New Brief: Using Capital Improvements to Create Competitive Advantage in the COVID-19 Era
Originally published by Dustin C. Read, Ph.D./J.D., Associate Professor, Virginia Tech and Sam Kuprianov, undergraduate Real Estate major, Virginia Tech in July 2020
The NAIOP Research Foundation published a timely new research brief titled "Using Capital Improvements to Create Competitive Advantage in the COVID-19 Era," written by Dustin C. Read, Ph.D./J.D., Associate Professor, Virginia Tech and Sam Kuprianov, undergraduate Real Estate major, Virginia Tech.
In addition to disinfecting common areas and promoting social distancing, some owners of office and industrial spaces are investing in capital improvements designed to limit the spread of COVID-19. This research brief evaluates the merits of these capital investments and their potential to create durable competitive advantages.
This is the second in a series of briefs the Foundation plans to publish in response to the COVID-19 pandemic's impact on commercial real estate, following "Navigating a Safe Return to Work: Best Practices for U.S. Office Building Owners and Tenants."
Key Takeaways:
- Building owners are actively researching capital improvements that may reduce the transmission of COVID-19, including HVAC system upgrades, UV lighting technologies, antimicrobial building materials and touchless technologies. Uncertainty about these improvements’ costs and benefits has limited their adoption, and it can be challenging to evaluate how effectively individual improvements limit disease transmission or whether they’ll be valuable to tenants after the pandemic ceases to be a major public health concern.
- Owners should view the pandemic as an opportunity to review the properties in their portfolios for any potential weaknesses, not just those exposed by the health crisis. In many cases, weaknesses unrelated to COVID-19 may pose a greater threat to a property’s long-term financial performance.
- Property owners should prioritize improvements that reduce the risk of viral transmission while also improving operational efficiency or addressing perennial tenant concerns about sustainability and corporate social responsibility.
- Many commercial property owners are turning to their property management teams to help them evaluate alternative responses to COVID-19. This frequently involves determining if new technologies are cost-effective, compatible with existing building systems, and capable of delivering promised health benefits.