Archives for December 2021

“Just because the price of a piece of property has risen dramatically does not mean its value cannot and will not continue to rise.”

High prices on properties shouldn’t scare off real estate investors, says John Chang, Senior Vice President and National Director Research Services at Marcus & Millichap in a video.

“Just because the price of a piece of property has risen dramatically does not mean its value cannot and will not continue to rise,” said Chang.

What matters, said the Marcus & Millichap expert, is the purchase price today, cash needed to buy, rates and terms for a loan, cash flow today, cash flow in the future and price at time of sale.

“(Investors) should focus on two things: the value of cash flow from that property today and the value of cash flow from a future disposition date, Chang asserted.

The history of the rise and fall in a particular piece of real estate over the last several years is irrelevant, he contended.

Chang noted appreciation has been strong in the last year in a number of property types in commercial real estate. He pointed out year over year the US average increase for multifamily has been 16.1% with 12.7% for retail, 10.9% for office and 21.7 for industrial. In certain cases, there have been huge gains for some markets including a 35.4% hike for multifamily in Phoenix and 32.1% for office in Atlanta.

Chang provided more nuance for investors in an earlier video last month, when he noted that investors would be well-served to consider the three- to five-year supply and demand outlook before snapping up assets.

Consider industrial, an asset class that’s up 22.3% over pre-pandemic levels, with revenues up by 11% and vacancies at a low near 4%. Despite that gap, “investors are purchasing these properties based on rising demand driven by e-commerce and supply chain disruptions,” Chang says. “But even though industrial absorption is at a record level, so is construction, and new development could ultimately bypass demand.”

It’s a similar story for multifamily.

“There’s a lot of speculation that apartment pricing is overheated,” Chang says. “We’re seeing cap rates hit record lows and record high prices in many markets, mostly high population growth areas.”

The average price per unit for apartments nationally is up 11.9% over end of 2019 levels, according to M&M data, but revenues are up by 12.6% and vacancies are at a record low of 2.8%.

Companies and Building Managers Gear Up for Occupancy.

As frontline building management professionals and tenants prepare for post-pandemic occupancy, they’ve developed plans and outfitted buildings to support safety, comfort, and well-being. And even though companies plan to accommodate remote work, they say many employees lack access to stable, high-speed internet services at home.

These are a few results from a return-to-occupancy survey of more than 450 facility and building managers and real estate consultants in the U.S. and Canada, conducted between June and August 2021.The Counselors of Real Estate was among the corporate sponsors for the survey, which was conducted by commercial real estate adviser Blue Skyre IBE and market research company HarrisX.

Supporting Work-From-Home Costs

Companies plan to support working from home by providing or reimbursing employees for software (70%) and office equipment such as printers, computers, and mobile or landline phones (69%) and by offering well-being reimbursement (46%). Nearly half (45%) say they’ll support working from home by offering new financial subsidies for home expenses such as rent or mortgage reimbursement and insurance. However, 40% of respondents estimate at least half of the employees at their facilities lack high-speed internet connectivity at home to facilitate remote work.

Reoccupancy Plans Put Safety First

Eighty-six percent of managers say leadership’s top concern is the safety, health, and well-being of employees, occupants, and visitors. Building managers are preparing for potential COVID-19 surges: 60% have a documented contingency plan, and 30% are preparing one.

Nearly all respondents (94%) say their buildings either have been or are being equipped with improved HVAC air filtration systems. Two-thirds of buildings will have hand sanitation stations and frequent cleaning of high-touch areas, and 62% of those surveyed say temperature checks will be required to enter the office.

How the Workspace Will Change

Fifty-five percent of respondents say they plan to have more than half their staff spend at least three days in the office; 23% say workers will spend 50% of their time in the office; and 21% expect most staff to work remotely most of the time.

Three-quarters of building managers surveyed plan to increase the number of conference and meeting rooms with networked audio and visual capabilities, while nearly two-thirds foresee more conference rooms for 10 or fewer people and more outdoor meeting areas. Despite the increase in work from home and anticipated changes to the workspace, more than half (54%) say their organization isn’t planning to change their real estate footprint by either increasing or decreasing square footage.

Source: “Many Happy Returns“

With COVID-19, office building property managers have been faced with the greatest challenge of their careers – designing offices that people will want to return to more than they enjoy the comforts of working from home. To that end, Equiem has released, “The Ultimate Welcome Back Playbook,” a 38-page booklet filled with ideas, based on survey responses from occupiers, for attracting workers back to the office. Partner Insights spoke to Jon Lesquereux, Regional Head of Asia Pacific at Equiem, about how property managers can make offices more appealing than ever.

Commercial Observer: How has the job of property manager changed over the past few years?

