REDNews Houston is known for their in-depth reporting on the projects, people, and trends making news in commercial real estate. Their events bring CRE heavy hitters together to share and learn from one another. Alyse was an invited panelist at the recent Houston Property Management Summit. Here she shares highlights and insights.
The Summit had four panels, each featuring topical experts. The moderated panels addressed:
- Managing the Property Management Business
- The Importance of Good Management
- Best Practices in Marketing, Leasing, Maintenance, and Operations
- Tenant Improvement and Building Upgrades
Amenities for all
Attendees and panelists represented diverse sectors and company sizes, ranging from retail to multi-family, and some office and some retail. I was on a panel with Jim Hill from Kirksey. He focused on multifamily projects, and I focused on retail and office. We discussed some really interesting concepts that we’ve been seeing in our respective practices that apply to all project types. What amenities are tenants looking for that will attract them on both the multi-family and commercial side? Is it conferencing centers or more traditional places to work? It’s not just about having a business center anymore. Now it’s really having a place for people to work when they’re doing work from home, so they aren’t in their apartment.
For commercial offices, space is being designed to attract employees to come to the office, whereas the focus was on the client or customer in the past. Amenities trending now are collaboration areas such as meeting areas, conference rooms, and cafes (aka break rooms.) Building managers are also including similar amenities in the common areas of their buildings. The current BOMA measurement calculation method allows amenity spaces to be included in the add-on factor for the building instead of lost revenue lease space.
Building technology for optimization
Building technology is at the forefront now. We discussed the new things coming into the market, like the variety of “smart” tools such as digital locks. The proliferation of apps that turn your phone into a remote control is more prevalent in multifamily, but not something we’re seeing as much in the office market. A technology we’re using a lot at AMB is virtual reality. With virtual reality, we can show clients their design at scale in 3D; it builds confidence in what’s going to be built. It’s easy to see where the money is being spent so the tenant knows up front what they’re getting and is happy with the completed project.
Planning around supply chain challenges
Supply chain problems are still challenging for all project types. We have to plan around big-ticket items like HVAC units during budgeting, knowing these items will impact the project schedule and total construction cost. We really look to the GC to help with this. Good contractors stay on top of the availability of different components in the marketplace. The more specialized or complex the item is, and depending on the geographic location we’re sourcing from, is at the heart of those items proving to be most difficult to get. This is why our team always selects contingency items. We’re still seeing some things that are hard to get in general, like appliances.
Construction cost, less is more.
Construction costs are averaging roughly $40 per square foot for projects like an office refresh. For renovations of existing space, the construction cost starts at around $85 and goes up from there. We’re seeing a lot of spec suites on the smaller scale because folks are leaving the WeWork-type of co-working and executive office setting. Tenants want something classier and more customized for their team and brand in an office. We see many tenants who aren’t very knowledgeable about the process, so they don’t have a broker. Typically, they don’t understand the construction timeline, and they’re facing an expiring lease, so they’re looking for space that’s move-in ready. They like nice office space with a little bit of design to it and some character; those spaces tend to lease faster. We’re doing projects where we’re dividing up full floors into 1,200 SF spaces and building them out as spec suites to draw in those types of tenants.
Property management and customer service
Other panels talked about how to manage tenants. My thought was, “How do you treat them well, and what are the strategies to ensure you’re looking out for their best interest? How do you help a retail asset like a mall? What’s the marketing budget for that? And how do you help that landlord attract those tenants?”
There are landlords out there who really care about the success of their tenants and help market them, so they succeed. During the panel, there was talk about the challenges of finding good renters in multi-family properties. Sometimes you have to help a bunch of people leave to improve the property. Then what happens when the management company has to come in and take over an asset? What is the communication like with the tenants (who are likely unhappy with the previous management company)? There’s a question of how much communication to do and what to try to find out why the previous management wasn’t working well. With some input and understanding of the tenant’s perspective, you now have an informed way to formulate a plan to help and maybe change what’s going on in the building. If it turns out unsavory things are going on in the building, for example, this is something you can find out from the tenants. Then talk to the building owner and determine what they’re willing to do to clear out the folks who are bringing a negative element to the property.
The success strategy I heard over and over again boiled down to having a team committed to clear and candid communication between all the parties involved (owner and tenant reps, brokers, on-site property staff, and architects.)This fits with the AMB mission to create positive change through design by being a positive member of the team collaborating on solutions with our unique knowledge as the building architect supporting the ownership and the management. Everyone wins.