The impact the COVID-19 virus is having on the commercial real estate sector is immense. We recently looked at how the pandemic is specifically affecting retail landlords and tenants, as they struggle in the face of self-isolation, social distancing and regional lockdowns.

In this, the second installment in this two-part series, we look at how the sudden change in work patterns is affecting the use of office space and the impact that will have on corporate property owners, operators and occupiers going forward. The blog examines what they need to understand to more effectively deal with the fallout from the worst global health crisis we have seen in the modern age.

New modes of working

Social distancing and remote working are being encouraged by businesses around the world, and for many it has become corporate policy. However, there are still a number of companies where remote working isn’t possible, for a variety of reasons, and the short-term action occupiers or landlords – whomever is responsible – need to take is making sure the regularity and intensity of office cleaning is increased and ensuring there are a number of sanitizing stations available to workers. Additionally, if any workers or visitors infected with coronavirus have been in the building then offices need to be closed down in order for a deep clean to take place.

For the companies where staff are working remotely, the current situation is likely already prompting them to rethink office space in the long run, questioning how they have previously utilized and occupied office space. Many modern offices are now open plan to help boost collaboration and encourage workers to socialize more, but it’s a double-edged sword because it means employees who are working closely together are more likely to transmit viruses between one another.

Assessing the new future for the workspace

As long as the COVID-19 crisis is having its current impact, the use of space and proximity of workers will have to be assessed and addressed in offices and other workplaces where people are still required to come in. Using data and technology to do this in the quickest, most accurate, effective way will be critical to organizations that need to move fast. On the facilities management side, having the technology to register and track which visitors are in a building when and for how long may also be critical to managing the number of people at a particular site at any one time and tracing any contact if that were to become necessary.

In the near term, landlords need to be prepared for tenants looking to break leases early, seek reduced rents or longer payments as the ongoing impact of coronavirus becomes clear. Many businesses are facing the possibility of having to reduce their workforces during the crisis, so landlords should look to work with these tenants to find alternative solutions that bridge the gap during the crisis.

Looking further forward, we are likely to see increased demand for things that will make open plan office environments healthier, like fans, filters, and dehumidifiers – and spaces that ensure people have enough social distance even in better times. We are also likely to see the trend toward working from home become a stronger consideration in workspace planning, as companies choose to provide more flexibility in this area on a longer-term basis. This may require greater flexibility within offices and other workspaces – and in the leases that occupiers seek moving forward.

Working together to ensure the future of commercial real estate

The COVID-19 pandemic is presenting the commercial real estate industry with unprecedented challenges and the best way to overcome them is to put in place plans for a worst-case scenario and hope it doesn’t come to that. Another key will be using the right technology to regularly create clear and consistent updates for investors, partners, employees and other stakeholders, which will help ensure their cooperation as businesses adapt to the rapidly changing conditions they are facing and prepare for a less turbulent future.

To come out on the other side of the coronavirus crisis as strong as or stronger than ever, landlords and property managers – whether dealing with retail properties or offices – need to work closely with tenants to find creative solutions; leveraging technology to understand your business situation in terms of leases and assets will be critical. The industry was already starting to recognize the importance of this type of collaboration, and the drive to survive the COVID-19 crisis might just push cooperation to a whole new level – and that can only be a good thing at the moment.

COVID-19 is dominating the news agenda, and while the immediate effects are clear, the long-term impact is still very much an unknown – and that’s giving everyone in the commercial real estate industry reason to consider both the near- and long-term future.

While under the current circumstance it’s difficult to predict what the commercial real estate market will be like next week, never mind in six months’ time, there are steps investors, owners and corporate occupiers can take to prepare for likely eventualities. With the right planning and technology support they can help protect themselves and, just as vitally, their industry from some of the impact from this rapidly evolving health crisis.

In this, the first of two-part series looking at the impact of the coronavirus, we look at how the uncertainty caused by the pandemic is affecting a retail sector already in crisis – and what retail landlords and occupiers need to keep in mind as they navigate the accompanying business challenges.

