manhattan and the larger New York City area.

Other tenants include Norton Rose Fulbright, Atlantic Investment Management, Swiss Re Group, Delcath, Susman Godfrey, Smith Gambrell & Russell and Oaktree Capital Management. SVB Securities expanded its lease in the building in 2022 to occupy the entire fifth floor. In 2023, O’Melveny & Myers LLP moved in as well, taking up floors 17 through 20.

The post Paramount Lands 74 KSF Lease in Manhattan appeared first on Commercial Property Executive.

In this monthly series, Commercial Property Executive sits down with experts from commercial real estate service companies of all shapes and sizes, and gets their insights on what makes for the most effective property management strategies across the portfolio, tech stack and team building levels.

Office operations 

• New Formulas for the New Office: It’s no secret that the pandemic and the subsequent ubiquity of hybrid work have changed the office experience forever. What role do amenities play in bringing employees back to the office, and what are the best ways to activate the buildings themselves?
• How Property Managers Influence Office Development: The design process is tricky, especially given the diverse needs of tenants that are signing leases at a time when the sector has an uncertain future. How can property managers help?

The tech stack

• How AI Boosts Industrial: Effective industrial property management includes the monitoring of many minute variables; it’s a process made much easier by predictive analytics and generative artificial intelligence.
• AI’s Power and Potential: Automation has the ability to significantly streamline office operations. Which areas can benefit the most?
• Unlocking Proptech’s Potential: Today’s tools reward office owners and occupants alike—but it takes the right strategy.
• Harnessing Proptech in Industrial Property Management: Experts weigh in on how to match the technology with goals of client service and operational reliability.

Niche property management

• Reimagining Retail: Strategies for staying on top of fast-changing tenant and customer needs.
• Powering Data Center Efficiency and Security: Insights on the best practices for operating these in-demand, technically challenging facilities at a time when data needs skyrocket.

Team building

• Recruiting the Next Generation of Property Managers: Industry veterans share insights on the  best practices for training and retaining high quality professionals.

The post Property Management Success: Trends, Strategies, Innovations appeared first on Commercial Property Executive.

Jason Anderson is the president of Vast Coworking Group, a company that has three coworking brands across nine countries and more than 200 flex office spaces. Vast is among the largest franchisors in the world, with Venture X, Office Evolution and Intelligent Office locations encompassing 2.4 million square feet.

In this interview, Anderson dives deep into branding models and talks about how he strives to transform his company into the “Marriott of coworking,” as he puts it.

READ ALSO: From Traditional Office to Coworking—Making the Switch

What has been pushing the coworking sector forward in the past few years?

Anderson: Currently, the coworking industry is experiencing a phase of rapid growth and expansion. The increased adoption of remote work arrangements has led to a surge in demand for flexible office space, as businesses seek agile solutions to accommodate distributed teams and changing work preferences. Vacancies in traditional commercial real estate have created opportunities for coworking operators to fill the void, offering landlords a viable alternative to long-term leases. This period of hyperscale growth has propelled the coworking industry into new territories, with a focus on innovation, collaboration and sustainability.

How does your brand stand out in the coworking landscape? What’s your brand’s story?

Anderson: At Vast Coworking Group, our branding model is inspired by the success strategies of established industry giants like Marriott in hospitality. Recognizing the lack of a dominant franchise player in the coworking sector, we set out to emulate Marriott’s approach to brand diversity and customer loyalty. We aim to offer a variety of coworking experiences under our umbrella. We tailor our coworking spaces to meet the varied needs of our clientele and our goal is to become the go-to destination for businesses seeking flexible office solutions.

We prioritize creating a cohesive ecosystem that incentivizes our members to stay within our network, fostering loyalty and maximizing value for both them and our brand. By positioning ourselves in alignment with Marriott’s successful branding strategy, we attract a diverse range of clientele, including top-tier businesses and industry leaders, who trust us to provide exceptional coworking experiences tailored to their unique requirements.

READ ALSO: When Coworking Meets Hospitality—A New Jersey Success Story

Vast’s framework includes several types of offerings. Could you expand on each and how you’ve given them different visual identities to appeal to different audiences?

Anderson: Each of our offerings has distinct visual identities and service offerings designed to appeal to diverse audiences. The remote option caters to individuals or teams who primarily work remotely but occasionally need access to professional amenities and meeting spaces. It’s ideal for those seeking flexibility without committing to a dedicated office space.

Distributed hub-and-spoke combines centralized office hubs with satellite locations—spokes—closer to where members live or work. It provides the convenience of local access while leveraging the resources of larger centralized hubs. Our centralized locations offer comprehensive workspace solutions, including private offices, conference rooms and event spaces. These locations are characterized by their size and amenities, catering to larger teams and hosting a variety of events.

Each type of offering is visually differentiated to reflect its unique characteristics and target audience. For example, Intelligent Office emphasizes personalized service offerings, such as virtual assistant services and private office spaces. The branding is subtle, creating a seamless integration with members’ businesses. Office Evolution features branded spaces with a focus on flexibility and scalability. With a larger footprint and a higher number of private offices, it appeals to growing businesses seeking professional environments.

Venture X offers expansive, modern spaces with versatile layouts, including coworking areas and event spaces. The branding is vibrant and dynamic, reflecting a focus on innovation and collaboration. By tailoring our offerings and visual identities to different audiences, we ensure that each member finds a workspace solution that suits their unique needs and preferences, whether they prioritize flexibility, scalability, or comprehensive amenities.

With so many locations in various countries, how do you ensure branding consistency across your portfolio?

Anderson: Ensuring branding consistency across our portfolio becomes easier as we expand. With a franchise model, success drives adherence to branding standards. When locations thrive, there’s strong alignment with brand guidelines. Our focus on three key performance indicators—leads, occupancy and revenue—guides our support team. If we’re driving growth in these areas, maintaining brand consistency is straightforward.

Challenges arise when locations struggle to meet these KPIs, leading to potential deviations from branding standards. Ultimately, by providing value and support that enhances location success, we mitigate branding issues and foster cohesion across our network.

READ ALSO: The Future Has Never Been Brighter for Coworking, Says Serendipity Labs CEO

Is it difficult to balance between maintaining brand consistency and allowing for localized customization to meet the unique needs of different markets?

Anderson: Balancing consistency with localized customization is akin to the approach taken by well-known brands. While customers expect a certain level of consistency, variations exist to accommodate diverse market needs. For instance, within the McDonald’s chain, locations can differ significantly in appearance and amenities. Similarly, our coworking spaces maintain a minimum level of quality and consistency defined by brand standards.

However, we also allow for creative flair and customization by franchisees, as those have the flexibility to personalize aspects of their spaces, such as interior design, within the parameters set by our brand standards. This approach ensures that while there’s consistency in quality and brand identity, each location can reflect its unique market and clientele.

For example, at one of our Venture X locations in Fairfax, Va., the franchise owner added elegant chandeliers and a living wall to enhance the ambiance. We support such upgrades if they align with our brand values and elevate the overall experience for members. Ultimately, we aim to maintain a balance where franchisees can infuse their creativity and local market insights while upholding the core brand identity and quality standards across our network.

Can you tell us more about how you acquired and refined your three brands?

Anderson: Venture X, Intelligent Office and Office Evolution were existing successful brands we acquired to enhance and expand. Intelligent Office was founded in 1995 and started franchising in 1999. We acquired it in 2024, with the goal of further improving its offerings.

Office Evolution originated in 2003, stemming from the founder’s positive experience utilizing flexible office space at an Intelligent Office location in Boulder, Colo. and we acquired it in 2022 to bolster our portfolio.

Venture X began in 2012 in Naples, and we partnered with them in 2015 to explore franchising opportunities. In 2016, we launched Venture X as a franchise, leveraging our industry analysis and vision to position it as a premier coworking brand.

How do you ensure that your coworking brands remain adaptable and responsive to the constantly changing needs of modern businesses and remote workers?

Anderson: Unlike a corporate ecosystem, our franchisees are deeply immersed in their businesses daily, with a personal stake in their success. This means they’re constantly attuned to the evolving needs of modern businesses and remote workers. With over 160 franchise owners actively engaged in their local markets and the industry, we receive real-time updates and feedback. This keeps us informed and agile, ensuring that our coworking spaces remain aligned with the changing landscape of commercial real estate and the demands of our clientele.

Why should potential partners consider utilizing a franchise model?

Anderson: Utilizing a franchise model offers significant advantages, particularly in industries with large investments, local presence and service-related offerings. Consider industries like gas stations, hotels and fast-casual dining, where franchising is the norm and success often hinges on local expertise and investment. Franchising allows for shared risk and capital, with franchisees having a vested interest in the success of the business. They bring local knowledge and a personal stake, often resulting in higher operational efficiency and customer satisfaction compared to corporate-run establishments.

While franchising isn’t the sole path to success, it’s a proven model in many sectors, offering a higher probability of success than solely corporate-run operations. In industries where competitors are franchising, it’s a strategy worth considering for scalability and market competitiveness. For us, acquiring existing successful brands was a strategic move to combine strengths and leverage franchising as a means to compete effectively against larger players in the coworking industry, ultimately enhancing our market position and scalability.

READ ALSO: Focus on Flexibility—Navigating NYC’s New Office Landscape

Looking ahead, what are your growth objectives? What role does branding play in adding more locations to your portfolio?

Anderson: Our growth objectives revolve around achieving market dominance, albeit with a touch of humor. When we started with just one Venture X location, aiming to become the third-largest player seemed audacious. Yet, through strategic expansion, we’ve achieved that milestone, boasting over 200 locations worldwide.

Our brand consolidation under Vast has been instrumental in signaling our unified approach to landlords and investors. With a database of 45,000 potential franchisees and 220 locations already sold, we’re on track for exponential growth. Moreover, our diverse portfolio, ranging from 2,500 to 50,000 square feet, allows us to cater to various property needs, setting us apart from competitors.

Looking ahead, our goal is for Vast to be the go-to choice for landlords and consumers alike, akin to how travelers rely on Marriott or the One World Alliance for consistent service and rewards. By positioning ourselves as the Marriott of coworking and the One World Alliance of flexible office space, we aim to establish Vast as the premier solution in the industry.

The post Where Branding, Franchising Meet in Coworking appeared first on Commercial Property Executive.

Together with his team, CEO Torrance built upon the Lewisville, Texas-based firm’s longtime mission as a national maintenance provider to residential and commercial properties for mortgage servicing companies. Within two years, they expanded and diversified, adding several new business lines and growing the workforce from about 300 to 500.

The company’s efforts were recently honored by Commercial Property Executive with the Gold award for Most Innovative Corporate Strategy during the 2023 CPE Influence Awards event.

READ ALSO: CPE Announces 2023 Influence Awards

Founded in 1986, Mortgage Contracting Services had established a national team of professionals and network of third-party vendors. But in the midst of the pandemic, the company’s ownership knew reinvention was needed to survive.

The first step, in 2021, was rebranding to MCS, with the tagline “Making Communities Shine,” to position itself across multiple business verticals. Torrance joined later that year as CEO. He previously held a leadership role at Brightview, where he led a business unit providing national commercial property maintenance services to large-portfolio accounts across multiple commercial segments.

One of Torrance’s goals, he recalled, was to bring an entrepreneurial culture to the business as it began looking for new ways to grow. The company had already built a national team of professionals and network of third-party vendors. But a key part of the reinvention process was establishing what the company was good at and who else would benefit from its expertise.

“I think that’s how you end up creating a vision and creating tactical goals,” he said. “It really starts with the mindset: Do you want to do this? Do you really want to take this business from where it is today into something different, or do you really just want to execute something better?”

MCS ownership, Torrance said, supported doing something different and reinventing the business.

“It boils down to having the right mindset and then building the right team to go execute the things we want to do,” he said.

The team includes Chad Mosley, president of the mortgage services division; Andrew Nolan, president of the commercial and rental services divisions; and Martin Urso, who joined MCS in 2023 as chief information officer. An industry veteran, Urso oversees continuous development of the company’s cloud-based software suite designed to provide solutions to meet corporate and field service goals.

Torrance’s Top Tips

MCS CEO Craig Torrance’s recommendations for reinventing and future-proofing a business:

• Be willing to adapt and change while keeping an open mind.
• Know what your company is good at and who could benefit from that expertise.
• Build the right team to execute your plans.
• Listen to ideas from your team.
• Embrace technology.

Strategic Moves

While focusing on protecting and strengthening its core product line, in 2022, MCS established a new single-family rental property services line and added other new commercial property services, including landscaping, snow/ice maintenance, electrical/lighting, plumbing and other general maintenance for residential and commercial properties including offices, retail stores and restaurants.

The SFR business line—which includes property inspections, renovations, ongoing maintenance and tenant turnovers—has grown quickly. In May 2023, MCS served 45 percent of the top 20 SFR owners. By early this year, market share had jumped to 70 percent.

“We have a really great business development team, and they’ve really been building a lot of relationships, and it just continues to grow,” Torrance told CPE.

In 2022, MCS established regional self-performing service centers, facilities with project management and service tech teams to support its growing client base. Now with 25 service centers, the hybrid model combines local partners with the company’s expertise and use of technology to maximize efficiencies, ensure transparency, enhance quality control and improve code compliance.

MCS also provides inspection services in many of its markets, and has continued to add more service centers. The goal is to add more licensed trades, like plumbers and HVAC techs, and continue the expansion. MCS already has self-performing service centers in Phoenix and Tucson, Ariz.; Dallas, Houston, Austin and San Antonio, Texas; Denver; Minneapolis; Chicago; Atlanta; Las Vegas; Orlando, Jacksonville and Tampa, Fla.; Nashville and Memphis, Tenn.; and Columbus, Ohio.

MCS, Torrance said, will open service centers where customers request them, which is what happened last year in Memphis and will occur this year with a facility in Albuquerque, N.M. Other sites eyed for expansion over the next 18 months include North Carolina, South Carolina, the Northeast and the Pacific Northwest, he said.

The company boosted its facilities service offerings to commercial customers in 2023, when it acquired a leading national commercial facilities services firm, Chain Store Maintenance. Services added include handyman, electrical, locksmith and plumbing. The acquisition also brought more than 30,000 new third-party service vendors to the MCS network, providing more support for its SFR and property preservation clients across the U.S. Starting this year, all commercial facilities maintenance services will be marketed under Chain Store Maintenance – an MCS Company.

Also last year, MCS expanded SHINEscapes, a commercial landscaping company serving Dallas-Fort Worth businesses. Plans call for more Sun Belt growth. Last year also saw MCS enter the direct-to-consumer home remodeling service with a pilot in Phoenix that was successful and will be expanded in 2024.

This year, MCS wants to provide more facility maintenance services at U.S. government properties, Torrance said.

The company is already servicing more than 1.6 million properties a year through its network of more than 30,000 certified service partners and plans for more growth. Asked if MCS has secured its longevity, Torrance compared the different business lines to threads that have been twisted into a single rope.

“If one thread is weak or struggling, then all the other threads are going to pull the business along,” he said. “That’s what makes us strong. That’s what ultimately future-proofs the business.”

Read the March 2024 issue of CPE.

The post How MCS Reinvented Its Business Model appeared first on Commercial Property Executive.

After struggling under the twin pressures of the pandemic and e-commerce, the retail sector has mounted a comeback that’s one of real estate’s biggest success stories. No small share of the credit goes to the technology, events and entertainment offerings that drive experiential retail strategies.

Yet rethinking how customers interact with retail spaces, brands and products remains a distinct challenge.

For the in-person experience, this means making shopping about as seamless and convenient as ordering from Amazon. Kristin Mueller, president of retail property management at JLL, believes that this relationship exists at every level, from the store layout and products to the way that a customer views a brand. “Our goal is to meet the customer where they are, and to help retailers meet them where they are,” Mueller said. This can occur through social media, digital advertising, events and other channels.

READ ALSO: What’s Ahead for Retail in 2024?

Within the stores, this translates to borrowing e-commerce ideas that complement brick-and-mortar shopping. “If a person enjoys going to a store so they can touch it, feel it or try it on, but they aren’t in a situation to carry out everything with them, (people) are waiting to help them get it to their homes,” Mueller observed.

That idea can also work in reverse, taking the form of proprietary digital strategies that aim to meet customers at the property level. At Avison Young, this “omni-retail” approach “starts with the digital customer journey, and drives (both) visitation to the property and sales to our tenants,” reported Meghann Martindale, principal & director of retail market intelligence at the firm.

No matter what form it takes, the boundary between online and in-person experiences should be blurred as much as possible, and managers should strive to be flexible above all, experts say.

That holds true for smaller local tenants which may not have the resources or expertise to make the most of these strategies. Sean Daly, executive vice president at American Realty Advisors, stresses the importance of working closely with these tenants “to ensure that their websites are up to date with active links and relevant information to improve interactions with potential customers.”

Meeting customers where they are (and aren’t)

In a more literal sense, online shopping can exist within the store, with apps that scan and order product becoming a mainstay. “One of the more notable changes has been the open adoption and even embracing of blending online shopping activity while physically (being) in a retail store,” observed David Verwer, managing director at Mode Commercial Property Management. The expanded use of apps that enable customers to scan and order products within the store translates to the critical need for strong Wi-Fi and cell service to serve the experiential retail environment, he added.

In the same vein, curbside delivery has evolved from a pandemic-era precaution to a convenient amenity. “It’s become almost a requirement for many retailers, and this impacts both parking and traffic flow patterns,” Verwer said.

American Realty Advisors has addressed these trends by expanding non-exclusive short-term parking at some retail centers, as well as creating permanent parking spaces for customer pick-up. “They can work to improve turnover, but they also require more active management with our site team,” in part to keep employees from accidentally using them, Daly reported.

Also in the transportation realm is rideshare signage, allowing for quick transportation via valet parking or Uber and Lyft pickup spots. These offerings are in line with digitized aspects of the in-person shopping experience, such as navigation apps and automated promotional texts to shoppers.

Optimizing the experience

Equally important to what happens inside retail centers is what goes on around them. Experiential offerings should complement—and, when possible, extend beyond—the conventional food and entertainment offerings that centers rely on to extend visitor dwell times.

One idea that Mueller endorses is inviting shoppers to bring their pets, particularly to open-air and lifestyle properties. “I asked our head of marketing, who talked about the increase in visitors and photo sales year-over-year, (about) how much of that is pets,” Muller recounted. “She said probably half.”

The key takeaway is to be creative. Verwer advises retailers to seek out new brand partnerships at grocery-anchored centers and in-store kiosks. Those features, he said, “would not have been considered a few years ago.”

Avison Young shares this approach with its Pop-Up & Grow program, which allows local brands to fit into turnkey spaces. Martindale attributes the success of the program in part to changing expectations of tenants, which task property managers with “driving placemaking, marketing, events and activation.”

Traditional local resources still have a valuable role to play. The power of farmers’ markets and local craft offerings to synergize with brick-and-mortar stores should not be overlooked. Here, the goal is to make the shopping “more of a unique experience every visit,” according to Verwer.

Attracting attention

The necessity to make the most of social media continues to generate creative ideas for marketing and customer engagement. One successful approach is a holiday partnership with local influencers who showcase a center’s offerings and experiences. “(They) navigate it, take shoppers into a store and show them why it’s a fun place to be and the interesting stuff they have, or a business that may be more entertaining,” Mueller reported.

The goal is to showcase the experience as much as the merchandise. “It needs to be what the consumer and shoppers in the area want, where they want to spend time, and to make them aware of it.” Mueller concluded.

The post Property Management Success: Reimagining Retail appeared first on Commercial Property Executive.

Last year, the commercial real estate industry faced high levels of uncertainty. A whirlwind of rising interest rates, a cooling economy, bank closures and overall volatility made 2023 difficult to navigate. Now, the trends that shaped last year can provide the industry with knowledge of the year ahead.

In terms of acquisition and disposition activity, the asset class that remained most active in 2023 was multifamily, DLA Piper‘s year-end real estate trends report shows. Multifamily assets, which accounted for 39 percent of overall sales, were followed by industrial properties, at 22 percent of the investment activity monitored in the report.

Office space accounted for only 7 percent of total deals, while retail came in at 10 percent, a significant growth from 2021 and 2022 data. Mixed-use developments recorded an increased investment activity, while life science properties saw a notable decline, from 6 percent in 2022 to 1 percent in 2023.

“We saw a significant increase in the purchase of neighborhood and grocery-anchored retail properties,” John Sullivan, chair of the U.S. real estate practice & co-chair of the global real estate sector at DLA Piper, told Commercial Property Executive. “We suspect that is likely due, at least in part, to the continuation of hybrid work arrangements. With people spending more time where they live, there is more demand for amenities in those areas.”

Survival periods stay the same

In terms of survival periods for sellers’ representations and warranties, the DLA Piper report found little change from mid-2023 to the end of 2023. The most common period continued to be 270 days, followed by 180 days.

READ ALSO: Why CREFC Survey Says Things Are Looking Up

Considering a less active market, the report shows no big changes between mid-year and year-end average liability caps and baskets for a breach of sellers’ warranties and representations.

Financing contingencies on the rise

As far as financing contingencies in 2023, 92.5 percent of agreements had none. Despite few purchase and sale transactions having these contingencies, the report shows that the number is increasing. From mid-year to end of 2023, there was an almost 2 percent raise in frequency, primarily in the form of loan assumption conditions.

At the end of the year, financing contingencies not in the form of a loan assumption made up 3.5 percent of transactions, compared to 4 percent with loan assumption.

“It’s a matter of relative bargaining positions,” Sullivan said when asked why he believes these contingencies gained in popularity last year. Financing contingencies favor the buyer. Therefore, when recent economic circumstances led to a buyer’s market in 2023, more sellers were willing to agree that the sale could be conditioned by a buyer’s ability to secure financing.

“Conversely, with debt more expensive and harder to obtain, few buyers were willing to risk the loss of their deposits if they were not able to secure financing at an acceptable rate,” Sullivan noted. “Although we expect to continue to see some financing contingencies this year, we expect that they will continue to very much remain the exception rather than the rule.”

Property and construction management

According to the 300 property management agreements analyzed in the DLA Piper report, there was no significant change in property management fees as a percentage of the property’s revenue from mid-2023 to the end of the year. As a percentage of the cost of the work, construction management fees also saw little change over the same period.

For industrial, life science, multifamily and office assets, the most common property management fee was in the range of 3 percent to 3.99 percent. Data centers and mixed-use developments most commonly had a property management fee in the range of 2 percent to 2.99 percent. Senior housing, life science and medical office buildings often had property management fees higher than 4 percent.

Construction management fees for multifamily and mixed-use properties most commonly represented 5 percent or more of the total cost of the work. For data centers, medical office buildings and life science assets, this percentage fell more often in the range of 2 percent to 5 percent. Contrarily, industrial and senior housing properties most frequently had construction fees in the 2-2.99 percent range.

One property management trend that did change from the mid-way point of 2023 to the end of the year was the frequency of a liability cap, which decreased from 9.28 percent to 6.23 percent, respectively.

For construction fees, while the percentage of the cost of work largely did not change, almost 4 percent more fees negotiated by DLA Piper limited the rate to hard costs only at the end of the year, when compared to mid-year fees. Some 31 percent of construction management fees included hard costs only at the end of 2023.

Sullivan added that this change in construction fees is likely a matter relative to bargaining positions, similarly to financing contingencies. “With less construction taking place, there is more competition for the construction management work, which in turn gives owners more bargaining power,” he said.

The post How CRE Deals Are Changing: DLA Piper appeared first on Commercial Property Executive.

About 18 months after acquiring several business lines from Washington, D.C.–based Madison Marquette, Avison Young has bought several more, the Washington Business Journal reported.

This time, the Toronto-based CRE company has acquired Madison Marquette’s specialty leasing, retail property management, marketing and leasing businesses. All in all, these encompass more than 6.1 million square feet of assets nationwide and 37 personnel across 10 states.

The deal reportedly closed on Jan. 1, under undisclosed terms.

Madison Marquette’s Gavin Farnam, who headed the firm’s retail property management and leasing teams, will carry out the same responsibilities for Avison Young as principal & managing director of U.S. retail services.

READ ALSO: Is an Investment Comeback Ahead?

Madison Marquette is co-developer of The Wharf on Washington’s Southwest waterfront and will retain access to the retail team, to manage and lease retail space in its mixed-use portfolio. In turn, Avison Young will be able to tap Madison Marquette’s investment and development advisory services.

In an interview, Harry Klaff, principal & U.S. president at Avison Young, told the WBJ that he anticipates more acquisitions through this year.

Among the executives in different regions around the country who are moving from Madison Marquette to Avison Young are Heather Almond, who will lead property management and marketing strategy; Meghann Martindale, who will lead research; Steve Toppel, who will serve as principal for retail leasing; and Dave Brown, who will serve as principal of specialty leasing.

Act I

In August 2022, Avison Young acquired Madison Marquette’s office and industrial property management, agency leasing, and project management service lines, adding more than 20 million square feet under management to its portfolio and 235 personnel to its team.

The acquisition brought AY into Hawaii and added to its presence in 11 states, including Texas, California and the East Coast.

But that earlier deal had another side: It created a partnership that enables Madison Marquette to access Avison Young’s data analytics, technology and global real estate platform, AVANT by Avison Young.

The post Avison Young Buys More Madison Marquette Businesses appeared first on Commercial Property Executive.

Companies such as JLL are addressing the crucial need for collaboration, innovation and employee well-being. Pictured here, JLL’s office in Phoenix. Image courtesy of JLL

At the beginning of 2024, the office sector finds itself at a pivotal juncture, navigating a landscape shaped by a confluence of transformative forces. The repercussions of the pandemic continue to reverberate, prompting a profound reevaluation of traditional office paradigms.

Remote work has entrenched itself as a lasting feature, overhauling they way organizations conceptualize and utilize office spaces. Hybrid work models have become the norm, fostering a newfound flexibility that challenges age-old conventions such as the 9-to-5 workday. Against this backdrop, companies are grappling with the imperative of fostering collaboration, innovation and employee well-being, which is sparking a metamorphosis in office design and functionality.

READ ALSO: Medical Office Real Estate Trends to Watch in 2024

“The office sector forged its way forward in 2023 as the world adapted to a new normal,” Elizabeth Hart, president of leasing for North America at Newmark, told Commercial Property Executive. “Significant demand for trophy space which enhances the tenant experience persisted, and many business leaders confirmed that in-person collaboration was a critical foundation to their company’s success.”

This prompted a two-way engagement between landlords and tenants, emphasizing collaborative and informed approaches. Demand for a data-driven real estate advisory approach intensified, with top talent leveraging data methodologies to exceed client expectations.

How 2023 set the scene for future shifts

Delving into the specific trends that shaped the office sector in 2023, Doug Ressler, manager of business intelligence at Yardi, underscored the prevalence of “quiet hiring” and the emergence of new hybrid work models. Illustrating the industry’s adaptability to evolving employment dynamics, there was a rising interest in coworking spaces and flexible lease contracts, which conveyed a departure from traditional office setups and an alignment with the broader trend of tailoring office spaces to dynamic business needs.

Amid these shifts, uncertainty in the commercial real estate market for owners and users alike prevailed, according to Jim Kruse, regional president of brokerage for Greater Los Angeles at Kidder Mathews.

“The U.S. commercial real estate market has certainly been in down times previously, but nothing like the current murkiness of not knowing what the end result is going to look like with the attitudes of the tenants about returning to work,” Kruse said. “Employers are reluctant to mandate a return, and employees do not know what the job market looks like if they were to refuse a mandate to return to work.”

The office sector experienced an excess of 58 million vacant square feet compared to occupied space through July, resulting in a record-high national office vacancy rate of 18 percent, according to CommercialEdge data. This surge was influenced by a slightly above-average introduction of new office space to the market, advancements in remote technology and the integration of flexible workspaces. The growing number of offices under construction and ongoing technological progress indicate forthcoming challenges for the office sector as it adapts to evolving work patterns and needs.

READ ALSO: 2024 in Green Building—What to Expect

“Physical office occupancy remains stubbornly low,” said Peter Kolaczynski, director at CommercialEdge. “A glass half-full perspective would be that the current physical occupancy is worst-case scenario prediction from 2020 and the outcome thus far has not been worst-case scenario, which reinforces how this problem is long term, given the length of leases going into 2020.”

Once again highlighting the need for adaptability in today’s dynamic business landscape, Ressler suggests that flexible seating arrangements were at the core of the evolving workplace last year. Such arrangements, incorporating aspects of technology, hybrid operations and the flex model, showcased the industry’s response to the changing needs of contemporary office users. The interplay of these factors defined the narrative of the office sector in 2023, setting the stage for continued evolution and adaptation in the years to come.

What’s in store for the office sector in 2024?

Max Tech Center in Boulder County, Colo., showcases modern communal areas and high-tech amenities throughout an expansive facility. Rendering courtesy of Alvarez & Marsal

Building upon the transformative landscape set in 2023, the office sector is poised for notable changes and challenges in the year that just started. Hart anticipates a surge in demand driven by employment growth across various office-using industries. Her positive outlook is underpinned by an impressive 11.5 percent increase in new business formation since September 2022, signaling a robust economic backdrop.

The stabilization of employer/employee expectations regarding in-office work further contributes to this optimistic forecast, as businesses proactively address economic uncertainties and incorporate advancements in AI-driven technology.

However, several headwinds will persist for the office sector in the new year.

