Originally published on June 29, 2020 by Meredith Hobbs
The COVID-19 pandemic will set a “new normal” for the office workplace as companies adopt and integrate remote work practices deployed during the pandemic, according to a new report from Cushman & Wakefield. Consequently, it will morph from a single location to an “ecosystem of different locations and experiences.”
Having—for the most part—quickly sheltered in place in March and April, office workers across the U.S. are slowly venturing back to their workplaces, according to a new weekly report from Kastle Systems International.
The Kastle Back to Work Barometer is an average based on millions of aggregated, anonymous daily building access data points from Kastle-secured properties in 10 major metro areas: Austin, Chicago, Dallas, Houston, Los Angeles, New York, Philadelphia, San Francisco, San Jose and Washington.
Originally published in Summer 2020 Issue by Shawn Moura, Ph.D., Trey Barrineau
Fears of contracting the coronavirus, government bans on public gatherings, mandatory closures of nonessential businesses and social distancing measures pose ongoing challenges to the retail and hospitality sectors. Many stores have been forced to temporarily close their doors in response to government mandates or in reaction to sharp declines in foot traffic.
The coronavirus crisis could also hasten the failure of retailers that are heavily indebted or have poor cash flow. The Wall Street Journal noted in March that junk-bond-rated retailers that are particularly reliant on Chinese imports are most vulnerable to the effects of the virus. Healthier retailers may eventually recoup some of their losses after the outbreak when consumers return to stores to satisfy pent-up demand for goods and services.
Originally published by NAIOP Charlotte
“The virus’ macroeconomic impact is now quite visible in U.S. data,” according to the Q2 2020 NAIOP Office Space Demand Forecast. “Since March 2020, COVID-19 has markedly altered the U.S. macroeconomic landscape as states issued stay-at-home orders designed to limit the spread of the disease. Workers across multiple industries are staying home, and it is unclear how or when they will return their workplaces. Due to the turmoil in the national economy, rising unemployment and continued uncertainty about future work arrangements, the U.S. office market absorption is forecast to decline into negative territory through the second quarter of 2021.”
The office sector appears to be less vulnerable to disruptions associated with the coronavirus pandemic than retail or hospitality, but it’s not entirely immune to an economic downturn — or the acceleration of changes in the ways people have been working during the crisis.
Mandatory closures and other social distancing measures have taken a toll on firms that are closely tied to the consumer economy, such as the British airline Flybe, which went bankrupt in March after travel bookings plummeted in the wake of the coronavirus pandemic. Businesses that cannot conduct most of their business remotely are also in peril. On the other hand, many companies have learned that they can run their operations without anyone physically in the office, a trend that has the potential to depress demand for traditional office leases.
NAIOP is offering all on-demand courses absolutely free to all members through August 1. No code is required. Members can log in with their member ID to see complimentary pricing.
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Originally published in June 2020 by Shawn Moura, Ph.D., Director of Research, NAIOP
Last week, the Trump administration’s Waters of the U.S. – or “WOTUS” – rule went into effect. The new regulation, which defines the scope of federal jurisdiction over streams, rivers and other bodies of water, largely replaces the broader Obama-era rule. NAIOP weighed in on a draft proposal more than a year ago, and in January complimented the Environmental Protection Agency and Army Corps of Engineers on developing a final rule that appropriately balances conservation and economic development.
In an effort to block the rule’s implementation, opponents of the legislation have been busy filing lawsuits in many of the nearly 100 federal district courts nationwide. And while a California judge threw out a request to block the rule nationwide, a Colorado court issued a preliminary injunction, putting the rule on hold in the state. A number of lawsuits, filed by environmental groups, states, tribal governments and other entities remain pending.
Originally published in June 2020 by Shawn Moura, Ph.D., Director of Research, NAIOP
Owners of buildings that have been partially or entirely vacated during the outbreak need to complete several tasks to ensure that buildings are clean, safe and in good working order before reopening.
As an initial step, building owners need to acquire personal protective equipment (PPE), such as gloves, masks and hand sanitizer, for cleaning, maintenance and operations staff, as well as disinfectant and cleaning supplies in quantities that are sufficient to meet ongoing operations. All staff require training in the proper usage and disposal of PPE, the proper application of disinfectants, proper handwashing techniques and social-distancing measures that are in accordance with CDC and Occupational Safety and Health Administration (OSHA) guidelines. This training is critical to ensure the health and safety of staff and building occupants.
Are you currently in a Tier 1, Tier 2 or Tier 3 market? Or perhaps a gateway city, a 16-hour city or a secondary market? Are you sure?
Tier models rank metropolitan real estate markets based on their investment potential or growth characteristics. But different analysts use different methodologies and rank markets differently as a result. Adding to the potential for confusion, analysts often adopt different terminologies to describe markets and may create separate rankings for different property types or different audiences.