The surge in home shopping

It’s no secret that retailers in shopping malls and main street alike have been facing intense pressure in recent years. Online only retailers, like Amazon, have leveraged the ease and convenience of technology to empower consumers to browse and purchase goods without having to leave their house. Already we are seeing ramping up to meet new home shopping demand spurred by the crisis, with the company hiring thousands in markets such as the UK and up to 100,000 in the US.

Coronavirus, which has spread across the world at unprecedented speed, is an additional challenge that retailers do not need. The need for “social distancing” and in some cases “self-isolation” is not only reinforcing shop-at-home habits but is spurring some people who’ve so far resisted online buying to try it – if only out of caution. What’s more, major brands such as Apple, Calvin Klein, Nike and Zara have closed stores worldwide temporarily.

The immediate impact of this is a significant loss of revenues, which in the longer term could lead to some staff being laid off and some physical stores being closed permanently, leaving more empty shop space. These are also popular brands that draw consumers to shopping malls and busy commercial centers in towns and cities, so those retailers that don’t close may suffer even more when popular neighbors close shop.

Taking action to reinforce retail on the ground

For now, retail occupiers will need to take stock of their situations – part of which will be assessing their leases to understand their options and restrictions. Are there clauses for breaks or rent holidays or tying rents to turnover they might need to be aware of and leverage? They may also need to take a deeper dive into their data to assess where they can manage with fewer staff, where they might close stores temporarily for now and where they might want to focus efforts when we eventually come out of the current crisis.

And for their part, what can landlords do? Those that want to keep their tenants in place will need to work with retailers to come up with creative solutions that will allow tenants to maintain operations and survive the current crisis. Landlord also have to understand their own property and lease portfolios and be aware of which clauses tenants might invoke and what they as owners and operators need to do to ensure they comply with all their obligations.

Flexibility on the landlord’s side may be crucial, as retailers will likely be looking for lower rents and longer payment periods to help offset the long-term effects of coronavirus. However, landlords could negotiate arrangements that allow them to recoup some lost rent when the economy rebounds — this can be through an agreement to peg rent to a percentage of revenue or a profit-based approach.

No matter what retail property owners, operators and occupiers do on their own, the situation is likely to require unprecedented cooperation between all parties to ensure a they recover to see a brighter future – as all sides want to see their sites survive and eventually thrive again. Working together to ensure this is really the only way forward at this point.

Property maintenance can be a time-consuming task. From facilitating maintenance requests to coordinating between owners, tenants and service providers, and all transactions in between – it can seem like an endless to-do list happening all at once.

To help streamline all your property maintenance tasks, Property Tree now comes with Maintenance Plus – the property maintenance platform designed to meet the needs of property managers, service providers, owners and tenants. Let’s take a look at how it can benefit you and your team in resolving maintenance issues more efficiently while providing transparency to all parties involved. Continue reading “Property maintenance just got easier with Maintenance Plus” →

This blog post relates to Rockend, one of our previous brands. For more information please read the press release.

Property management is a daily exercise of juggling tasks and shuffling between roles. It can get pretty exhausting for many. For Tamara Dalziel, Principal Licensee at Investment Property Hotline, it’s all about having the right mindset and the right property management software to make things just that much easier.

She shares with us her experience using Property Tree and how it made her and her team more productive and efficient.  Continue reading “Property Tree Client Story: Tamara Dalziel of Investment Property Hotline” →

Clearly, COVID-19, aka the coronavirus, is top of mind these days. The World Health Organization has designated it as a pandemic, the number of infected individuals continues to grow, and decisions increase by the day. So, what might we expect for the multifamily real estate industry?

Before diving in, it is important to note that the degree of the impact will grow with the duration of the crisis. If things resolve in a matter of weeks, the impact will be much smaller, and we’ll likely avoid a prolonged dampening of economic activity.

Student and senior housing: Early impacts

As it stands, many colleges and universities have either cancelled classes or moved to a fully digital delivery method. Some are extending Spring Break. Some are cancelling the semester. It follows that if students are going home early, then the first segment of the market that will feel pressure is student and student-adjacent housing.

Impacts in the current period may arise from students or parents looking to break leases early as a result of unforeseen school closures. Leasing for future periods may also be impacted as students are no longer in close proximity, making traditional on-campus marketing programs less effective.

