As 2016 rapidly comes to a close, Bisnow takes a look at the concerns and priorities for real estate firms in the year ahead. Bisnow sought out IREM president Michael T. Lanning, whose background includes SVP and market leader at Cushman & Wakefield in Kansas City, MO. The following are his four biggest challenges for the industry to tackle in 2017.
To keep up the momentum, management teams must focus on hiring and securing new young talent to the field—particularly with those seeking to establish their careers in the real estate industry over the long term. Brokerages and real estate businesses can do their part by supporting young professionals and mentoring them through internships and in the early stages of their careers. One surefire way to ensure the nurturing of young talent is to reach out to students who may not have considered real estate as a possible career path; IREM’s university outreach program, for instance, seeks out students before they graduate college. Planting the seed early is key; real estate is a tough industry, and those hoping to enter it must come prepared.
As we slowly begin preparing for the challenges and rewards of 2017, more scrutiny is being placed on the reporting and results stemming from each real estate project. Helping project owners and developers outline and reach their sustainability goals may play an important role for a multitude of real estate firms, but should begin to take precedence.
Keeping Up With Tech Advancements
Most people rely on some form of smart tool as their primary form of communication, whether that’s a smartphone, tablet or laptop. Email, instant messaging, video conferencing and social media are now the primary avenues of immediate contact, and real estate firms need to recognize that—and readily adapt to it. “Real estate managers today have to be adaptable to changes in the workplace and in the properties they manage,” Michael says. “And that includes adopting new technologies, software and apps.” Whether it’s lease renewals, remote meeting capabilities, virtual building tours or online banking, real estate managers need to pay attention and adapt as more professionals begin incorporating these tools into their careers.
Although real estate is cyclical, every player in the industry from the small-town broker to the CEO of Cushman & Wakefield must be prepared to weather every storm. While it is impossible to predict and micromanage every aspect of the market and its effect on one’s business, it is essential to develop evolving tactics and strategies to protect it. This necessitates a wide range of skills, particularly in effectively managing. The only thing real estate brokers and managers can be inflexible on is flexibility, and they should expect to adjust their management focus on a yearly, monthly and even daily basis to satisfy clients, developers and owners.
Read more at: https://www.bisnow.com
By Henry Updegrave | Shared Post from the Hightower Blog
This is a sneak preview from The Modern Broker, our guide for brokers in a tech-enabled world, coming out next week. Subscribe to the blog to get notified as soon as it comes out!
One of the key parts of being a modern broker is staying up to date with latest technology tools. They can supercharge your business, and you never know when technology might end up being the difference between winning or losing a deal.
If you’re a real estate professional and haven’t checked out Floored, you are seriously missing out. One of the hardest parts about marketing an under-construction building is selling the space’s potential. Floored creates 3D renderings of any space that allow prospects to visualize the space they need. Maybe you have an unfinished building and your client wants to see what it would look like as a finished office. Or maybe you have a space that is finished and furnished and they want to see it as a blank slate. Floored can do it all.
The nice thing about Evernote is it’s like a dozen apps in one. You can use it to take notes, record audio clips, snap photos, scan documents, share notes, make presentations on the fly, and more. All the notes are easily searchable, since they are stored as structured data, meaning your notes and thoughts are never more than a few keystrokes away. While Evernote was at one point rumored to be in bad shape as a company, it’s tightened its focus and started growing again this year, much to the delight of its loyal users.
We all have our favorite news sources, but it’s nice to have an app that is specifically for industry news. The News Funnel is free and streams aggregated real estate news 24/7. You can create a customized feed and get instant access to relevant local and national news. And if you’re part of a real estate company, you can use The News Funnel for distribution, content production, and advertising.
Using cloud storage is key to being a mobile broker. Box is one of the best out there because it’s secure,offers a bunch of free space (10 GB), and has great collaboration tools. You can pull up contracts, forms, and plans from anywhere.
CompStak is a free lease comp exchange for CRE brokers, appraisers, and researchers. All comp submissions are completely anonymous so user privacy is protected and they guarantee their comps are recent and accurate. CompStak has in-house expert analysts that review and cross check every transaction for legitimacy and take care of data entry so you can send your comps in any format in about a minute. It can be extremely helpful to access comps when out with prospective tenants (and it integrates with Hightower).