In the NAIOP Research Foundation’s report, “A New Look at Market Tier and Ranking Systems,” Maria Sicola, Charles Warren, Ph.D., and Megan Weiner with CityStream Solutions, LLC, examined how analysts develop and use ranking systems and considered ways these systems could be improved.
Originally published in NAIOP's Summer 2020 Issue By Shawn Moura, Ph.D., Trey Barrineau
The office sector appears to be less vulnerable to disruptions associated with the coronavirus pandemic than retail or hospitality, but it’s not entirely immune to an economic downturn — or the acceleration of changes in the ways people have been working during the crisis.
Mandatory closures and other social distancing measures have taken a toll on firms that are closely tied to the consumer economy, such as the British airline Flybe, which went bankrupt in March after travel bookings plummeted in the wake of the coronavirus pandemic. Businesses that cannot conduct most of their business remotely are also in peril. On the other hand, many companies have learned that they can run their operations without anyone physically in the office, a trend that has the potential to depress demand for traditional office leases.
“High-priced office space, and new construction in particular, is going to see a hit,” said Anirban Basu, CEO of Baltimore-based economic consulting firm the Sage Policy Group, during a recent webinar with NAIOP Maryland. “People are going to be thinking about what kinds of commitments they’re going to make, and cash is king right now. If you’re trying to preserve cash, that doesn’t take you into A-plus office space necessarily. And if you do use A-plus office space, you’ll probably try to rent less of it. You’ll have more people telework if possible.”
Originally published on June 23, 2020 by Shawn Moura Ph.D.
Last week, NAIOP conducted its third survey of its U.S. members on how the novel coronavirus has affected their businesses and local markets. The survey examines the outbreak’s effects on conditions in commercial real estate and evaluates how firms have responded. The June survey results reveal that development conditions have continued to improve since May.
For the first time, NAIOP is publishing data it has collected on rent payments and tenant requests for rent relief over the last three surveys. As with other metrics, these data reveal gradual improvement in market conditions since April.
The survey was completed by 351 NAIOP members between June 15 and 17, 2020. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders and investors.
Originally published by Bloomberg CityLab on June 22, 2020.
As cities emerge from coronavirus lockdowns, the way people use parks, stores, restaurants, transit, streets and homes is changing in ways both subtle and dramatic.
If one thing is certain, it's that our definition of normal has changed. After months in lockdown to prevent the spread of the coronavirus, cities are reopening — some with masks and social distance, others with still growing numbers of infection. It’s unclear what cities will look like in a year or more, but in many areas the landscape is already starting to shift.
Originally published by the Real Estate & Building Industry Coalition
Governor Roy Cooper announced yesterday that as trends move in the wrong direction, North Carolina will remain in Phase 2 for three more weeks. Executive Order 147 also requires face coverings in public and at various business settings where individuals cannot maintain a physical distance of six feet from others.
Construction sites are specifically included:
7. In Certain High-Density Occupational Settings Where Social Distancing is Difficult. Social distancing is inherently difficult where multiple workers are together in manufacturing settings, at construction sites, and in migrant farm, other farm, and agricultural settings. Therefore, in businesses or operations within North American Industry Classification System (NAICS) sectors 311 to 339 (manufacturing), 236 to 238 (construction), and 111, 112, 1151, and 1152 (agriculture), all workers must wear Face Coverings when they are or may be within six (6) feet of another person.
Originally published on June 22, 2020 by NAIOP.
NAIOP, the Commercial Real Estate Development Association, has selected Kilroy Realty Corporation (NYSE: KRC) as the 2020 Developer of the Year – the association’s highest honor. The award will be presented during NAIOP’s CRE.Converge conference in Las Vegas this October.
“On behalf of my colleagues at Kilroy, I would like to thank NAIOP for this prestigious award. This recognition is reflective of the talent, drive and collaborative spirit of Kilroy. As a team, we continue to push commercial real estate forward by delivering thoughtful and innovative work environments that support the most dynamic companies in the world,” said John Kilroy, Chairman and CEO of Kilroy.
Kilroy Realty Corporation is a publicly traded real estate investment trust and member of the S&P MidCap 400 Index with over seven decades of experience developing, acquiring and managing office and mixed-use projects. The company’s innovative approach to sustainable, modern work environments helps drive creativity, productivity and employee retention for some of the world’s most influential digital media, entertainment, health, research, science and technology companies.
Originally published on June 9, 2020 by Chris Barnet in DMagazine.com.
Imagine the last time you went to the doctor. You likely rode up an elevator and sat in a lobby or waiting room, elbow-to-elbow with other patients. You probably filled out paperwork, either with a pen and paper or maybe a touch screen device. Unless you were sick, you probably didn’t wear a mask.