Jon Lesquereux: There is an expectation that property managers today will have a deeper knowledge of technology and, in particular, smart buildings. They will need to be able to collate, analyze, and interpret data from a wide range of sources. They need a refined concept of, and approach to, customer service. They need to be able to introduce and manage flexible space. And they have to be able to manage an ESG strategy.

Why is strong data capture essential for property managers in creating strong tenant experiences? 

Improving customer experience is an iterative process. By collecting data and running sentiment surveys, the property manager can assess the performance of an initiative, adjust their next initiative, and more accurately target content, goods, services, and experiences.

Was “community” a topic property managers gave much thought about prior to the pandemic?

The concept of creating communities within and around office buildings has been around for a while, but COVID has accelerated the trend. More property managers now realize that the tenant isn’t their primary customer group; it’s the individuals who work in the tenancy that they need to pay attention to. If they don’t, those people will simply work from home.

How has that changed, and why is community an important concept now?

It is considered more important because it forms part of the “workplace experience” that will ultimately help businesses attract and retain talent. There is plenty of evidence that the personal connections formed through strong community are an important aspect of enhancing workplace experience. If that community is tied to a certain piece of real estate, then it builds customer loyalty around the building, and thereby increases the likelihood of an individual or company wishing to either come to a property or remain there. Our very own Global Office Tenant Report (GOTR) asserts this very thing: When asked what the main purpose of the office is, 73 percent of global occupiers said “to stay connected to colleagues,” and 71 percent said, “collaboration.”

What are some of the best ways property managers can shore up community in their buildings?

We have just released a complete step-by-step playbook to help property managers with this very thing: Our “Ultimate Welcome Back Playbook.” There are many ways to create and sustain community in an office building, such as providing a lively calendar of events and activations. People love seasonal celebrations, just-because drinks mixers, and freebies. And, of course, the fastest way we’ve found is to deploy a tenant experience platform. A digital hub, accessible from phone and laptop, enabling everyone in an office building to commune and socialize, bridging the gap between the real world lobby and its online equivalent – it’s almost the definition of community in the modern world.

The best thing for a property manager to do, when getting started with the concept of community, is find out as much about their customers as possible. Don’t speculate – ask. Send out polls, surveys. Hold focus groups. Once you’ve found out that there’s a massive appetite for fitness classes or seminars, you can provide them. That’s good customer service – as traditional as it comes – and is your best way to build a community that people will want to belong to for a long time.

In addition to community, health and wellness are important values for tenants that need to be addressed. What are some of the best ways to communicate to tenants that health and wellness will be a priority moving forward?  

Owners need a workplace experience platform. You can brand a platform as a “health and well-being hub” for an entire building, if you choose, or it can form a key pillar of your building’s digital strategy.

How has the return to work resulted in different approaches to office community in different markets?

Australia continues to lead the way in terms of developing and sustaining workplace communities. The U.S. is more likely to focus on “proven ROI,” whilst Australia is more able to accept that there is element of intangible or hard-to-measure benefits in community building.

What are some of the new technologies making the return to workplace easier?

Many building owners are developing touchless technology for security access, lift calling, etc. In our Global Office Report, 54 percent of occupiers said they want touchless smartphone access control. We are working with a number of clients to deliver this seamless functionality through our app.

Also, technologies that enhance productivity, flexibility, and convenience, such as desk-booking systems and occupancy sensors, and smart initiatives like air quality monitoring, which is sought by 38 percent of GOTR respondents.

Technologies that offer active and effective communication channels, and tenant engagement platforms that provide connection between the asset and the individual, are also highly desired, including by 48 percent of GOTR respondents.

What are some of the biggest obstacles to getting workers back to the office?

People want safety and security, first and foremost. The deck is already stacked against the office, with work-from-home being as convenient as it is, so when you don’t have an Indoor Air Quality (IAQ) platform telling you how clean your air is or how the CO2 level is at optimal levels for productivity, why would you bother?

Property managers need to realize that by boosting the workplace experience beyond expectation, they have the best chance to get a higher percentage of workers back. It can start with something as obvious as physical fit-out: 50 percent of global occupiers said they want relaxation zones in their workplace; 34 percent want their desks to be spread farther apart; 34 percent want more workout areas; and 33 percent want more breakout areas.

Source: “The New Challenges for Property Managers Post-COVID, and How To Meet Them“

As property owners grapple with how to deliver differentiated experiences, technology continues to play a major role. Access control is the foundation for delivering new capabilities today—and opening up the door for future innovations.

The internet of things (IoT) is revolutionizing the way that we think about the built world. At the same time, as the economy continues to emerge from almost two years of pandemic-related upheaval, the nature of work has also changed. Ubiquitous work-from-home arrangements and emerging hybrid models have blurred the lines between the home and the workplace.