DocuSign allows for fast, easy, and totally secure electronic signatures. Completely legal and life-changing. Once a client is ready to sign, you don’t want to waste a single minute getting the contract in their hand. You can also store and send documents within the app. DocuSign has specific plans designed for real estate professionals, so it’s customized to exactly what you need.
Strong internet access is an absolute necessity in today’s workplaces, especially when it comes to attracting millennial tenants. That’s why WiredScore started offering a new building certification for connectivity. While you might think that certification is nothing more than a piece of paper, it’s actually a valuable sales tool for brokers. It gives them an objective, third-party verification that a building’s internet is up to snuff, which they can then show to clients in order to help steer them toward the best possible building.
You’re probably already on LinkedIn. But even if you’ve reached the coveted “500+ Connections” milestone, chances are you’re still probably not using LinkedIn to its maximum benefit. In addition to posting in relevant groups and sharing original content, you can also tap into add-ons like LinkedIn’s Sales Navigator to win more deals.
It can be extremely tricky for tenant reps to find reliable contact info for all of their leads. As one of the biggest existing B2B contact databases, ZoomInfo solves that problem. You just sign up, search your potential leads on ZoomInfo, and get their up-to-date phone numbers and email addresses. It makes it much easier for brokers to keep their pipelines full.
Think of Reonomy as a more commercial real estate-focused version of ZoomInfo. It helps brokers uncover contact info for owners of specific buildings by drilling down into alternate data sources, such as tax records. Its analytics also give brokers a read on a building’s leasing activity and likelihood to sell.
42Floors is a simple, intuitive site where business users can look up local office vacancies. It’s emerged as one of the best places for agency brokers to list their properties, especially if they’re targeting tech tenants in urban centers. Since launching in New York City in 2012, the listing service has expanded across the country.
Tour books are an important piece of marketing collateral for brokers. They help potential tenants remember the spaces they’ve toured, access important details about a space’s amenities, and hang onto the broker’s contact information. The problem is that they can take a long time to make–time that could be spent building pipeline or giving even more tours. Spaceful solves the problem with a simple software that helps brokers build beautiful tour books quickly.
In a time where everyone has a smartphone, a tablet, and and a desktop computer, it seems like setting up meetings should be easier than ever. But in many cases, all those options create confusion and simply add another detail for meeting attendees to hash out during scheduling. GoToMeeting cuts through that and lets you set up video or voice conferences that can be accessed by clicking a link or dialing a phone number. It’s a great way for brokers to keep in contact with tenants and owners.
Hightower is the leading leasing and asset management platform that puts all of your leasing data at your fingertips in real time. Your business is mobile and Hightower is too. Our mobile app enables commercial real estate professionals to run their leasing process from anywhere at anytime. The platform is intuitive and collaborative, and increases visibility, productivity and results. Best of all, there are specific products for both tenant reps and landlord reps.
By Henry Updegrave | Shared Post from the Hightower Blog
When most people think of commercial real estate, their minds gravitate toward the types of properties they’re most familiar with: offices (where they work) and retail (where they shop). They’re usually not thinking of the industrial properties where the goods they use are made and shipped from.
But CRE professionals know better than to underestimate the importance of the industrial space. While the deals for these properties may not be as eye-poppingly rich as those for premier office and retail space, industrial tends to be a more stable, long-term investment for owners and a consistently in-demand property type for brokers. However, anyone who wants to get involved in industrial needs to be an expert.
The foundation of that knowledge always starts with an understanding of the basics. Here’s our rundown of the eight most common types of industrial real estate.
The word “manufacturing” evokes images of giant factories churning out products. And yes, that’s true on a basic level. Manufacturing sites are where goods are produced and assembled, and according to NAIOP, they tend to be less than 20% office space, have loading docks for trucks, and clear heights of at least 10 feet. But that leaves plenty of room for variation, as these properties change a lot based on their purpose. Here are the two most common buckets:
- Heavy manufacturing: These giant plants tend to make heavy-duty goods and materials. They usually have tens or even hundreds of thousands of square feet in usable space, along with powerful pieces of equipment, three-phase electrical power, and plenty of space for trucks to load up product. The exact machinery inside is usually customized to the end user, so heavy manufacturing plants need to be renovated when they take on new owners or tenants. Consider Austral USA, the massive shipbuilding facility in Mobile, AL. If someone else wanted to take over that factory and use it to build, say, cars, they’d need to change up the equipment accordingly.