“The market is still in the process of adapting to hybrid work as the dominant working pattern, as only 28 percent of pre-pandemic leases of large blocks of space have come up for renewal,” said David Bitner, executive managing director of global research at Newmark.

Bitner noted there’s an abundance of low-quality office spaces nationwide, with 16 percent of them having a lease rate of 70 percent or less. Kolaczynski acknowledges the challenge of functionally obsolete office space dragging down the market, emphasizing that localized approaches are crucial for resolution. Flexibility will be a key trend in 2024, with varying requirements leading to smaller fixed spaces but increased flexible options.

“Quality locations and quality product will continue to see interest and be the driving factor,” he noted. “Much like in retail through the past 20 years, there were clear winners and that concept will bleed into office.”

READ ALSO: How Much Will Investors, Lenders Reduce Activity?

Ressler believes most businesses will reduce their office square footage in 2024, mandating specific onsite workdays. But despite the rise in in-person attendance, there is an expectation of office downsizing as companies seek financially viable space levels. This will push owners to continue to adapt layouts and amenities to suit evolving work behaviors, including soft seating, collaboration rooms, wellness spaces and hot desking. Office space users are demanding more stimulating and responsive work environments, so landlords are anticipated to invest in amenities and technologies to differentiate offerings and create dynamic communities.

But beyond all these concerns, the top challenge for landlords this year will be handling potential delinquencies and loan defaults. The office sector faces significant distress, with a substantial portion of loans maturing by 2025, posing challenges for refinancing.

“Office owners with loans maturing in the next three years—totaling more than 9,500 buildings and 17 percent of office stock—face an uphill battle,” Ressler warns.

The maturing debt challenge

Kolaczynski agrees that access to capital and the high cost of capital will remain an issue for the office sector. Though expressing concern about maturing debt, he acknowledges the deviation from the predicted doom and gloom.

“While we have not seen a wave of foreclosures, cost of capital is a continued issue for the foreseeable future,” Kolaczynski said.

Meanwhile, Ressler underscores the substantial funding gap confronting the office sector due to lower loan-to-value ratios and substantial value erosion.

“Between 2023 and 2025, office owners will face a financing gap of $72.7 billion—or 26.4 percent of the lending volume originated between 2018 and 2020,” he said. “This will likely lead to distress for some property investors and force others to inject more cash into their properties. The retail sector faces a similar problem, but at a much smaller magnitude.”

READ ALSO: 2024 CRE Forecast—Is an Investment Comeback Ahead?

The cumulative funding gap could cause distress for investors unwilling or unable to invest more cash, resulting in losses for lenders due to falling property values and illiquid markets. Notably, high-profile defaults have already occurred in the early part of 2023. According to Hart, $190 billion in office loans matured in 2023, marking the largest maturity year tracked by Newmark Research. And with expectations of significant annual maturities in 2024 and 2025, proactive measures are needed to navigate this period diligently and collaboratively, but this is no easy feat.

Ressler suggests that pessimistic lenders may bundle non-performing loans for sale on the secondary market at a discount. Lenders with conviction may opt for loan workouts and short-term accommodations. While the funding gap presents opportunities for equity investors and mezzanine lenders, the availability of mezzanine debt is uncertain. European insights indicate a decrease in subordinated debt origination as debt investors adopt a cautious approach.

All in all, Kruse believes significant changes will unfold by the end of 2024, barring unforeseen political or international events. The impending challenge of maturing debt is pivotal, and the industry’s response to bridge this gap will offer crucial insights into large investors’ expectations for the sector in the coming years.

The post Office Trends in 2024: How Much Will the Sector Change? appeared first on Commercial Property Executive.

The national vacancy rate clocked in at 9.1 percent year-to-date, according to a November 2023 outlook from Clarion Partners, while vacancy in first-tier markets was at 8.7 percent. Asking rents rose above $80 per square foot in first-tier markets. 

But it can be hard to break into this fledgling real estate market. Life science properties still total fewer than 200 million square feet. 

READ ALSO: Emerging Life Science Hubs Stake a Claim

So how can a developer get their foot in the door? Life science experts say development alone won’t attract startups, never mind the Pfizers or Amgens. If you want long-term leases with high-profile tenants, you’ll need a development strategy that caters to both their technical needs and workflows. And don’t forget the Golden Rule: location, location, location.

Specific, yet versatile

Any speculative development in a dense, competitive market must consider technical needs as early as possible, according to Cynthia NeSmith-Montanez, senior director of MGAC’s Northern California office. For life science, specs can get really specific really fast.

“How much do you need in the way of electricity?” NeSmith-Montanez asked. “What do you need in the way of special filtration systems? Do you need (deionized) water?”

READ ALSO: Life Science Market to Bounce Back

Ryan Cos. prefers a preemptive approach, and virtual and augmented reality allows for direct property assessments. “(These) really walk people through spaces so they can touch and feel how they operate before they even spend a dollar,” said Adam Burrington, the firm’s national director of project development for life science.

The keyword to all this? Plenty.

“We want to make sure that there is plenty of power and ventilation, as well as strong fiber connectivity,” noted Sondra Wenger, head of the Americas commercial operator division at CBRE Investment Management. That idea also extends to the layouts and floorplate configurations.

The exterior of 1229 W. Concord Place, a 285,000-square-foot facility developed on Chicago’s riverfront. The facility is a component of the Lincoln Yards master plan, a 50-acre project that includes creative office, retail and recreational space, in addition to 6,000 planned residential units. Photo by Kendall McCaugherty, Hall+Merrick Photographers

Strategy, specs, synergy

At the Navy Yard, a Philadelphia mixed-use campus with more than 1 million square feet of life science space, developers Ensemble Investments and Mosaic Development Group designed spaces to include 11-foot lab modules, with 50- by 22-foot column bays, despite the diverse array of offerings.

Such specifications “are a lab planner’s dream because they allow them to build a long rectangle on the most efficient floor possible that eliminates waste,” according to Mark Seltzer, managing director with Ensemble.

Ryan Cos. involves a lab planner from day one. “You have to make sure that all of your dimensions work for your turnarounds and otherwise,” Seltzer added. This includes mechanical specs.

Another must-have is ample loading docks leading to secure storage spaces in light of how many materials and how much equipment flow through such buildings.  

“We have a large, fully enclosed loading dock and service areas, recognizing that different tenants have different equipment needs, and we want to ensure that we are providing enough space so it can be done with ease,” mentioned Suzet McKinney, principal & director of life sciences at Sterling Bay, “This is something that tenants really care about.”

Sterling Bay serves life science tenants at 1229 W. Concord Place, a 285,000-square-foot property located along the Chicago riverfront.

Creating biosafety level 1 lab spaces that can be brought online quickly can also help developers attract tenants. The RMR Group adopted this approach at Unison Elliot Bay, a recently renovated, three-building campus in Seattle.

“These are going to be move-in ready, with minimal capital needed,” pointed out Christopher Bilotto, executive vice president at The RMR Group. “Maybe they have some desires around certain cosmetic looks, but all the mechanical infrastructure, lab benches, culture tissue rooms and office space (are there), so tenants can come in and start operating within a very short time.”

Productivity is important, but so is presentability. Meeting space that includes training rooms, private conference centers and the right balance between lab and offices give tenants “functionality in the building, and an attractive backdrop to keep employees focused on the work,” Bilotto concluded.

Located at 100 Binney St. in Cambridge, Mass.’ Kendall Square neighborhood, The Alexandria Center at Kendall Square is a 10-story, 432,000-square-foot life science building close to the city’s top universities, as well as its myriad other life science companies. Tenants include pharmaceutical giant Briston Myers Squibb, as well as several smaller cancer treatment research companies. Image courtesy of Newmark

Clusters, hubs and huddles

Of course, the developer’s checklist is never complete without the where. “(Tenants want) to make sure they have access to the talent pool, to educational institutions, that there is plenty of other companies around them.” CBRE IM’s Wenger emphasized.

Boston’s Kendall Square hub in Cambridge is located near both Harvard University and MIT. That, and the existing infrastructure, were key considerations when CBRE IM purchased 100 Binney and 300 Third St. two years ago. “You have all these great biotech companies, combined with heavyweight institutions, and they are all feeding off each other and sharing talent,” Wenger said. “The cluster itself is an amenity.” 

READ ALSO: Life Sciences Bolster Boston’s Office Pipeline

South San Francisco, the birthplace of biotech, has long been a magnet for life science tenants for its proximity to Stanford and Berkeley. But developers of newer spaces are getting an edge by equipping their buildings with manufacturing capabilities.

“A client we are in conversations with (that) does third-party manufacturing is looking into expanding into Alameda, not so much because it is (R&D) space, but because it is manufacturing space,” MGAC’s Montanez reasoned.

On the other hand, smaller tenants seeking value-oriented spaces without compromising on technology and accessibility may look to markets that are peripheral to these hubs.

READ ALSO: Medical Office Real Estate Trends to Watch in 2024

Such a mindset influenced the redevelopment of Riverwalk Labs, a 168,000-square-foot, under-construction project in the Boston suburb of Bedford. While the property may not have direct access to the city’s universities, hospitals and biotech companies, its flexible floorplates and larger location make for an appealing space.

For Redgate, the redevelopment’s project manager, the property combines an easier commute with convenient access to nearly all of metro Boston’s college-educated workforce. “When you look around the Boston area, west of the Massachusetts Turnpike, the area has seen the most growth in attracting life science companies,” noted Tom Hamill, one of the firm’s principals.

What’s more, rents in the area are lower than in Cambridge. As such, the property’s intended tenants are “well healed, more mature companies,” with space needs on the order of 20,000 to 80,000 square feet, according to Hamill. “This is the type of tenant that we are looking to attract—(one that) wants value but without paying the steep price that you see in Cambridge.”

The lab space at Unison Elliot Bay, a three-building project in Seattle that includes speculative suites, as well as customizable spaces. Rendering courtesy of The RMR Group

Amenities: tangible and intangible

Beyond location and tech, the actual work experience is a chief consideration for developers and operators alike. Amenity offerings at life science facilities are crucial to tenants as a vehicle for attracting talent and for bringing employees back to the office. They are even more critical in life sciences because a physical presence is likely to be mandated and the work is often not 9-5, Montanez noted.

“You (could) have an experiment running for days, and you are waiting to see what that drug discovery provides for you, and you might not have time to get home and to the dry cleaners,” Montanez said. “Understanding this, prudent developers include work-life balance-centric offerings—such as fitness centers, laundry and dinner services, freeing tenants from worrying about if they (have) time to exercise or have lunch or dinner.”

Natural light and fresh, filtered air are also key. “We do things like real-time air quality monitoring in our facilities, and the data and information is available so that tenants can see what the air quality looks at any given moment,” McKinney shared.

Read the January 2024 issue of CPE.

The post Attracting Life Science Tenants in Core Markets appeared first on Commercial Property Executive.

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Highly-amenitized Class A buildings like Zero Irving in New York City are capturing a lot of attention from tenants and high rents. Image by Davis Brody Bond courtesy of August PR

Much of the news around office space can make the situation appear rather bleak. This isn’t quite the reality, however. For brokers, there are also positive aspects to today’s market.

Across the nation, for example, high-quality office assets are getting leased at lighting speed. Companies are searching for the best, most highly-equipped office product available and competing at high rental prices for a secured lease.

“In the midst of a transformative bifurcation between traditional and cutting-edge offices, we are seeing a shift toward community magnets, those assets that are enticing tenants with amenitized and experiential spaces,” Jonathan Pearce, head, investments, office and life sciences, United States for Ivanhoé Cambridge, told Commercial Property Executive.

READ ALSO: How Lifestyle Offices are Redefining Work-Life Balance

As of October, the national average full-service equivalent listing rate was $37.77, a 0.4 percent decrease over the year, CommercialEdge data shows. Further, the vacancy rate is up 150 basis points on a year-over-year basis to 17.8 percent. These numbers don’t tell the full story for every asset type, though.

“The newly constructed AAA office assets are definitely a bright spot,” said Terence Kirk, executive vice president, Lincoln Property Co.

While some Class A buildings may be the most attractive in terms of amenity and physical space appeal, many tenants are finding that Class A offices don’t have the most compelling economic value, according to Adam Henick, co-founder, Current Real Estate Advisors. Therefore, another plus for brokers is the availability of more economically viable spaces as well.

“One of the ironies over the past couple of years is that we’re seeing some of the highest vacancy numbers that we’ve seen, but you’re also seeing some of the highest rents price per square foot that tenants have ever paid,” Henick said. “It’s a tale of two markets.”

What tenants want

In an effort to get employees to return to in-office work, companies are seeking out the best bang for their buck. Therefore, Kirk noted that the flight to quality trend remains as strong as it has been for the past several years.

“I expect demand for the highest quality office space in virtually all major markets to remain healthy for the foreseeable future despite the macroeconomic headwinds impacting commercial real estate more broadly,” Kirk said.

But, while a nice kitchen space, coffee area, meeting room and perhaps even a fitness center are all encouraging features, a growing number of employers are taking it a step further—incorporating sustainability, for example—to enhance the overall experience, Pearce explained.

“State-of-the-art amenities are nothing new for the Class A office world, but a captivating evolution is underway, where cutting-edge amenities that seamlessly blend sophisticated hospitality features and advanced technology while also spearheading environmental, social and governance initiatives are redefining the work experience and positively impacting the communities they serve,” Pearce said.

Amenities aside, one thing that is becoming increasingly difficult is mapping out how companies are utilizing their office space to maximize efficiency.

“Space planning has become a more challenging task than it perhaps used to be because companies are trying to plan for how many days a week different sections of their workforce are using the office,” Henick said. “Is everyone going to have a dedicated desk? Are they going to employ a hot desking concept?”

Layouts are becoming far more specific to varying business types, Henick observed. For example, venture capital companies are increasing their square-footage space in office buildings for more event spaces and additional rooms to invite portfolio companies to come and work out of. Financial service companies and law firms are following a similar trend.

On the other hand, many tech companies are rightsizing and downsizing their footprints. Therefore, many of these tenants value flexibility in a lease agreement rather than the size or bells and whistles.

“In the past, square footage may have been one of the leading inputs, whereas now I think that square footage is an output that comes from a prioritization and functionality,” Henick said.

Brokerage strategies

Disruption to the office market means disruption to the office brokerage space. With national leasing volume down by some 40 percent since before COVID-19, according to an Avison Young report, even industry veterans are needing to reevaluate traditional strategies.

“Connecting with both the tenants’ and the end users’ needs and viewing the office as a destination rather than an obligation is paramount when looking at how to shift strategies and stay up with the latest office trends,” Pearce said.

Another key is being flexible and having access to as much data as possible to enhance the effectiveness of leasing strategies.

Kirk’s advice to brokers in this environment is to wait to prescribe any client solution until a proper diagnosis of the need or problem can be made.

“Brokers tend to get bogged down with asking rents, comps, tenants in the market, etc.,” Kirk said. “While these are important factors and you can’t lose sight of them, it’s imperative that you understand your client’s enterprise-wide challenges and goals and are actively solving them.”

In light of high interest rates and a volatile economic environment, office brokers now have to factor in landlord-facing complications as well.

“It’s highly typical when we’re negotiating a lease transaction that the landlord is super focused on the credit of the tenant…,” Henick said. “Now more than ever, we’re seeing increasing questions from the tenants on what is the nature of the credit on the landlord side.”

The post Getting Into the Heads of Office Tenants appeared first on Commercial Property Executive.

AI in industrial: Predictive potential

For industrial property managers, the most longstanding uses of automation technology to enhance value are predictive analytics models, which aggregate data across properties and portfolios to inform decision making. Such technologies have uses from monitoring and informing improvements to a building’s infrastructure to enhancing decisions around tenant space needs. The advantages of such technologies lie in their ability to influence decisions in a manner far quicker through information than that of a human manually combing through raw data.

Meaghan Elwell, President of the industrials division, JLL Work Dynamics. Image courtesy of JLL Work Dynamics

On the maintenance end, this translates to monitoring the health and performance of mission-critical manufacturing, electrical, data storage and HVAC equipment, with the goal of getting ahead of both predictable and unforeseen problems. “The more we can leverage (artificial) intelligence to get ahead of any problems and monitor the infrastructure in a building, the more effectively we can deploy our human resources to use their time most efficiently in getting to the sources of the issues,” detailed Meaghan Elwell, president of the industrials division at JLL Work Dynamics.

Here, the game is a matter of size, given the firm’s management portfolio. “Think about any industrial manufacturing facility, distribution center or fulfillment center. That is a lot of ground to cover for any facility manager or technician, and they can’t be in every place at once, no matter how many you have. You can triple the square footage without tripling the people” Elwell explained.

Scaled up to the portfolio level, such priorities are indeed resource-intensive. “These seem like basic things, but when you are managing 3,500 properties across 10,000 customers, you have to be able to do that with data and inform your employees to be proactive,” noted Clark Ardern, chief technology officer at Link Logistics. Such ideas inform JLL Work Dynamics’ use of platforms such as Corrigo, a work order filing software that combines internet-of-things-connected sensors that monitor the performance of equipment in real time with automated data collection. Another technology whose use is informed by this philosophy is Hank, which creates 3D digital twins of properties that fully audit the workings of a building in order to inform maintenance decisions.

Clark Ardern, Chief Technology Officer, Link Logistics. Image courtesy of Link Logistics

Prologis combined its IoT-connected building management system with automation, and integrated both into the enterprise resource planning software that property managers use. “This platform encompasses reactive maintenance, equipment management, virtual document management, cost management and reporting, and data visualization all in one,” detailed Sineesh Keshav, the firm’s chief technology officer. Highlights include a pumproom management solution that is able to predict leaks before they happen, as well as a carbon data management system that helps further sustainability goals.

READ ALSO: What’s Ahead for Industrial? SIOR Conference Report

Outside of the service-centric nature of property management, predictive models assist property managers with the business end. Link Logistics uses a proprietary platform to collect information both from its properties and publicly available data. With such information, personnel can make informed decisions about facilities and capital improvements, or even if the property is still worth owning. “(They can be) things as basic as weather, but also economic data points that we can pull in to help us understand where to buy, when to buy, when to sell and how to position our spaces so that customers can be most effective in their businesses,” Ardern told Commercial Property Executive.

Generating value

Sineesh Keshav, Chief Technology Officer, Prologis. Image courtesy of Prologis

In contrast to its forward-looking sibling, generative AI, which uses data to actively synthesize information, has seen a more recent, yet explosive emergence into property management. The most immediate beneficiary is lease administration, which Ardern refers to as the “bugaboo of owner-operators.” Generative AI aggregates the data, but differs by way of its ability to generate the documents on its own. On the development end, Link created a proprietary platform that extracts the information from unorganized content, with the goal of training a language-processing model to function as a human would.

The advantage of such technology? “(It) gets smarter and learns every time it abstracts a new lease,” Elwell detailed. For Prologis, which uses AI-based document generation, “what used to take several days and weeks to get a lease into our operational system now takes several minutes,” Keshav observed. Of course, the personnel still play a role in auditing the abstractions and information.

For its part, Link Logistics plans to train a language-processing model to “interrogate the information in a human interaction kind of way,” one that allows customers and employees alike to “get data points faster, easier and smoother,” according to Ardern.

Other areas where generative AI generates value is in equipment operations, bringing complex manufacturing, HVAC and storage solutions online quicker. “Every piece of equipment comes with an information packet. The more we can leverage machine learning to quickly digest all of that information, the more we can plug it into the technology that our engineers are using, so that they have it top of mind, right at their fingertips,” Elwell detailed.

The ability to quickly and (most of the time) accurately create content also has vast marketing potential. Prologis is experimenting with using AI to generate marketing collateral. JLL has developed a proprietary GPT model called JLLGPT, that it uses from “writing great LinkedIn posts to leveraging abstractions of leases,” according to Elwell.

Down the road, Keshav foresees propensity to buy models and space planning simulations as “fascinating applications,” that need to be further refined to see widespread adoption.

The ultimate assistant

In light of all these use cases, it may be tempting to adopt the latest GPT model or predictive analytics software, especially given the speed of their adoption by the market. “When you think about when the PC was introduced, it took 20 years to really impact productivity and operations. With mobile and cloud (technology) it was even shorter, and with AI it is going to be even shorter than that,” Ardern said.

But property managers would do well to consider the technology in the context of how humans themselves will use these models. “We can leverage AI to help us be smarter, but we can never want to replace the deep experience, skillset and knowledge of the people who are managing the equipment and these buildings,” Elwell cautioned.

Keshav agrees, and sees the time-saving aspects as the primary motivator. By saving our frontline employees’ time by automating repeatable tasks with technology and AI, we help them spend more time with our customers and other stakeholders,” he told CPE.

The post Property Management Success: How AI Boosts Industrial appeared first on Commercial Property Executive.

Commercial Property Executive looks at some of 2023’s most intriguing deals.

C&W Brokers Record $365M SoCal Industrial Asset

10545 Production Ave., Fontana, Calif. Image courtesy of Cushman & Wakefield

Rexford Industrial Realty acquired 10545 Production, a Class A 1.1 million-square-foot industrial property in the Inland Empire West submarket of Fontana, Calif., in a record sale-leaseback deal with national tire distributor Tireco for $365 million. The transaction marked the highest aggregate sale price for a single industrial asset. The deal included a two-year sale-leaseback with options to extend the lease term with the tenant.

Cushman & Wakefield’s National Advisory Group based in Southern California marketed the property and was led by Executive Vice Chair Jeff Chiate, Rick Ellison, Jeffrey Cole, Mike Adey, Brad Brandenburg and Matt Leupold. The firm’s Phil Lombardo, Chuck Belden and Andrew Starnes also provided local leasing advisory.

Chiate told CPE that the property’s location—on the West Coast and near Southern California freeways, ports and airports—and size helped boost its value.

“There is currently also very limited Class A industrial supply available for sale of this magnitude and profile in the market, making this asset even more appealing as an investment both in the near term, given its baked-in rental income via the leaseback, and in the long term to fulfill expected tenant demand in the sought-after Inland Empire,” Chiate said.

The sales team executed a formal marketing process and procured multiple offers from well-capitalized institutional investors and through various rounds of bidding.

Fennelly Sells Former N.J. Nuclear Reactor Repurposed as Drug Manufacturing Facility

31 Schalks Crossing Road, Plainsboro, N.J. Image courtesy of Fennelly Associates

Turkey Island Corp. sold a 31-acre property in Plainsboro, N.J., this year on a site containing the nation’s first privately owned nuclear reactor. Developed in 1957, the property was later transformed into a drug manufacturing facility. Jacobus Pharmaceutical, which manufactured “orphan drugs,” pharmaceutical agents that treat very rare conditions, had leased the property but had to shut down after losing a critical patent. The buyer of the 31 Shalks Crossing Road, which includes a 50,150-square-foot building, was Princeton Life Science Park LLC, which acquired the facility for $7.7 million. The buyer also purchased the patents held by Jacobus and equipment and retained the employees. Turkey Island Corp. bought the property after it was decommissioned as a nuclear reactor in 1980. The property had been designed to commercialize isotopes across the country and played an integral role in the United States nuclear power research program for decades.

Jerry Fennelly, president of Fennelly Associates in Hamilton Township, N.J., and Matt Fennelly, corporate real estate specialist, represented seller and procured the buyer. The buyer contacted Fennelly Associates.

Fennelly said the biggest challenges were dealing with concerns about past radioactivity, equipment limitations and lack of a conventional marketing playbook. The team executed an omnichannel marketing strategy with press releases, social media engagement, immersive videos and ads on various platforms. The buyer, a West Windsor, N.J., private equity firm, contacted the brokerage through a newspaper ad. The entity saw the opportunity to buy both a drug manufacturing company and facility in a competitive life science market.

“Selling a former nuclear reactor is a challenge that few brokers will ever face in their careers,” Fennelly said. “Although the assignment was by no means an easy one, we knew we could lean on our time-tested combination of superior local market knowledge paired with our deep marketing expertise across asset types to secure a buyer so our client could achieve their goals with the property.”

IPA Arranges Leasehold Sale of Ground Lease for Orange County Retail Center

1440-1628 E. Lincoln Ave., Orange, Calif. Image courtesy of Marcus & Millichap

Jacksonville, Fla.,-based retail REIT Regency Centers expanded its West Coast holdings with the acquisition of the leasehold interest in a long-term ground lease for Nohl Plaza, a 103,639-square-foot retail center in Orange, Calif., from Nohl Plaza LLC for $25.3 million. The REIT now owns 12 grocery-anchored shopping centers totaling more than 1.5 million square feet in Orange County.

Vons anchors Nohl Plaza, which is 95 percent leased with Starbucks, Del Taco, Bank of America, the Tartan Room restaurant and Union 76 gas station and other tenants. Built on 10 acres between 1966 and 1979, the buyer had owned the center since 1989. The property is located at the intersection of Lincoln Avenue and Tustin Boulevard. It is also adjacent to California State Route 55, which records traffic counts of more than 222,000 vehicles per day.

Institutional Property Advisors, a division of Marcus & Millichap, represented the seller and procured the buyer. The IPA team was led by Executive Director Tom Lagos, IPA’s Patrick Toomey, Jose Carrazana and Joe Linkogle, senior vice president with Marcus & Millichap.The transaction was handled on behalf of Regency Centers by the firm’s senior vice president investments-West, John Mehigan, and Managing Director Barry Argalas.

“Navigating a marketing campaign for a leasehold offering while interest rates were broadly affecting commercial real estate values was challenging, Toomey said. “We strategically positioned the asset to appeal to the right investors and highlighted the property’s below-market 80-year ground lease, which has a right of first refusal, and the anchor tenant’s below-market lease,” said Toomey.

36 KSF Lease Brokered at Historic Chicago Loop Office Building

125 S. Clark St., Chicago. Image courtesy of Transwestern Real Estate Services

In the largest new lease signed in Chicago’s Central Loop this year, Total Quality Logistics inked a five-year deal for 36,322 square feet at The National, a 20-story, 600,830-square-foot office building located at 125 S. Clark St. owned by Commerz Real.

Previously located at 328 S. Jefferson St., TQL’s new lease represents a 5,000-square-foot expansion in the CBD. Built in 1907, the designated Chicago landmark building was renovated in 2016 and rebranded The National. The renovations added a fitness center, tenant lounge with bar, pool table and collaborative seating, outdoor terrace and Revival Food Hall, a 24,000-square-foot dining marketplace.

Transwestern Real Estate Services, led by Executive Vice President Eric Myers, Senior Vice President Kathleen Bertrand and Senior Associate John Nelson, represented the building owner. TQL was represented by CBRE’s Jon Milonas and James Otto.

Brokers involved in the deal told CPE the building’s best-in-class amenities set The National apart from other office buildings in the CBD and helped boost leasing. Nelson said tenants are attracted to The National because of its beauty, history and amenities that fulfill their requirements.

“The National’s robust food hall gives a plethora of options and brings life and energy into the building. The building also has stable ownership in Commerz Real, strong amenities that give tenants the ability to recharge and socialize, and good access to public transportation,” Nelson said.

Tenant Takes Full Industrial Building in Chicagoland

1723-1757 Marshall Drive, Des Plaines, Ill. Image courtesy of Lee & Associates

Last spring, Advanced Plastic Corp., a custom plastic extrusion company based in Lincolnwood, Ill., was looking to lease about 30,000 square feet of warehousing space. The company ended up signing a long-term lease in September for an 87,703-square-foot industrial building at 1723-1757 Marshall Drive in Des Plaines, Ill., owned by DRA Advisors, which was split into two spaces of about 30,000 square feet and 60,000 square feet.

Once Advanced Plastic saw the Des Plaines site, they realized they could add production as well as warehousing and distribution at the building. They liked the fact that the building already had a side-load dock for easier loading on flatbed trucks. Advanced Plastic began considering taking the 60,000-square-foot space. After discussions with the landlord, the company agreed to lease the entire building and also use it for overflow office space. In addition to locking down a long-term contract, leasing the full building gives the tenant more control, particularly over parking.

Rick Anesi, senior vice president at Lee & Associates in Rosemont, Ill., was the broker for Advanced Plastic Corp. Brad Simousek, senior vice president at Lee & Associates in Rosemont, along with Lee & Associates Principals Jeff Janda and John Cassidy, represented the landlord, DRA Advisors.

Challenges included finding the space requirements for the client in a tight industrial market that needed to be near the firm’s main facility. Once they agreed to expand the lease and add manufacturing at the site, the electrical system needed to be upgraded. Anesi said the company plans to begin operations at the Des Plaines location in early 2024.

“Advanced Plastic chose this site due to its size and location. The way the building is configured allows them flexibility for manufacturing, inventory and distribution,” Anesi said. “They also liked the fact that they will be the sole tenant.”

Repositioning Blighted Colorado Mall for Sales, Leases

Intersection of Interstate 25 and U.S. 34, Loveland, Colo. Image courtesy of CBRE

Schuman Cos. has completed the purchase of the 315,000-square-foot site of the formerly blighted Loveland Outlets in Loveland, Colo., with the $12.3 million acquisition of the south parcel of what is now called Loveland Yards, from owner Craig Realty Group. The 37-acre site at the intersection of Interstate 25 and U.S. 34 was acquired by Schuman for a total of $27.3 million.

