The most successful companies are those that utilize data and analytics as a supporting tool to adapt to rapid market changes, but how can you simplify Big Data to improve daily decision making? How can online services help you stay connected while safely doing business miles apart? There are innovative solutions that offer a combination of tools that boost profitability, efficiency, communication and even security. Read on to discover four ways asset intelligence (AI) technology can help CRE operators understand how to navigate market shifts and emerge with a competitive edge. 1. Use data to enhance asset performance On average, more North American organizations have been using big data for benchmarking and prescriptive analytics over the past few years. In fact, according to KMPG’s 2020 CEO Outlook, 92% of Canadian CEOs fast-tracked their transformation to meet COVID-19 challenges, with 76% believing that investments in tech tools such as automation, artificial intelligence and cloud systems are critical to unlocking long-term growth. As a result of the tech adoption, the CRE industry is seeing AI enable teams to identify patterns and recognize trends by easily visualizing broader pools of data that influence KPIs, all within a customizable dashboard. With the assistance of automation and machine learning, the data becomes more refined over time facilitating more informed decisions on everything from marketing spend to concessions and leasing velocity. Having ongoing access to distilled real-time reporting encourages team collaboration, a data driven culture and empowers departments to stay on track of projects – it can even give individuals the latitude to go beyond their day-to-day responsibilities. During challenging times, this refined data also gives operators better insight into deals and key early wins that can reassure and even excite stakeholders. 2. Forge a clearer pathway to success with cloud-based data management Cloud-based asset management platforms offer key insights into portfolio health including revenues, debt, risk, occupancy and sales. Such data helps asset managers make more strategic decisions and set stakeholder expectations. Benefits also abound at the property level. Today’s asset management software seamlessly integrates with site-specific tools. Integrated, cloud-based technology supports facility and construction managers, leasing agents and property-level users. From online rent payments to digital procurement, users save time, decrease redundancies and improve accuracy within a single integrated system. With site staff connected to a single point of truth, they can efficiently make better day-to-day decisions. Structured dashboards enhance the value and practicality of data. “[Commercial clients] want a solution that’s designed for them and which connects them to the central data system with mobile applications and dashboards. That’s why we created a connected ecosystem for the operations side with Yardi Elevate,” explains Brian Sutherland, vice president, sales commercial at Yardi. He continues, “Expanding data access to the back office is tied to the larger issue of data management. The challenge is dissecting data and making it actionable for informed decisions. That’s the importance of role-based dashboards that remove guesswork for building operations people who need to control costs and work more efficiently.” Modern asset management technology platforms assimilate data at the property and portfolio levels and make it universally available. With a complete set of information, asset managers can evaluate pipelines, connect investors with appropriate deals and create an effective management plan. More strategic deal execution paves the way to increased revenues and overall success. 3. Gain greater efficiency and convenience throughout your organization with online services The cloud offers a unique opportunity to work with live data from anywhere with an internet connection. Executives can review reports, approve expenses and authorize payments when and where it’s convenient for them. Asset managers virtually present live reports to stakeholders with real-time data that is consistent throughout reporting systems. Whether in the office or a remote work environment, leaders across the organization achieve greater accuracy and efficiency with online services. At the property level, online portals make it easy to process rent payments,...