- Light assembly: These spaces tend to be a lot smaller and simpler than their heavy counterparts. That’s because they’re usually where products are assembled from smaller parts, stored, and eventually shipped off to be sold to consumers. As such, they can much more easily be reconfigured for different tenants. A quick search for manufacturing properties onLoopNet will likely reveal several sites in your area that fit the bill.
Storage and Distribution
While manufacturing sites are where products are made, these properties are all about how products are moved around and ultimately sent to an end user. Size can vary wildly depending on the type of property, but these facilities tend to be around 20% office space at most. Here are three common types:
- Distribution warehouse: As the name implies, these warehouses are primarily used to ship goods, which means location matters. If you want to quickly get your products anywhere in the country, you need to be toward the middle of the country, preferably near an airport. But the size of the occupying company can change that, and impact design as well. For example, Amazon occupies several custom-built, high-tech fulfillment centers around the country (hence why it offers same-day delivery in so many markets), some of which are as bigger than 1 million square feet.
- General purpose warehouses: These warehouses are more geared toward storage than distribution. That difference can play out in several ways. For example, most general purpose warehouses have a lower door to square footage ratio, since products aren’t being moved in and out as often. It also means that location matters less than what’s being stored there, which is what drives most of the variation in these spaces. For instance, one subset of general purpose warehouses is cold storage facilities, which are equipped with freezers and generally used to store perishable food items.
- Truck terminal: On the other end of the spectrum from general purpose warehouses are truck terminals, which are entirely devoted to transportation. They’re simply intermediate sites where goods are loaded from one truck to another, and have little to no storage space.
Flex properties are designed to give tenants flexibility in usage, and are generally made up of at least 30% office space. However, there are also more specialized types of flex buildings that serve more specific purposes for industrial tenants:
- R&D: R&D refers to research and development, the process by which companies create new products and improve existing ones. R&D properties vary a lot depending on the tenant and what they’ll be using the space for. For example, Google’s soon-to-open self-driving car project facility will be 53,000 square feet, feature wide open, indoor spaces to test self-driving cars away from prying eyes, and be located near Detroit, which is home to some of the country’s best auto talent. The property specifications fit the use case perfectly.
- Data Center: Data centers are where companies put the equipment that holds their data, keep their internet up and running, and make cloud storage possible. They average about 100,000 square feet but can get much bigger, the world’s largest being a 6.3 million square foot facility in Langfang, China. The reason that size varies so much is that lots of companies choose to lease space in third party data centers. As of Q4 2016, this is one of the hottest sectors in commercial real estate.
- Showrooms: Showrooms typically have a mix of space devoted to offices, warehousing, and most importantly, showrooms. Typically, more than half of the space is devoted to showcasing and selling products. The most familiar example to most people would be a car dealership, but there are several other kinds of businesses that need showroom space.
Function Over Form
This list is by no means comprehensive. There are several other types of industrial space, not to mention other characteristics that differentiate the types we cover here. But these are the most common types, and they illustrate a key point about industrial real estate: The spaces need to be tailored to specific goals for different kinds of businesses.
By Katie Paxton Christ | Shared Post from the Hightower Blog
We know that millennials are already making a big impact on office life and work style. But, since many offices have come to be a reflection of the company culture, the millennial effect is also impacting the physical office, interior design, and furniture.
These trends are influencing some of the most common tenant improvements (TIs). As visual inspiration, we’ve included a few links to Office Snapshots, essentially the Pinterest of incredible new office spaces. Take a click and see the vast array of implementation of these trends.
First impressions are everything. For both your clients and your future employees. Branding in entry ways and reception desks are critical. Use recurring themes and design elements to consistently remind people where they are — work with your designers to select key accent colors, furniture pieces, or lighting elements that emphasize the brand. Tough Mudder’s New York headquarters is a great example — it is very industrial, with just enough orange. On a slightly more subtle note, Index Ventures in San Francisco uses materials and elements from their original office to maintain brand continuity. More recently, Pandora filled its new Minneapolis office with references to local artists like Prince, reinforcing its brand as a music company and its ties to the city.