Student housing operators will need to be prepared for the eventual questions from current students as university schedules change, causing early move-outs. Digital marketing and leasing will become more important to connect with students for future semesters, driving all aspects of the lead-to-lease process into digital channels.

Senior housing has a different set of challenges to monitor and address, given that mortality rates of COVID-19 typically increase for people over 70. Expect to see changes in community programming and a focus on reducing gatherings of people, coupled with increased focus on cleanliness in common areas.

Conventional, market rate housing: Trickle-down impacts

For conventional, market rate apartments, we must look at likely impacts on current residents as well as potential impacts on future demand.

Risk aversion is greatly reducing large gatherings of people. Governmental guidelines, conference cancellations, sporting body reactions, political rally cancellations, and changing corporate travel policies will continue to drive negative impacts on local economies. Even a coronavirus conference was cancelled due to a local outbreak.

All major sports leagues in the US have suspended play. The NCAA’s flagship event, March Madness, is now cancelled. Broadway is closed. Sporting and event venues tend to be surrounded by a cottage industry of bars and restaurants that will surely feel a disproportionate impact. We can expect a number of business to close or to furlough staff as a result.

In addition to pre and post-game meals and entertainment, impacts will be felt across transit, parking, merchandise, and in-venue vendors. Immediate impacts in the hospitality and travel sector will yield a reduction of incomes, and possibly temporary or permanent loss of employment until we return to normal operations.

If we couple this impact with a survey conducted by the First National Bank of Omaha in 2019 that indicates that nearly half of Americans are living paycheck to paycheck and more than half do not have an emergency fund, it is likely that some residents will have a hard time making their rents. Landlords should be prepared to address these situations as they emerge and not be too quick to create vacancy.

Landlords who also manage retail spaces that are reliant on event-based traffic should be prepared to address tenancy issues on that front as well.

Multifamily housing: The impact of staying home

With commercial and educational organizations sending people home, the average number of people onsite at residential properties throughout the day is sure to increase. Much like senior housing impacts, we can expect a reduction in group events. We can also expect fewer users of common areas and amenities as people stay at home.

And that phrase, “stay at home,” may be a clue to resident attitudes as the summer leasing season approaches.

If the coronavirus crisis extends beyond April, we can expect lower demand for vacant units. We can expect more folks to stay in place as economic unrest will cause people to be cautious. Staying in place may be seen in the form of higher renewal rates, at prices capped by rent control measures in some markets, or more folks going month-to-month until they have clarity in their own personal situation.

As mentioned with student housing earlier, we can expect a greater focus on digital marketing to drive demand. Self-guided tours, the trendy topic at recent industry events, will become more pervasive as prospects seek to limit person-to-person engagement. We should also see an increase in 3-D tours, drone footage and other digital mediums to drive traffic. Operationally, online leasing and electronic payments, both widely available technologies, should see increased adoption.

If we do see a drop in demand and an increase in renewal rates, there will be an unmistakable impact on pricing. This change in market dynamics will put revenue management systems and processes to the test. Largely having gained wide adoption in the last decade of continued growth, there have not been many cases of dealing with sagging demand and the impact on pricing.

Development: Supply chain impacts

In August of 2019, the NAA published an article titled “Apartment Completions Set to Spike in 2020,” which shared that there are more than 500,000 units under construction, with nearly 360k of them scheduled to deliver in 2020. It has yet to be seen if global supply chain disruption, as a result of this virus, will impact these deliveries. Materials as simple as an electrical outlet, often produced in China, could become a barrier to delivery if supply lines are disrupted. Developers should assess impacts of potential material shortages and adjust accordingly.

A disruption in delivery plans will put pressure on financing as well as planned operational benefits, creating the potential for a myriad of fiscal issues for developers, owners and operators.

Actual v budget: Expect variances

Most multifamily organizations cast their budget in the fall of 2019 and looked at 2020 as more of the same: strong demand, strong occupancy, strong pricing and a need for more capacity. A straw poll of MRI conference attendees put a potential recession in 2021 or beyond. While we may or may not have a formal recession, the impacts of this virus, if experienced for a protracted amount of time, could create recession-like conditions, undermining the assumptions used to build 2020 budgets. Reforecasting conversations will need to happen. Expectations will need to be reset and the inevitable conversations about expense reductions will likely take place.