For the last year, CRE professionals have closely watched the overall economy and the commercial real estate market to monitor the effects of the pandemic. We’ve discussed the value of knowing your tenant, how the industrial market has largely remained strong and how to handle rent concessions and deferrals. One concept that has flown under the radar is the percentage rent model. Percentage rent is simply the process of applying a percentage rate, above a monthly base rent, based on the monthly income of a tenant. According to Peter Morris, principal at Greenstead Consulting Group, “this royalty is paid to the landlord to entice the landlord to consistently improve their property for more traffic flow, better co-tenancy, etc.” Morris appeared on a recent ICSC webinar to address the percentage rent model and its effectiveness in today’s market. “Percentage rent has no offsetting costs,” Morris added. He believes this is a tool that can be used effectively by both landlords and tenants. “If you can’t give all of one thing, you can offer the rest in percentage rent and negotiate it all the way down to zero,” he said. One of the keys, however, is to introduce the model at the beginning of negotiations. Because landlords are highly focused on certainty, “percentage rent is a tool that should be in every lease,” as Ivy Z. Greaner, COO at Bedrock Detroit, explained. Now, due to the Covid-19 pandemic, “landlords should implement percentage rent as the place to alleviate for all retail tenants,” she added. The general consensus is that this model does not get used often enough. Typically, in retail leases, 7% on every dollar is industry standard when gross sales reach an agreed-upon amount known as the breakpoint. However, tenants may choose to offer a higher percentage, in exchange for lower base rent or lease renewal right, if they believe their income may not rise quickly. When it comes to financing a property, percentage rent could play a role as well. “Because percentage rent is fluid and a retailer isn’t obligated to pay it, lenders don’t necessarily underwrite on it, but it does give them confidence,” Greaner said. Lenders can tie it into longevity at a site versus the odds a retailer would leave elsewhere, but the panelists agreed overall it wouldn’t move the needle on the cap rate or on the determining factors whether to make a deal. As a landlord relying heavily on percentage rent, Morris suggested looking at the market rent versus the base rent you are achieving, which will help you get a deal or justify the financing needed for another property. It may not be a driving factor in negotiations with a lender, but it could be a smart add-on to conversations. Gavin Farnam, president of retail services at Madison Marquette, said that his company has actually used COVID-19 restrictions as a driver for new deals that previously would not have been as desirable as they are now, such as open-air restaurants or gathering spaces.  He said their company is doing lower base rent with increased percentage rent to incentivize business owners to create cool, trendy establishments where there is community demand. While offering percentage rent is not feasible or advisable in all instances, Morris says he uses this tool often. “In my history of doing leasing for landlords and tenants, I mention it right off the top in a quid pro quo basis in order to get a deal done,” he said. Airport retail is almost exclusively a percentage rent business. While the actual hangar space and other tenancy in the airport is traditional rent, retail establishments are driven by percentage rent and are typically very profitable due to upcharged goods (for example, $20 for a breakfast that would be $10 elsewhere). There are several factors to take into consideration, such as a user’s occupancy cost and gross margins, when negotiating percentage rent. “We...

Back in 1946, we were on to something. The American Standards Association, now the American National Standards Institute, issued guidelines for healthy buildings. Among the standards stood a novel concept: occupied rooms should have access to fresh air. It seems like common sense now, but it’s not common practice today. That standard was all but forgotten by 1981 and the repercussions haunt us through the pandemic. Fortunately, a new class of experts highlights the benefits of healthy buildings as a way to promote public health and improve asset value. Introducing Joseph Allen, breathing new life (and science) into old ideas Joseph G. Allen is an assistant professor at the Harvard T.H. Chan School of Public Health. He is also the faculty advisor to the Harvard Healthier Building Materials Academy. During NMHC OPTECH 2020, Allen lead the session “Clean is the New Green.” He guided participants through the numerous ways in which buildings can prevent the spread of germs, promote health and yield higher returns for investors in the process. His session brought participants back to December 2019. Allen and his peers wrote an article on the importance of healthy buildings research to advance health. SARS and other epidemics inspired the paper, but they had no idea how close they were to the brink of a pandemic. “We had narrow misses in the past, influenza epidemics that were nearly pandemics. We knew that we were overdue, and we knew that buildings would play a role,” says Allen. Less than a month later, COVID-19 hit the U.S. By the end of the season, the pandemic had the globe in its grips. Allen and his team worked tirelessly to educate the public on the role that enclosed spaces play in the transmission and prevention of disease.  “We have to understand first how we are exposed, and then we can simply line up the corresponding control strategies, like higher ventilation, better filtration and use of masks,” says Allen. Controlling exposure points begins with the air The potential for close contact transmission, contaminated surfaces and airborne transmission must all be addressed in healthy buildings. Airborne transmission is the trickiest to manage. Smaller airborne particles can linger in the air for 30 minutes. They can travel beyond six feet with studies showing “viable virus as far as 16 feet,” reports Allen. Creating a healthy interior space requires more than social distancing. “In each outbreak, people were indoors with no masks and low to no ventilation. This is so important because airborne transmission is what drives super spreader events,” explains Allen. “A study published just last year found that ensuring even minimum levels of outdoor air ventilation reduced influenza transmission as much as having 50 % to 60 % of the people in a building vaccinated,” says Allen. Buildings can help to reduce the spread of disease through intentional ventilation and filtration techniques. Builders and managers acknowledged this fundamental truth in the late 1940s. By the early 1980s, however, efforts to reduce energy consumption lead to poorer indoor air quality. “We’ve lost our way over time,” explains Allen. “We’ve placed the emphasis only on energy. As a result, we are here in the sick building era where buildings can’t respond to the crisis at hand. They can’t bring in outdoor air.” Allen advises building managers to bring in as much outdoor air as they can to dilute airborne viral particles. It’s often as simple as opening the dampers. Recirculated air should be filtered by a MERV13 or higher filter. Such filters capture at least 80% of viral particles. If managers cannot reach those standards, Allen recommends the use of portable air cleaners with HEPA filters, which capture 99.97 percent of particles. Building building resiliency Americans spend 90% of our time indoors. Curiously, funding in the health industry often goes towards research regarding exercise, nutrition and the impact of external pollutants such as cigarettes and smog. Allen explores the...