Schuman is repositioning the former outlet center into for-sale or for-rent condos for retail, office or flex use with suites available from 1,000 to 120,700 square feet. To date, nearly 95 percent of the north parcel space is sold, leased or in final negotiations with tenants including Avery’s Tea House, Slate Studios, Gold’s Gym, School of Rock, CycleBar, Citipointe Church, Ewing Leavitt Insurance and Trek Bicycles.

Several south parcel tenants have remained, and one new 5,281-square-foot lease has been signed and a 9,925-square-foot lease is in negotiation. The mix is primarily retail, followed by flex and office.

Melissa Moran and Jon Rue with CBRE’s Fort Collins, Colo., office arranged the property sale and are marketing the spaces for sale and lease. There was no broker for the sellers.

“This center sat underutilized for decades at one of the best locations in Northern Colorado,” Moran told CPE. “Rather than a demolition and shift to a new use, they saw an opportunity to leverage the property’s existing strengths and its location to create a new center that met a specific need in the community.”

Moran noted the for-sale offering has been compelling because it allows small businesses to build equity in their real estate.

Federative Republic of Brazil Signs Long-Term LA Lease

6222 Wilshire Blvd., Los Angeles. Image courtesy of Decron Properties

It’s not often an international election impedes on a U.S. office lease, but that’s what happened when Decron Properties wanted to lease the entire top penthouse of its 86,736-square-foot Class A building at 6222 Wilshire Blvd. in Los Angeles to Federative Republic of Brazil for Brazil’s Consulate General office. Decron ended up signing a $10.4 million, 10.5-year, 16,477-square-foot lease with Brazil but had to wait until Brazil’s presidential election on Oct. 3, 2022, and subsequent run-off election on Oct. 30, were held. Final approval came in spring 2023.

Brian M. Dunne and Don Hudson of Kidder Mathews and Stan Gerlach of CBRE represented Brazil in the deal. Micheal Geller of JLL represented Decron.

The lease was notable for its term and size, according to Kidder Mathews. The 10.5-year term is more than double Los Angeles County’s average office lease of 4.25 years since 2022 and more than three times the average size (5,070 square feet).

Waiting for the elections was a major hurdle for the deal to close, Dunne said, and Decron chose to wait about a year with no income from the space until the Brazil lease could be signed because of the tight office leasing market and competition from properties like Century City.

“They have the German Consulate on the fifth floor, and they know how good this type of tenant can be for the ownership,” Dunne told CPE.

Other challenges included finding a central location with their space requirements that wasn’t in a luxury market like Beverly Hills because the tenant feared criticism back home from political opponents.

Former San Diego Office Property Signs 3 Life Science Tenants

12250 El Camino Real, San Diego Image courtesy of JLL

Phase 3 Real Estate Partners Inc. converted a former office building in the Del Mar Heights submarket of San Diego into an 86,000-square-foot, Class A lab building and quickly signed three tenants for a total of 16,385 square feet. The building at 12250 El Camino Real offers suites ranging from 4,000 to 12,000 square feet, and is aimed at early-stage biotech companies that find it hard to lease smaller Class A lab suites in the market.

The new tenants are Mabwell Therapeutics, which signed a 6,777-square-foot lease; Genece Health, which signed a 5,152-square-foot lease; and Lygos Inc., which signed a 4,511-square-foot lease.

JLL’s Chad Urie, Grant Schoneman and Taylor DeBerry represented the landlord in all three leases. Tristen Schneider and John Hundley of Kidder Mathews represented Mabwell. Shane Poppen of Hughes Marino represented Genece and Lygos.

DeBerry said Phase 3 Real Estate partners designed Genesis Del Mar to accommodate early-stage life science companies looking for graduator-sized lab suites.

“These suites are typically the first commercial space a life science company leases upon ‘graduating’ from the incubator,” he said. “Phase 3 and JLL were able to capitalize on that demand by delivering highly efficient suites on time.”

Complex Sublease Deal Signed at Florida’s Celebration Pointe

5001 Celebration Pointe, Gainesville, Fla. Image courtesy of Avison Young

Constant Contact faced an increasingly common problem when the pandemic ended—too much office space because many workers were working permanently from home. The firm was looking to sublease about 25,000 square feet at its office at 5001 Celebration Pointe in Gainesville, Fla., owned by Celebration Pointe Office Partners II LLC.

Avison Young Principal Rick Cain knew it would be challenging in a tertiary market like Gainesville to find a single company that could take that much square footage at Class A lease rates. After marketing the property for several months, Cain was contacted by Gas South, an Atlanta-based energy provider that had opened a Gainesville office but was not happy with the space.

Cain represented both Constant Contact and Gas South.

While Gas South’s executives liked the sublease space, they were still committed to a year on their current lease. Cain negotiated a reasonable period of rent abatement to help offset a portion of Gas South’s remaining term freeing them up for the subleased space.

“In my experience, when you are dealing with a sublease situation it can be a complicated process, Cain said, noting his prior relationship with the landlord as the original leasing agent for the building helped in this deal.

Madison Avenue Bank Branch Converted to Luxury Retail Spaces

540 Madison retail spaces, Manhattan. Image courtesy of DivcoWest

When DivcoWest had finished repositioning the office tower at 540 Madison, a 292,000-square-foot Class A building, it turned its attention to an oversized bank branch occupying 9,266-square-feet of valuable Manhattan real estate on the building’s ground floor. The landlord collaborated with Newmark Retail to transform one large bank at the corner of Madison Avenue and 54th Street into three separate storefronts that are now leased to luxury brands.

Danish-based Bang & Olufsen, one of the world’s top high-end consumer electronics companies that designs and manufactures its products, signed a long-term lease for 1,557 square feet. H. Stern, the U.S. outpost of a posh Brazilian-based luxury jewelry company, signed a long-term lease for 1,450 square feet. They joined Japanese watch company Grand Seiko, which took 6,259 square feet late last year.

Ariel Schuster, Newmark vice chairman, and Director Mitch Heifetz serve as the exclusive leasing agents for the retail component and represent ownership on the transactions. They also dealt directly with H. Stern on its lease. Charlie Koniver of Odyssey Retail Advisors represented Bank & Olufsen. Newmark’s Ben Birnbaum and Alexandra Tennenbaum represented Grand Seiko.

“Our goal was to convert this oversized bank branch into a retail destination,” Heifez told CPE. “We came up with a plan to revamp the space to provide three locations that high-end brands would find attractive and create a strong tenant mix that would complement each other.

Read the December 2023 issue of CPE.

The post In a Low-Deal Year, These Transactions Stand Out appeared first on Commercial Property Executive.

The Oakbrook Terrace Tower rises 31 stories. Image courtesy of Hiffman National

Hiffman National has been selected by BLK IL Tower LLC to manage a 31-story office building in Oakbrook Terrace, Ill. The Oakbrook Terrace Tower totals 792,000 square feet and is the tallest standing asset in the state outside the city of Chicago.

Located at 1 Tower Lane, the building features a fitness center, pool, conference center, deli and a Starbucks. An underground parking garage, EV charging stations and a car wash are also available at the property.

Completed in 1986 and designed by Helmut Jahn, the office tower is on an approximately 15-acre site, according to CommercialEdge data. The building was acquired by EQ Office in 2015 for $119 million.

READ ALSO: Staying Ahead of the Curve in Property Management

Oakbrook Terrace Tower is situated at the intersection of Route 83 and Roosevelt Road, providing tenants with easy transportation access into Chicago and throughout the surrounding area. Downtown Chicago is 19 miles east, providing a variety of dining, entertainment and retail options. Oakbrook Center mall, featuring more than 160 storefronts, is within walking distance, while the O’Hare International Airport is 15 miles north of the property.

The LEED-certified asset is 75 percent occupied. Tenants include Bosch, IMG Technologies, ECC Insurance Brokers, LifeStart, RMKC and Nordic Energy, the same data shows.

Along with six of the property’s past management team members, Hiffman National’s Carrie Szarzynski, senior vice president, and Heather Battaglia, portfolio manager, will lead management operations for the building.

Chicago office landscape

As of October, Chicago asking rents for office assets came in at $27.78 per square foot, lower than the national average by $9.93, according to a recent CommercialEdge report. Meanwhile, the city clocked in the largest sales volume in the Midwest year-to-date, with $858 million in office deals completed.

Recently, a 46-story office tower in Northbrook, Ill., landed a new 40,000-square-foot lease signed by UL Solutions. The downtown building spans approximately 1.2 million square feet and includes 11,000 square feet of retail space.

The post Hiffman National to Manage Illinois Office High-Rise appeared first on Commercial Property Executive.

Image by K-Kwanchai/iStockphoto.com

With weather conditions intensifying, your property may be at risk of stormwater failure and potential fines. Depending on your location, a certified inspector from your local municipality may evaluate the stormwater system on your property quarterly, yearly or every few years. In this webinar, you’ll learn more about the assets on your property and how to ensure your property is safe and passes inspection.

What are the most common causes of sinkholes? Where do they occur? And how can you protect your property against them?

Join CPE and Ryan Watson of AQUALIS, as we discuss how you can safeguard your assets, including how to evaluate risk and identify the first signs of system failure. You’ll also learn about:

• Keeping your property safe and compliant
• The run-to-fail method vs. the maintenance investment method
• Common failures and how to avoid them

Our panel:

Sponsored by:

The post Protecting Your Property From Stormwater Risks appeared first on Commercial Property Executive.

Principal Eric Strauss has been with America West Properties for more than 27 years. Image courtesy of America West Properties

Commercial real estate tenants’ preferences and needs have been constantly changing over the past few years, urging property managers to stay flexible and regularly adapt. Going forward, the potential economic headwinds that the CRE industry will likely need to face in 2024, along with the rise of generative AI in CRE, are also going to impact the way property managers handle operations.

America West Properties is overseeing roughly 4.5 million square feet of retail, office, medical office and industrial space across California, ranging from single-tenant to large multi-tenant assets. Commercial Property Executive asked Principal Eric Strauss to expand on the strategies that work best for property management companies in the current economic climate. 

How has this year been for AWP and its property management portfolio? What were the biggest challenges you encountered?

Strauss: Our property portfolio grew at a fantastic rate and maintained an excellent occupancy ratio throughout the year. We were able to engage several new Yardi platforms and utilized new Yardi consultants. Working with the Yardi tech staff, we have been able to streamline and expedite our weekly internal company systems, and better serve our 1,500 tenants and 1,500 vendors each month, allowing our managers to have more tools and time to work on their portfolios.

Our 2023 goal was to reposition the company internally to be prepared for growth with new management contracts but to also be ready for large expense increases that could affect the bottom line due to the cost of living in California with the inflationary times that we are now experiencing.

By far, the biggest challenge has been dealing with the time it has taken to find qualified employees for a range of positions including accounting, assistant managers and property managers. Due to the delays in finding the right personnel and the time to train them, we have had to limit bringing on new clients until we could achieve the quality of new property managers and accountants that are required to best serve our clients and their properties.

READ ALSO: Deloitte’s 2024 CRE Outlook

Tell us more about the impact of remote work on AWP’s operations.

Strauss: We operated in the office throughout the pandemic with little interruption and never had to close the office. We have a staff of 18 employees and having an in-office team style approach to property management is a requirement of the company for managers. Because of our investment since 1996 in Yardi, we have a successful remote accounting staff for several of our employees and it is a seamless operation. We strive to have excellent communication with our staff, and found the importance of meeting weekly as a group on Zoom to discuss company objectives, property issues, and upcoming management requirements. The feedback and participation have been a real driving force in our success these past few years.

Considering the tough economic climate, how have tenant collections evolved across your portfolio this year?

Strauss: We maintain a strong focus on tenant receivables at the company. Our internal policies require diligent communication and follow up with not only the tenants but also the property owners. We are selective in what properties we manage to avoid having a property with collection issues taking up too much of managers’ time and affect the remaining other properties in the portfolio.

CBDs nationwide continue to record high office vacancies. Besides implementing hybrid or non-remote work policies, is there anything else that tenants can do? How can property managers help?

Strauss: The office market sector is going to present many challenges for all parties involved in real estate in 2024. I think the office properties that have the right team approach with marketing, leasing and management, and that can effectively communicate with the tenants and property ownership will see the most benefit.

The value of keeping an existing tenant is focal in my opinion and managers will be needed to be able to effectively manage costs to create or save as much value for the building as possible. The last thing an owner wants to hear is that the tenant left the building due to ineffective property management.

What about the retail portfolio you manage? How have trends in retail evolved over these past few years, and what is the key to successfully manage these assets?

Strauss: Our portfolio consists of grocery-anchored and strip retail centers. We are finding that many tenants are utilizing their social media campaigns to drive their customers to their brick-and-mortar locations. These creative smaller tenants often will reach out to conduct local fund raisers for philanthropies, schools, or clubs on a smaller scale. Also, the food truck culture has been a great amenity for smaller properties to drive foot traffic to the centers.

Since the pandemic, our clients have been driven to really understand retail tenants over the past few years. The rise of social media had many owners concerned about their tenant base a few years ago. As things have evolved, landlords understanding their tenants’ businesses better has created a better relationship between the two, and also created a stronger ability to strengthen the tenant mix. The result is increased tenant sales, increased traffic to the centers and increased rents for the property owners.

Once again, property managers must evolve and understand their tenants and retail mix to be able to create a strong retail dynamic for everyone involved. Strong communication, frequent visits and understanding tenant sales volumes are a key to success at the properties under management.

READ ALSO: When Will It Be a Good Time to Invest in Retail?

America West Properties also manages a sizeable industrial portfolio. What can you share about these properties in terms of current demands from your clients?

Strauss: Industrial property management has been relatively on auto pilot for many years due to the shift to e-commerce warehousing needs and the strong demand for relatively nonexistent warehouse space that occurred in California. With changing economic factors, it’s going to be critical to effectively manage costs, including skyrocketing insurance premiums to maintain the high rents tenants have been paying.

While industrial vacancies are increasing in the California marketplace—albeit not in comparison to the office sector—property managers must have a continued focus on strong collections and communication with their tenants. In the past, it was maybe a matter of days before the vacant space was leased again, whereas now it could be several months before a new tenant occupies the space.

What is your take on implementing new technologies, such as AI, into property management strategies?

Strauss: Our feeling is that if you are not embracing technology for property management you will get left behind by not only your clients, but also your employees. People want to utilize the best technology to make their jobs and lives easier, and owners want to enhance their properties’ functionality and performance through technology. We are looking into several AI options right now to see how they could fit into the way we need to do business in the future both from a management, accounting, and property value-add performance perspective.

How do property management services need to evolve in 2024, and how is AWP prepared to deal with upcoming challenges?

Strauss: Along with others in the industry, we are preparing for the challenges that appear to be on the horizon in 2024. The AWP team utilized 2023 to solidify and expand our internal management and accounting operations and add efficiencies by expanding our Yardi footprint in many ways. Working toward the owners’ goals and objectives, our team of dedicated personnel will provide streamlined operations and expertise to add value and quality property management service in 2024.

The post Staying Ahead of the Curve in Property Management appeared first on Commercial Property Executive.

The Waterline Club. Image courtesy of GID.

We’re thrilled to announce a very special event!

Join the CPE editorial team at the Waterline Club in NYC on Dec. 1st for a fun-filled morning.

Whether you’re a fan of CPE or simply curious about what we do, this is the perfect opportunity to connect with our editors. You’ll have the chance to ask questions, share ideas and even pitch some stories!

Plus, you’ll be able to tour the beautiful Waterline Club and learn about this unique property.

Don’t miss out! Register for our meet and greet here.

Questions? Email Editor-in-Chief Jessica Fiur.

The post Meet the CPE Editors at the Waterline Club! appeared first on Commercial Property Executive.

Aerial view of Greenway Plaza. Image courtesy of Lincoln Property Co.

Lincoln Property Co. has been selected by a court-appointed receiver to provide property management services at Houston’s iconic 11-building, 4.5 million-square-foot Greenway Plaza office and mixed-use complex that is home to many of the city’s top companies.

Located on 52 acres between Houston’s central business district and Galleria submarket, the area is surrounded by high-end residential and retail areas. Built by the late Kenneth Schnitzer of Century Development starting in the late 1960s, Greenway Plaza is considered to be Houston’s first mixed-use development and an early example of the live-work-play concept.

READ ALSO: Creating a Winning Back-to-the-Office Formula

The Class A campus has been a landmark in the city and many of Houston’s top companies have offices there, including Occidental Oil & Gas, Invesco, Camden Property Trust, Boardwalk Pipeline, Magnolia Oil & Gas and Stephens. In September 2022, Invesco renewed its lease at Eleven Greenway Plaza, where it had been located for more than four decades. The global investment management firm signed a long-term lease extension for more than 180,200 square feet at the 31-story, 746,437-square-foot office tower.

$465 million CMBS loan default

The complex has had several owners over the years and undergone numerous upgrades. The most recent joint venture that owned Greenway Plaza, the Canada Pension Plan Investment Board, Nuveen Real Estate and Silverpeak Real Estate Partners, defaulted on a $465 million CMBS loan, according to reporting by Trepp and Bisnow.

When the loan matured in May 2022, refinancing efforts were unsuccessful, and the loan was transferred to special servicing two months later. But forbearance was granted, and the loan was paid through June 2023. Citing Trepp, Bisnow stated the borrower indicated over the summer it was no longer able to perform under the forbearance agreement and the loan went into default. A receiver has since been appointed, leading to the new property management assignment for Lincoln.

Greenway Plaza had previously been managed by Parkway Property Investments LLC. Parkway had earlier been the full owner of the campus but in April 2017 sold a 24.5 percent stake to a partnership between TH Real Estate (now Nuveen) and Silverpeak. CPP Investments also acquired a 24.5 percent stake and later became 75 percent owner of the complex after acquiring Parkway Inc. in a $1.2 billion merger in October 2017. Following the merger, Parkway Property Investments emerged as a spinoff.

Charlie Giammalva, executive vice president, Lincoln Property Co., said in prepared remarks Greenway Plaza is a cornerstone of the Houston office market and its significance cannot be overstated. Giammalva said Lincoln will bring a highly experienced team of professionals that have worked on large, complex assignments to the property and deliver efficiency, elevated maintenance and unmatched tenant experience.

Greenway Plaza amenities

The LEED Gold-certified complex has numerous amenities for tenants and visitors. Amenities include bike rooms; a food hall known as The Hub; casual fine dining; Lifetime Fitness, with outdoor pools and sundeck; a Primrose School for childcare; banking; sundry shop; coworking concepts; drycleaner; florist; hair salon; commercial printing and graphics. There is also an event space, a conference center and greenspace. A 388-key Doubletree by Hilton hotel is part of the complex and also has meeting and banquet facilities.

Buildings outlined

In addition to Eleven Greenway Plaza, the buildings to be managed by Lincoln include:

• One Greenway Plaza, an 11-story, 210,038-square-foot office building;
• Two Greenway Plaza, an 11-story, 209,914-square-foot office building
• Three Greenway Plaza, a 21-story, 518,578-square-foot Class A office tower;
• Four Greenway Plaza, an 11-story, 241,294-square-foot Class A office tower;
• Five Greenway Plaza, a 31-story, 912,011-square-foot Class A office tower;
• Eight Greenway Plaza, a 15-story, 255,305-square-foot Class A office tower;
• Nine Greenway Plaza, a 31-story, 747,819-square-foot Class A office tower;
• Twelve Greenway Plaza, a 15-story, 254,920-square-foot Class A building;
• 3800 Buffalo Speedway, a five-story, 155,761-square-foot office building;
• The Shops at Greenway/The Hub, a single-story, 97,411-square-foot food court and dining hall.

The post Lincoln Property to Manage Houston Landmark appeared first on Commercial Property Executive.

Outdoor terrace at the Kettner & Ash building in San Diego. Image courtesy of Haley Hill Photography

More than three years after the COVID-19 lockdowns dispatched office workers to their kitchen tables, spare bedrooms and closets, getting them back into the office remains an arduous task. It seems that initial offers of free food a year or so ago didn’t quite do the job.

So, what do workers want in order to return to the office full time—or at least with some regularity? To start with, more flexibility and the opportunity to at least save money, suggested Frank Weishaupt, CEO of communications equipment company Owl Labs, which recently released its 2023 State of Hybrid Work report.

One of the biggest reasons that employees are resisting return-to-office mandates is because they’re spending an average of $51 per day on commuting, parking, food, coffee, pet care and other goods and services—money they didn’t need to spend the last three years, he added.

READ ALSO: Office Struggles, Adaptations: An Architect’s Perspective

“Companies need to consider paying for employees’ commuting costs, subsidizing food and beverages, and providing child or eldercare,” Weishaupt declared. “The traditional perks that once worked are no longer cutting it.”

Emphasizing experience

Employers that recognize these challenges are focusing on creating workplace experiences that exceed the work-from-home experience—simply matching it fails to make up for the added costs and lost flexibility that accompanies returning to the office, said Bryan Berthold, global lead of workplace experience with Cushman & Wakefield. To do that, companies need to conduct surveys to find out what people want in an office environment.

Coffee shop at the Kettner & Ash building in San Diego, Calif. Image courtesy of Haley Hill Photography

Typically, a handful of common items related to productivity show up in the surveys that Cushman & Wakefield conducts, he added, such as dual monitors, conference room video capabilities that work better than what employees have at home, and ergonomic chairs. More broadly, employees want to be able to work from home when they need to concentrate on a task and go into the office for collaboration.

“Companies are really homing in on what matters most to their people,” Berthold said. “Employees have had work-life flexibility for three years, but the minute mandates are implemented, workplace experience and engagement drop.”

Albert DePlazaola, a senior principal with Unispace, a global strategy, design, project management and construction services firm, has seen similar technology demands in employee surveys. If the internet connection isn’t stronger in the office or if the collaborative tools don’t function any better than at home, it aggravates employees, he said.

“It’s less about having free dry cleaning and bone marrow and oysters for lunch,” DePlazaola remarked. “It’s more about being productive and collaborative and not simply doing the same things they would be doing at home.”

Happy team moments

Mosaic Construction, a fast-growing multifamily, commercial, residential and cannabis design-build firm based in Northbrook, Ill., surveyed its workers about a year ago when it began searching for new space. At that point, employees had largely already returned to the 2,200-square-foot office about four days a week, said Ira Singer, a founder of the company.

Indoor putting green at Mosaic Construction’s office in in Northbrook, Ill. Image courtesy of Mosaic Construction

Mosaic eventually found 5,800 square feet that had not only been built out during the pandemic but that also provided better collaboration space, a large kitchen and private offices—all of which were highlighted as needs. Other elements include an indoor putting green, brand new furniture, natural light and the ability to easily expand, he remarked.

“We thought about private offices and the type of huddle space that would allow people to shut their doors and work or have a meeting without a lot of distractions,” Singer said. “We’re focused on culture, and there has been a banding together where we are experiencing happy team moments.”

Landlords step up

While Mosaic found a landlord who happened to have space ready to move into, other office owners are making broad improvements that can help companies entice workers back. That’s especially true in markets with high vacancy rates.

In San Francisco, for example, demand for office space was so high in the years leading up to the pandemic that building owners didn’t need to provide many amenities to attract tenants, observed Wes Powell, an executive managing director with JLL in the market. But with the vacancy rate now at a record high of around 30 percent, San Francisco landlords are adding outdoor areas, conference facilities, meeting rooms, tenant lounges, bike parking and fitness centers, he continued.

“These are things that have been happening throughout the U.S. for some time, and San Francisco is only now catching up,” Powell said. “Landlords are figuring out what they can do with their buildings physically and are making improvements pretty quickly in order to compete.”

READ ALSO: New Formulas for the New Office

In downtown San Diego’s Little Italy district, owners of the Kettner & Ash building are leveraging an art-filled, warm and inviting hotel atmosphere and coffee shop in the lobby to attract tenants, as well as a third-floor indoor-outdoor lounge with a catering kitchen, lounge, bar and shuffleboard.

The landlord also signed coworking firm Spaces to draw companies, said Derek Hulse, managing director of Cushman & Wakefield’s San Diego office division, who represents building owners Divco West and Ocean West Capital Partners. The strategy has paid off. Last year, architecture firm Perkins & Will opened a San Diego office in the coworking space and then did a direct deal with the landlord.

“Maybe there will be a shift in the next couple of years, but for now, the hybrid work model is here to stay,” Hulse explained. “There’s been a realization that companies have excess space that they need to shed. But at the same time, companies still want highly amenitized and better-located space.”

The post Creating a Winning Back-to-the-Office Formula appeared first on Commercial Property Executive.

She became the leader of this transformation and, over the past decades, her efforts paid off as the Active Design Guidelines were downloaded in more than 180 countries, influencing the design of buildings and infrastructure projects worldwide. The Active Design Guidelines provided the foundation for Fitwel’s multi-faceted approach to improving health and well-being. The healthy building certification standard was originally created by the U.S. Centers for Disease Control and Prevention and General Services Administration, with the CDC remaining the research and evaluation partner for Fitwel.

In the interview below, Frank expands on how Fitwel is equipping real estate players with the tools they need to prioritize health and well-being within the buildings they own or manage. 

The pandemic has been a major catalyst for the attention real estate owners and managers pay to the health of the people using their spaces, and Fitwel surfaced as the on-point measuring method. How are things now when we’re passed the COVID-19 threat?

The main driver for the demand for healthy buildings is a growing awareness of the direct impact that real estate has on occupant health and well-being, shares Joanna Frank. Image courtesy of Fitwel

Frank: The pandemic undeniably served as a pivotal moment for the real estate industry, propelling a heightened focus on the health and well-being of individuals using these spaces. Fitwel emerged as a highly relevant tool during this time, providing a robust framework to assess and enhance the health and well-being of the occupants of these buildings. However, even as the COVID-19 threat gradually recedes, the significance of Fitwel remains as strong as ever.

In today’s landscape, responsible investing is rapidly gaining traction. Investors are placing increasing emphasis on a company’s environmental, social and governance performance as a crucial factor in their decision-making processes. Fitwel plays a vital role in this context by helping the industry define the S in ESG. We offer strategies for developing and maintaining optimum health-promoting environments for building occupants, helping companies boost their ESG scores and ratings like GRESB.

Recently, we surveyed investors to gauge their views on health and wellness in real estate. The report revealed how COVID-19 has elevated the importance of health in investment decision-making and how respondents intend to enhance their wellness-related asset management strategies in the coming year. It also outlines three major recommendations for how the sector might better incorporate health and wellness initiatives into its ESG strategies. The survey also uncovered that 87 percent of those surveyed experienced demand from their tenants for healthy buildings.

With the pandemic in the rear-view mirror, what is the main driver for healthy building demand? What is currently Fitwel’s focus?

Frank: The main driver for the demand for healthy buildings is a growing awareness of the direct impact that real estate has on occupant health and well-being. The pandemic further accentuated the importance of spaces that prioritize health. Individuals are increasingly valuing environments that promote physical wellness, mental well-being and overall quality of life. Moreover, investors and stakeholders are recognizing the long-term value of properties that prioritize occupant health, productivity and tenant satisfaction. As a result, there is a shift towards incorporating evidence-based design strategies and technologies that enhance indoor air quality, access to natural light, active design elements and overall wellness. This demand is influencing real estate developers, owners and operators to prioritize health-centric features and certifications, thus shaping the trajectory of building design and operation in the coming years.

Fitwel’s post-COVID-19 era focus on equipping investors with tools where they can prioritize health and well-being within built environments transcends competitive advantages; it mitigates risks and aligns with holistic ESG goals. Fitwel’s platform ensures consistent integration of people-centric metrics, quantifying the S in ESG and enabling data-driven decisions across the real estate sector. As the industry shifts toward data-driven solutions, Fitwel leads in standardizing benchmarks for societal health, strengthening ESG strategies and contributing to the industry’s $53 trillion ESG investments. This approach to value creation through health resonates powerfully with leading real estate companies, evident from their adoption of Fitwel for ESG reporting and portfolio-wide impact.

Furthermore, regarding climate change, our focus pivots towards the ‘people’ perspective in the context of climate change rather than solely focusing on supporting carbon reduction or sustainability certifications. Research underscores the inseparable link between the health of the planet and the health of its inhabitants. Fitwel’s approach centers on leveraging the built environment to optimize health in a warming world. We tackle the challenge by examining ways to optimize both the built environment and the planet from a people-centric standpoint. This encompasses strategies aimed at reducing the drivers of climate change while nurturing holistic well-being.

What sets Fitwel apart from other benchmarks?

Frank: What distinguishes Fitwel from other benchmarks is its unique combination of evidence-based strategies and peer-reviewed research. Fitwel stands out by offering a dynamic framework that is rooted in scientific rigor and constantly evolving to address emerging health and well-being challenges. Generated by expert analysis of more than 7,000 academic research studies, Fitwel is implementing a vision for a healthier future where all buildings and communities are enhanced to strengthen health and well-being. It’s the only real estate tech platform to combine benchmarking and certification and, coming online in 2024, ESG metrics, offering what the CDC considers the most impactful strategies based on science.

As investor demand for ESG reporting grows, Fitwel benchmarking offers real estate owners a clear way to incorporate health-related strategies and outcomes across all three categories, but most especially to the least-defined category—Social. According to our Fitwel partners, Fitwel Certification is a validation of what’s being put in their ESG reports as legitimately making an impact on the people living and working inside their properties. By adopting a common set of guidelines, the real estate industry can commit to better environmental initiatives to spark widespread change across the industry. This is a vital joint effort as we work to combat climate change, with the added benefit of making our communities healthier. 

