How Will Commercial Building Managers Budget for the Unknowable? | TAKE THE SURVEY→

How Will Commercial Building Managers Budget for the Unknowable?

The summer has not brought much good news on the COVID-19 pandemic. The number of people infected is rising across much of the country. Hospitalizations and deaths are creeping back up. In many states and cities, reopening has been delayed or even rolled back. The fast-emerging consensus is that it will be a while—perhaps 2022—before things start resembling “normal” again.

This was the backdrop for last week’s BOMA International annual conference—conducted virtually, of course. As the largest organization for commercial real estate’s operators, BOMA focused its conference content on grappling with how to run an industry that depends on people gathering in their buildings to do work.

“Don’t overreact to the next six to twelve months,” urged BOMA President Henry Chamberlain in his annual State of the CRE Industry address.  “We expect things to be getting back to normal in 2022 [emphasis added].” If the first thing that comes to mind is that this sounds like a long time until a “new normal,” then your reaction is the same as mine.

The New Normal Will Be Taking its Time

What things will eventually look like is obviously uncertain, but there are some data points that suggest something other than a doomsday scenario. Gensler’s Work from Home Survey 2020 was cited frequently by conference speakers (including this author), particularly one headline that only twelve percent of knowledge workers say they want to work exclusively at home after the pandemic. Another 44 percent say they never want to work from home. On the other hand, that leaves another 44 percent who want to split time between home and the office.

The forced experiment of mass remote work during the spring and summer has proven that we can be at least as productive in many ways, but it has also clarified what we miss about working in physical proximity to our colleagues. The Gensler study and others, such as Cushman & Wakefield’s The Future of Workplace report, quantify some of this. It seems reasonable to assume that the pandemic may have accelerated, rather than created, an end game of flexible workplaces, and that will be a challenge for commercial office owners and managers.

Reoccupancy: An Extended Purgatory

But what do we do until we get there? That question is more unsettling. The emerging consensus is that commercial office buildings are looking at a long period of disruption to their traditional business model—an extended purgatory. In terms of rent and occupancy, the worst may be yet to come. Because of government stimulus, “rent collections have actually been stronger than expected [in Q2], so the true impact has yet to be felt in CRE,” said Michael Broder, President & CEO of Brightline Strategies, a consultancy based in the Washington, DC area. Most real estate owners probably have a forecast of rent delinquency risk by now, but of the tenants who remain, no one really knows when most of them will come back en masse, nor how many in-person days will be spent in the office when they do.

This has produced an odd situation in which many fully staffed buildings have been sitting practically empty for months. Their management teams have not been idle, preparing for reoccupancy by increasing cleaning (including changing schedules to make janitorial staff more visible to the few tenant employees who have returned to the office) and preparing to keep occupants appropriately spaced in lobbies, elevators, amenity spaces, and other common areas.

A lot of this may turn out to be short-lived. But Sheryl Schulze, Global Repositioning and Landlord Services Lead at Gensler, believes there’s a long-term place for healthier buildings. “We will see more guidelines and programs written to measure the health of buildings,” she said. ““Before, amenities were the key to the workplace; now, it’s health.” Her response when asked if this is all an over-correction: “Not really. We should be doing a lot of this anyway.”

What to Do Now?

Perhaps so. What is clear is that, for the interim period (which could be twelve to eighteen months) there is a chance for real innovation in operating buildings—not just the kind of “innovation” where you run a pilot program of a new proptech app at a couple of buildings, but a more deeply considered experiment in changing the way buildings work. As Shelby Christensen, BOMA International’s newly minted Chair and Chief Elected Officer put it in her keynote, “We have the opportunity to set aside business as usual and try new things.”

The timing is precipitous because building owners and managers are approaching the season for preparing budgets for next year. If you own or manage an office building, you may think it an unenviable task. How do you budget for the unknowable? That is a question that will need to be answered long before there is as much information as decision makers want.

Our Response: New Research

If we can’t truly know what the best operational approaches will be to set the stage for what the industry hopes is a new normal in 2022, we can at least understand some best practices based on what industry practitioners are thinking today. That’s why we’re excited to launch new, original research in the form of the Commercial Office 2021 Budget Priority Report. Our hope is that it gives tangible guidance to asset and property managers groping for best practices while planning for another tumultuous year. We think there will be a real range of approaches across the industry, and we expect this research to identify some action items that can be tailored to a specific property or portfolio.

Below is survey that will form a component of this research. If you are a commercial office asset/regional manager or property manager, we hope you’ll take a few moments to participate. As a thank you, all participants will get exclusive access to a free preview of the findings. We’ll also be interviewing some industry leaders to get their perspective on how they plan to steward their properties and portfolios through a year that is sure to demand the best of them and their teams.

SURVEY NOW CLOSED

Thanks all who participated!

About You (copy)

Thank you for participating in our survey. Can you first tell us about your role and your property/portfolio? (NOTE: This survey will be most relevant to owners/managers of commercial office properties.)

Capital Budget Outlook

First let's look at your outlook for capital investment.

Operating Budget Outlook

Now let's get into how you expect your operating budget(s) for 2021 to look as compared to 2020.
Big decrease (more than 25%)Moderate decrease (-11-25%)Maintain within +/- 10%Moderate increase (+11-25%)Big increase (more than 25%)
Administration
Building communications
Cleaning
Preventive maintenance
Energy
Water/sewer
Tenant service request management
Tenant engagement/ experience
Leasing/ marketing
Security
Roads/grounds/ parking
Taxes

Operations Outlook

Finally, please tell us about operational strategies you plan to implement or continue as a result of the COVID-19 pandemic.

Thank you for participating!

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