How is the commercial real estate landscape changing and how do we adapt? How will we apply those learnings to our future as a technology innovator? These questions have been on the mind of the team at Yardi Canada as well as on technology providers worldwide. Commercial asset managers require flexible workspaces and integrated technology to adapt and thrive. Those foundations pave the way for greater efficiency, resilience and human-centric design. To further explore trending implementations of destination workspaces and integrated technology, a recent “Future of the Work Place” webinar hosted by The Empire Club of Canada provided valuable insights. More equitable, accommodating and accessible workplaces It begins with considering occupant safety. Yardi Canada is an occupier of offices in Toronto, Vancouver and Saskatchewan with 400 employees across the country. In addition to following provincial COVID guidelines, we are considering the very nature of the employee-workplace relationship and how that relationship may change to promote more equitable occupant wellbeing. During the webinar, Infrastructure Ontario president Toni Rossi explains, “Can tenants make it safely to work? Once there, can they work in healthy conditions? It is not just about feeling safe in a space, because that’s personal. It’s about leaving their homes and getting to work safely, and working safely, because more people (these days) have the responsibility to care for the elderly and for young children.” For managers of all asset classes, the pursuit of equitable workspaces encourages the creation of healthier environments for all occupants, including service workers and vendors who may not have remote work options. Previously overlooked spaces, such as control rooms, could be reconfigured to accommodate worker wellbeing. With such considerations in place, large office spaces can maintain their appeal and with the right technology, they can be managed remotely. Revisiting open floor plans and measures of productivity While the pandemic has challenged the popularity of open floor plans in residential real estate, commercial landlords are experiencing greater demand on this front. Yardi Canada agrees with the panelists concluding that open concept workspaces will continue to demonstrate value for commercial tenants. Before the pandemic, tenants who opted for open floorplans were looking to drive work environments that encourage teamwork, learning and creativity while supporting social activities. These spaces continue to serve the same purposes while offering the added benefit of social distancing without feeling isolated, open concepts permit a functional and healthy use of space. The open space also encourages inclusion and wellbeing in the workplace. Tenants can provide greater consideration to their employee’s work preferences, integrate biophilic design principles throughout the office and take advantage of amenities such as wellness rooms. Panelists acknowledge that many workplaces will uphold a hybrid model of in-office and remote work options. Sarah McKenzie, independent consultant – Innovation and Future of Work observes that the “office will likely shift from a central destination for all employees to a more fluid ‘hub’. Its use will fluctuate based on the needs of occupants.” At Yardi, we are engaging with employees regarding remote work and flexible, in-office options. Multiple factors will influence our decisions, from productivity to company culture and employee wellness. Such engagement, however, paves the way for workplaces that are both client-focused and employee wellness-centred. Asset managers would benefit from innovative tools to manage such flexible workspaces, offering access to tenants as a value-added service. Foundational tools for the future Asset managers must have access to reliable data to efficiently address the unique and changing needs of tenants. There are a lot of innovative products being developed in the industry today. The first step is to implement technology to streamline and automate processes which will promote greater efficiencies, increase insights and enhance decision making. With this as a base, leadership can take the next steps to create the vision of that future workspace. Technology that seamlessly combines portfolio health, tenant risk, deal management, budgeting and construction in a single connected...