Business continuity

Beyond the economic and fiscal dimensions of this crisis, multifamily organizations should update their business continuity plans (BCP), seek new ways to leverage technology since the BCP plan was last updated, and revisit policies in accordance with governmental guidance for health and safety.

American writer Denis Waitley once said, “Expect the best, plan for the worst, and prepare to be surprised.” Sage advice, given the current state of affairs and the uncertainty inherent in not having a clear idea of what lies ahead. Multifamily organizations should already be taking steps to assess changing conditions and plan accordingly.

This blog post relates to Rockend, one of our previous brands. For more information please read the press release.

Strata Master v12 with File Smart v7.11 is here! Communication is the big winner in the latest release of Rockend’s Strata Management software, with major upgrades to Rockend SMS. You can now schedule one-off and recurring messages, increase the max length, dynamically change your sender ID and reply options per SMS, and create and use templates across the agency.  

Continue reading “Strata Master version 12 is all about communication” →

Once your commercial property attracts the right kind of tenants, your next step is to move into one of the most important phases of the commercial lifecycle: abiding by the leases you signed.

Property and asset managers are challenged to execute against the lease terms and understand the impact of the lease information on the broader portfolio, which makes accessing and managing lease data a vital aspect of your business. Maximizing your commercial property leases by getting the right data to the right people in an efficient manner can go a long way in bolstering your portfolio.

Structure the information in the lease digitally

To gain actionable insights from leases, the first step is to digitize the information. If property managers and other users have difficulty accessing lease information, or if the data contains errors, then how can they perform their jobs properly? The lease drives daily activities, and so the data from the lease must flow to the correct users. You need to be able to extract clauses and other data points from the lease, exposing the lease information to appropriate members of the organization. Lease abstraction can be performed in a variety of ways, from using in-house teams to choosing to outsource this activity. Recently, the application of artificial intelligence (AI) for lease abstraction has delivered greater efficiency and accuracy for this process, and it enables users to easily link directly to source documents.

If there are any updates on the lease along the way, the last thing you want to do is staple an addendum to the lease and file it away. Often, cumbersome, manual processes are how companies attempt to guarantee that the right people will be notified. Keeping your lease information updated digitally and making sure everyone in your organization is pulling from a centralized database will mitigate the risk of errors down the line.

Mine information in your enterprise data

Making sure that easy access to lease data is available across your organization is only the first step of the process. Only 20% of enterprise data can be found in structured data like leases and contracts. How can your users get their hands on the other 80% of enterprise data – unstructured data in the form of images, audio files, word processing documents, and emails – that help them do their job?

Missing critical information found in unstructured data can cause problems in future operations, but with MRI @Work, your organization can move unstructured data into a central hub that all relevant users can access. Making unstructured data accessible can help you get the right information from both the lease and extemporaneous sources to the members of your organization who need it.

When structuring deals, the right data can shed some light on which decisions will benefit your portfolio the most. For example: If you are giving a tenant two months free rent, how does that impact the deal? If there is a co-tenancy in place and the main retailer shuts down, what is the impact on the other lessees?

Never forget a key term or miss a critical date

MRI @Work provides you with data visualization tools to keep your business efforts organized and focused in the right direction. Along with configurable reporting capabilities, these tools deliver personalized information to the end user in a way that shows only the data they need. With detailed dashboards, users can view accurate, at-a-glance information or dig deep into the data to find all the points they’ll need to do their jobs effectively.

Additionally, the automation found in MRI @Work reduces the role that human error plays in lease abstraction and data management, making it easier for the end user to trust the information that ends up on their desks.

Getting your enterprise data where it needs to go only benefits your commercial property business if that data is visible and actionable – can your team actually keep up with key terms and critical dates based on all the resources you’ve pulled together? Missing key terms can have a negative financial impact on your portfolio as well. Some forward-thinking organizations have begun to utilize AI to audit their existing lease data and have discovered significant under-billings and missing recoveries charges because of inaccurate or inaccessible data.

MRI @Work enables property and asset managers to utilize the important data found in leases faster and with more accuracy. By maximizing the lease, the end user can make more informed business decisions and act upon the information that serves as the lifeblood of the business. Learn more about MRI @Work in this webinar.