Remember, however, that culture should always inform design. Not the other way around. Only have shared spaces is communication and collaboration really is important to your culture. Otherwise, there will be a sense of misalignment.
For brokers and building owners, your tenants should also be proud of their building. While location is mostly everything, there is strong value in a statement lobby, elegant (and efficient) elevators, and great amenities and shops.
Large Open Spaces and Small Phone Booths
Rent prices are climbing, and sf/person is dropping. Gone are private offices and extra-large cubicles with high walls. In their stead, are open-air environments with bench desking and casual seating clusters. Unfortunately these settings often make for a noisy work environment.
Phone booths, huddle rooms, war rooms, team rooms, nap rooms – all offer an escape from the melee of conversations and phone calls. They should be soundproof, internet connected, and tucked away from high-traffic zones. The ultimately difference in each type lies in the level of technology (mounted screen, white board) and seating style (table, couch, bathtub?). Styles cover a huge range, from the traditional to deconstructed British phone booths and more. Boston-based wireless audio startup Sonos even offers its team smaller, more personal spaces at a 1:1 ratio.
Furniture Configurations for Inspiration and Innovation
Have you ever tried to work together in a group and found people carrying chairs, moving tables, and struggling with computer cables? Steelcase, Herman Miller, Knoll and other workplace furniture designers have begun to design furniture and settings specifically for collaboration, brainstorming, and innovation. Knolls’ Antenna Workspaces, Herman Miller’sLayout Studio and Steelcase’s media:scape are evidence of an industry-wide adaptation of the collaborative trend. Do you have any furniture dealers in your Rolodex? You should. Strong relationships between owners, brokers, design firms and vendors mean cost savings for your tenants.
In the history of commercial real estate, private offices sat around the edges of the floor plate, while all the juniors and amenities spaces were clustered towards the middle. Walls, doors and bookshelves kept daylight from filtering into the rest of the office.
But, as millennials spend more time in the office, the separation between home and office is blurring. As a result, work spaces are being designed to accommodate longer hours of work and comfortable, pleasant environments. Daylight is becoming a necessary feature for all employees and spaces. When walls and cubicles are still needed, the trend leans towards frosted glass and lowest possible walls to maximize access to daylight. Storage, copy rooms, restrooms and phone booths are clustered in the middle. Software AG’s San Francisco office is a great example.
By Kelly O’Brien | Shared Post from the Hightower Blog
When the biggest commercial real estate owners make moves, the rest of the industry feels the consequences. So who are these players and how do their strategies differ? We’ve found a lot of variation at the top, with each landlord taking a unique approach to their portfolio.
Here’s our overview of the top five commercial real estate owners by square footage.
Prologis is the top CRE owner in the world, with almost 607 million square feet around the globe as of 2015, according tothe 2015 Annual Report.
If you include facilities managed or still under development, that number rises to 669 million square feet.
The behemoth company both owns and invests in industrial real estate, focusing on supply chain facilities near major transportation hubs, including airports, seaports and interstates. Prologis uses its immense size as a selling point to lure e-commerce companies with diverse and growing needs.
“If the building you lease today doesn’t work for your tomorrow, we have a lot more space where that came from, in a lot of different markets,” Prologis CEO Hamid Moghadam told REIT.com. “So if you are a big-time company and have ambitious growth and expansion plans, you can make a gazillion little deals, or you can come to Prologis for one-stop shopping.”
Because of its global presence, Prologis also takes the threat of climate change seriously and works to keep its business sustainable. To that end, the company releases a sustainability report every year and has been reporting its climate footprint since 2006. It also takes advantage of its position as one of the world’s largest owners of rooftops to install solar panels on many of its buildings.
2) Blackstone Group
The mammoth international investment firm includes among its assets the world’s biggest real estate private equity operation. The unit owns many kinds of CRE properties, totalling $103 billion in assets, and its office holdings alone would be enough to put it in the top five.
Blackstone owns 153 million square feet of office space globally, and is the largest owner of office property in the U.S. As of March 2015, its domestic holdings include the iconic Willis Tower in Chicago with 3.8 million square feet and a stake in at least six Manhattan office buildings totalling 5.3 million square feet. Blackstone also owns 179 million square feet of retail space and 153 million of industrial, along with 96,000 multifamily units.