The past year has been full of challenges from a traditional office perspective. These challenges have come in a series of phases ­­— initially sending employees home for an indefinite amount of time, implementing physical and tech upgrades to safely welcome workers and guests into offices, creating a potential hybrid working model to accommodate distancing in the workspace and now waiting on sufficient vaccine distribution that will encourage more employees to return to the office. As we look at the progress we’ve made toward re-entering physical workspaces, there is still a great deal of uncertainty as to when occupancy will return to pre-COVID levels. On a recent Realcomm webinar, a group of panelists was asked when they thought their offices would return to some sort of normalcy. Their answers varied: “When we hit 50% occupancy could vary, especially in California with its restrictions,” said Stuart Appley, managing director at CBRE. Appley suggested that around September he believes they could reach 30% capacity in office. CBRE Group is the largest commercial real estate services company in the U.S., and it employs a workforce of more than 100,000. Last fall, the firm formally changed its global headquarters address from California to Texas, where it already has a significant presence, handling property management, leasing and development services for Dallas and Fort Worth office space, as well as other commercial real estate assets. Susan Gerock, CIO and vice president of IT at Washington REIT, says she’s hopeful to be at 50% occupancy “at some point in the fall, but many companies won’t even try to start bringing people back until September.” Joe Rich, senior vice president at Related Companies, and Ilan Zachar, CTO at Carr Properties, both pushed their timelines out a bit further, with Zachar saying his customers believe the end of 2021 will bring some normalcy, while Rich admitted that a return to 100% occupancy is unlikely to happen at all in his opinion. This is a significant cause for debate among industry leaders, because while there is a chance that 100% occupancy is a thing of the past, there is a wide range of guesses as to what working models will look like long term. Once the pandemic is “over” in terms of social restrictions, all signs point to the elimination of a standard 9 a.m. to 5 p.m., Monday to Friday schedule. Whether it’s fewer hours or fewer days in office, employees who have the ability to fully function remotely will do so more often than they did before March 2020. “This trend was occurring before the pandemic, but this just accelerated it,” Rich said. As Zachar mentioned, 25-30% of Carr Properties’ workforce was remote pre-COVID. Many companies were not worried about a drop in productivity when sending employees home, but were concerned about missing out on the tangible benefits to being in an office. Interpersonal relationships and hallway conversations cannot be duplicated on Zoom or Microsoft Teams. In the same manner that the office will lose its appeal, city centers are losing their vibrancy when workers aren’t in the offices. With studies showing that New York City is below 20% office occupancy, Rich expressed concerns about how viable this is for businesses throughout Manhattan and other major hubs. “Our vibrancy is currently at risk,” he said. “We can’t work without public transport.” The concern over mass transit use is one of the principal factors affecting a slow return to physical workspaces. Dallas, Houston, Austin and Philadelphia have all seen significantly higher number of employees returning to office than New York, Chicago and Washington, D.C, the latter three much more dependent on mass transit usage. Leveraging the right technology The panel made a point to differentiate between two unique sets of technology. “COVID tech” are advances such as thermal scanning, virtual conferencing and contact tracing which became necessary due to the pandemic. The second category, tech to encourage people...

Since 2000, the U.S. office market has witnessed a good share of trophy deals, which is usually a sign of strong market conditions. Using CommercialEdge data, the following is a review of the top 50 office deals of the last 20 years. Specifically, the report looked at office buildings of at least 50,000 square feet in size and mixed-use properties that have more than 50% office space (for further details, read our methodology). Additionally, the report highlights major deals in the Northeast, Midwest, South and West, as well as best-selling Class B office spaces and properties less than 250,000 square feet in size. #1 Office Deal of the Last 2 Decades: $2.8 Billion Sale of GM Building New York City occupies the first 12 spots within the list of top office deals of the last two decades – an unsurprisingly dominant presence in the ranking. As for office deals outside of New York City, only 11 transactions made the cut — with more than half of those being portfolio deals. The highest-ranking office deal from outside New York City was the $1.64 billion Century Plaza portfolio in Los Angeles. Sold by General Motors in 2014, the three-building portfolio totaling 3.3 million square feet placed 13th. Boston features four entries on the list, led by 500 Boylston and 222 Berkeley in 23rd place. EQ Office sold the 1.3 million-square-foot Boston office space to a joint venture between Oxford Properties Group and JP Morgan Chase in 2015 for $1.3 billion. Notably, several buildings were sold twice since 2000, fetching top prices each time. One such property is the General Motors Building in Midtown Manhattan, which also ranks as #1 office sale since 2000. Boston Properties paid $2.8 billion for the office tower located at 767 5th Ave. in 