The next time you go to the doctor, the experience is likely to be quite different. As a result of COVID-19, how medical office space—and office space in general—is used is going to change.
As physical offices are beginning to reopen and elective procedures are allowed, we are starting to have a better understanding of what a doctor’s visit could look like in the future.
Originally published by Shawn Moura, Ph.D., Director of Research at NAIOP in June 2020.
Measures to contain the coronavirus outbreak temporarily slowed economic activity and dramatically reduced occupancies at many commercial buildings. As state and local governments outline plans for a phased reopening of the economy, office building owners and employers are formulating plans that will allow employees to return safely to work.
This research brief provides an overview of best practices in improving safety against the coronavirus for building owners and employers. It focuses on immediate measures to improve building safety. A future research brief will address longer-term implications of the coronavirus outbreak for building operations. The brief draws from guidance provided by the U.S. Centers for Disease Control and Prevention (CDC), Cushman & Wakefield and JLL; insights provided by Gensler staff in a recent NAIOP webinar; and recent media reports.1 Readers should consider referring to individual guides and to the CDC website for additional recommendations.
Owners of buildings that have been partially or entirely vacated during the outbreak need to complete several tasks to ensure that buildings are clean, safe and in good working order before reopening.
Originally published on June 16, 2020 by NAIOP.
After weeks of pumping the brakes on a so-called “phase four” coronavirus relief bill, the White House recently signaled its interest in moving an additional legislative package, provided it includes certain priorities.
In an interview last week, trade adviser Peter Navarro sketched out the Trump Administration’s vision: a $2 trillion bill, with incentives for companies to “bring back” manufacturing jobs, and a “critical” payroll tax cut. A relief bill of that size would bridge the gap between the $3 trillion House-passed The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, and a $1 trillion version that Senate Majority Leader Mitch McConnell (R-KY) has called for.
Buildings and businesses that have been closed (or open at reduced capacity) for a prolonged period have reduced water usage, potentially leading to stagnant water inside building plumbing that could become unsafe to drink. Businesses should take steps to flush the building’s plumbing before reopening.
Clearing the water lines, known as flushing, can be done by running the tap water for an extended period in the building. The goal is to turn over the water left in the pipes with fresh, clean water from the public water main. This process will clear the stagnant water when reactivating dormant plumbing systems and ensure the water in the building is safe as well as taste and odor-free before the resumption of regular water use.
Depending on the scale and type of facility, the process of flushing the lines could vary drastically. Charlotte Water recommends that individual entities research guidelines that pertain to their respective industries and buildings. You can learn more by reviewing Charlotte Water’s website. Resources will be updated continuously.
The economic disruptions from COVID-19 have had significant impact on the credit quality of tenants, building occupancy and demand from buyers, resulting in substantial uncertainty in the valuation of commercial real estate and complexity in the accounting for lease modifications.
John Thomas, CEO of Physicians Realty Trust, and Dennis Power, CFO of the Opus Group, shared their experiences with tenant collections, lease concessions, market demand, and the resulting impacts on real estate valuation across their market niches. Brent Maier provided his view on the impacts he has seen in his role as the leader of Baker Tilly’s real estate transaction advisory services team while Mike Kamienski and David Jamiolkowski, also from Baker Tilly, shared their view of how these issues will impact financial reporting from a real estate impairment and lease accounting perspective. Don’t miss this discussion of critical topics so you understand the valuation and leasing impacts from COVID-19.
Originally published on June 5, 2020 by Shawn Moura, Ph.D.
The coronavirus pandemic has accelerated social and economic changes that were underway before the outbreak, while also leading consumers, workers and employers to adopt new preferences and behaviors. Collectively, these changes will require that commercial real estate firms adopt new approaches to design, customer relations and business operations to be successful in the future. Christopher Lee, founder and CEO of CEL & Associates, offered his predictions for how the outbreak will reshape demand for commercial real estate in the U.S. and outlined steps that firms can take to remain competitive during a recent NAIOP webinar.
Lee observed that the commercial real estate market is currently about halfway through a downturn. Although the Federal Reserve’s intervention in credit markets and fiscal stimulus measures have mitigated some of the outbreak’s effects on the economy, “all of that is going to burn off fairly soon unless another economic stimulus comes forward.” Substantial economic uncertainty and fears about the coronavirus have paralyzed decision-making in most markets. Buyers are concerned about the pandemic’s effects on building revenues and expenses as well as potential liabilities from infections, and some may no longer be able to secure favorable financing for an acquisition. Sellers are uncertain whether they should sell now or wait out the pandemic, and are unsure whether they will have good options for investing the proceeds of a sale.