Blackstone sums up its approach to CRE with the slogan, “Buy it. Fix it. Sell it.” The company’s vast stores of liquid capital allow it scoop up investments at the time when they’re most in need of improvements that will boost their value upon resale.
3) Simon Property Group
Simon Property Group lives at the other end of the CRE spectrum from Prologis. A self-managed real estate investment trust, it owns, manages and develops hundreds of shopping centers around the world.
Simon owns 209 properties domestically, totaling more than 184 million square feet of retail space in the U.S. in 2016,according to National Real Estate Investor. Most of those properties are malls and premium shopping outlets, including Copley Place in Boston, The Forum at Caesars Palace in Las Vegas and Woodbury Commons in New York.
The company likes to say it is in the business of creating destinations, not just spots to go shopping. The focus has paid off, as Simon has been named the most admired company in real estate by Fortune magazine six times, including in 2015 and 2016. In 2016, Simon was ranked No. 1 for innovation, social responsibility and quality of management, among other things.
4) Duke Realty Corp.
Duke Realty Corp. manages to be the fourth largest CRE owner on our list – with 138 million square feet of assets owned or under development – despite focusing exclusively on the U.S. market.
The self-managed real estate investment trust specializes in industrial and healthcare properties, but offers a wide variety of services, including development, leasing, property management and construction.
Duke, a publicly traded company, continues to hone its investments, aiming for the most profitable areas. In 2009, 55 percent of its portfolio was made up of office buildings, but that has since fallen to 1 percent. And it plans to increase focus on “modern bulk distribution properties” to strengthen and expand the partnerships it currently has with e-commerce companies.
The medical office buildings Duke owns, though they make up a smaller percentage of its holdings in terms of square feet, work as a steady counterpoint to the industrial holdings. Medical facilities are more resistant to economic downturns and tend to have longer lease periods, with Duke’s medical tenants staying an average of 13 years.
5) General Growth Properties
Rounding out the top five CRE owners is General Growth Properties, another retail operator with 131 retail properties totalling 128 million square feet, according to the firm’s 2015 Annual Report.
General Growth Properties is a real estate investment trust that owns and operates 100 of the top 500 malls in the country and uses its extensive network to work with large companies looking to expand to multiple locations at once with its “Portfolio Review” program.
It also puts a premium on corporate sustainability and has been awarded the Green Star award by the Global Real Estate Sustainability Benchmark for its focus on reducing water and energy consumption at its mall properties.
By Erik Dolan-Del Vecchio | Shared Post from the Hightower Blog
Today’s developers have a lot more to consider than just the local building code and the laws of physics when designing a new property or renovating an existing one. Working through the seemingly endless list of building certifications can become a massive project in its own right. That’s why below, we’ve broken down the major certifications by category and their major benefits.
The most well-known class of certifications, green certifications cover a lot of ground. They address the direct and indirect impacts buildings have on the environment by setting guidelines for the design, construction and operations of different kinds of buildings. In order to attain one of these certifications, a building must meet several requirements, primarily around water usage, energy efficiency and incorporation of sustainable materials in construction.
While these certifications do vary somewhat in their sustainability requirements, the biggest difference often lies in how compliance is documented. Some require long and expensive applications while others are affordable and easy to attain. Here’s an outline of the key general green certifications:
- LEED: Internationally recognized, LEED has certified more than 13.8 billion square feet of building space and is run by the U.S. Green Building Council, a non-profit organization. This certification is required of buildings for many U.S. federal agencies, along with state and local governments. It consists of nine rating systems spanning everything from new to existing buildings. LEED certification relies on documentation instead of on-site testing and once you’ve gotten it, LEED effectively lasts forever. While the program has many positives, it is also often cumbersome and expensive to acquire a LEED certification.
- BREEAM: Historically the certification of choice in the U.K., BREEAM is the longest-running method of assessing and rating a building’s sustainability. The key difference from LEED is that BREEAM certification can only be attained after having licensed assessors examine the building. They report back to BREEAM’s parent company, Building Research Establishment, and issue certification if the building passes their inspection. One common critique of BREEAM is that it’s no longer non-profit and tends to charge significantly higher fees than LEED does.
- Green Globes: Adopted from a Canadian protocol, this certification operates in the U.S. through the Green Building Initiative and follows an online assessment and rating system. Green Globes covers green building design, operation and management and is unique in being easy to use and affordable to obtain. It comprehensively covers seven categories, including energy, water and emissions, yet is far less widely used and recognized than LEED.