Fitwel addresses health as an interconnected system, with no single dominant category or area of focus, and as such, all strategies are voluntary, with no individual prerequisites. We are seeing more and more real estate sustainability directors view health and the environment not only as important priorities but also as two sides of the same coin, recognizing that green buildings are often healthier.

READ ALSO: Inside the Mass Timber Playbook

Share with us some projects you consider flagship healthy buildings.

Frank: Marriott’s Bethesda headquarters is a world-class hospitality organization that recognizes that people are the sources of its innovation and success. With support from Gensler, The Bernstein Cos. and Boston Properties, Marriott International Headquarters in Bethesda, Md., received a Best in Building Health award for the highest-scoring design property in 2022… Fitwel certification and prioritizing health is not only demanded by occupants and customers, but it is also an important tool for attracting and retaining job seekers, offering a place where associates can thrive and focus on physical and mental well-being.

Vornado Realty Trust achieved the Best in Building Health award for the highest-scoring multi-tenant building for THE MART. The property meets 83 percent of the Health Impact Category strategies, reinforcing the emergency preparedness, indoor air quality and water testing programs, and focusing on proper lighting and building access points. Fitwel also supports Vornado’s ESG program and the impact that social programming and positive health practices have on occupants and employees. THE MART is the largest Fitwel-certified building in the world, spanning 4.2 million square feet, making the impact on people significant.

Rockefeller Center is Fitwel-certified courtesy of Tishman Speyer. Image courtesy of Fitwel

Tishman Speyer teamed up with Fitwel to certify one of the world’s most iconic landmarks—Rockefeller Center. The achievement amplifies Rockefeller Center’s vision to prioritize the physical, mental and social well-being of its occupants and surrounding community. Fitwel’s commitment to health through building design and operation paired well with Tishman Speyer’s desire to create beautiful spaces that foster community and productivity.

Tell us about the benefits—physical and mental—active design strategies have in real estate developments.

Frank: Fitwel offers a comprehensive pathway towards addressing the indoor and outdoor built environment interventions that support holistic health. Across asset types, a Fitwel building certification addresses not only air quality, biophilia and daylight access, but also offers a wide array of other opportunities to support mental and social well-being, from walkability to community destinations, outdoor lighting, farmers market access and more. By incorporating Fitwel design strategies, not only do they help reduce stress but also boost emotional well-being, improve productivity and focus, and foster a positive holistic health—social, emotional and physical well-being.

Biophilia has made a comeback in recent years and pairs up seamlessly with Fitwel. Which are your preferred biophilic design solutions?

Frank: In the era of climate change and pandemic risk, how building design for public health will evolve will shape the future. This, combined with a growing number of people spending much of their time indoors, there is an abundance of evidence to suggest that creating connections between nature and the built environment can increase our well-being.

We are seeing more buildings incorporate biophilic design elements, bringing nature indoors with living walls, green roofs and extensive use of natural materials. This approach will improve air quality, reduce stress and enhance occupants’ overall well-being. Design interventions that can enhance this connection in both our outdoor and indoor environments include views of nature, incorporating natural materials into the design—wood, rock, water—providing access to natural light, plant walls, potted plants, hydroponic gardens, hanging plants and water features. Other outdoor designs include greenways, gardens, serene spaces, and restorative spaces like forests, parks, or greenery along streets and urban areas.

How many Fitwel-certified projects are there in the U.S. and globally? Which areas lead in registered and awarded Fitwel certifications?

Frank: There are more than 1,500 certified projects globally, spanning across more than 50 countries; 1,125 of these are in the U.S. Office projects make up for more than 50 percent of these certifications, encompassing both building owners and tenants. Some recognizable names among these certifications include Meta, Microsoft and Peloton.

Multi-tenant base building properties account for approximately 30 percent of all Fitwel-certified buildings. Commercial properties account for more than 20 percent of all Fitwel-certified buildings.

Interestingly, the residential sector is experiencing rapid growth in the post-COVID-19 era. This growth is particularly evident in the increasing adoption by residential REITs. In terms of market distribution, the U.S. stands out as our largest market, constituting 79 percent, while California leads in most certified projects at more than 250. Additionally, Fitwel has gained significant traction in other prominent markets such as Canada and the U.K.

Tell us about the Fitwel Standard v3 slated to launch in December. What prompted these changes?

Frank: Fitwel Certification has never been more important in future-proofing assets and portfolios. We regularly evolve the Fitwel Standard to ensure it reflects the most recent research and evidence, is responsive to input and insights from our users, and is optimized for resiliency, impact and value. The current version, Fitwel v2.1 includes clarified strategy language, expanded pathways for compliance, and various strategy requirement updates. Since its launch in 2018, Fitwel v2.1 has proven to be scalable, globally relevant, adaptable to various asset classes and types and reflective of market demand.

Version 3 (v3) of the Fitwel Standard reflects insights from the latest public health research and data-based evidence substantiating the valuable link between health and the built environment. Additionally, it offers a streamlined and more efficient documentation and certification process, easy-to-use resources and tools, and several tech enhancements to improve the overall user experience.

Meanwhile, we are excited about our September launch of Fitwel’s Certified Metrics Module pilot that we created in collaboration with EVORA Global, a groundbreaking step in ESG reporting for real estate investors. This tool standardizes and substantiates social impact data, addressing the need for a unified approach to measuring and reporting the S in ESG. The pilot provides rankings and insights for certified projects, focusing on strategies that impact health and material risk, offering valuable information for investment decisions. The Certified Metrics Module involves industry leaders such as Alexandria Real Estate Equities, Tishman Speyer, BentallGreenOak, and more, driving global adoption of these metrics.

The post Boosting Asset Value Through Fit Buildings appeared first on Commercial Property Executive.

Four Westlake. Image courtesy of JLL

JLL’s Houston leasing and property management team has been selected as the exclusive property manager and leasing agent for Four Westlake, a 20-story, 560,888 square-foot office tower located in the city’s Energy Corridor.

The firm’s new roles follow the property’s September foreclosure and subsequent trade to Pacific Life Insurance, according to reporting from Bisnow.

Four Westlake’s previous owner, Treeview Real Estate Advisors, defaulted on a $70 million loan for the property’s purchase, leaving it in the hands of the lender, Pacific Life Insurance Co., the article states. The property went up for auction in early October following a Notice of Acceleration, but the firm failed to find a buyer, even at a 50 percent price discount.

Presently, the California-based insurance firm and institutional investor remains the owner, and has committed to renovate the distressed asset’s lobby, conference spaces and fitness facilities, according to JLL.

Leasing at the building will be overseen by Managing Director of Houston Agency Leasing Tyler Garrett and Vice President Matt Pruitt, while Managing Director Connie O’Murray will lead property management.

A profile of Westlake Park

Four Westlake was built in 1992 as the largest component of Westlake Park, a 58-acre, four-building office campus that totals more than 2.3 million square feet of space. Oil and gas giant BP was the fourth building’s former anchor tenant, leasing space adjacent to its U.S. headquarters at 501 Westlake Blvd.

READ ALSO: Property Management Success: AI’s Power and Potential

According to CommercialEdge, the Four Westlake Park is sectioned into 28,000 square-foot floorplates, and includes a covered multi-level parking structure. Located at 200 Westlake Park Blvd., the building’s immediate neighbors include offices from BP, alongside the Houston office of Korean compressor manufacturer Hanwha Power Systems. The world headquarters of ConocoPhillips and McDermott International sit within a mile to the east, while downtown Houston lies 16 miles away, accessible through the Interstate 10.

Recharging the Energy Corridor

Houston’s Energy Corridor remains one of the nation’s top performing submarkets, despite the city market’s overall lukewarm fundamentals. Office leasing activity here, which was up 40 percent as of the second quarter, is getting a boost from employers such as BP mandating a three-day in-person workweek.

According to data from JLL Research, Class A assets in Houston saw a positive absorption of approximately 125,000 square feet in the third quarter, while the whole market presented a negative absorption of more than 600,000 square feet, driven by Class B’s significant move-outs.

The beating heart of the nation’s oil and gas industry remains active on the investment and leasing front. Earlier this month, Interra Capital Group bought Memorial Pointe, a 226,586 square-foot office building along Katy Freeway. Over the summer, engineering giant Gulf Cos. signed off on a 52,148-square-foot lease at Eldridge Oaks, a 349,190-square-foot property owned by Broadshore Capital Partners.

The post JLL to Lease, Manage Houston Office Tower appeared first on Commercial Property Executive.

Such platforms, and their associated uses and future potential for high-level decision-making, marketing, maintenance and tenant engagement have risen to the forefront of interest for office operations. Commercial Property Executive spoke with several veteran property management experts and got their insights on the best present uses for artificial intelligence, alongside its future potential.

Dialing in the day-to-day

Cary Fronstin, Partner & Director of Property Management, Foundry Commercial. Image courtesy of Foundry Commercial

When it comes to assisting in and, at times, replacing property management tasks done by humans, some low-hanging fruit has been adopting automation for more rudimentary operational tasks.

One area where property managers have started to enjoy using automation is lease administration, an often lengthy process tangled in a maze of numbers and legalese. Generative platforms, by way of their ability to rapidly extract, process and analyze information, expedite it considerably. “It [does it] to such a high level, where the review after getting those abstracts back is really brief, because they get it right most of the time,” explained Cary Fronstin, Partner & Director of Property Management at Foundry Commercial.

This time reduction has allowed property managers and brokers to enhance their relationships with tenants through the leasing process. For Sarah Cannella, Director of Property Management Operations at Hiffman National, automation allows for a renewed focus higher-level tasks such as accounting, analyzing the actual language of the lease terms, as well as devising and planning maintenance and repairs. Once the more time-consuming information extraction process is complete, “this time-saving benefit allows property managers to focus on tasks that require their specialized expertise,” Cannella told CPE.

Sarah Cannella, Director of Property Management Operations, Hiffman National. Image courtesy of Hiffman National

Also in the realm of assistance is the platforms’ ability to nearly instantaneously respond to work order requests, particularly at times when on-stie managers may not be at a building. “We have automated workflow systems where tenants can go in, type in what their request is, and AI interprets that,” Fronstin noted.

On a day-to-day basis, the most common complaints that Foundry often receives in its office spaces are for temperature changes. Rather than gambling on a property manager sitting at their desk at the moment that a request is sent, the AI interpreter communicates directly with an HVAC engineer. “The days of having tenants call in a work order request to a manager that may or may not be sitting at a desk are not as frequent,” Fronstin reflected.

Hiffman uses a chatbot that functions along similar lines, and inputs work order tickets directly into the management team’s systems. Cannella sees an added benefit in the bot’s accessible nature, unencumbered by oftentimes cumbersome work order software. “These tenants, often working on the warehouse floor and not at a desk, appreciate the convenience of texting the chatbot without the need to remember a username or password,” she explained.

A marketing assistant

Alongside a significant facilitation in both saving time and interacting with present tenants at a property, automation is playing an ever-more important role attracting and retaining high-quality leases. Beyond the chatbots that often greet every visitor to an office property’s website, the platforms also have the ability to generate useful marketing content.

READ ALSO: Marketing Executives Unveil Their Best Practices

Fronstin has observed a niche for the platforms in presenting virtual space plans to prospective tenants, particularly at older office assets that may be struggling with occupancy amid a widespread flight to Class A, amenity-driven spaces in gateway markets.

Here, a virtual space planner transforms the less modern space into more modern, redesigned office. “It’s marketing gold,” Fronstin explained. “It allows tenants to see things that they may not be able to visualize [by] themselves, and actually lease up a space that they may not have considered,” he added.

Decision-making potential

Ilene Goldfine, Chief Digital Strategy Officer, Hines. Image courtesy of Hines.

In the same vein that property managers benefit from the platforms’ versatility for lower-level tasks, they also recognize its strategic value. For Ilene Goldine, chief digital strategy officer at Hines, much of the platforms’ potential comes by way of their ability to derive insights from data and inform strategic decision-making. “What are the insights that they are telling you that you can’t see with the naked eye?” Goldfine asked. Such a question applies not only to diagnostics, but to the aforementioned tasks.

Justin Segal, President at Boxer Property, has observed such a trend particularly in the realm of predictive analytics for many aspects of a given office property. “If an organization has good metadata and historical transactional data, then AI can be used to predict outcomes based on past performances, and the outcomes that you can predict are anywhere you have structured data,” Segal detailed. Noteworthy examples that Segal listed were for predicting the likelihood that a tenant will renew a lease at a given price, or the extent of customer satisfaction with a program at a property.

Justin Segal, President, Boxer Property. Image courtesy of Boxer Property

Acting as a de facto decision maker, the platforms’ ability to analyze data also translates into decisions of interpersonal interaction “We use them to determine which customers to talk to, and out of eight [thousand] tenants, the ability to focus on three or four is extraordinarily helpful,” Segal detailed.

In this realm, there is a hybrid of humans and robots, working together to produce the best outcomes for a property. “At the end of the day, that level of experience that somebody could be bringing is encapsulated in a system now, and that system will handle the predictive and data management tasks in deciding where to go have a conversation or intervene,” Segal said.

With all of this in mind, property managers must keep in mind automation’s limitations, as well as the importance of proper data collection and hygiene. Both are paramount, given the fact that these platforms are incapable of synthesizing data by themselves, as well as their susceptibility to internal and implicit biases. One study from datanami quoted Peter Relan, a co-founder & chairman at Got It AI, a developer of enterprise-focused chatbots, as citing a 15 to 20 percent hallucination rate for generative platforms such as ChatGPT. “They’re only as good as people updating them and keeping them relevant,” Goldfine cautioned. “If [you] don’t put more information in, then that is stale information that you are basing those decisions on. This is all based on good foundational data,” Goldfine concluded.

The post Property Management Success: AI’s Power and Potential appeared first on Commercial Property Executive.

Doug Ressler, Manager, Business Intelligence, Yardi

Covering the bases

Regarding property and facilities management, AI can help with tasks like analyzing building functions and layouts, systems management (HVAC, lighting, data systems, etc.) and organizational tasks. By using AI, property managers can further streamline chores like safety, security and efficiency. And for commercial brokers soon AI could help with generating leads and prospects.

The e-commerce revolution continues to disrupt the retail landscape. Specifically, changes in consumers’ buying habits have affected the commercial real estate industry, both negatively and positively. On one hand, some retailers have shuttered many brick and mortar locations. However, the change benefits the industrial warehouse sector. Regarding technology, commercial real estate technology has adapted, causing a minor revolution in warehousing in relationship to retail. So not only is there a greater demand for industrial warehouses, but there is also a great demand for high-tech solutions in these properties.

Another area of focus is data. In general, data gives better insight into properties for the commercial real estate business process and leads to more informed decisions. This might include data captured by a property manager from building operations via smart systems. At the same time, it could include data purchased from a third-party regarding properties, submarkets, or neighborhoods.

For prospective buyers and tenants, this data informs their buying and leasing choices. For property managers, data helps them to better manage their properties. At the same time, brokers need to stay on top of the latest data for their own sake and the sake of their clients.

And finally, commercial real estate industry works with enormous amounts of digital tenant and property data. Combine this with the IoT, mobile apps and digitally based solutions, it is crucial that cybersecurity in commercial real estate be top-notch. After all, no one wants to get a message from their landlord, property manager, or broker stating that their sensitive information has been compromised. —Doug Ressler, Manager, Business Intelligence, Yardi

Mark Rose, CEO, Avison Young

Driving efficiency

AI will receive the most attention as a real and exciting technology. The reality is AI is best used if it is embedded into other technology platforms and processes. AI, if embraced, will drive efficiency and deliver on targeted solution sets. This is where innovators and ideation professionals need to focus. —Mark Rose, CEO, Avison Young

Shekar Narasimhan, Managing Partner, Beekman Advisors

Looking ahead

The AI buzz has affected the markets and will affect lives. But it seems not to have touched the CRE sector YET. I think we will see virtual leasing of apartments, virtual inspections of buildings, management of energy and space in office and retail and even hospitality check-in change within three years. It’s where the bulk of jobs are in our industry. —Shekar Narasimhan, Managing Partner, Beekman Advisors

Note from the editor: Interested in joining the CPE Executive Council for a chance to be featured in upcoming articles? Email Editor-in-Chief Jessica Fiur.

The post CPE Executive Council: Tech & Trends to Focus On in 2024 appeared first on Commercial Property Executive.

The Shops at South Town in Sandy, Utah, another shopping mall under Pacific Retail’s management. Image courtesy of Pacific Retail Capital Partners

Pacific Retail Capital Partners has assumed management and leasing responsibilities at Park Place, a 1.1 million-square-foot retail center in Tucson, Ariz. The deal marks PRCP’s entry into The Grand Canyon State.

Park Place entered special servicing earlier this year, when Brookfield Properties defaulted on a $200 million loan provided by Deutsche Bank National Trust Co. in 2011, public records show. LNR Partners now oversees the property.

PRCP’s portfolio totals 24 properties encompassing more than 20 million square feet. The firm has recently purchased a 1.2 million-square-foot mall in Bridgewater Township, N.J., in a transaction that also included a 94,000-square-foot open-air shopping district adjacent to the property.

A Tucson retail landmark

Developed by Joseph Kivel in the 1970s, Park Place underwent several major renovations throughout the years. The fashion and entertainment destination features a food court, a children’s play area, a nursing lounge, a cinema with 20 screens, ample parking and an abundance of restaurants.

Anchored by Century Theaters, Dillard’s, Round 1, Total Wine & More, Ulta Beauty and Old Navy, the indoor shopping center features national brands and local business. The property’s tenant roster includes Applebee’s, Chipotle, Guess, Pandora, Sephora, Starbucks and Victoria’s Secret, among others.

Initially named after Sears Park, the property included a standalone Sears store which later became a major anchor but closed down in 2018. Park Place Partners, a partnership between Evergreen Devco Inc. and Wentworth Property Co., purchased the former Sears store in 2022 for $12.3 million.

Located at 5870 E. Broadway Blvd., Park Place is roughly 8 miles from downtown Tucson. The surrounding area is home to numerous retail options, including the adjacent Plaza at Williams Center. Davis Monthan Air Force Base is less than 3 miles south.

The post Pacific Retail Capital Partners to Manage Tucson Shopping Mall appeared first on Commercial Property Executive.

Technological advancements create new opportunities to streamline operations through collaborations with trusted vendors.

Jake Smith, director of asset services, Transwestern

“This integration can help drive internal costs down and reduce the costs to our buildings,” noted Jake Smith, vice president & director of operations for asset services at Transwestern. But he warns that seamless integration of vendor technologies requires comprehensive cybersecurity measures to guard against breaches.

During the post-pandemic return to office, Transwestern’s vendor decisions have been informed by a hospitality approach to amenities and tenant engagement. Technology and data analytics provide an understanding of real-time occupancy and the amenities that are being used on a given day. “We are gaining critical insights into how tenants are interacting with the building—like reserving a training center or ordering food—so that we can better offer the services that are needed,” Smith noted.

Building management should have an open line of communication with vendors—and tenants. There is a basic expectation for vendors to be reliable and trustworthy. “If something is not right, and you find out early, a minor issue does not have to become a big issue later,” remarked Zair Cheema, clinical assistant professor at New York University’s Schack Institute of Real Estate. That’s also why it’s always a good idea to invite tenants to share their feedback.

Since COVID-19, office building occupants have become more aware of guidelines for indoor air quality, ideal temperatures and water management. Cheema points out that sensors can help vendors and property management collect data about performance in a specific part of a building or for the entire property. “Then you can use data points to do surveys or talk to occupants,” he added. Some office campuses have small devices that post the cleaning and maintenance schedule with a keypad for building occupants to give feedback about a vendor’s performance.

Integrating property management in the early stages of designing a new building or retrofitting a building or taking over a new asset and reclassifying it is a must, according to Cheema. “Whatever we’re doing in the market, having the operations team part of the initial stages as a stakeholder is very important. We are designing with energy efficiency, water conservation and indoor air quality in mind.” Vendors should also understand the building’s design and function, he added.

Is the price right?

Ryan Room, COO, JLL property management

Building strong vendor relationships over time can also impact pricing. JLL’s property management team is adding value by scaling with their preferred service providers to capture better pricing while simultaneously increasing accountability around service delivery and the supply chain, reported Ryan Room, COO, JLL Property Management.

To facilitate vendor selection and pricing, Colliers maintains an intranet page that enables collaboration across the company. “It has forms and processes and procedures—our best practices are all lined up so that all our teams are working through the same format to manage client buildings in a consistent manner,” reported Tim Allison, executive vice president for Colliers’ U.S. real estate management services.

Providing a highly detailed request for proposals and a scope of work with clear performance metrics helps ensure apples-to-apples pricing on bids. The going rates will vary by market and the lowest price may not always offer the best value. As Allison puts it, “You could be getting more services or a better-defined scope from some vendors than others.”

Another way to ensure good value is to hold pre-bid meetings with vendors, walk through the asset and present clear expectations upfront about goals and performance, Allison advises. “It allows you to get the best pricing and the best value for the work,” he said. “But being responsive and very thorough also goes a long way with our clients.” Typically Colliers has one-year contracts, but there’s always a 30-day out clause in case an insurmountable performance issue emerges early.

Looking ahead to the future of property management and vendor relationships, Allison commented, “Anything we can do to reduce operating expenses—that’s the driver.” Energy is a huge component of costs. Colliers partners with companies that can analyze power consumption by every piece of equipment in the building 24/7, even when it’s unoccupied, and notify management about unseen problems that need to be fixed.

Hearing tenant feedback

Heather Battaglia, office portfolio manager, Hiffman National

According to Heather Battaglia, office portfolio manager at Hiffman National, every job or service is an opportunity to review vendor performance. Hiffman National’s management operations platform provides a vendor performance survey to each member of the property management team. The survey allows them to relay feedback so leadership can update Hiffman’s vetted vendor list as necessary.

“We absolutely survey tenants as well to make sure that vendors are doing a great job,” she adds. Tenants may have observed something that the management team was unaware of or have interacted with the vendor. Another benefit of the survey is letting tenants know that their voices and opinions are important to the management team.

“Our tenants are also able to formally provide this feedback through Hiffman National’s annual tenant satisfaction survey,” said Battaglia. “However, we find this feedback is often received through routine proactive check-ins from our property managers.”

Quality workers are still in high demand, and vendors often struggle to hire and retain them. Additionally, many owners are restarting capital projects they put on hold during COVID-19, and meeting the pent-up demand is proving to be challenging for vendors.

“It’s been interesting to see how AI is starting to shape what innovations are possible for both vendors and managers,” Battaglia observes. Hiffman National expects that advancements in the tools will help increase productivity and reduce spending along with providing real-time analysis and predictive modeling of building systems. “Our management operations team is continuously vetting new technologies and processes that will enable us to work seamlessly with vendors that are able to embrace new technologies.”

Sustainable supply chain

CBRE has a competitive—and market-inclusive—process for selecting its property management vendors. Categories include janitorial, vertical transportation, security, landscaping, snow removal, fire safety, HVAC, disaster recovery and restoration, and pest control. “Our work even extends into services that are brought in by our host customer experience teams,” said Joanne Lupatkin, Head of Procurement​, Property Management Americas. “That could include fun food events, yoga instruction and more.”

In addition to supplier diversity, Lupatkin’s team looks to engage vendors that can do the work at properties in a sustainable manner and with knowledge of local initiatives. “We’re taking a look at carbon emissions, of course, and seeing how we can work with our partners to measure that going forward,” she said.

“Most major companies we work with have a plan and resources around this, but we also work with small to medium-sized local businesses. We want to help them accelerate their work around net-zero emissions and emissions reduction overall. We have a lot of smart building technology that we’re working with our clients to bring to their buildings to help make a more efficient ecosystem,” Lupatkin reported. CBRE suppliers are encouraged to become certified by EcoVadis, a global provider of business sustainability ratings.

The post Vetting Vendors: Top Tips for Evaluating Performance appeared first on Commercial Property Executive.

Retail is largely flourishing in areas that benefited from inward migration during the pandemic, such as the Sun Belt, Peter Braus, managing principal & cofounder of Lee & Associates NYC told Commercial Property Executive.

Peter Braus, managing principal & cofounder, Lee & Associates NYC. Image courtesy of Lee & Associates NYC

“Florida, for example, is experiencing double-digit year-to-year growth,” Braus explained. “However, many of these geographies also are overbuilt, and consequently, the older retail projects, and specifically the Class B and C malls, are suffering, even in good markets.”

Retail demand can also look entirely different from one submarket to another. New York City retail, for example, is appears healthy. But in some areas, like Midtown East, occupancy rates are underperforming. This trend is also evident in downtown Los Angeles, San Francisco and Atlanta.

“Some suburban and less densely populated areas, as well as those struggling with economic instability, may experience varying levels of demand,” said Lawrence Taylor, founder & chairman of Christina. “One example that presents a good case is San Francisco, a market struggling with high office vacancy rates, tech industry shifts and high costs of living, which have all contributed to an overall decrease in retail demand.”

What retailers want

When it comes to national retail trends, there are certain spaces that consistently perform. In Class A malls, for example, the boutique-size spaces continue to attract attention, Braus said. For big-box fashion retail, there is a trend toward downsizing in order to meet the consumer in a street retail environment, leading to stores such as JC Penney, Sears and K-Mart giving up massive locations and other big-box retailers adapting to smaller storefronts.

“H&M opened their first experiential pop-up in Williamsburg, N.Y., in 2022 and Macy’s just announced the rollout of a smaller store model that will carry a more curated selection,” said Danny Volk, founder of Vantage Real Estate Advisors. “However, experiential retail is taking the opposite approach, locking down very large spaces in locations such as stale shopping malls and warehouses for concepts like pickleball, paddleball, arcades, escape rooms, etc.”

Lawrence Taylor, founder & CEO, Christina. Image courtesy of Christina

In Los Angeles, for example, the retail experience has become more dynamic and creative, leading retailers to blend the consumer experience across different mediums, including online, direct-to- consumer delivery, and traditional brick-and-mortar facilities, Taylor noted.

“As a result, we’ve noticed that retailers are trending toward smaller physical storefronts, which allows them to offer a combination of both online and in-person experiences,” he explained. “In addition, midsize restaurant spaces offering unique dining experiences also remain popular, especially on pedestrian-oriented streets.”

Mixed-use developments are continuing to gain traction, catering to the consumer’s desire for convenience, Taylor noted.

In addition to space requirements, retailers have other considerations when debating where to sign a lease. As with any CRE asset, companies weigh rent prices, building conditions, co-tenancies and neighborhood demographics. In urban locations, foot traffic makes a difference, too. And, of course, location is king.

“Above all, the terms of the agreement need to be such that the landlord can feel good and make their obligations, and the tenant can make money,” observed Volk. “When a deal is only penciling for one side, that’s when we see premature turnover.”

Factors like ease of access, proximity to target consumers, competitive lease terms and parking all impact the decision, as well, Taylor said. “Moreover, retailers are increasingly interested in spaces that allow them to integrate technology and create immersive, engaging shopping experiences,” he continued.

Resiliency ahead

While other property types may be bracing for impact or are already experiencing a downturn in demand, retail is largely expected to maintain a strong footing. Braus believes that, while high interest rates and economic volatility will drag on upcoming retail expansion, the fundamentals look good moving into next year.

“Inflation was expected to take a major bite out of consumer spending, but it hasn’t seemed to occur,” Braus said. “If the Fed manages to achieve a ‘soft landing,’ then we would anticipate retailing to remain strong going into 2024.”

Likewise, in Los Angeles, retail will continue to recover and thrive, supported by a diverse and resilient consumer base, Brause predicted. “Despite the rapid rise in interest rates, which has affected all facets of the real estate industry and the economy, demand for street retail in the best locations continues to accelerate,” he noted.

READ ALSO: What Retail Investors Want Now: A View From Transwestern

For Volk, retail’s robustness in the near term will depend on pricing. Landlords that value great tenants will continue to offer incentives to lure those tenants in.

“Examples of strong deal points include additional free rent periods and great tenant improvement allowances packages,” he explained. “There will always be speculation on the staying power of this retail comeback, but the feasibility of it will truly depend on the ability of landlords to create an environment for retail to survive.”

Trends to watch

While traditional retail seems to be enjoying a comeback, experiential retail continues to sweep the nation. In some cases, big-box spaces are trying to reinvent themselves as experiential.

“I think the most interesting thing to watch is how these large spaces will be repurposed into new uses,” said Braus. “This represents millions of square feet and will present great opportunity. However, high interest rates will present a challenge to redevelopment of these properties.”

These adaptive reuse developments are taking hold across the nation. Spaces that are dated or underutilized are being converted into pickleball courts, ping pong areas, golfing spaces, etc.

“Over the past few years, we’ve noticed an increase in experiential retail tenants, such as fitness studios, coworking spaces and wellness centers,” Taylor observed. “We’ve also seen an uptick in demand for quick-service, grab-and-go food operators and high-end salons. Additionally, there’s a growing demand for grocery stores and pharmacies, reflecting consumers’ focus on health and convenience.”

The emergence of health-related spaces is also something to watch.

“In a post-COVID world, there is a rise in consumer interest in not only health but also cosmetic treatments, and these tenants are willing to pay competitive rents to meet their consumers in the most convenient place possible to capture that drive,” said Volk.

The post Getting Into the Heads of Retail Tenants appeared first on Commercial Property Executive.