All of this adaptation provides an exciting opportunity to rethink the relationship between people and the buildings where they spend their time. Residents have new expectations about their homes, as well as the offices where they work. There is an appetite for improved experiences, and the good news is that improving experience can improve financial performance.

As more property owners grapple with how to deliver differentiated experiences, technology continues to play a major role. Access control serves as the foundation for the smart building, delivering new capabilities today and opening up the door for future innovations. This trend holds true across all asset classes, with differing benefits for each property type.

The value of experiences for multifamily housing

An unusual feature of smart-building technology is the breadth of benefits that it delivers to the companies that adopt it. It improves living experiences while at the same time creating operational efficiencies and ultimately lowering costs. At Latch, our work with an ever-growing base of multifamily operators has taught us how owners and operators think about returns on smart-building investments.

Here are four of the most common ways that communities achieve ROI from access control implementations:

1. Increased rental value

Convenience and technology-driven experiences matter. Smart-access control is fundamental to enabling today’s modern lifestyle and as more residents come to rely on service providers, package deliveries and contactless guest access, the ability to control access via an app is transformative. This is often reflected in the value of a property. Communities with smart-access control typically achieve higher rents than an otherwise similar neighboring property that still uses keys.

2. More effective marketing

Tours that showcase beautiful, simple-access control tend to be more successful than tours that start, for example, with a lockbox.

Beyond the tour experience, the reputational benefit of the technology can be a force multiplier for marketers. As reputation scores have grown in importance for multifamily marketers, they have amplified current residents’ digital “word of mouth.” A tech-enabled tour and living experience burnishes a community’s reputation and ultimately improves marketing performance.

3. Higher productivity

Keys are a barrier for multifamily productivity. Processes such as move-ins and move-outs cost significantly more time and money when you need to factor in making and distributing keys, changing out locks, etc. Additionally, everyday occurrences like property tours, guest access, lock-out situations and package handling all cost time and money when keys are involved. Replacing keys with technology can convert wasted site team hours into more lead follow-up, completed maintenance tickets and greater efficiency.

4. Improved operating models

Access-control solutions also enable operators to make more radical changes to their operating models.

Keyless entry enables self-service leasing, which has become increasingly popular during the pandemic. It also helps centralize many of the leasing functions. The financial and safety benefits are obvious, but in today’s challenging talent environment, it’s wise to focus leasing agents’ time on closing leases (rather than touring) to eliminate some of the more time-consuming parts of the job and provide better career progression.

Evolving the office experience for today

While multifamily operators have been grappling with work-from-home arrangements, forward-thinking offices have been working on the challenge of enticing workers to return. Few problems are more pressing at the moment than worker shortages and the “Great Resignation.” The quality of the workplace experience should be a high priority for most companies.

One way for commercial office owners and operators to address this challenge is to empower their tenants through technology. From the lobby to the offices themselves, building owners are looking for ways to improve, and one experience that is ripe for improvement is visitor entry.

Typically, visitor entry at commercial office buildings is unnecessarily complicated, from long lines in the lobby to complex and timely visitor invite processes for tenants. The same kind of technology that is streamlining multifamily buildings can also be deployed in office buildings, enabling visitors to go from the front door, through the lobby and to their meeting more seamlessly than ever before.

Imagine a process where your meeting invitation comes along with simple check-in instructions. Visitors can simply show their electronic credentials and identification at the front desk for simplified check-in. Returning visitors don’t ever need to check in at the front desk, and buildings become more pleasant and much less frustrating places to visit. At the same time, building tenants can enjoy a simple invitation process. Instead of emailing requests to office managers or adding visitors to antiquated systems, they can simply invite visitors using an app or an integration through their calendar.

As workers return to the office after a couple of years of Zoom calls, a “Zoom-like” invitation process allows the built world to meet and exceed the expectations set online. At Latch, we’re working on just such a technology-enabled experience with three of New York City’s most iconic buildings: Rockefeller Center, the Empire State Building and Brookfield Place.

Competition for scarce talent shows no sign of relenting for the foreseeable future. Consumer and worker preferences have changed over the last couple of years, raising expectations about the quality of experiences and the technology that facilitates them. Commercial real estate owners and operators should treat resident and tenant experiences as a top priority.

Looking ahead

If the past two years have taught us anything, it’s the importance of being agile. By enabling buildings with smart-access and smart-building technology, property owners gain the built-in flexibility necessary to future-proof their assets while transforming the overall tenant experience and driving end-to-end efficiency.

Source: “How Smart Access Control Is Improving the Built World“