Energy and Health Certifications
Each of these certifications is specifically focused on a single area of a building’s sustainability or health impact. Since these certifications are more specialized, developers can use them to attract buyers or tenants who care about creating a better experience for their occupiers:
- Energy Star: Mainly focused on energy usage, Energy Star is a widely recognized, government-run product certification label that certifies lighting, heating and cooling equipment, commercial roofing and office equipment, among other goods. It also provides an energy performance rating system for buildings, awarding top performers Energy Star certification for one year. While not all building types are eligible, the program is expanding to include more. The best thing about this program is that it’s free and helps developers actually save money by recommending them products that use the lowest amount of energy.
- Greenguard: This certification zooms in on indoor air quality and promotes the use of low-emitting building materials, cleaning agents, paints, electronics and other consumer products. Not widely used, it aims to assess the air quality inside a building to ensure the health of those in it. This sets it apart from most certifications, which tend to look at the ways a building impacts its surroundings, rather than the people inside it. It’s developed and run by the Greenguard Environmental Institute and offers certification for new commercial and residential buildings along with major renovations. Certification requires meeting strict requirements and must be renewed annually.
- WELL Building Standard: Managed and administered by the International WELL Building Institute, a public benefit corporation, this certification has a performance-based system for measuring building features that impact human health and wellbeing. Specifically, WELL focuses on air and water quality, fitness, comfort and interior lighting. The idea is that businesses stand to benefit if they design their buildings in ways that make employees happier and healthier, and therefore more productive. Developers must register online and work with an assessor, who will review project documentation and perform onsite testing, to gain certification. The process also isn’t cheap, with performance verification alone costing around $9,000, depending on building type and size.
New to the world of building certifications, connectivity certifications evaluate the quality, speed and reliability of a building’s internet connection. Fundamentally different from the certifications above, this certification serves as a tool to would-be tenants and investors who want to know how a building’s connectivity stacks up rather than an overview of a building’s sustainability or health measures.
- WiredScore: The first and only connectivity certification to date, WiredScore dates to 2013 and was launched by New York City’s Bloomberg Administration in partnership with New York City Economic Development Corp. Since then, WiredScore has certified over 500 properties totaling more than 200 million square feet of office space in more than 30 cities. The system offers landlords a platform to share information about connectivity with tenant and broker communities and takes between 45 and 60 days to determine a building’s certification. Building owners must pay a fee for their certification, which lasts two years.
While WiredScore is currently the only building certification of its kind, it’s likely that we’ll see similar certifications pop up as technology becomes more and more important to commercial real estate. For instance, it’s easy to imagine a certification system that rates office buildings based on the level of smart technology with which it’s equipped.
It’s useful and valuable to secure the right building certifications. Obtaining them can save money by cutting energy usage, attract tenants by showing off a building’s level of connectivity or qualify for a government contract thanks to a building’s environmentally friendly design. But before a certification can do any of those things, you need to know which ones are right for which buildings. From general green certifications to the new breed of connectivity certifications, our rundown is a good place to start.
By Kelly O’Brien | Shared Post from the Hightower Blog
The entire globe has contributed to climate change, but the negative consequence will be unevenly distributed on the local level. Coastal cities in the U.S. have already been hit by damaging floods as a result of rising sea levels and a growing number of extreme weather events.
Those problems will only get worse in the coming decades, and commercial real estate will bear a significant amount of the damage. By 2050, commercial real estate losses due to flooding could exceed $1 billion per year. But since demand remains high in major waterfront metros like New York, Miami, Boston and San Francisco, developers in those and other coastal cities are taking extra measures to make sure their buildings are protected from floods and other disasters.
When It’s Done Right
One early example of climate-conscience construction shows how valuable such projects can be to their communities when done right. Opened in 2008, the Ikea in Red Hook, Brooklyn sits on the site of a historic dry dock.
Being perched on the shoreline forced the Swedish home furnishings retailer to grapple early on with the dangers of floods and heavy storms. The store was built on pillars to keep merchandise above the level of any rising water, while the ground level was given over to a parking lot. Power generators and electrical systems were also elevated to avoid water damage.