L to R: Brian Sutherland, Vice President of Sales at Yardi; Clinton Osteen, Senior Director of IT at Granite Properties; Ilene Goldfine, Chief Digital Strategy Officer at Hines; Sandy Jacolow, Senior Vice President & Chief Technology Officer at Empire State Realty Trust; Betsy Reed, Senior Vice President of Technology at Starwood Capital Group. Image by Gabriel Frank

Data analytics, generative AI, ESG initiatives and office tenant engagement were the buzz at the first day at CREtech New York 2023, one of the industry’s largest innovation expos. Panelists covered both emerging and longstanding technology trends within the $20.7 trillion market.

CEOs stay the course

In the first panel discussion, titled Recalibrating for the New Normal, Scott Rechler, chairman & CEO of RXR, provided his thoughts on the state of the economy, and some observations around his firm’s top business interests.

Top of mind were high interest rates coupled with a possible recession, public trust in financial institutions, as well as the present and future of the office work environment. “Unfortunately, I think that rates will stay higher for longer, and it likely means that (there will be) some recession.”

At the same time, Rechler noted several bright spots in the economy, such as in the stock market and in sectors including multifamily, with any possible knowledge on the severity and duration of a recession as buoying the expectations of investors. “There is chaos before the clarity, and the opportunity is in between the chaos and that clarity,” Rechler said.

When it came to discussing the realities of remote work and the evolution of the office sector, Rechler did not mince words. Owners and operators need to dial-in the quality and appeal of their spaces, in both the physical and digital realms. “We can’t pretend that it’s a good thing for work-life balance and productivity when people don’t want to come to work, worry about air quality and don’t want to come when it’s difficult. The days of lines and lines of cubicles are over.”

Scott Rechler, Chairman & CEO of RXR (right) in conversation with L.D. Salmanson, CEO & Co-Founder of Cherre. Image by Gabriel Frank

However, the incentives to do so stem not only from encouraging as much in-person collaboration as possible but to win over tenants in an increasingly competitive market. “70 to 80 percent of tenants out there want to get into 20 to 30 percent of the buildings.”

Such sentiments were shared in other panels later in the day, particularly one where several leading property companies shared their strategies for meaningfully implementing technology.

Ilene Goldfine, chief digital strategy officer at Hines, stressed that new adoptions of technology should prioritize the people that work both within and around commercial assets themselves. “We have put an entire ecosystem around people. “It’s (a matter of) hiring the right people that give the experience to our tenants, and standards for however we are going to be able to operate the business.”

Goldfine further detailed this approach to CPE in an interview, where she emphasized the importance of creating a “flexible” and “seamless” experience for tenants, one where they can work from space in a broad variety of assets that the firm manages, accessible through a newly developed tenant-experience platform. “How do you get that flexibility through technology?” Goldfine asked.

Data-driven investments

Yao Morin (left), CTO of JLL, in conversation with Raj Singh, Managing Partner of JLL Spark. Image courtesy of JLLT

In demonstrating these adaptations in real time, many panelists were eager to showcase their uses of two of the most commanding presences in CRE technology today: data analytics and generative AI. For the former, which has a presence in nearly every aspect of CRE operations, from maintenance management to social functions, the reliability of the information is more important than its volume. “We need to make sure that the data has good ownership, and you want a good governance policy that can identify it and how it is classified,” explained Yao Morin, JLL‘s newly appointed CTO.

For the latter, the firm has developed its own natural language learning and processing model, JLL GPT, the first of its kind in the industry. Morin spoke of the platform’s usefulness in areas such as project management and workflow optimization, and highlighted its ability to save on both time and costs in monotonous, difficult tasks such as accounting and bill-paying. “It can help extract data from (utility) bills, which is a simple thing, but it can be a game changer,” Morin said.

READ ALSO: Why Well-Being in CRE Projects Is a Must

Similarly, data analytics were shown to not only optimize a given company’s internal operations, but to be a key informer of investment priorities. On the venture capital side, sustainability and tenant experience-enhancement were the winners. Rezso Szabo, general partner at Illuminate Financial, believes that investments that focus on sustainability are a must. “Not having a net zero pledge as a large financial institution, and not wishing to serve that customer segment is no longer viable.”

In the same panel, Laurent Grill, a partner at JLL Spark Global Ventures, advised attendees to focus on startups that can “innovate in a variety of categories,” but to also focus on physical efficiency. For instance, Grill listed the example of efficiency in construction, which often comes by way of changing building materials, a decision made solely in the realm of the physical. “People have to make those changes. Tech is not the only solution,” Grill added.

Material priorities

Left to right: Bob Gillespie Managing Partner at REACH Commercial
Second Century Ventures; Abbey Donnell, Founder & CEO of Work & Mother; Kerri Davis,
Co-Founder & CEO
Fortress PropTech. Image by Gabriel Frank

Other panels at the conference focused less on data and more on experiential technologies and investments, and how they can drive value and heightened engagement at commercial properties. At one such panel, Abbey Donnell, founder & CEO of Work & Mother, a provider of lactation suites at office properties, discussed the importance of adding as much convenience and safety as possible to the workplace. “You are not competing with just the building down the street, you are competing with living rooms,” Donnell said.

The importance and stakes of this competition could not be higher, as fewer than half of new mothers that have returned to work since the pandemic have left in the first year. Consequently, investments in amenities and technologies such as Work & Mother have also allowed operators to create a more equitable office work environment.

Attesting to the value that solutions such as Work & Mother provide, Brian Wallick, director of New York Investments at Nuveen, noted that while these investments may appeal to a more niche variety of office workers, “the feelings they provide are more intense,” he told CPE. In turn, they not only exist as lucrative offerings for prospective tenants, but as incentives for existing ones. “It’s been a dramatic shift,” Wallick concluded.

The post CREtech 2023: The Digital and Physical Converge appeared first on Commercial Property Executive.

AlohaNAP, a multi-tenant data center in Kapolei, Hawaii. Hyperscale facilities and their hotel-style counterparts bring very different planning and energy requirements. Image courtesy of 1547 Critical Systems Realty

Over the past several years, the supply of, demand for and investment in data centers has increased dramatically. According to data from JLL’s North American Data Center Report, about 3,000 megawatts of data center capacity was available at the end of the first half, with 2,500 MW absorbed over the same period. Capital markets and developers remain engaged, despite high financing costs, as the sector generated more than $10 billion in transactions in the first half.

These trends are expected to continue, particularly as a growing number of data center customers utilize artificial intelligence. That brings demand for reliable, efficient, sustainably operated facilities.

Keep it cool

Ronald Davis. Image courtesy of the Uptime Institute

Uptime—the period of guaranteed operations and availability—is paramount in data center management, regardless of the facility’s size or location. The requirement goes hand in hand with sustainability commitments, as operators strive to couple optimized energy expenditures with strategies for efficiently cooling the facilities and their sensitive hardware.

“It’s a system of equations,” observed Ronald Davis, vice president of professional services at the Uptime Institute. “You have an efficiency equation, a sustainability equation and an availability equation.” These factors raise questions about cost and capacity, as data centers consume a great deal of energy and produce an immense amount of heat.

Consequently, a top priority of managers is the cooling solution, which demands constant evaluation and innovation. “Cooling is your biggest opportunity to improve efficiencies, but it’s also where you lose most of your efficiencies,” said Chris Napier, vice president of operations at CyrusOne. These considerations increase operational costs, and inefficient cooling can drastically hamper uptime.

Chris Napier. Image courtesy of Sgambati Photography

As a result, this aspect of management necessitates a constant stream of reliable data about a facility’s thermal profile. Sean Farney, executive director of data center strategy and information at JLL, advises that the use of this information goes together with astute decision-making.

“(We can) turn temperatures up to reduce power consumption, making sure that the equipment is OK with higher heat, and can run as efficiently and not beyond recommendations from the manufacturer, or we can reduce water consumption,” Farney noted.  What enables these decisions, he added, is information on temperature, humidity airflow and consumption.

READ ALSO: What 2023 Will Bring for Data Centers

That approach remains a top priority in the proptech realm. CyrusOne continuously evolves its tech stack and building management systems around thermal profiles, and monitors consumption at the level of individual cabinets. The firm uses data to curate its buildings and mechanical systems around a “hot-in, cold-out” configuration. Cold air is used to pressurize a balloon under perforated tiles that lie beneath the server cabinets.

“It’s a concert between the tech stack giving us feedback, our power management teams looking at utilizations and points within our facilities,” Napier reported.

Julie Coates. Image courtesy of 1547 Critical Systems Realty

In devising solutions such as CyrusOne’s, firms must also take into account how a facility’s size influences energy expenditure and capabilities. For instance, hyperscale facilities, which often host business-critical information and meet significant storage requirements, need energy distribution and planning that is vastly different from smaller, hotel-style colocation facilities. “You are looking at 5-megawatt vs. 5-kilowatt customers,” noted Julie Coates, vice president of lifecycle management at 1547 Critical Systems Realty, which develops and manages custom-built data centers.

Data centers that occupy space in office buildings may not offer the opportunity to be as efficient or as sustainable as a standalone facility operated by Google or Amazon. One facility that the company operates in Portland, Oregon, is housed in an office building built in 1913.

The firm opted to remove the boilers from its spaces, installing exchangers that use excess heat generated by the servers to heat adjacent offices. “It is very difficult to do a lot of energy efficiency and sustainability initiatives, and that was one of the things that we could do to make it more efficient. In the end, it’s all about creativity,” Coates emphasized.

Expecting the unexpected

Sean Farney. Image courtesy of JLL

Along with efficiency and sustainability-driven uptime, physical and virtual security is a top priority for data center managers. Containing both sensitive information from major companies and expensive hardware, the facilities are potential targets for all sorts of disruptions, from hackers and burglars to simple human error. For Davis, security is a “highly scripted” environment of polices, processes and procedures that go from the front desk to the server racks.

On the physical level, Farney likes to keep it simple, with “large gates, big walls, lots of cameras and a 24/7 guard force that keeps an eye on the facility and walks the grounds.” Davis extends this approach into facility interiors, with biometric security, badge identifications and room-specific PINs. “Every level has its own policy and process-guided access control,” he added.

Such considerations extend to the virtual realm of hardware and software. Davis cites a case where a technician with the best of intentions may use a jump drive that has not been appropriately secured against malware to install firmware updates. “Control over any memory device is very important,” he advised.

At the same time, security is also a matter of a site’s specific capabilities and layout. “It all goes back to knowing your customer base” at both the level of the facility and its contents, Coates noted.

“Not every building is going to have an anti-scale perimeter fence, not every building is going to have biometrics,” she added. Where the data itself is concerned, managers must consider the needs of tenants that require certifications, such as HIPPA or PCI. “You need to make sure that you are doing whatever you need to meet those compliance standards with that customer,” Coates said.

Still, many aspects of facility management and, in turn, the skills that make for effective managers, fall outside the realm of the predictable.

“The data suggests that human error is the leading cause of outages in the industry,” Davis said. Data center facility managers are valued by their ability to adapt to and correct mistakes at operations that have little margin for error, he added. As a result, humility—and a willingness to question and learn—are just as important to technical acumen, he added.

And Napier offered this advice: “When all lights are green, check and feel it yourself, and make sure that you agree.”

The post Property Management Success: Powering Data Center Efficiency and Security appeared first on Commercial Property Executive.

Rolls-Royce assembly plant for mtu Series 2000 engines in Kluftern, near Friedrichshafen, in Germany. Image courtesy of Rolls-Royce

Rolls-Royce, which develops and delivers power and propulsion solutions for customers in more than 150 countries, has tapped JLL as its global facilities manager running FM operations across the company’s 15 million-square-foot real estate portfolio in the U.S., U.K., China, Germany, India and Singapore.

The long-term contract starts in February, when JLL will begin operating as Rolls-Royce’s exclusive strategic global FM partner for the 44 sites including manufacturing, warehouse and office space.

Utilizing its proprietary technology and data-driven insights, JLL’s FM services will be aimed at accelerating operational initiatives and helping Rolls-Royce achieve its sustainability commitments. The company notes it is committed to making its products compatible with net zero carbon emissions to meet demands for more sustainable solutions.

READ ALSO: Property Managers’ Time to Shine

Andrew McManus, global head of property services, at Rolls-Royce, said in a prepared statement the company looks forward to having JLL as its global strategic partner to drive best practices and efficiencies across its diverse real estate portfolio. He said effectively planning, managing and operating the various locations to create safe, sustainable and inspiring environments for employees has never been more important as they navigate the changing world of work.

Citing JLL’s own global footprint, Neil Murray, CEO, Work Dynamics, JLL, said in prepared remarks the firm’s end-to-end approach to real estate, including an in-house technology division, will enable JLL to help Rolls-Royce optimize its portfolio and create efficiencies to support long-term strategy and achieve operational sustainability goals. Murray said facilities management plays a critical role in building resilience and creating better workplace experiences and outcomes in a company’s portfolio.

North American presence

In the U.S., Rolls-Royce employs nearly 6,000 people with significant operations in 27 states. The company employs more than 1,000 people across six provinces in Canada. Eleven main sites are listed on the company’s website for locations in the U.S., including its North American headquarters in Reston, Va. In October 2019, Rolls-Royce North America announced it was moving its headquarters from the Reston Town Center to 1900 Reston Metro Plaza, a Class A, 373,479-square-foot office tower where it was taking 20,000 square feet.

The company’s power systems are used in aerospace, naval marine, energy and off-highway applications. Rolls-Royce products and services support key customers across the U.S. including the U.S. Department of Defense, Boeing, Lockheed Martin, Northrop Grumman, Bell, Robinson Helicopter, Gulfstream and major commercial airlines such as American Airlines, United and Delta.

The post Rolls-Royce Taps JLL to Oversee Global Facilities appeared first on Commercial Property Executive.

To find out what makes marketing experts tick, we asked three experts the same question: “If you had to choose one fundamental best marketing practice, what would it be? Why?” Here’s what they had to say.

Katherine DeMercurio. Image courtesy of Evergreene Architectural Arts

Katherine DeMercurio, Director of Marketing, Evergreene Architectural Arts: “A fundamental best marketing practice is to be integrated into all layers of staff—from the person who has their name on the door to the technical experts straight out of school. There are always interesting insights to be passed down by upper management that can be complemented by today’s advancements in technology or a more sustainable way to perform work, which is hugely important to the next generation. Working in a multi-generational workplace offers a plethora of learning opportunities to best market the work and highlight the people that make it all possible. It’s important to establish relationships across the board for the best perspective to connect and communicate with clients, vendors, partners, along with attracting and retaining employees.”

Nathan Reyna. Image courtesy of Avison Young

Nathan Reyna, President, SMPS New York Chapter, and Media and Content Specialist, Avison Young: “The baseline, fundamental best marketing practice is absolutely nurturing buy-in from the leadership teams at your firm. Marketing-led firms have an established voice and point of view that best attracts top-tier talent, engages clients, and fosters a culture of collaboration within the firm. Our members, comprised of marketers, communicators, and business development professionals of all levels in their career, seek to be that strategic and dynamic partner with their respective firm leaders in order to advance their business goals.

“A great example of this would be building engaging and provocative content like white papers or case studies by utilizing firm principals or accelerators as thought leaders and subject matter experts, with marketing folks acting almost like investigative reporters within their firms to drive out compelling project and people stories.”

Karen Benoit. Image courtesy of Kidder Mathews

Karen Benoit, Chief Marketing Officer, Kidder Mathews: “I would say to do very thorough strategic brand planning to identify key differentiators to build an on-point brand personality/voice, messaging and visual representation. It’s critical to have this foundation to inform all other marketing and branding activities to create a strong, recognizable brand. It should be re-examined at appropriate intervals to keep pace with changing market dynamics and to maintain a fresh and modern brand.”

Jason Price, Executive Director of Marketing and Research, Commercial Properties Inc.: “When you think about all the commercial real estate properties there are in the world, the features they offer, and the needs each building satisfies for a business to thrive, I would attest that one of the most important, and critical services a brokerage firm provides for their clients is the professional promotion and presentation to the right group of potential investors or tenants. Anyone could build the most amazing state-of-the-art building in the world, but if no one knew about it, meaning it wasn’t promoted and presented to the right group of tenants or buyers, it would struggle to sell or lease and could potentially fail to provide a return on the investment.

“Commercial brokerage firms have a strong grasp of the local market and understand what is in demand and know how much people are willing to pay to get the building features they need to support their businesses. In addition, brokerage firms have built up thousands of contacts through multiple transactions and memberships to national or international networks, which help connect the right buyers or tenants seeking commercial space in the market. Promoting a property goes beyond the basics of just posting it on a brokerage company’s website. Professional brokerage firms will develop marketing collateral, acquire high-quality photography and possibly even capture aerial drone video footage. All this will be utilized to promote the best features of the property and help tell its story to a diverse group of potential buyers or tenants. This is achieved by uploading the collateral on multiple commercial real estate listing platforms, sending information out through their subscriber-based email marketing platforms and promoting the information on the firm’s social media channels.”

The post Marketing Executives Unveil Their Best Practices appeared first on Commercial Property Executive.

On the property management front, this translates to re-establishing the office as a destination worth the commute and an experience that cannot be replicated elsewhere. Property managers also have new strategies to reach that goal: an even greater focus on initiatives that emphasize wellness, productivity and sustainability.

The exterior amenity spaces at 1700 Broadway. Outdoor green space has been in high-demand for tenants and employees working in the office. Image courtesy of Rockpoint

A rapid evolution

For many property managers, making office spaces lively and engaging is not a new goal, but there are new methods for reaching it. First steps include identifying what the tenants want to get out of their in-person work experience, recognizing that the hybrid model is here to stay, and that office settings must actively compete with remote work.

Dan Domb. Image courtesy of Rockpoint

These trends have accelerated since the start of the pandemic, often leading tenants to defer lease renewals. “We observed that tenants would communicate a return-to-office target date, forecast that timing and those dates would come and we would only have tenants push those out further,” observed Brenden Welch, managing director of property management at Bridge Commercial Real Estate. “That is not new—we have seen a lot of companies transition to hybrid.”

“What we are seeing is that to motivate employees to come to the office, you need to provide them with an environment that they cannot easily replicate at home,” said Daniel Domb, a managing member at Rockpoint. Amenity offerings such as fitness centers, dining spaces and lounges, once seen as investments to enhance a space’s market value and asking rents, have turned into necessities for a space’s survival. “Before, we were doing it so we could get top-of-market rents. Now, you need to do it if you want to maximize potential to lease space,” Domb added.

Observation and communication

A screenshot of the BridgeEngage interface. From the application, tenants are both able to access building information, reserve amenity spaces and receive notifications about events happening at their building. Image courtesy of Bridge Commercial.

To stay competitive in these areas, property managers need to not only make their offerings as up-to-date as possible, but to effectively communicate their purpose. “Quality of life … is number one for workers, and number two is health and wellness,” reported Randy Fink, managing director for JLL Property and Asset Management.

Other observations go beyond the very idea of work itself. The very act of working in-person and collaborating with one’s team produces experiences that are irreplaceable in any meaningful way. “The workplace remains a crucial element, not only for its on-site services and productivity-enhancing features but also for its role in personal and professional growth,” explained Whitney Burns, senior vice president of Global Client Strategy at Hines.

The observations on both Fink and Burns’ parts have led to the firms prioritizing direct communication efforts at their properties. “We can’t take the obviousness of what (the buildings) can offer to employees for granted, and so we have had to double down on communication,” Fink said. Taking such a step might push some team members out of their comfort zones. Typically, property managers interact mostly with facility managers, office managers and local executives. Increasingly, however, those stakeholders “have asked us to talk to employees directly about what is going on at the property that is worth being there,” Fink reported.

A central green space at the Terraces at Central Perimeter campus. Green space is a very important and oft-requested amenity at office spaces, but the ability to activate has proven to be a key differentiator for driving occupancy. Image courtesy of JLL

Consequently, the firm has taken to engaging directly with occupants, alongside human resources departments, to communicate events at the spaces. In turn, employers are able to use those events—such as happy hours and social programs—as ways of both fostering collaboration and community in employees. For Fink’s team, this has led to an increased appreciation for how amenity spaces are used. In the case of a fitness center that doesn’t offer classes or other social activities, or a lobby with plenty of seating but no free coffee, “it’s about making sure that there is some kind of crew structure to make sure that the spaces and amenities are activated,” he added.

At Terraces at Central Perimeter, a two-building office campus in Atlanta, the firm used the property’s expansive outdoor spaces, a highly sought-after offering, to host carnivals with food trucks. The result? “We had a full building on a Wednesday afternoon, and the tenants organized around it as well.”

The fitness center at Terraces at Central Perimeter. JLL’s property management team at the site has placed an emphasis on activating the spaces for socialization, alongside providing them. Image courtesy of JLL

Hines has taken a similar approach to JLL, communicating directly through newsletters, tenant engagement applications, social media and emails to make sure that tenants are in the know about the happenings at their spaces. Reflecting upon this shift, Burns said, ”This narrative shift shows that we’re not just a workspace; we provide the platforms for growth, mentorship, and community engagement that today’s professionals crave.” To this end, the firm does not only showcase its amenity spaces in its marketing, but its mentorship opportunities and event hosting.

Where this appeal is concerned, other firms have turned to the proptech development realm. As part of its efforts to bolster occupancy and engagement at its properties, Bridge has developed BridgeEngage, a mobile and desktop-capable application that keeps tenants and employers in the loop about site-specific events and amenities, as well as community content and retail options. “It’s another tool that helped us engage with the population around building activities, as well as the things we are doing at the properties themselves,” Welch detailed.

The lounge at 1700 Broadway. Modern spaces that promote socialization and collaboration are key to bringing tenants back into the office. Spaces such as the above have been a prime subject in many marketing campaigns encouraging new leases and returns to in-person work. Image courtesy of Rockpoint

Visual importance

To this end, the act communicating the appeal of a given office space is only one part of the puzzle. The amenity offerings themselves must be both inviting and visually appealing for prospective and current tenants. Here, the communication lies in the visual. “With both (new and prospective) groups, we want to showcase physical space that allows a collaborative working experience with unique building amenities alongside technological improvements that might motivate a tenant to upgrade its current office or lease space in one of our properties for the first time,” Domb detailed.

At 1700 Broadway, a 42-story office tower in the Columbus Circle district of Manhattan, Rockpoint renovated the entire lobby during the pandemic, a recent development in the long line of upgrades. Other fixes that the firm made to the property following its acquisition in 2018 include a lounge, multi-use amenity bar, rooftop terrace and fitness center. At present, the space’s occupancy rate sits at 92 percent.

Visual appeals also extend to the function of a space, something highly specific to the needs of different tenants. Like the direct outreach involved in marketing, so too is the process applicable to making sure tenants have their desired space layouts, on top of the ability to work as productively as possible. Here, a case-by-case approach is the most effective, according to Zac Gruber, president of the office division at Banyan Street Capital. “It boils down to the leasing teams spending the time to really understand the tenant’s needs, drawing trends and spending time with the data to ensure that they are seeing every prospect and that your available space shows as well as it possibly can,” he told Commercial Property Executive.

Working priorities

Randy Fink. Image courtesy of JLL

However, marketing office space and appealing to tenants goes beyond amenity offerings and events. An equally important priority towards driving occupancy is in a space’s functionality and layout, the actual ability to work within it. Such functionality recognizes the reality of hybrid work.

First and foremost, the offices need to adapt to the reality of hybrid work, and that should not come at the expense of productivity. “You have to have the video conferencing capabilities, you have to have the flexible technology that allows them to operate their businesses,” Domb added. Making sure that every inch of the property has a stable internet connection, alongside the best remote work applications, is a must.

Often, this can involve costly upgrades. “In conference rooms and meeting spaces that were set up with presentation technology for in-room meetings, we had to make sure that there was sound for larger meetings, as well as the ability to present a screen for content,” Welch noted. Many spaces have been equipped with video technology that can meet the demand for virtual meetings, he added.

Ultimately, the combination of experience, socialization and functionality in office spaces has presented a solution to some of the struggles that the sector faces. “(It’s a) strategic opportunity. Employees are looking for connections, productivity and purpose, employers are looking for productivity and collaboration inside of an office space,” Fink concluded.

Read the August 2023 issue of CPE.

The post Property Management Success: New Formulas for the New Office appeared first on Commercial Property Executive.

From a supply and demand standpoint, the idea makes sense as hybrid work becomes the norm. But true candidates for residential conversion are the exception rather than the rule: Costly design interventions, structural integrity, mechanical system age and performance, floorplate size, zoning regulations, the cost basis and the nature of the neighborhood—any of which can foil a conversion—are just some of the initial variables developers must assess when considering a deal.

READ ALSO: What Hinders Office Space Conversions?

What’s more, some states and cities are demanding that buildings live up to new sustainability measures to fight climate change, suggested Julie Whelan, global head of occupier thought leadership & research consulting with CBRE in Boston. That poses yet another challenge.

“There are some older office buildings that are not going to be able to achieve these new standards, and they are going to have to be dealt with,” she stated. “They’re not always going to have a highest and best use and will just have to be razed.”

At a minimum, developers should plan on spending $500 to $600 per square foot on an office-to-residential conversion, said Richard Jantz, an executive managing director with Cushman & Wakefield in New York. Plus, on a square-foot-basis, the average rental rate for an apartment is about half that for run-of-the-mill office space.

READ ALSO: As Hybrid Work Expands, Coworking Is No Longer the Exception

Hence, not only are developers incurring costs on the conversion, but they also cannot increase their cost basis to generate more revenue from potential residents, he added. That means buying conversion candidates at a discount is paramount. Yet such financial wildcards don’t take into account the tight-fisted credit environment at the moment.

“It seems so simple—you’ve got space that people aren’t using and people who need space to live in, so why not connect the dots?” Jantz said. “But I honestly think office-to-residential conversions are probably the least realistic version of adaptive reuse.”

Needle in a haystack

Gensler worked with PMC Property Group on Franklin Tower Residences, a project that converted the former GlaxoSmithKline headquarters into 360 apartment units and opened in 2019. Image courtesy of Robert Deitchler/Gensler

Recent research and tools developed to assess the viability of such projects support that assertion. Looking at completed, in-progress and planned conversions of offices into any alternative use since 2016, CBRE found that 91.1 million square feet has been or would be removed from the market. That’s less than 2 percent of total U.S. office supply, reported Jessica Morin, research director who specializes in office for CBRE’s Americas Research team.

Meanwhile, when assisting the city of Calgary to develop a plan to reuse largely vacant downtown offices in 2018, architecture firm Gensler created a tool to gauge reuse potential by analyzing building and market characteristics, including the state of mechanical, electrical and plumbing systems, the window-to-wall ratio, the size and shape of the floorplates, and surrounding residential rental rates.

READ ALSO: How Vacant Office Spaces Get New Life

The firm found that about three out of 10 buildings in the 43 million-square-foot market had the potential to become apartments, said Kelly Farrell, a principal with Gensler & global leader of its residential practice. “Depending on an owner’s basis in the building, that number may be even lower,” added Farrell.

To help fuel conversions where it makes sense, Calgary is providing grants of $75 per square foot of office space that will become housing. Gensler is now helping U.S. cities formulate similar strategies as empty and underutilized or obsolete buildings contribute to falling downtown property values and diminishing tax revenues, Farrell also mentioned.

“The fundamental question centers on how incentive programs will work, because converting these buildings is not a simple task,” explained Farrell, whose firm worked with PMC Property Group to convert the former GlaxoSmithKline headquarters tower in Philadelphia into 360 apartment units in 2019. “It’s much simpler to develop a new building from the ground up than it is to rip out the guts of a building and do a conversion.”

The Franklin Tower Residence project. Developer PMC Property Group changed out the full mechanical, electrical and plumbing systems, which freed up room to create a rooftop lounge and outdoor deck. Image courtesy of Robert Deitchler/Gensler

Helping hand

Some cities and states are already crafting incentive policies. In June, San Francisco began seeking developer input on how the city could help speed up or enhance conversions through regulatory changes, financial incentives and other means. That followed approval of legislation that provides zoning and fee exemptions, among other benefits, to help streamline the reuse process.

“The number one thing that is needed for conversion projects is city support,” said Thomas Cox, founder & managing principal of TCA Architects. “We’re seeing a lot of the tech industry meltdown, especially in the Bay Area, and San Francisco needs to get people back downtown.”

To the south, Los Angeles continues to expand and modify a 1999 adaptive reuse policy that has fueled the conversion of some 12,000 new housing units by expediting approvals and relaxing code and zoning requirements, according to the city’s planning department. That program was in place when Forest City Enterprises converted three office buildings that added 745 downtown units to the market early this century, said Cox, who worked on the projects. The properties were largely acquired at discounts, which helped financial feasibility. Cox sees a similar dynamic at play today.

Currently one of his developer clients pursuing conversions is negotiating with a bank that took three heavily vacant downtown Los Angeles office buildings back to either acquire the properties or partner with the lender in a deal. The goal is to turn one of them into housing after moving tenants into another building. If it succeeds, the developer will repeat the process, Cox said.

“What we’re seeing now is a very large change in ownership of these office buildings—lenders are taking them back and are discounting the pricing,” he said. “That’s opening the door for developers to step in and consider a residential conversion.”

The Franklin Tower Residence project spread out amenities such as a media room, basketball court and spin studio throughout the building. Developer PMC Property Group changed out the full mechanical, electrical and plumbing systems, which freed up room to create a rooftop lounge and outdoor deck. Image courtesy of Robert Deitchler/Gensler

In limbo

The office-to-residential conversion theme is hardly new and tends to emerge in the commercial real estate cycle’s recession phase. Following the savings and loan crisis, New York City launched the 421g Tax Abatement program in 1996 to facilitate office-to-residential conversions in downtown Manhattan. The initiative helped convert roughly 13 million square feet, or about 13 percent of the downtown office market, into 12,865 units in 11 years, according to New York’s Citizen Budget Commission.

Such incentives don’t exist today, however. Despite support from the governor and New York City Mayor Eric Adams, a proposal geared toward facilitating residential conversions south of 60th Street in Manhattan failed to clear New York’s General Assembly this year. That could change if more office owners can’t refinance their debt and a mass of assets wind up with lenders, Jantz noted. But for now, he suspects lenders are addressing troubled loans on a one-off basis.

“My gut tells me that lenders don’t see a reason to change that approach. I think everybody believes that people are going to eventually return to the office in a more robust and regular manner,” he reported. “Going to the office five days a week may not come back, but if you have people working the same three to four days during the week, you’re going to need office space.”

Read the August 2023 issue of CPE.

The post The Tricky Task of Office-to-Residential Conversions appeared first on Commercial Property Executive.

In a mixed-use space, retail tenants benefit from the clients, and commercial and residential tenants benefit from convenience. Image by Mohit Kumar via Unsplash

People love convenience. And what’s more convenient than being able to get all your errands done in one place? Or grabbing a coffee in the same building as your office?

To the public, mixed-use properties offer the ability to be more efficient and productive, Alex Valente, principal with Trammell Crow Co.’s residential subsidiary High Street Residential, told Commercial Property Executive.

“Everyone is so busy all the time, and when a developer can provide a mix of uses that appeal to or meet the needs of a resident in a multi-faceted manner, it’s typically a winning formula,” he observed.

It’s not just the public that benefits, however. Tenants and owners see plus sides, too.

The advantages of a mixed-use space

While the format of a building may not be the primary driving factor in whether or not a tenant signs the space, it is an extremely important consideration. If other factors—location, workforce, population migration, etc.—are all satisfactory, property type can be the deciding factor.

“It depends upon the tenant, but there can certainly be great advantages for a tenant in a mixed-use environment, whether it be coworking, multifamily, retail, etc.,” said Todd Caruso, retail services lead, Americas at CBRE.

Advantages include a retail tenant having a built-in client base, whether they be located in a commercial building with office companies overhead or a residential building. Even a hotel component can be advantageous when an office space has clients coming in and out. This beneficial relationship flows both ways.

“For the tenant, it is typically a nice amenity to have services such as coffee, dining, dry cleaning, etc. easily accessible to where a resident lives. This can be especially advantageous in a suburban setting, where a resident may not need to get in their car to access such amenities,” said Valente.

In a mixed-use space, retail tenants benefit from the clients and commercial and residential tenants benefit from convenience. “We’ve also found that residents will tend to identify where they live to friends and family based specifically on the associated retailer in the building,” Valente noted. “It can be a point of pride or status for a resident.”

On the owner’s side, there are benefits to a mixed-use property, as well. With the trend of redeveloping B- and C-class malls, converting these spaces to mixed-use commercial properties means saving on some sales tax, according to a J.P. Morgan 2023 economic outlook.

Tenant considerations

Some retailers prefer mixed-use formats due to the built-in customers. Other companies like these properties because the landlords are typically better capitalized, and commercial tenants often need generous tenant improvement allowances for a build-out, said Valente.

There are other considerations for tenants. For example, considering the office distress that commercial real estate is currently seeing, some retail tenants may not want to rely on a mixed-use office space for success. This is especially true in large-scale, self-absorbing projects.

“(Office tenants) may not represent 100 percent of the customer base for the retailer, but they represent a large portion,” Caruso told CPE. “So those retailers may hesitate to see other square footage leased first.” Smaller mixed-use environments may be less dependent on this factor.

READ ALSO: The Big City Rebound and Its CRE Implications

Further, the right tenant mix is one that reflects the surrounding market. In areas with a high volume of retailers nearby, non-retail companies may look to occupy space.

“Don’t discount the unique uses that might be associated with a mixed-use environment,” said Caruso.

More specifically, he noted a number of malls and mixed-use environments where health-care companies have introduced themselves. Whatever is in demand for consumers is a tenant consideration for the property.

Creating synergy

For tenants, finding success in a mixed-use environment means researching the current market demands as well as understanding the existing tenant mix. On the owner and developer side, success can come down to the curated environment.

“We spend a lot of time focused on the interplay and coordination between the multifamily and commercial spaces in our mixed-use projects,” said Valente. “We also put in a lot of work to make sure that the retail use at a mixed-use property fits our understanding of our tenant demographics, or, in the case of to-be-delivered buildings, our demographic thesis (i.e., who we think our tenants will be).”

Aligning one aspect of a mixed-use project with another is equally as important as ensuring the mixed-use development fits the tenant base. The energy throughout the project needs to flow.

Caruso explained that to ensure that synergy, placemaking is key. There must be a method to green space locations, open seating, underground parking, proximity from retail to office to residential, different types of food and beverage uses, etc.

“Mixed-use has to be integrated in order to work,” he said. “It needs to be well thought out architecturally and design wise to ensure you have appropriate integration.”

The post Getting Into the Heads of Mixed-Use Owners, Occupiers appeared first on Commercial Property Executive.

The 2023 CPE Influence Awards recognize the commercial real estate industry’s most noteworthy properties, projects and transactions. The winners will be selected by a panel of judges representing expertise across commercial real estate disciplines.

And, new this year, a focus on people! We want to celebrate your top executives and your rising stars.

Enter by April 3rd for our special early-bird rates. We have extended the deadline to July 31.

READ ALSO: Entering the CPE Influence Awards? Try These 10 Tips

Explore our categories:

• Best Amenities
• Broker of the Year
• Most Innovative Corporate Strategy
• Best Design
  • Industrial
  • Mixed-Use
  • Office
• Best Development
  • Industrial
  • Mixed-Use
  • Office
• Development Company of the Year
• Best ESG Program
• Best Financing
• Best Investment Transaction: Portfolio
• Best Investment Transaction: Single Property
• Best Lease
• Most Effective Property Management Program
• Property Manager of the Year
• Most Effective Repositioning/Redevelopment Plan
• Rising Star
• Most Innovative Technology
• Unbuilt

New for 2023:

• Executive of the Year
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Most Effective DEI Program
• Best Design: Retail
• Best Development: Retail
• Humanitarian Award

The 2023 winners will be selected by a panel of judges representing expertise across all commercial disciplines. Interested in being considered for the judging panel? Email Jessica Fiur.

Winners will be announced and honored later in the year.

Questions? Contact Editor-in-Chief Jessica Fiur.

The post Deadline Extended! Enter the 2023 CPE Influence Awards appeared first on Commercial Property Executive.

Building in El Segundo, Calif., owned by Lincoln Property Co. Image courtesy of CommercialEdge

Lincoln Property Co. has acquired Irvine, Calif.-based property and asset management company RiverRock Real Estate Group, in a deal that adds more than 50 million square feet to Lincoln’s property management portfolio. With this move, Lincoln is expanding its services to third-party clients connected to various asset classes including office, retail and industrial.

Founded in 2003, RiverRock is active in California and Arizona and offers services such as property and project management, accounting, as well as due diligence and financial management. Founder John Combs will continue to be part of the leadership team and will focus on the West Coast.

This is the first merger and acquisition deal for Lincoln since the appointment of Ali Daubert as Chief Strategy and M&A Officer and the February announcement of the company’s strategy that involved the appointment of David Binswanger and Clay Duvall as Co-CEOs, as well as an investment by funds managed by Stone Point Capital. At that time, the company also announced its plan to expand in management services.

Since its founding in 1965, Lincoln has constantly diversified. Starting from residential, the company later expanded into commercial real estate in the 1970s and then into military housing starting with 2001. The company’s current footprint includes some 470 million square feet. Since 2018, Lincoln acquired and developed more than 60 million square feet of space, valued at $24 billion.

Recent Lincoln Property Co. deals

Lincoln Property Co. made several significant moves involving retail, office and industrial assets throughout the first half of 2023. In early January, Lincoln, in partnership with Harvard Investments, broke ground on Goodyear AirPark, a 7 million-square-foot industrial project in Goodyear, Ariz.

Back in April, Lincoln secured a lease with Sabra Health Care REIT at its FLIGHT at Tustin Legacy, an 870,000-square-foot office campus in Tustin, Calif. That same month, the company was selected to manage a 640,000-square-foot Amazon fulfillment center in Pooler, Ga.

The post Lincoln Property Buys California Management Firm appeared first on Commercial Property Executive.

Rob Raymond, Managing Director, FTI Consulting. Image courtesy of FTI Consulting

The office sector as we knew it before 2020 is dead—this perception is very common in commercial real estate, although there still are some voices that believe it is just a myth. For Rob Raymond, managing director at FTI Consulting, the myth is more of a reality than we think, considering we’re more than two years post-pandemic and the total return to the office hasn’t happened. As a specialist working alongside clients with significant office portfolios, Raymond thinks we’re going to see more distress in the office sector in the second half of the year.

In a podcast interview with Commercial Property Executive Senior Editor Laura Calugar, Raymond painted a fairly grim picture for office real estate for the rest of 2023, but he also talked about the silver linings.

“I think this isn’t such a sudden crash as what happened in 2008-2009,” he said. “If capital markets really do dry up, it’s been a slow drying and we’re going to be a little bit more prepared for it this time.”

Tune in to find out more about Raymond’s outlook for the office sector! Here’s a list of the topics discussed in this episode of FTI Experts’ Hub, CPE‘s quarterly podcast series with FTI Consulting specialists:

• Is the death of the office just a myth? (0:42)
• The office landscape today vs. 2009 (2:57)
• Will office values ever recover? (3:45)
• The flexible approach (5:04)
• Taking advantage of employees’ reluctance to return to the office (6:39)
• Is the bulk of problems in Class B&C office? (8:40)
• What delinquencies and loan defaults mean for the sector (09:55)
• Expectations for lenders and borrowers in the second half of the year (10:51)
• Prepare for more office distress (12:00)
• Will the conversions trend pick up steam? (13:39)
• How cities are recovering from the pandemic at different rates (16:28)
• Are suburban offices strengthening their comeback? (18:34)
• Cities or regions expected to outperform going forward (20:41)

Follow CPE’s podcasts on Spotify and Apple Podcasts!  

The post FTI Experts’ Hub: Expect More Office Distress in H2 2023 appeared first on Commercial Property Executive.

To understand the emerging trends in shopping centers, Near looked at 28 malls across the U.S., comparing performance around consumer behavior data for Q4 of 2022 versus the same time period in 2021 and 2019.

Read Near’s report on CRE Trends to Revitalize Shopping Centers to learn:

• How are shopping centers doing overall?
• What 5 trends are helping boost shopping center performance?
• How can insights from consumer behavior data drive CRE strategy?

How Consumer Behavior Data Can Inform Decisions

If there’s any one constant when it comes to consumer behavior, it’s change. The trends that are resonating now are likely to be different in a few years, or even a few months. In order to stay on top of the changes, it’s critical to leverage consumer behavior data to personalize the shopping experience, focusing on creating engaging and convenient experiences that keep customers coming back for more.

By utilizing consumer behavior data, shopping centers can:

• Understand shopper movement patterns
• Leverage insights to attract the right tenants
• Access insights on competitor locations
• Keep up with market research

And more.

Interested in seeing all the trends, and learning how these strategies have been successfully deployed at shopping centers across the U.S.? 

Read CRE Trends to Revitalize Shopping Centers or Sign up for a demo.

The post CRE Trends to Revitalize Shopping Centers appeared first on Commercial Property Executive.

Image by Ammar kk via unsplash.com

Bringing workers back into the office through highly amenitized spaces has been an ongoing trend since the pandemic brought about hybrid and work-from-home flexibility. For industrial building employees however, remote work is not an option. Unlike the workforce of other sectors, employees at distribution centers were deemed essential during the pandemic, and exempt from stay-at-home orders, often times working in less-than-ideal conditions.

The NAIOP Research Foundation commissioned a report by KSS Architects regarding employee wellness in distribution centers and how design can enhance their comfort. The warehousing and storage subsector workforce is increasing, going up to 1.94 million workers as of January this year versus 1.3 million workers employed in January 2020, data in the report shows. Considering the strength of the industrial sector and the masses that work to keep it running, promoting a healthy work environment is as important as ever.

Ensuring safety, increasing comfort, reducing physical strain, instilling a sense of belonging, and supporting mental and emotional health are among the key wellness objectives the study is focused around.

Impact of break rooms

One of the key design recommendations to pursue these wellness objectives observed in the study is the use of break rooms.

“The typical distribution center only provides for large break facilities in a single location, making them mostly inaccessible during short break periods,” according to the report. Having more break rooms and spaces at various sizes can help.

The stresses that can arise from working in a distribution center, including loud noises, harsh physical requirements, isolation from fellow associates, etc., can all be in part remedied through the implementation of break rooms.

Large break spaces, as outlined by the report, often include bathrooms, mother’s rooms, eating spaces, hydration stations, relaxation spaces and game spaces. These rooms are able to provide physical and mental rest and offer a space for workers to find community. It’s not just large break spaces that can provide wellness benefits, however. Medium and small spaces are good too.

Medium break rooms, characterized by a single bathroom, hydration station and protection from machinery, should have design elements that promote inclusion. The key wellness strategy, as outlined by the report, is to provide “a microenvironment for temporary relief from environmental stress.”

Designed for a single worker, small break spaces offer room to rest and hydrate including a space to sit and be protected from machinery. Even a place small enough to offer workers some time off their feet can be critical to the overall mental and physical wellbeing of a facility’s workforce.

Additional design recommendations

The study highlights many other elements that can also be incorporated into the design of modern distribution centers to ensure wellness objectives are being met. All these solutions are intended to be adaptable and to work within the typical layout and constraints of industrial facilities. Some of those included in the report are:

• Site entry: Ensuring the exterior of the facility promotes outdoor activities, separates workers from machinery and provides open spaces.
• Transportation lounge: a space for truckers to eat, drink, stretch, exercise and rest. It also offers a place to socialize and safely communicate.
• Workstation: An area built to a human scale with local conditioning, noise reduction and furniture-like adaption for workers.

“Significant improvements can be made within the current design paradigm, ranging from basic shell and infrastructure improvements to the introduction of key program elements,” the study outlines.

The post We Also Need to Amenitize Industrial. Start With the Break Room. appeared first on Commercial Property Executive.

Image by Magnet.me via Unsplash

The practice of recruiting and training the next generation of property managers has evolved with the advent of new technologies and tenant needs. Many industry jobs have shifted focus from maintenance to assisting tenant experience through technology and hospitality skills.

When building teams comprising professionals who are newer to the workforce, veteran property managers place an equal emphasis on technical acumen and people skills—key adaptations to a more customer service-centric industry.

One of the key indicators of property management’s shifting role is an increasing emphasis on sophisticated, yet practical technical knowledge. These areas range from proptech platforms to market intel and economic fundamentals.

Eye on data

Randel Waites. Image courtesy of Avison Young

Key to the manager’s expanded problem-solving responsibilities is an eye for analyzing property data, from foot traffic numbers to carbon emissions. The skill is increasing in importance as property management and its associated technology plays a central role in building design and operation.

“The sophistication has gone up significantly,” said Randel Waites, principal & managing director of the Real Estate Management Services Group at Avison Young. Waites told Commercial Property Executive. “It’s not just Excel, operating expenses and property taxes. It’s about what you can bring in terms of applying bigger systems with data analytics,” he said.

Noting how this affects the qualifications for property managers, Waites said, “We’re kind of becoming a tech company that does real estate, and that changes fundamentally what we are looking for.”

READ ALSO: CRE Brokers Power Through Decline in Deals

Dennis Skelly. Image courtesy of Stream Realty Partners

With the technical focus comes increasing tenant expectations, especially for enhancing the value of investments, notes Dennis Skelly, national director of property management at Stream Realty Partners. The firm’s property managers advise clients on market intel, trends, capital improvements, asset repositioning strategies and leasing decisions, all with the aim of boosting value.

In Stream’s portfolio, that translates to helping get tenants and employees back to the office, a task that had not existed in the past for property managers. “It requires a different mindset and way of thinking when it comes to property management and customer service,” Skelly said.

Those skills factor into Skelly’s hiring process. “I would like to understand what their financial literacy is— understanding budgets, operating statements, analyzing internal investment, the types of systems that they have worked with, and types of projects that they have worked on,” he said.

Client-facing skills

Though the breadth of technical skills for success in property management has changed, the requirement for other qualities have not. “The ability to be client-facing is always critical,” Waites said.

According to Skelly, communication skills should rise to those expected in hospitality. “From a personal standpoint, I really look for who the person is,” he said. “At Stream, our core values are nice, smart, honest and passionate.” To find team members who embody those qualities, the firm has sourced talent from hospitality. “There is a high level of service that they live and breathe every day, and that will translate well into some of the offerings in our office properties,” he added.

Along with the skills that make for effective and personable property managers, the places where they are developed, as well as where recruiters can seek them out, have also changed.

Skelly cited the opportunity for college undergraduates to get experience in the field, with schools such as Virginia Tech and Brigham Young University offering property management programs.
“We are having a lot of success identifying candidates right out of college who went to school, studied it and have experience coming into the industry,” he reported.

Waites advocates for membership on local Building Owners and Managers Association boards and attending national and regional industry events. “They’re the best way to source people, and to get to know your competitors” he said. “We’ve all heard about the six degrees of separation, but real estate is more like 3,” he concluded.

The post Recruiting the Next Generation of Property Managers appeared first on Commercial Property Executive.

525 W. Van Buren. Image courtesy of Stream Realty Partners

AEW Capital Management has appointed Stream Realty Partners as exclusive leasing agent and property manager for 525 W. Van Buren St., a 521,604-square-foot Class A office building in Chicago’s West Loop. The current ownership picked up the office asset in 2015, when it paid Northwood Investors $135 million, CommercialEdge data shows.

Stream Realty Partners’ Executive Vice Presidents Andrea Saewitz and Matt Lerner will be the leasing brokers in charge, while the company’s Leader of Industrial Property Management & Partner Victoria Knudson, together with Vice President of Office Property Management Tim Gilbertsen, will serve as property managers.

READ ALSO: As Hybrid Work Expands, Coworking is No Longer the Exception

Tenants present at the property include the Chicago Immigration Court; Upwork; New Horizons Computer Learning Center; HR consultancy Insperity; Risk Placement Services; and Chicago’s Bureau of Alcohol, Tobacco, Firearms and Explosives, among others, according to CommercialEdge.

Situated in Chicago’s central business district, close to interstates 90 and 290 and to multiple train and subway stations, such as Union and LaSalle Street, the office property is 10 miles from Chicago Midway International Airport and 17 miles from O’Hare international.

Completed in 2000, the 16-story office building includes 12 passenger elevators, 33,865-square-foot floorplates, 1,100 square feet of retail, an on-site conference center, a tenant lounge, bike storage facilities and 1,740 parking spots, according to the same data provider. Additionally, the property includes a glass lobby with 25-foot ceilings, a column-free floor infrastructure, as well as a new fitness center.

The tower offers an attractive amenity package, on par with today’s flight-to-quality trends, good connectivity throughout the city and a sought-after downtown location, noted Stream Realty Partners’ Lerner in prepared remarks.

Chicago office vacancy rate drops, close to other large cities

According to a recent CommercialEdge report, Chicago’s office vacancy rate of 18.8 percent is still relatively high, above the 16.7 percent national figure, despite dropping 180 basis points year-over-year as of April. The rate also remained in line with other major office markets, including San Francisco (19.4 percent), Brooklyn (19.4 percent) and Seattle (19.0 percent).

Earlier this month, Stream Realty Partners expanded its office leasing portfolio with more than 800,000 square feet across three Chicago buildings, located in the West Loop and Fulton submarkets. The company was tapped as leasing agent for Macquarie’s 550 W. Adams, the RMR Group’s 400 S. Jefferson and Aberdeen Development’s 315 N. Racine.

The post Stream Realty Tapped to Lease 522 KSF Chicago Office Building appeared first on Commercial Property Executive.

Stormwater systems are the responsibility of property owners, but their health is often neglected until it’s too late. However, this run-to-failure method is extremely costly, and repairs are time-consuming.

A regularly scheduled maintenance program enables property owners to comply with regulations, as well as identify any safety or functionality deficiencies, before they require a rebuild of the entire underground system.

You’ll learn more about:

• The most important steps to include in your maintenance program
• How maintenance programs save property owners money
• Ways to ensure regulatory compliance
• Warning signs you may be missing

Panelists:

Sponsored by:

The post Evaluating Your Strategy for Stormwater Management appeared first on Commercial Property Executive.

Image by Morgan Lane via Unsplash

Amid the economic uncertainty and paucity of deals, some commercial brokerage companies are conducting layoffs and closing some offices. On the other hand, some firms are finding now as good of a time as ever to expand their national footprints.

There are a variety of factors that weigh in on expansion decisions. “Even when there is uncertainty in the market revolving around interest rates, inflation and the possibility of a recession, the opportunity for strategic growth remains,” Otto Ozen, executive vice president of The Mogharebi Group told Commercial Property Executive.

Specializing in multifamily investment sales, The Mogharebi Group is considering new markets that will satisfy clients’ current needs, whether that be potential for improved yields or safety and wealth preservation.

READ ALSO: CRE Brokers Power Through Decline in Deals

On the commercial side, quality brokerages can easily expand to new markets, according to Matthew Stearns, senior managing director, head of Originations with Black Bear Capital.  

“It’s a great time to (expand) because sponsors need brokers/advisors more than ever given all the market dislocation,” said Stearns. “Things are changing so quickly that it’s important you take deals out wide to the market.”

Further, in difficult times, competition amongst advisory firms stiffens, and there is an obvious bifurcation in quality. Stronger firms have a greater opportunity to grow while weaker firms may close up shop.

Which markets exactly?

Black Bear is looking to increase their presences in high-growth markets in the Southeast and Southwest regions, followed by possibly the Northeast and Midwest, Stearns explained.

Stream Realty Partners has entered into three new markets in the past two years, most recently opening a Miami location in January.

“We are really focused right now on making our three newest markets (Nashville, Phoenix, and South Florida/Miami) thrive,” said Derek Land, head of new markets and partner at Stream Realty Partners. “That doesn’t mean we aren’t eyeing a few ideas/markets for expansion down the road. But we are super excited about the new markets we have just entered.”

On the multifamily side, The Mogharebi Group recently added offices in New Mexico and Nevada.

“We are looking to expand in markets that have a void we can fill, targeting those where we can build solid partnerships with advisors who are market leaders,” said Ozen. “Markets we see as potential expansion opportunities include California feeder markets and emerging markets with promising economic growth in states such as Arizona, Texas, Florida, Colorado and Idaho, among others.”

The reasons behind expansion locations

While there are many reasons a brokerage may choose to expand to a certain location, the common denominator seems to be population growth. In places with a negative migration pattern, obtaining financing or gaining market share can be exponentially more difficult and less profitable.

The main reason Black Bear is keen on southeastern and southwestern regions is due to this very phenomenon, Stearns stressed.

“There is still a substantial migration pattern from many of these high-tax and high-crime states/cities into more favorable states as it relates to taxes, crime and quality of life,” he said. “Follow the money and it’s clear where most folks want to park money on deals.”

Where clients want to put money is a top priority among various property types, asset classes and CRE markets. Ozen explained that when considering where to put boots on the ground, The Mogharebi Group follows its clients’ capital.

Along with population growth, Stream Realty Partners also looks at markets where their full-service platform is most effective. “It’s important for us to use our robust service platform, along with our development and acquisition platforms, to grow local offices strategically,” said Land. “See Nashville, Phoenix and South Florida. These areas have great population growth and plenty of land/space to grow.”

Stiff competition

Not all brokerages have the capability to expand given the current CRE climate. The goal is to maintain and grow the best client services possible. Expansion is just one of the many ways brokers are getting ahead of the competition.

“Since we are privately held with no corporate debt, we can be aggressive while some of our competitors are cutting resources,” said Land. “It’s simply offense vs. defense.”

The post Top Markets for Brokerage Expansion appeared first on Commercial Property Executive.

Image by Cameron Strandberg from Rocky Mountain House, Alberta, Canada/Wikimedia Commons

When wildfire smoke blanketed the Northeast last week, some owners could be confident about the air quality in their buildings. Hines’ 555 Greenwich, a recently completed office and retail building in Manhattan’s Hudson Square submarket, for example, contains a cutting-edge ventilation system that also monitors air quality in real time.

Wildfires are becoming more frequent due to global warming, and wildfire season is getting longer, according to the U.S Environmental Protection Agency. That has stakeholders questioning whether commercial and multifamily buildings have the capacity to properly block the wildfire particulates entering buildings.

READ ALSO: How to Protect CRE From Wildfires

One of the chief ways to make indoor air quality better is to allow as much outdoor air into the building as possible. The dedicated outdoor air system (or “DOAS”) at 555 Greenwich provides 100 percent fresh outside air delivery to the interior spaces at the point of use and 70 percent above code for air delivered directly to occupants, but not before the air meets the building’s sophisticated air filtration system. Needless to say, not every building has such advanced technology.

Therefore, the level of hazard owners and tenants faced last week, when the EPA’s Air Quality Index peaked at 484 in New York City and over 400 in Philadelphia, depended on how well the outdoor air was filtered as it entered the building.

Newer and LEED-certified properties—555 Greenwich is Platinum-certified—and upgraded properties will have Merv 13 filters, which can adequately remove the particulates in wildfire smoke, according to Tom Javins, a mechanical engineer based in Missoula, Mont. Javins is currently part of an ASHRAE consensus committee writing a guideline (GPC #44) designed to protect occupants of commercial buildings from wildfire smoke exposure.

READ ALSO: How the Western US Drought Impacts CRE

“If the commercial building has done any work for mitigation of COVID, the particulate size of the virus is about the same as wildfire particulates,” Javins noted, “and they would have made an investment that can carry over to wildfire season.”

There is a key difference, though. The way to prevent against airborne pathogens is to dilute the air with a high ventilation rate. But to block wildfire particulates, owners should limit the outdoor air intake rate to just what is needed for ventilation (ASHRA Standard 62.2), Javins said: “That height during a wildfire will bring in more smoke.”

Unlike hospitals, the majority of commercial properties today do not use those filters, Javins found in research he conducted with the EPA. “Most buildings will very quickly match the outdoor air conditions because they do not have adequate filtration,” he added.

Quality is in the air

Since the pandemic, indoor air quality has been a huge focus for the commercial real estate industry. In March 2022, the Biden administration launched the Clean Air in Buildings Challenge as part of the national COVID-19 Preparedness Plan. And indoor air quality has become a key focus for many owners and groups like ASHRAE and the International Well Building Institute.

For those owners who have not made air quality investments, last week was a “stressful week,” said Matthew Trowbridge, chief medical officer at the International WELL Building Institute, and it highlighted the importance of preparedness and prevention.

“Sometimes the moments that will pay off occur very quickly and without some warning,” he observed. “Sometimes that lasts for a week, like we are experiencing now, and sometimes it lasts for three years, like in the pandemic.”

Trowbridge is hoping the event can be used as a catalyst for owners to think about ways to make a building healthier. Every building and circumstance is different, he said, and “building owners have hundreds of different ways to make buildings healthier, Trowbridge noted.”

Source: U.S. Environmental Protection Agency

During wildfire conditions, IBWI recommends shutting windows; turning off air conditioners at home and using air purifiers indoors; wearing N-95 masks outdoors; and utilizing apps that measure air quality. Vulnerable individuals—the elderly and those with underlying conditions—should limit exposure to the outdoors.

“None of this is rocket science,” Trowbridge said. “It just needs to be done carefully and then combined with other management strategies. I think you can make a huge impact.” 

Trowbridge also recommended that owners and managers get involved politically. “The market needs a strong standard to be able to work toward,” he said. “It really is a public health necessity, and there’s also equity issues. We need to make sure that it’s not just the best office buildings. But we need to be working to make sure that safe, indoor environments are available, and for everyone.”

Return to work upside

Questions about indoor air quality last week did not help employers trying to get people back into the office. But, at times like these, commercial buildings may actually be a healthier place to be because many owners have made the necessary upgrades, Trowbridge noted.

“Some businesses are promoting the fact that, once they’ve made these investments in more advanced HVAC systems that enhance ventilation and air filtration systems, they offer a great indoor experience and higher productivity every day,” he said. “But then there are moments like this where the office can actually offer an even more predictably safe experience.”

The post Is Your Building Ready for Wildfire Fallout? appeared first on Commercial Property Executive.

From left: Beth Rooney, Grayson Scott, Brewster Smith and Jeffrey Garza Walker discuss supply-chain issues during NAIOP’s annual I.CON East conference in Jersey City, N.J. Photo by Paul Rosta for CPE

Though the shipping bottlenecks that disrupted the industrial sector and the economy during the pandemic have eased considerably, supply-chain strategies remain center stage for industrial real estate developers, investors and advisers. At I.CON East, NAIOP’s annual East Coast industrial conference, experts outlined new best practices and answers to continuing challenges.