The planning paid off in 2012 during Hurricane Sandy. Thousands of homes and other buildings in Red Hook took heavy water damage and lost power during the storm, but not Ikea. As one of the biggest, functioning buildings in the days after the storm, the store hosted the local FEMA headquarters and gave out hot meals to displaced homeowners. Local waterfront advocacy group PortSide New York even gave the store a “Good Neighbor Award” for its recovery work.
When It’s Good Business
Ikea’s planning won it good will in its community and increased business after the crisis, but climate-change resistant developments often make financial sense even if a disaster never hits, according to Sarene Marshall, the executive director of the Center for Sustainability at the Urban Land Institute.
Marshall leads ULI’s “Returns on Resilience” project, which highlights buildings around the country that have seen business benefits from environmentally conscious design and construction.
She points to the office building at 1450 Brickell in downtown Miami as a prime example. City zoning requires a number of storm precautions, like impact-resistant glass on the bottom 30 feet of any building to protect against hurricane winds. But the office’s developers went beyond the city minimums, sheathing the entire tower in the more expensive glass.
Obviously, that makes 1450 Brickell better prepared for storms, but it also pays off on calmer days. The impact-resistant glass is a better insulator than cheaper materials, which helps the office keep cooling and heating costs down.
“So every single day there’s not a hurricane, they’re saving money in that building,” Marshall told Hightower.The developers also turned the building’s climate-preparedness into a marketing tool. Because they could argue that the building would be functioning in the days after a disaster, they were able to lure financial firms that require uninterrupted service, according to Marshall.
“They leased their building twice as fast as their competitor buildings that were going up at the same time,” she said.
When Continuing Service Is Crucial
In the case of the Spaulding Rehabilitation Hospital in Boston, the stakes of staying open are even higher. During Hurricane Katrina, more than a dozen patients died at a medical center in New Orleans. Those tragic lessons were still fresh when development began on Spaulding a decade ago, and developer Partners Healthcare took every precaution to make sure its new hospital could survive a similar disaster.
Built on a curve of the Mystic River near the Boston Harbor, the hospital is capable of operating in isolation for four days after a weather emergency. The first floor is 2.5 feet above the estimated 500-year floodline. But even if water does reach above that mark, it will only touch the cafeteria, meeting rooms and physical therapy studios – all non-essential spaces that would be minimally damaged by water.
Instead, patient rooms and crucial mechanical infrastructure are elevated on upper floors. A large diesel tank sits in a flood-proof vault in the basement, ready to pipe four days worth of gas to generators on the roof in case the electrical grid goes down. The hospital is also fully stocked with four days worth of food and water for patients and staff.
After a flood, water would quickly dissipate through an extensive drainage system, clearing the way for rescue and support crews to access the building.
When It’s Over
Nearly as important as surviving a natural disaster is being able to asses the damage and resume operations as quickly as possible once it’s over.
In San Francisco, the Building Occupancy Resumption Program allows commercial property owners to get pre-certified so that a private inspector can declare their building fit for occupancy within hours after a disaster, rather than waiting several days for the Department of Building Inspection to do an assessment. The multi-family residential building at 455 Market Street, managed by Cushman & Wakefield, has found that the program also reduces the cost of earthquake insurance because the building is less likely to lose rent in the days following a tremor.
Although BORP was created in response to California’s frequent earthquakes, it’s a great example of the kind of public-private partnership Marshall says is crucial to building climate-change resilient cities.
Marshall applauds developers who protect their buildings from climate-related risks, but also encourages them to engage with local governments on broader plans.
“The building, in some ways, is only as resilient as the community around it,” she said.
It’s one thing to move electrical systems to the roof, but what if the city power lines delivering the electricity run underground and are swamped by a flood? Having a functioning office building in the hours after a hurricane is great, but what if the whole urban transportation system has come to a stop and no one can get to work anyway?
Those are the hard questions developers and city officials will have to answer together in the years to come.
By Henry Updegrave | Shared Post from the Hightower Blog
It is no secret that the U.S. office market has been lagging behind in the broader commercial real estate recovery. The sector has struggled to regain its footing in a few key areas.
The biggest impediment to recovery continues to be tepid demand for space – primarily due to greater tenant emphasis on workplace efficiencies, corporate downsizing and lower levels of growth for office-using jobs specifically. “Tenants have gotten much more focused on space efficiency this cycle and packing more folks into a smaller number of seats,” said Jed Reagan, a senior analyst at Green Street Advisors. Green Street hosted a webinar on “US Office Real Estate: Fundamentals & Valuation” in early October that highlighted current conditions along with a look at what’s ahead for the market.
Here are some of the key takeaways.
Vacancy and Demand Are Low, Yet Rents Stay High
The subdued demand has resulted in vacancies above historical levels. Nationally, occupancies are hovering between 84 to 85%, which does not compare favorably to past recovery cycles. In 2000, for example, 35 out of the top 50 metros reported occupancies above 90%. Today, only four of those metros are above 90%, according to Green Street. “There has simply not been enough demand to produce any meaningful occupancy growth compared to prior cycles,” said Reagan.
A surplus of space would normally tip the balance in favor of a tenant’s market. Yet leasing costs have remained high, noted Reagan. One reason for those high costs is that tenants are changing the way they think about space and are demanding more tenant improvement dollars.
Lower levels of construction are providing some good news for landlords and investors, as there has been very little new competition added to the market over the past several years. Although development activity is picking up in some metros, Green Street is forecasting that supply will remain at moderate levels for the next few years. Notably, construction is on the rise in some Sunbelt and tech markets, such as San Jose, Nashville and Austin, are seeing higher levels of construction. Manhattan also has a large amount of space that will be coming to the market over the next three to five years that is likely to create some softening as that space is absorbed.
Good News for Owners: Office Property Values Are Sky High
Despite the lackluster fundamentals, it is a great time to be a seller in the current market. Office property values are at all-time highs. Given the yield-starved environment, global capital is expected to continue to flow to the U.S. real estate market, especially office properties located in major gateway markets. According to the Green Street Commercial Property Price Index, office values are about 10% above the prior peak in 2007. Cap rates also have moved down from about 9% to almost 5% over the last six or seven years, noted Reagan.
That being said, over the past year appreciation has been slowing, cap rates have flattened out and the buyer pool has thinned in some markets as buyers have become more selective. “There is some evidence that suggests that lower quality real estate has seen some downward valuation pressure. So, that is something that we are watching,” added Reagan.
Green Street is forecasting that occupancy and rent growth will remain fairly steady over the next couple of years, but will decelerate closer to 2020. “The good news for office is that the deceleration is expected to come later and slower than the other major sectors,” said Reagan. So, the outlook for office is favorable compared to other property types.
Irvine Company, So Cal Edison and So Cal Gas Host Smart Buildings Seminars, Exhibit Hall and Networking
The Buildings Maintenance & Management Expo (BMME) featuring educational seminars by Irvine Company and So Cal Edison, building management industry speakers, exhibitor showcase and networking opportunities will be held Tuesday, October 25 at Anaheim Convention Center. Admission is free.
“Sustainability initiatives, new technologies, policy mandates and funding incentives are shaping the future as public and private sector leaders explore, source and integrate smart building solutions,” said Scott Kitcher, conference co-sponsor and President & CEO of Sustain OC, formerly Clean Tech OC.
Buildings management, sustainability and operations seminars will be held on topics such as microgrids, energy storage, seismic retrofits, security, compliance and smart systems. The Orange County Sheriff Department will hold a special active shooter and crisis management clinic, and presentations by leading utility, energy and industry experts include:
* Rich Bluth, Irvine Company
* Caroline McAndrews, Southern California Edison
* Corey Lee Wilson, International Facility Management Association
* Scott Kitcher, Sustain OC (formerly Clean Tech OC)
* Mark Walter, Biix Smart Building Software
* Heather Williams and Shane Millhollon, Orange County Sheriff Department
* Stephen C. Duringer, Duringer Law Group
* Andrea Marr, Regatta Solutions Energy Services
* William Exeter, Exeter 1031 Exchange Services LLC
Facility managers, commercial real estate developers, architects, engineers and government officials are invited to access the latest products, services and clean tech equipment in the exhibit hall. This event is co-hosted by The Register, International Facility Management Association, Apartment Association of Orange County, Sustain OC and Buildings Maintenance & Management Magazine. Hours are 8:30 am to 4:00 p.m. For pre-registration and more information, please visit www.buildingsexpos.com.
Editors Note: For interviews or media credentials contact: David Kuff at firstname.lastname@example.org