End users are adjusting their location choices in response to the logjams that occurred. “I see companies more than ever saying, ‘We’ve got to have redundancy in our supply chain,” NAI Horizon Executive Vice President Jeffrey Garza Walker told the audience in Jersey City, N.J.

Stakeholders must also meet the challenge of supply-chain resilience, panelists said. All links in the chain, and its key linchpins, must be visible to the end user, in order to avoid “getting caught being dependent on one supplier,” said Grayson Scott, senior consultant for supply chain consulting at CBRE.

READ ALSO: East Coast Ports Challenge West Coast Mainstays

Some end users are moving their distribution locations from such port-adjacent Tier 1 markets as the Inland Empire to locations such as Phoenix and Bakersfield, Calif., noted Brewster Smith, head of supply chain solutions for the occupier services group at Colliers.

Another factor, especially on the West Coast, is labor strife at the Port of Los Angeles, the Western Hemisphere’s busiest container port, and the neighboring Port of Long Beach. “I think the answer is that shippers and beneficial cargo owners need to be dynamic,” said Smith. That means flexibility and looking at potential alternatives, such as Seattle.

Resilience is closely tied to decisions about reshoring and near-shoring. “We have certainly seen a diversification of sources,” said Beth Rooney, director of the Port of New York and New Jersey and the panel’s moderator. CBRE’s site-selection business is currently 90 percent industrial, noted Grayson Scott of CBRE.

Reshoring questions

Reshoring strategies also require assessing the key issues including expertise, capacity and cost, Scott advised. Cost savings, he added, was the reason that many companies offshored manufacturing in the first place.

Walker cited a telling January 2023 study indicating that 93 percent of CEOs are considering reshoring. “You have to be strategic, more than ever,” he emphasized.

Despite the lessons of the supply-chain crisis, however, developing a business contingency plan is uncharacteristic. As a rule, end users don’t take the opportunity to gather in a room with a whiteboard and list the 10 worst things that could happen to their business, Smith reported. “Once things settle out, people just go back to business as usual,” he observed.

This issue is complicated by geopolitical trends. China is the biggest investor in Mexico’s industrial sector, in large part because production facilities there offer China-based companies access to the entire North American market, Walker observed. Geopolitical factors also shadow the massive investment in U.S. chip factories, he added. The best sources for neon gas, an essential ingredient in chip manufacturing, are China, Russia and Ukraine.

In addition, many cargo owners are looking to have a green supply chain, responding to pressure from shippers as well as NIMBY-ism, noted Rooney. Yet approaches often differ by company size. Sustainability tends to be a higher priority for large-cap companies, which may be under greater pressure to respond to ESG concerns, than for many mid-cap companies, whose top priority is expanding the footprint, said Smith.

The panelists concluded by suggesting best practices for commercial real estate professionals.

• Smith: When discussing business with a client, “Stay off the real estate as long as humanly possible.” Instead, he advised, ask questions about the client’s business, such as the company’s pain points and compliance concerns. “You’ll be seen as a trusted adviser, as opposed to just an industrial broker.”
• Walker: “Find out what makes their business go.” He encouraged the audience to get involved with industry organizations that they are passionate about and find opportunities to network with clients’ decision-makers in settings outside of business.
• Scott: “Understand what they’re trying to solve for. What are their long-term goals and desires?”

The post Forging Stronger Links in the Supply Chain appeared first on Commercial Property Executive.

Near surveyed 590 data leaders across Commercial Real Estate, Retail, Restaurants, and Travel & Hospitality. The survey found 78 percent of data leaders agree that “consumer behavior data is critical for our team’s business decisions.” However, looking specifically at 81 data leaders in Commercial Real Estate who answered the survey, just 54 percent agree. This lower reliance on consumer behavior data could be costing CRE organizations opportunities.

In fact, 58 percent of data leaders in CRE agree that “our organization has missed business opportunities due to insufficient data,” well above the 40 percent of leaders overall who agree with that statement. To understand what’s happening, we explored some of the challenges data leaders in CRE face.

Hurdles Data Leaders Face in CRE

Cate Zovod, Vice President of Product & Industry Marketing, Near. Image courtesy of Near

Compared to other industries, applying consumer behavior data to Commercial Real Estate poses some unique challenges. First, the product in CRE is highly heterogeneous, making it especially difficult to uniformly develop and apply models. Additionally, the timeline of CRE projects is protracted, often taking years between the initial decision around site selection and the completion of a development.

To add to those industry-specific challenges, CRE data leaders cited 3 top hurdles to using consumer behavior data for decision-making:

1. Finding sources of high-quality data (38 percent)
2. Technical challenges of blending data (32 percent)
3. Not enough technical expertise in-house (28 percent)

Notably, data leaders in CRE were more likely to select two of these challenges than data leaders overall: finding sources of high-quality data (38 percent vs. 34 percent overall) and not having enough technical expertise in-house (28 percent vs. 23 percent overall). Concerns around data quality could be one key reason that data leaders in CRE were more likely to agree that “our organization has a lot of data but isn’t effective in regularly using it to inform decisions” (45 percent vs. 39 percent overall).

How Leaders in CRE Use Consumer Behavior Data – Key Use Cases and Insights 

When they do overcome these hurdles, data leaders in CRE are more likely to hone in on a few key use cases. They say consumer behavior data is critical for 2.4 use cases on average, lower than the 3 for data leaders overall.

The top 3 use cases for CRE data leaders are:

1. Site Selection & Real Estate Acquisition / Disposition (42 percent)
2. Market Research (38 percent)
3. Store Formatting & Merchandising (30 percent)

CRE data leaders are more likely to prioritize Site Selection as a use case than data leaders overall (42 percent vs. 23 percent).

Looking at the specific insights from consumer behavior data that they find most useful, CRE data leaders prioritize understanding visitors’ Home Location (41 percent) and Work Location (38 percent) as critical above all other insights. While Demographics come in as their third most valued insight (36 percent), CRE data leaders are less likely to value Demographics than data leaders overall (52 percent).

Looking Ahead and How CRE Can Embrace Data

Looking ahead, data leaders in CRE say their top priority for data in the coming year is “doing more to integrate siloed data across departments” (47 percent). However, on balance they are planning to use less consumer behavior data for decision making in the coming year — with 36 percent of CRE data leaders saying they plan to use less and just 31 percent planning to use more.

Looking ahead to the next 12 months, does your organization plan to use less, more, or about the same amount of consumer behavior data for decision making as it did in the past 12 months?

This is significantly different from data leaders overall, of whom 57 percent plan to use more, versus just 16 percent who are planning to use less.

Steering away from using consumer behavior data is a risky move. CRE projects can be extremely complex and expensive, and consumer behavior data presents a much-needed way to reduce blind spots and risks. While implementing an effective data strategy for CRE presents some specific challenges, it can also uncover incredible opportunities and competitive advantages.

To get started, or expand your organization’s use of consumer behavior data, it first helps to have a data champion in the company to get teams working better with data. The good news is that many CRE organizations have that — 69 percent of data leaders in CRE reported that their organization does have a Chief Data / Digital / Information / Innovation / Technology Officer or similar role (slightly higher than 65 percent for data leaders overall).

Once a data champion is in place, there are some key steps they can take to help teams effectively use data for decision making:

• Start with clear, specific questions and use cases you want to address
• Highlight elements that are easy to understand – e.g. trade area visualizations — before getting into more technical analysis
• Equip teams with templates and guidelines for utilizing the data
• Help teams understand how to interpret the data — and how to use it in a pitch

By ramping up a strategy around consumer behavior data, CRE organizations can reduce risk in site selection, increase visibility around competitor locations, attract the best tenants for each location, keep up with market changes, and more.

Want to learn more? See how data leaders can leverage real estate analytics, or read the full study, The State of Global Consumer Behavior Data.

The post Commercial Real Estate Relies Less on Consumer Behavior Data Than Other Industries – That Needs To Change appeared first on Commercial Property Executive.

“I think the entire (brokerage) industry is going to experience a smaller pipeline and a slower trajectory and lower volume of deals, predominantly based upon the lack of sale transactions,” commented Jeffrey Rinkov, CEO of Lee & Associates. “Investment in land for development has been significantly slower, which speaks to the uncertainty of costs of construction, financing higher costs of labor and materials and the uncertainty about exit cap rates or development upon completion.”

During the first quarter, commercial real estate sales volume declined 56 percent year-over-year to $85 billion, according to an analysis by MSCI. The total was comparable to the 2015-2019 average of $88 billion, but office sales were especially hard-hit. Central business district office sales were off 77 percent from the long-term average during the first quarter. And for the first time since 2010, pricing in April declined for all commercial asset categories, MSCI reported. Pricing for industrial properties dropped 0.8 percent year-over-year.

Image by retrorocket/iStockphoto.com

“The public markets are telegraphing that there’s a significant disconnect between market expectations and pricing,” said Mark Grinis, leader of the real estate, hospitality and construction practice at Ernst & Young. This difference in opinion of the value of a transaction may be more visible in the public markets than in the private markets, but it remains one of the most prominent challenges, Grinis added.

Contributing to the mismatch is that investors prefer to sell their assets and create liquidity at 2022 cap rates, noted Patrick Luther, co-founder & managing principal of the net lease unit at SRS Real Estate Partners. “If an owner has fixed debt with an expiring term after 2025, those owners are generally cash-flowing, even if they overpaid for what they bought,” Luther said.

Most investors are electing to hold and ride out the cycle than sell now and take a loss, he observed. After a sale, capital would be reinvested at a higher cap rate and the interest rate for the debt portion of the capital stack would be around 6 percent. By contrast, the rate for in-place debt would be in the 3 percent to 4 percent range.

In this climate, maintaining a steady revenue stream will be difficult if leasing and tenant representation volume are below par. “I don’t think any brokerage will be spared this year,” Luther said. “The drop in volume most clearly and quickly impacts brokerage firms that do not cross sell or communicate business lines other than pure sales.”

As is always the case when sales slow down, the capacity to tap into financing sources through long-term relationships is foundational for staying competitive. “Even in a tough market, potential deals will find their way to the brokerage firms,” said Suraj Desai, head of hospitality and capital markets for Black Bear Capital Partners. “The strategy of knowing the right capital source has been a long-term arduous effort that focuses on relationship and trust that we have built.”

New frontiers

Although slower deal activity inflicts pain on advisory services, it also presents opportunities for solving problems and even for improving the company’s position.

“Historically, these times bring about innovative solutions, ideas and opportunities,” observed Juan Bueno, principal & U.S. president for Avison Young. “We continue to see trends of flight to quality in major U.S. markets—a possible indicator that investments toward amenities and property upgrades are attracting employees back to the office.”

Potential strategies range from reinvesting in the business to shifting emphasis to new services and strengthening client relationships. Opportunistic advisory firms will find business in places the company may not have historically engaged in.

“You’re starting to see situations where changes in ownership will influence opportunities for the brokerage community,” Grinis noted. “Ultimately, the brokerage community’s successes are getting on the ‘sell side’ of knowing who’s in ultimate control of the property. And that is kind of a dynamic that is changing.”

Tenants which signed leases a year or two ago may be only now opening for business. In those cases, brokers’ revenue is spread between tenant signings and openings. “That said, most leasing professionals are seeing steady volume on second-generation space due to high construction costs,” Luther noted. “It’s easier for a tenant to remodel or use an existing building than to build new ones, as they can open more quickly and cost-effectively if they can utilize an existing structure.”

As owners and landlords move into problem-solving mode, the property management and leasing side of a broker’s job becomes more important. “Right now, it’s all about the above-and-beyond white-glove service in a down market that will position you for the sale when markets and the cycle improve,” said Luther—a principle that applies to such tasks as lease renewals, obtaining an insurance quote and identifying a new tenant.

Upgrade and reinvest

Continuing to build out distribution, database and marketing tools is also effective. At SRS, enhancing those tools requires servicing and following existing clients, being selective about opening new offices and investing in current staff. Struggling brokers are backstopped with loans or draws while support staff numbers are maintained.

At a time of changing client needs and a volatile market, reinvesting in the business must still be a priority. “While we may be in a slightly lower revenue environment, we’re not decreasing our resources,” said Rinkov. “This is an opportunity to provide better and enhanced resources to make sure that we are involved in cost-efficient spending that will yield benefit for our clients.”

On a micro level, this multi-faceted approach means attending industry events, collaborating with other industry professionals, streamlining workflows and increasing access to data. On the macro level, it’s all about finding ways to continue adding value to clients.

“With an environment where we’re concerned about a looming recession and we’re seeing some softening taking place in rents and some rising vacancies, particularly in the office market, a lot of clients out there are focused in on shoring up the strength of their buildings.” Grinis said. “This is a terrific time to help clients and customers and all your relationships, to find opportunities to build resilience in the portfolios and the assets that they control.”

Talent show

With a slower pace for the brokerage business on the investment side, Rinkov believes the best way to sustain the brokerage business overall is through a strong leasing practice.

“I think our investment agents working with our leasing agents is really going to be the strength of how we can provide great value to clients and help them reposition properties, help them understand where we can provide tenants to increase net operating income, where we can backfill vacant spaces and how we prepare those properties for what will be an evolving and improved market,” Rinkov explained.

For the past several years, the pace of market growth, rental growth and value growth in CRE has been dramatic. Now, the capital and deals that brokerages are sourcing is going to be highly selective. Brokerage talent will be a differentiating tool.

Where there is a return to fundamentals and an examination of what is most important in retaining and growing the brokerage business, there is upside.

“People can focus in on the negative side of the transaction, and certainly it will be challenging for a lot of people, but I think you always have to recognize that there are huge opportunities,” said Grinis. “The way we are changing how we do things, there are a lot of really great opportunities and great disruption that’s happening in the sector.”

Read the June 2023 issue of CPE.

The post CRE Brokers Power Through Decline in Deals appeared first on Commercial Property Executive.

Image courtesy of Honeywell

Facility managers, developers and building owners have traditionally been the focus in terms of the importance of building outcomes, but occupants—workers, visitors and customers—and their experience in the space are key to the future of optimizing the investment in buildings. Facility managers have always looked to run an office building efficiently while minimizing operational costs. For developers and building owners, the focus has always been return on investment. Where does that leave the occupants and their needs?

Staffing an office building accounts for roughly 90 percent of the total cost of operation. So, improving productivity, attracting, and retaining talent, improving the occupant experience and increasing employee engagement seems obvious. But in reality, the human element is often overlooked in the pursuit of more traditional metrics.

Image courtesy of Honeywell

While there had been increasing demands for a home-like experience at work, the COVID-19 pandemic put the office work environment under a magnifying glass in terms of both the role the office will play in the future as well as the expectations occupants have while they are in the office. Occupants now expect a safer, more secure, and well-coordinated experience. From parking to check-in, from getting through security to the comfort of their workspaces—they want the office experience to be as seamless and easy as it was working from home.

Providing an engaging occupant experience will play a key role in transforming the office into a collaborative, interactive work environment. People will want to work in the office for the collaboration they cannot replicate at home. Studies show that people are more creative when collaborating in person and that the process of bonding develops trust among participants. Trust then becomes an enabler of creativity.

Not only will the office building of the future be highly dynamic and collaborative, but it will also serve as the cornerstone of a company’s identity and culture, which you simply cannot get from an online environment.

The Honeywell Advantage

A great occupant experience means providing the reassurance that everything is being done to keep building users healthy, safe, and secure. In a post-pandemic world, the healthy work environment is non-negotiable. Beyond feeling reassured, occupants will also want to know that their work environment is helping protect them and their loved ones.

Honeywell’s experience across 10 million commercial buildings has provided a unique view into the problems building owners, managers and users need solved. That is why we have developed five outcomes which will enable occupants, facility managers, developers and building owners to be more successful in their day-to-day activities, creating a collaborative work environment that can help increase productivity and efficiency. These solutions, through interconnected ecosystems, will provide actionable insights as the role of the office evolves, and will not only provide for changing needs, but can completely transform the experience of occupants in the building.

The vision is focused on five outcomes:

1. Frictionless: Welcoming & memorable experience from Gate > Parking > Lobby > Elevators > Desk / Floors for employees & clients.
2. Sustainable, predictable & efficient: Improve buildings performance / KPIs that balances comfort and energy with ease.
3. Safe & secure: Well prepared responsive operations to address issues, anomalies and threats.
4. Healthy & comfortable: Intelligent and autonomous building controls with occupant feedback / request to enhance all time comfort.
5. Inviting & informative: Intuitive and effortless access to all information: find / navigate / seek help

What happens in your building is what matters most about your building. An occupant experience that delights building users pays dividends throughout your business model, from talent retention, to repeat business, to energy optimization. Honeywell’s vision, breadth of innovative products, and global experience all come together to deliver true end-to-end open solutions.

Download ‘The New Office Building Returning to the Future’ to dive deeper into how technology can improve your occupant’s experience.

The post Enhance your occupant experience. Drive greater performance appeared first on Commercial Property Executive.

Tyler Robinson, Managing Partner, SVN | Urban Properties. Image courtesy of SVN | Urban Properties

Although the New Orleans CRE market overall is currently demonstrating robust activity supported by several noteworthy projects, its office market is still struggling, mirroring national trends. Despite these hurdles, many in the CRE industry are still optimistic about the future of the New Orleans office market and believe that there’s growth potential.  

“We have raised an equity fund and are actively looking to place capital in the region,” Tyler Robinson, managing partner of SVN | Urban Properties told Commercial Property Executive. Urban Venture Fund seeks to deploy more than $30 million into Gulf South real estate by 2025. 

With more than 40 years of combined experience in the market, SVN | Urban Properties’ specialists take a holistic approach to navigating the current challenges, banking on their in-depth understanding of the local Southeast Louisiana market, and supported by SVN International Corp., the national brand under which they operate since March 2022. The boutique firm is established at Urban Hub, a flexible office space it owns in the heart of New Orleans’ Lower Garden District, that opened almost three years ago. 

In the interview below, Robinson talks about his company’s journey so far, and touches on the story behind Urban Hub, the flexible office concept that promises to reimagine coworking in the metro. 

READ ALSO: Paving the Way for Women in CRE: Insights From a Pennsylvania Broker

Apart from the well-known, nationwide challenges, are there any specific issues that you’ve noticed in the New Orleans office market?

Robinson: New Orleans tends to march to the beat of a different drummer. Typically, a bass drum, in a brass band, during a second-line parade. It rarely follows national trends and the office market is no exception. In fact, in terms of office-to-residential conversion, we have been ahead of the national trend.  The office market in New Orleans has remained fairly soft, even as inventory has been reduced by apartment or hotel conversions. The last time an office tower was built in the city was in the 1980s. All that goes to say that, while are and will continue to experience some additional declines in office occupancy, it will not have the same impact as what is unfolding in other markets.

How has your partnership with SVN International impacted your operations so far? To what extent is it fueling your growth?

Robinson: We are proud to be standing here today—it has been quite the journey and we still feel as if we are just getting started. Joining SVN International has created some wonderful opportunities for us—both in terms of internal systems and in terms of brand recognition and competitiveness in the market.  Our tech portfolio received a 10-fold overnight boost when we joined and our ability to set our advisors up for success via training, tech and reporting metrics received a similar boost. We have a great amount of confidence in our ability to grow the company with all these tools backing us and we’ve seen this in practice in the past year with SVN.

What sets your approach apart from other similar firms in the area?

Robinson: We like to pride ourselves as a local group with institutional services. The four managing directors have varied backgrounds and all worked previously at larger firms, and this is part of what differentiates us in the market. Our approach is very much informed by our institutional experience but is softened by our collaborative and relaxed approach. 

Can you share a few details about major office deals and/or projects in the New Orleans area that you’ve recently been involved in?

353 Carondelet St. Image courtesy of SVN | Urban Properties

Robinson: On the project management front, we recently completed 353 Carondelet, a historic renovation of a four-story office building for Fidelity Bank’s headquarters. We were honored to serve our client by procuring and managing all aspects of the construction process. This project started in the fall of 2019, so we had a very interesting set of circumstances to navigate. We were still able to deliver the building on budget and almost on time, despite a six-week shutdown on the project due to the start of the COVID-19 panic. 

Fidelity Bank occupies the first, second and a portion of the third floor, and SVN | Urban Properties is marketing the remaining space for lease. Much of our recent office-focused leasing and management activity has been in the medical office sector, which mostly comprises smaller buildings near medical centers. 

READ ALSO: Building an Effective Commercial Property Management Team

How does Urban Hub fit into your overall business strategy? Is it a core focus area or more of a complementary offering?

Robinson: We created Urban Hub out of necessity—we needed to fill some excess space in our office building, which we purchased in February 2020. We knew that pursuing the traditional office lease direction was not the route for us, or for the space. We want Urban Hub to act as a home for those who don’t want to work from home. We have a bar and a dining table in the kitchen, couches throughout, a ping pong table in the backyard, a front porch—all things that incorporate that feeling of being in a home. 

Urban Hub fits into our strategy in multiple ways. SVN | Urban Properties was the first tenant in Urban Hub, so we are aware that it’s a fun place to work and we intend to keep it that way as we plan to remain a tenant. Secondly, we desire to purchase real estate with the intention of creating more Urban Hub locations. This gives us the opportunity to create brokerage and development opportunities for our team. Thirdly, having a coworking company in the portfolio allows us to create relationships with individuals and companies whose real estate needs may change over time and we want to be there for them when those needs arise.

What amenities do tenants enjoy at Urban Hub? What makes this space unique?

Robinson: Urban Hub offers amenities that you tend to see in many well-done shared workspaces: a stock of coffee—and even beer, wine, and other spirits…it is New Orleans, after all—ping pong, a kitchen and bar area, phone booths, multiple conference rooms. We bring in practitioners for sound baths, yoga and breathwork. We have regular gatherings for the members—crawfish boils, holiday gift exchanges, happy hours. 

These types of things are common today in the modern workplace. What really sets the space apart is somewhat intangible. The most important amenity offered is the community. Urban Hub is right-sized so that everyone knows everyone, and it’s that family atmosphere that captures the hearts of our members. 

READ ALSO: How Coworking Creates a Sense of Community

What types of businesses and individuals are you targeting for your Urban Hub space?

Robinson: The mix of people at Urban Hub ranges from individuals who just want a spot to plug in and log on, to a rapidly growing start-up. Most people keep daytime work hours, some show up in the evenings and on weekends. Importantly, the mix is harmonious. The culture of the place is important to us—that same reason is why many of us choose to live in New Orleans—and we target users who will appreciate the focus on culture. 

What are your expansion plans for this year and beyond, both in commercial real estate and the coworking sector, in particular?

Robinson: SVN | Urban Properties plans to expand in all areas this year and beyond—we are actively seeking to hire additional advisors. We have seen a rapid expansion of our property management portfolio and we have staffed up in that department to continue that growth. 

Since we started with three people in 2015, we have always sought to expand—as individuals and as a company—and we have pursued that expansion organically and consciously. This has been the key for us in expanding while maintaining our culture. With Urban Hub, we are aware that the feel and the culture created in the space are of utmost importance. As we seek to expand that business line, we will continue to maintain the focus on building the brand, but not forcing its expansion.

The post How Coworking Is Reviving New Orleans’ Office Scene appeared first on Commercial Property Executive.

Amazon fulfillment center. Image courtesy of Amazon

Lincoln Property Co. Southeast (Lincoln) has been selected to manage a 640,000-square-foot Amazon fulfillment center in Pooler, Ga. Senior Vice President Shane Froman, Senior Portfolio Manager Industrial Lead Kim Steward and Senior Portfolio Manager Natalie Matteson will handle property management for Amazon Savannah SAV4.

USRE Savannah LLC, an entity affiliated with USAA Real Estate, owns the facility that officially opened in February. The fulfillment center came online on more than 73 acres in the Savannah, Ga., metropolitan area, near the intersection of interstates 95 and 16.

The Amazon facility is part of the Chatham County Development Site, also known as the Pooler Megasite, a 1,900-acre area that became part of unincorporated Chatham County in 2015. The property has been divvied out to multiple companies including Mitsubishi Hitachi Power Systems, according to Statesboro Herald. The location is 9 miles from the Port of Savannah and Savannah/Hilton Head International Airport.

Amazon Savannah SAV4 was first announced by Governor Brian Kemp in May 2021. The distribution center was anticipated to employ some 1,000 workers to pack and ship customer orders. Amazon’s robotics technology is featured in the facility to work alongside employees.

Savannah’s industrial market

Savannah’s industrial performance last year landed it among the top emerging industrial markets in the nation, topped only by North Central Florida. With record-breaking development activity paired with an increased amount of leasing deals, the market is extremely strong.

Alongside Amazon, major companies like Hyundai and KISS are developing and acquiring industrial properties in Savannah. Lincoln already manages some 4 million square feet of assets in the area.

The post Lincoln Property to Manage Savannah-Area Amazon Facility appeared first on Commercial Property Executive.

Image by Campaign Creators via Unsplash.com

For industrial property managers, a strategic approach to implementing property technology goes a long way toward maximizing the efficiency of a space and tenant satisfaction. According to experts, what is equally important to the [choice of] technology is a tailored, yet accessible and versatile property management technology platform.

One common priority is accessibility and ease of use for the technology and data analysis. Tushar Aggarwal, global head of business transformation and analytics at CBRE identifies this as the firm’s top priority for proptech adoption,

“Although we look at point solutions being integrated, it’s all about the user experience, and the customer experience we provide to the clients and tenants,” Aggarwal told Commercial Property Executive.

Chris Bosler, Vice President, Hiffman National. Image courtesy of Hiffman National

In real time, the service-oriented aspect of property technology that prioritizes tenant and user satisfaction extends to implementation. For Hiffman National, this role extends to duties such as equipment tracking and monitoring, with the recognition that the technology allows tenants to optimize operations.

“Our tenants are not in the management business,” said Chris Bosler, vice president of the firm’s Texas region. “They are focused on their day-to-day activities. What that allows us to do is track all that equipment for them.”

User-friendly values

When Hiffman National integrated this distribution center in Tinley Park, Ill., into its management portfolio, a transition-focused tool helped determine the best technology to provide tenants. Image courtesy of Hiffman National

As part of this approach, the firm has centralized its utilizations of the Building Engines platform for its material management duties such as maintenance, tenant tracking, HVAC monitoring and communications, all through a user-friendly interface.

“Our tenants are not on a computer; they’re usually in a warehouse or handling their day-to-day activities,” Bosler told CPE. “The interface needs to be user-friendly.”

In this spirit, Aggarwal cites the importance of keeping a level head, particularly regarding the myriad events that may arise at an industrial property, and the role of technology in addressing them. “It’s not a regimented program,” he noted. “There are all sorts of things that happen at an asset, and you have to be ready for anything that comes up,” he said.

Tushar Aggarwal. Image courtesy of CBRE

To this end, CBRE has developed Pulse, a front-facing, cloud-capable proptech centralization tool that enables access to readily available property information, such as regional and portfolio-based performance data. Additionally, it integrates programs alongside MRI Angus to its maintenance management capabilities, providing quick, easy-to-digest information to engineers and related personnel that in turn can be relayed to tenants.

Joe Stokes, chief product officer for CBRE Property Management, characterizes this strategy as based on relatively basic but reliable technologies that are applicable to the boots-on-the-ground nature of the job. “We really need to get the nuts and bolts right to solve real world problems,” he said. For CBRE, the basics take the form of accessible, accurate data.

Understanding limits

Sonya Huffman, Chief Administrative Officer, Link Logistics. Image courtesy of Link Logistics

Link Logistics embodies that idea in its proptech utilizations. The firm combines multiple technologies to create a distinct platform that integrates its management-related data and duties into an accessible, convenient network. “Many of the tools people build don’t talk to each other. When we talk about field personnel or operational utilization, we want our team to go to one place,” said Sonya Huffman, the firm’s chief administrative officer.

Link’s property management technology platform features best-in-class operating tools that are used to provide the team with a single source of truth. Link’s platform consists of Yardi for accounting, lease administration and construction management, Anaplan and Argus for budgeting and forecasting and Salesforce for business workflow and customer relationship management.

Despite the scale of its portfolio, the firm seeks to make its property services meet its tenants’ specific requirements. “(Link wants) to make sure that everything we are asking our hundreds of field personnel and accounting teams to utilize is intuitive, makes sense and is as simple as the technology they use in everyday life.” Huffman said.

Such an approach goes beyond physical technology. “All the members of our IT team have experience in real estate operations and real estate accounting,” Huffman told CPE. “They understand the suite of tools that are available, and they also have the business acumen to understand how making a choice is going to impact the way people operate.”

READ ALSO: Tapping Into the Rise of Renewable Energy

Future view

Joe Stokes. Image courtesy of CBRE

The various tools combine to form a versatile platform that allows Link’s property managers to access the information they need when they need it, without regard to its origin. “They don’t necessarily know that the engine is (from) Anaplan or Yardi,” Huffman noted. “They see one visualization, and they can layer in commentary on variance or budget, or questions about a lease within that one interface.”

At the same time, the emphasis should still be on in-person interaction; the technology is an assistant, not a replacement. “(For) people that are in that field, you want them to be at the properties talking to customers,” Huffman added.

The client-focused, centralized approach to technology is applicable to where the sector is headed, particularly in the use of automation and artificial intelligence.  Link uses it to read through lease agreements, with the goal of delegating less mundane tasks to human property managers. “We want to make sure that the people running the business are performing the most valuable functions,” Huffman said.

Stokes sees the value of investing in new technology, but without compromising the service-centric nature of the business: “Over time, there will start to be a lot more thought around the hygiene factors, and how we actually deploy something that is going to solve a real-world problem.”

The post Strategies for Harnessing Proptech in Industrial Property Management appeared first on Commercial Property Executive.

Solar canopy at Bishop Ranch. Image courtesy of DSD Renewables

The adoption of renewable energy continues to gain traction across the country, with solar photovoltaic energy accounting for 45 percent of all new electricity-generating capacity additions through last year’s third quarter, according to a recent report from Solar Energy Industries Association and Wood Mackenzie. For context, in 2021, the ratio stood at 43 percent, up from 41 percent in the previous year.

California maintained the leading position in solar capacity installed—3,187 megawatts in 2022 through the third quarter—well ahead of the next state in line, Texas (2,325 megawatts), the same report shows. 

The Golden State is also a favorite playground for DSD Renewables, a company that spun out of General Electric in 2019, and which has since developed and deployed 425 megawatts of solar capacity across 23 states. DSD is funded by large financial institutions, having raised more than $1.5 billion, which has allowed it to grow and support its customers’ energy needs.

DSD has several notable projects underway, including the installation of 13MW of rooftop solar at 25 Home Depot store locations across California. Upon completion, the installed capacity is expected to generate more than 17 million kilowatt-hours of clean energy annually that will directly power the retailer’s locations. The partnership between DSD and Home Depot began in 2017, when DSD was awarded its first request for proposal from the retailer to install 11.5MW of solar at stores across New Jersey, Maryland, Connecticut and Washington, D.C. The collaboration continues today with additional projects planned in Arizona, Illinois and New York.

Profitable business during stormy times

Although in growth mode, the solar installations industry has its share of challenges. Some are specific to the business—which revolve around the uniqueness of each solar installation and implicitly each project site, for which there are no “cookie-cutter, off-the-shelf solutions,” as Chad Edwards, senior director of origination at DSD puts it—and the macro ones, which include rising inflation and supply chain issues.

To address industry-specific problems, DSD relies on a team of engineers, designers and developers, who identify these challenges and come up with tailored solutions for each client. In addition, the company has a dedicated canopy team that designs proprietary and patented water and ice management systems, which can be integrated into their projects. This is a breakthrough for the company and adds value to its customers in inclement weather locations because it creates dry parking environments while reducing maintenance and operating costs, according to Edwards.

The high inflation is driving many of DSD’s new customers to evaluate or re-evaluate solar as a method to hedge against future cost increases. The multi-dimensional benefits of solar, combined with the incentives from The Inflation Reduction Act, offer a valuable opportunity to decouple from fuel-based energy.

READ ALSO: What Does It Take to Complete the Transition to Renewable Energy?

When supply chain challenges worsened, the market changed dramatically, and many solar installers found themselves unable to deliver their projects on time. Traditionally, the engineering, procurement and construction (EPC) would buy the equipment needed for solar projects, such as inverters, switches, panels and the like. But now, with the extended lead times, that pattern is not viable anymore, as it would be too late to wait for an EPC to purchase this equipment at the time these are brought into a project.

Hence, DSD took another route. It started purchasing equipment in advance and one-off purchases turned into strategic orders. Edwards confirmed that the equipment DSD needs for its 2023 rooftop portfolio has already been purchased, including for the Home Depot California portfolio. In addition, the company also partnered with PanelClaw and QCells to strengthen this strategy and make large purchases.

Shiny solar projects

A success story is DSD’s solar canopy at The Source, the parking garage at White Plains Shopping Center in Westchester County, New York.

“The project required exceptional engineering and advanced construction techniques because, to maximize system size, they needed to cover the ramp of the garage top, as well as the parking structure itself,” Edwards said. “Maximizing size was also important as this is a community solar asset, meaning it provides the benefits of renewable energy to the surrounding community.”

The project resulted in 1,423kW of renewable energy and a covered parking area with water and ice management technology. Not only did this add extra protection for the mall’s customers, but it also helped the owner reduce maintenance costs.

Another remarkable project that DSD worked on is the 600-acre Bishop Ranch in San Ramon, Calif., which houses 30,000 employees that work across more than 600 businesses in a 10 million-square-foot office campus. The park holds the distinction of the largest concentration of LEED space outside of a major metropolitan area and expands its existing comprehensive program to minimize its environmental footprint through a solar installation that supports the company’s core green philosophy and complements an award-winning transit program, extensive recycling initiative, green cleaning practices, over 300 electric vehicle charging stations and more. Additionally, City Center Bishop Ranch is the largest shopping center in the world to be awarded LEED Platinum certification.

Furthermore, the campus is touted as being the world’s largest multi-campus solar and energy storage installation. The distinction was a surprise, Alexander Mehran Jr., CEO of Sunset Development, confessed to Commercial Property Executive. The company has owned the project since 1978.

“We analyzed the energy usage of every building at Bishop Ranch and then optimized the solar and energy storage systems for each building that had suitable rooftop and parking lot areas,” Mehran said. “As we added up the capacity of solar and storage across Bishop Ranch—installed and in development—it totaled 25MW of on-site, behind-the-meter capacity. The solar designs have been recognized as some of the most spectacular and in keeping with the architecture, but it was a delight to discover that it was also the world’s largest,” he continued.

DSD used the Federal Investment Tax Credit to offer competitive power purchase agreements. “Without them, the projects at the contracted rates would not be viable,” explained Mehran.

The first phase of the solar installation started in 2021 and amounted to 1.3MW, which produce 2.1 million kWh of clean energy per year. The second phase of the installation is slated for delivery in the first quarter of 2024 and consists of 15.5MW of solar and 7.1MW of storage. Upon completion, it will offset the business park’s energy usage by 90 percent. This is the equivalent of producing 22,239,778 kWh of clean, renewable energy annually, which amounts to 9,621 metric tons of carbon dioxide emissions avoided, corresponding to taking more than 2,000 gasoline-powered cars off the road or planting more than 159,000 trees.

READ ALSO: From Concept to Completion—The Largest Rooftop Solar Project in DC’s Brookland

The goal is to reach 100 percent offset, according to Mehran. They constantly monitor energy usage and efficiency across Bishop Ranch and will investigate any shortfall once all systems are fully operational. They also consider looking at the wholesale market and virtual PPAs. “Not all kW is created equal and variable pricing affects the value of solar. With sophisticated monitoring systems, we will be able to monitor building usages in real time and tweak the deployment of solar and energy storage assets at critical times to maximize benefit,” he said.

The partnership between Sunset Development and DSD formed as a result of a series of events. Back when DSD was part of General Electric, GE was a tenant at Bishop Ranch. GE Solar and DSD worked closely with Renzo Piano/BAR Architects and the design team on the City Center solar canopy located atop its parking garage, which opened in 2018. Since then, the two companies have reapplied some of the design aspects of City Center across the Bishop Ranch campus.

For Bishop Ranch, DSD’s engineering team worked closely with the megadevelopment’s architectural team to align on a vision that was “unobtrusive and seamless,” said Edwards. They were able to replicate Bishop Ranch’s beam design on more than 800 columns throughout the installations and used bifacial modules with a translucent back sheet to enable maximum light penetration. 

A look at renewable energy’s future

The passing of the Inflation Reduction Act has provided substantial market certainty for renewable energy, including on-site and off-site generation, storage and electric vehicle charging infrastructure, said Edwards with confidence.

“In 2023, we will start to see even more enterprises and MUSH market (buildings owned by municipal and state governments, universities, schools and hospitals) customers setting and accelerating sustainability and net-zero goals,” Edwards expects. “This transition, in combination with the rising costs of traditional energy sources, means the renewable energy industry as a whole is set up for a banner year.”

Moreover, renewable energy is evolving within commercial real estate from a special project to a strategic initiative. Edwards noticed that landlords are now looking for ways to align with their tenants’ sustainability targets, and he believes that solar is one of the most efficient ways to help them achieve their goals. 

Last but not least, state policies are diversifying and evolving, creating a complex landscape for landlords. “We work hand in hand with landlords to show the opportunities across their national portfolio, whether that’s generating additional lease revenue or controlling costs,” Edwards added. 

The post Tapping Into the Rise of Renewable Energy appeared first on Commercial Property Executive.

However, these types of transactions are extending beyond investors. Brokerage firms have acquired real estate services companies to complement their services, expand their footprint and stay competitive in a tough market.

An early 2023 example was KLNB‘s recent acquisition of Edge Commercial Real Estate, allowing the Mid-Atlantic brokerage firm to expand in size by some 20 percent. In a single step, KLNB expanded its office footprint, increased its CRE tenant representation platform and entered the multifamily market.

A March merger with KLNB’s joint venture partner, the Divaris Group, saw Divaris Real Estate absorbing The McGarey Group. Divaris Real Estate is a real estate platform that, alongside other divisions within The Divaris Group, manages and leases some 37.3 million square feet of commercial real estate. Under its new leadership, The McGarey Group will continue to operate as it had been, performing leasing and advisory services for mixed-use retail developments.

Image by DenisKot/iStockphoto.com

“The KLNB joint venture and the acquisition of The McGarey Group are not directly related to each other,” said Tony Divaris, international controller, CFO & executive committee member of Divaris Real Estate. “However, they are both built on strong industry relationships, and finding the right counterpart and balance to our efforts.” Divaris explained that both strategic partnerships have cohesive working relationships between the owners and company executives. Each deal led to a strengthened business and additional services.

Also following the industry trend, SSH Real Estate acquired Advantage Building & Facilities Services, a property and facilities management company. Advantage, founded in 2005, had been a long-time client of SSH. After looking at several acquisitions of both property management and brokerage companies, SSH chose Advantage as the first company it acquired.

“It was just, really, a perfect fit in terms of having no real duplication (in services) but enabling us to expand on the services we can offer that are already consistent with what we are doing,” said Peter Soens, founding partner of SSH. Key factors in the decision included similar values along with enough existing familiarity between the two companies for a relatively seamless transition.

“It really came down to having more clients and a lot of small contracts that add up and give us a good diversity of revenue and the ability to enter into different companies and businesses that aren’t going to hire us to do a full scope of management,” Soens reported.

Acquiring the right company comes down to a slew of factors. Not only do all of the metrics need to line up but the companies’ values need to align as well.

The similar values that presented themselves across these headliner deals are some of the most critical components in evaluating a deal before it comes to fruition, according to Jonathan Keith, managing director with Risk and Financial Advisory, Deloitte & Touche LLP.

“I think one of the key best practices is in pre-acquisition diligence and identifying and understanding the strategy for doing the acquisition and what benefits you’re trying to achieve,” Keith said. Due diligence of understanding such fundamentals as headcounts, different systems and HR plans is highly important.

“That way you understand the steps you have to take and you can measure the hitting of those milestones and reach synergistic value,” he explained.

Why to make a deal now

After a stretch of rising property valuations and low capital costs, the industry is now facing the fallout of rate hikes and concerns raised by regional bank failures. Stiff competition is leading toward businesses figuring out how to continue operating and find a normal ground.

“When you look at the brokerage space there is a trend toward consolidation of a very fragmented ecosystem,” said Tim Bodner, global real estate deals leader with PwC. That consolidation is being driven by a couple of factors, the most important of which is the scale of the firm and its product offerings.

“Many of these businesses’ customers like to go to one provider,” Bodner added. “If you are not able to offer the full ecosystem of services it is really hard to compete, in particular on the brokerage side of these businesses, which is a transactional business with lower margins.”

READ ALSO: Property Management’s Role in the Development of New Office Spaces

The second goal Bodner believes is driving consolidations is diversity of product mix and scope, followed by filling geographic gaps. “Every business is trying to figure out what their new normal is going to look like coming out of the pandemic and how they are going to operate a new business model,” Bodner noted.

“During times of uncertainty, we tend to be very bullish, so with the current economic climate as it is we feel it is a great opportunity for expansion and solidifying our footprint in the markets we have a presence in,” Divaris added, on his reasoning for making an acquisition in this climate.

On the acquired companies’ side of things, businesses who hired aggressively during an upturn of the market throughout the past several years without significant capital are now struggling to survive, explained Claudine Cohen, managing principal, value360 at CohnReznick.

“The industry is highly fragmented, which lends itself to consolidation and the ability to obtain synergies and efficiencies through back-office functions, sales and marketing,” and other functions, she said. As weaker entrants leave the market, more opportunities for mergers, acquisitions and consolidations arise.

For those that have the capital for corporate-level deals, Keith believes that acquisitions can bring multiple value, such as picking up complementary services, creating more cash flow and adding value. The potential to scale up is attractive, as well.

“With greater scale there is the potential to leverage your fixed base cost by adding existing services to a business…” he said. “If you have a healthy portfolio of clients but you want to do additional services for those clients, buying a business that’s outside of your current competency to complement that can sometimes be easy to pull in and sell to existing customers, and vice versa, to sell to the customer base from potentially a different service line.”

Why now may not be the right time

On the contrary side, today’s economic conditions present sound reasons that this is not the right time to go through with a merger or large-scale acquisition. Leading the list are an expectations gap between buyer and seller and the difficulty of accessing the right capital.

“Putting those two factors together, I think, make it a challenging time,” Keith said. “That’s not to say there aren’t opportunities to do [M&A deals] depending upon the entity you’re looking at, where it’s positioned, the quality of the assets it’s servicing, the quality of the service, how sticky it is, etc. But in my view, those are two major headwinds to getting a deal.”

Nathan Florio, an advisory principal at Deloitte Transactions and Business Analytics, concurred that the capital markets challenges make it a difficult time to move forward. “It’s definitely a harder atmosphere to underwrite a deal,” Florio told CPE.

For SSH’s acquisition of Advantage Building & Facilities Services, the timing was favorable. “We were fortunate to secure our terms before rates really escalated,” Soens said.

However, Bodner believes most of the pressure to be felt in the capital markets climate is in regard to larger transactions. “The smaller deals that are fulfilling a specific niche will continue to get done,” he said.

Finding the right financing

While securing finance for corporate-level acquisitions is increasingly challenging, it is possible. “It’s going to be hard because the valuation is affected by interest rates,” Soens noted. “It is just about being creative in how the transactions get done because the financing markets are so challenging.”

Funding these deals can come from several sources. “Relationship banks are still out there to finance these types of deals, but real estate has gotten a lot more challenging to finance,” observed Soens.

However, Bodner believes that who real estate companies find for their relationship bank is changing.  “Increasingly in the real estate ecosystem there has been a complete evolution in private debt capital, where a lot of the nontraditional players are starting to become the relationship banks of the future.”

For smaller acquisitions, of $15 million to $20 million EBITDA, Cohen told CPE that there is still debt available, although it is more expensive and clients are structuring transactions differently.

“Alternative structures may involve earnouts and seller notes,” she said. “There is significant capital through private debt funds and other alternative debt providers.” Senior lenders in many regional markets are still active, as are the larger banks, although leverage multiples have come down.”

Beyond nontraditional banking players and for larger transactions, most deals will happen via liquidity or equity trades.

“These businesses, particularly the larger ones, have a tremendous amount of liquidity,” Bodner added. “Large brokerages have the balance sheet capacity to play offense and make big deal acquisitions.”

Where the balance sheets, cash and liquidity don’t cut it, equity will still do the job. “Financing these deals is generally performed utilizing equity with little to no debt,” Divaris noted. “In most cases we have seen earnouts as the channel used in the acquisition process so as to ensure the transition of value from the acquiree to the acquirer.”

Upon stabilization of interest rates, more traditional lending opportunities would presumably start re-emerging. However, for the time being, finding the right financing requires creativity.

“(The means to finding funding for these transactions) is changing rapidly and changing almost daily as the news comes out,” Florio said.

Continued momentum

While some service firms have no choice but to enter merger and acquisition deals, others are holding off and waiting until more ideal conditions present themselves. However, there are some general trends as to what types of companies are likely to acquire or be acquired.

“I believe brokerage and service entities will perform the most mergers, joint ventures and acquisitions with like-minded talent wanting to do more in their particular market or expanding into other markets,” Divaris predicted. “The opportunity to leverage the strengths of individual brokerage and service entities enhances the chances of success and will appeal to more companies that might have previously been competitors.”

Scaled brokerages are likely to be interested in companies with recurring and resilient revenue streams. Therefore, Bodner expects property management, facilities management and valuation companies to be the most prominent targets for acquisition.

“In terms of the businesses that will think will most often be the acquirers, it is going to be the scaled participants in a lot of cases,” said Bodner.

Cohen believes that along with a strengthening of services, it is a fragmented industry that will lend toward more deals of this nature.

“I think the trend for consolidation will continue due to industry fragmentation and the abilities to obtain economies of scale as the market recovers,” she said.

The deals market surrounding acquisitions, mergers and consolidations of this nature is not always episodic or linear. While many companies are currently undergoing these types of transactions to remain competitive amid economic uncertainty, the main question may be: Do we think the real estate brokerage space is going to continue to consolidate? Bodner says yes.

“There is not enough differentiation and scale in some of these businesses to compete in the environment we are moving into,” Bodner stated. “Businesses that don’t have scale in terms of size, talent, product mix can either sell or close up shop. They are going to be forced to.”

Read the July 2023 issue of CPE.

The post What the New Wave of M&As Means for CRE appeared first on Commercial Property Executive.

Breana Wheeler, Director of Operations, BREEAM U.S. Image courtesy of BREEAM U.S.

BREEAM has continued to grow its presence as a global standard measuring and certifying the sustainable performance of built world assets. In the U.S., the number of BREEAM-certified assets marked a nearly 160 percent increase last year. Furthermore, the platform’s U.S. footprint rose to 27 states, with Delaware, Kentucky, Maine, Ohio, Oregon and Washington, D.C., welcoming their first certified buildings. In 2022, 113 new communities saw the addition of a BREEAM-certified asset, and several new asset types achieved certification, including the first-ever data center and hotel.

Breana Wheeler, BREEAM’s U.S. director of operations, talked to Commercial Property Executive about milestones and plans for the European sustainability model in the U.S.

LISTEN TO: Podcast—Inside BREEAM Certification

Tell us more about BREEAM’s ‘first-evers’ in 2022. What features distinguish these properties from the rest?

Wheeler: The leading global data management firm Iron Mountain was the first to receive BREEAM certification for a data center in North America. It achieved a BREEAM Excellent certification for its AZP-2 data center in Phoenix.

AZP Data Center. Image courtesy of BREEAM

While data centers can be a notably difficult asset when it comes to navigating sustainable performance, Iron Mountain demonstrated leadership in the space by executing measures that significantly improved performance during the design stage, such as producing detailed energy-use simulations and models, refining building material selection, and reducing water consumption by more than 50 percent to cut the costs and carbon emissions of future tenants. 

Additionally, the award-winning hotel and lifestyle brand citizenM achieved the first BREEAM certification for a hotel property, and also in 2022, BREEAM had its first self storage facility certified in the U.S.

Which states rank first in BREEAM certifications?

Wheeler: Hundreds of buildings have been BREEAM-certified in the U.S. over the past two years. California has the most BREEAM-certified assets, followed by Illinois, Texas, Georgia, New Jersey and Virginia to round out the top five, with New Jersey and Virginia tied in with the number of assets.

Which projects hold the highest BREEAM designation in the U.S.?

Wheeler: Currently, the highest BREEAM designation is held by Iron Mountain’s AZP-2 Data Center, which holds a BREEAM Excellent rating (76.1 percent). For BREEAM In-Use, it is citizenM’s New York Times Square Hotel with BREEAM Very Good (67.1 percent).

In a 2021 interview for our sister publication, Multi-Housing News, you mentioned WashREIT was going to spend $350 million on the expansion of its Green Bond Framework for green buildings that achieved BREEAM certification as part of its ESG roadmap. How did that unfold?

Wheeler: Elme Communities, formerly WashREIT, received BREEAM In-Use certification for eight of its multifamily properties in the Washington, D.C., region. Since the announcement, the firm has made significant headway toward its ESG goals, allocating a majority of its $350 million inaugural green bond offering to green building improvements and certification, as part of a multifaceted ESG strategy addressing energy efficiency, water efficiency and renewable energy. 

What is pushing the adoption of BREEAM practices?

Wheeler: Stakeholders across the real estate value chain have become laser-focused on evolving ESG expectations, making the business case for a science-backed assessment standard like BREEAM stronger than ever before. Our partners and their stakeholders continue to see tangible evidence that BREEAM increases the long-term value and rental yield of a building, driving and protecting asset value across property types and geographies.

The threat of climate change is no longer abstract. Climate events are becoming more acute and more frequent, helping investors realize the increased risk to asset value over the longer term. The threat of these climate catastrophes is compounded by the looming threat of stricter ESG reporting standards carrying penalties for poor asset performance, prevalent at both the national and regional levels. These regulations and standards further promote BREEAM adoption as they necessitate accurate and transparent metric tracking and reporting for owners and operators, which BREEAM is known to consistently deliver through a third-party certified, science-backed solution.  

There is also a financial opportunity in fostering a more sustainable portfolio. Tenants continue to push for the adoption of more sustainable practices in the buildings they live and work in, and BREEAM helps drive the adoption of best practices by setting benchmarks that exceed regulations and local practices, recognizing innovative initiatives.  

Which of the real estate property classes would you like to see embracing BREEAM faster? Why

Wheeler: We, of course, encourage assets across all property types to embrace BREEAM and more sustainable practices, and in 2022, we saw a notable increase in the number of industrial assets certified. This is heartening considering how properties within this class have often lagged in addressing ESG concerns. Increased BREEAM adoption within this market is expected to continue in 2023 as reports of double-digit growth in e-commerce sales coincide with the stakeholders’ search for more accessible, smart, and efficient properties. 

We’re expecting to also see BREEAM certifications grow in the self storage arena as the global market has experienced notable growth in recent years, adding 7 million square feet to the market in the past five years alone.

READ ALSO: Green Building—Pathway to Profit and Resiliency

Progress over perfection—how does this apply to sustainability in real estate?

Wheeler: Many owners and operators in the industry see sustainable asset certification as an end goal when it really should be viewed as a snapshot in time. BREEAM rating benchmarks help owners comprehensively understand the sustainable performance of their portfolio not only by identifying areas of strength, but perhaps more importantly, by identifying blind spots and key opportunities for improvement. This education-forward approach allows owners and operators to continue communicating sustainable successes to stakeholders while maintaining an accountability-based approach to ESG. Those who adopt a ‘progress over perfection’ mentality are ultimately better primed to receive relevant learnings that can be proactively applied cross-portfolio for future improvement.  

Furthermore, this kind of mindset helps to safeguard firms against the risk of greenwashing, which has been a significant concern for the sector. Through BREEAM and the many educational resources we provide for the industry, organizations are encouraged to share their story transparently and understand that the sector’s sustainability journey necessitates a long-term concerted effort that leaves room for progress as we navigate this complex situation.  

There’s an imminent recession looming over the world. How is that going to affect ESG commitments and BREEAM adoption?

Wheeler: Recessions are times to rethink and reposition assets to protect or grow value. The fundamentals driving ESG—climate risk, natural resource depletion etc.—aren’t changing or going away because the market is down and indeed provide an even further imperative to keep pressing forward to manage the risks these issues present. BREEAM provides a method of managing risk and capturing opportunities related to sustainability performance while delivering transparency, which is most needed in times of uncertainty. 

Amidst market shifts, building owners and operators need to adjust their overall strategies, and this includes their approach to ESG commitments. Particularly in this economic environment, investors are concerned about providing concrete evidence relating to the sustainable performance of their buildings and ensuring the accuracy of the data behind it, in order to prove the long-term value of their assets and accurately assess the health of their portfolios. To address these needs, BREEAM’s platform emphasizes transparency by offering data verification and third-party assessments to support credibility and validity.  

As more sustainable financing pathways emerge, this data will also be critical to the lenders and financiers, who will play key roles in financing the construction of new assets or the conversion of existing properties. 

For asset owners and operators, now is the time to be proactive—holistic, science-driven standards like BREEAM are best equipped to provide insights and guidelines for improved operations and reporting in order to meet increased stakeholder expectations. 

What lessons are yet to be learned by the U.S. from the EU in 2023?

Wheeler: The European investor market has been ahead of the U.S. for decades in terms of sustainability goals. European investors began asking detailed questions and seeking data to assess how their investments were performing in relation to ESG goals years before that became an industry practice with any prominent traction in the U.S. This has influenced how American investors look at sustainability and gauge the impact of their portfolios. 

Sustainable finance has been a focus of BREEAM since its inception, and we have found time and time again that European regulations are setting the bar for the U.S. Even as we see regulations taking effect from organizations like the Securities and Exchange Commission, investors who want European capital, in particular, will have to understand and comply with European regulatory requirements. As a global standard, BREEAM can help translate that for U.S. owners, reducing the reporting burden and supporting compliance.

The post BREEAM Advances on US Soil appeared first on Commercial Property Executive.

Image by lukasbieri via Pixabay

Traditionally, the design and development of commercial office spaces has been the task of architects, engineers and urban planners. While those professionals do much to influence office projects, they often have relatively little interaction with tenants and their employees. The day-to-day function of an office space, as well as its optimal uses, is the job of the property managers who oversee operations on both a micro and macro level.

In light of the evolving nature of office work, property management-related design considerations, at all stages of development, are central to a commercial office space’s success. According to experts, the key is a data-driven, nuanced analysis which takes into account tenant needs and how the space fits in to its surroundings.

A case-by-case approach

Chase Garbarino. Image courtesy of HqO

For many property managers involved in this process, a common theme is a recognition that optimality in management is specific to the uses and needs of a space’s tenants, as well as its integration with its surroundings. Chase Garbarino, co-founder & CEO of office and workplace management software provider HqO, sees value generation in these respects as a matter of site-specific strategy. According to Garbarino, such methods should be driven by data-focused analysis of engagement and productivity as well as tenant uses, something unique to individual office spaces and buildings.

“A corporate lawyer, in terms of the space they need for private conversation, is very different from an engineer in our company developing software,” Garbarino told Commercial Property Executive. “When you’re talking to a tech company, you should have an integral understanding of the trends of how engineers work. If it’s a call center, what are the different needs they have for physical space?”

Kelly Wheeler. Image courtesy of Transwestern

As such, property managers not only play an instrumental role in design process through their operational expertise, but through their technological knowledge. Transwestern embodies this approach in its management-focused development of office space, which focuses equally on tenant experience and maximizing an operator’s returns.

According to Kelly Wheeler, senior vice president & director of operations and strategy for asset services, “The first thing that is most important to understand is what the developer or owners’ goals are, and that is going to vary by asset class and location. Something that you may do in a central business district, you may not do 30 miles west of Houston.”

As a result, specificity informs the business goals of a project. “Recommendations change based on location and asset class,” Wheeler noted. “When you are going ground-up versus repositioning, you have to consider existing occupancy and the tenants already in place.”

READ ALSO: How Designers Put Natural Materials to Work in the Office

The firm implemented these principles during construction of Bank of America Tower in Houston, which was completed in 2019. The property management team was brought on a year before the building was occupied, which enabled it to evaluate everything from mechanical systems to lobby green spaces. “Being able to contribute those nuances during the development of a building are really valuable in the long run,” Wheeler said.

Constant evaluation

To evaluate the needs of tenants and workers at both the macro and micro levels, Garbarino emphasizes using engagement data, as well as building customer-focused relationships. What managers and their colleagues should not do in these aspects is simply borrow from other operators. “The problem historically, in the industry, has been an amenity arms race,” he cautioned. “Don’t go in LinkedIn and see that one hot new amenity that everyone is posting about; that is the polar opposite of being customer-oriented.”

This is a continued focus for Transwestern, particularly regarding the tenant experience in a new development. “Thinking about what the tenants’ experience is going to be after the building is occupied really comes from people who have experience operating the building,” Wheeler noted. “Do you design an open coworking space so that they have a third place to work? Do you have an outdoor garden?”

Building relationships

Chuck We. Image courtesy of Hudson Pacific Properties

Alongside the relationships that tenants will have with the space and each other, property managers should consider how an office building is integrated into its location. Those considerations range from the property’s carbon footprint to its potential uses as a public space.  For Hudson Pacific Properties, this mindset governs both the company’s approach to sustainability and its interactions with surroundings. From a sustainability perspective, Chuck We, executive vice president of the firm’s northwestern and Canada investments, takes a two-pronged approach, which he sums up as “operational sustainability” and “sustainability from embodied carbon.”

We detailed the firm’s emphasis on moving from coal and gas power toward electrification at the buildings it owns and manages. This approach extends to embodied carbon, where Hudson Pacific has streamlined the sourcing of its materials and products to providers that are able to source locally. “[In the] built space, if you can have an impact on embodied carbon by rebuilding and creating, you can have just as much of an impact on the environment.” We told CPE.

Where the more intangible relationships are concerned, Hudson Pacific has taken to treating spaces as communities that should be integrated with their surroundings. Areas that would conventionally be used for employee dining are transformed to become more accessible.

“Historically, you would look at how many seats can we put out there for people to come out from their office space and have lunch,” he said. “Now, we actually look at that as a bit more of a public amenity. You can drive a couple of food trucks up to service that lunch. It’s not just about building the hard-edge facility; it’s thinking about how you integrate it into the overall thinking about your campus and your offering.”

The post Property Management’s Role in the Development of New Office Spaces appeared first on Commercial Property Executive.