2008. The office tower had previously been sold in 2003 for $1.4 billion — landing it in 18th place for a second entry on the top 50 list. Another property with double entries in the list is the News Corporation Building, anchored by media giant Fox News. Located at 1211 Avenue of the Americas, its $1.52 billion sale in 2006 was the first sale to land it a spot on the list — in 15th place. Then, in 2013, Montreal-based Ivanhoe Cambridge acquired a 51% stake in the property for $855 million, enough to hand it the 50th position on the list. Highest-Ranking Office Deal of 2020 Falls Short of $1 Billion Mark for First Time Since 2012 In 2020, the $900 million sale of 330 Madison Ave. landed in first position, followed by the $810 million transaction of the former Master Printers Building — both in New York — and the $729 million sale of 245 Summer St. in Boston. It’s worth noting that the last time the leading office sale of the year was less than the $1 billion threshold was in 2012. At that time, Singaporean wealth investment fund GIC Real Estate paid $851 million for the 48-story 101 California in San Francisco. Likewise, the highest-ranking office deal in the West last year was the $664 million deal for the Transamerica Center in San Francisco, which was closed by a joint venture between SHVO and Deutsche Finance. In addition to the iconic Transamerica Pyramid, the transaction also included the 185,000-square-foot office building at 505 Sansome St. and the 52,000-square-foot property at 545 Sansome St. By comparison, Apex Capital Investments closed a $187 million deal last December for the 352,000-square-foot Grand 2 at Papago Park Center in Tempe — the priciest sale of a Phoenix office space for rent in 2020. Two other transactions of Tempe office buildings close out the ranking, trading for less than half of that amount: Discovery Business Campus – Northern Trust III for $65 million, and the Park Bridge and Park Garden at Fountainhead Corporate Park for $62 million. To the west, there was a much tighter race for the first...

As part of the 2020 IMN Real Estate Private Equity Funds Virtual Forum, Yardi had the unique opportunity to participate in several panel discussions and share thoughts on trends in technology and investment management. In one session, “Meeting the Challenges of Fund Administration, Investor Reporting & Transparency,” Scott Tavolacci, Yardi regional director of global solutions, moderated the conversation. As Tavolacci noted, it seems that roughly 10 years ago the hedge fund space and the private equity space expanded into fund administrators and real estate may have been a bit behind. However, recently the real estate sector has picked up speed in this sense, and as Jeff Bush said, over the last five years, he’s seen a lot of real estate managers and firms thinking about and questioning fund raising and outsourcing practices every time they find a deal. Bush, president of Standish Real Estate Services Group, believes that the real estate industry is often taking the approach of seeing what works best in other sectors, mitigating risk or mistakes potentially along the way. Technology has played a major role in all aspects of fund administration as it does for just about all walks of business. Usage has only increased with the mass exodus away from the traditional office during the pandemic. The ability to use portals to access information in real time and make transactions on the go is vital, for anyone from investors to fund administrators. Beyond that, it’s important to have a connected solution that brings together all office functionality from accounting in the back office to investor relations with front office management. Real estate traditionally lagged behind in terms of tech usage, but the pandemic has expedited tech adoption while still keeping the focus on the value of data. Platforms are providing more secure and reliable ways to access and relay data between entities without any time-consuming or error-prone manual effort to aggregate data from disparate sources. In “Using Technology to Improve Efficiency & Returns,” Chris Barbier, Yardi industry principal for investment management, explained that while advanced tech has become a prominent focus for the industry, it was the more basic requirements that were in high demand earlier during the pandemic. “Starting with payables, people were going into the office, picking up the check printer and bringing it home with them. You would think some of these payables processes would be pretty basic, but as the workforce went remote, we saw this was an area of need to adopt some technologies,” Barbier said. Departments such as accounts receivables also saw a major uptick in tech usage. A large part of this was due to the volume of people who need visibility to data and reports, from accountants to property managers to CFOs to portfolio managers. Without basic data sharing and connectivity between departments, remote work would not have been nearly as successful as it has been this year. There was initially a significant level of uncertainty surrounding workforces transitioning to work from home environments, as both panel discussions touched on. Several panelists noted, however, that fears of lack of productivity hardly materialized, as companies adopted tech at higher rates than ever before and employees proved that remote work is feasible long term. On the investor side, the importance of communication has been highlighted throughout the year. “Investors want to know quickly what is going on with their portfolio and investments, so we’re seeing an uptick in tech adoption for better communication with investors to provide them information they’re looking for,” Barbier added. “It’s really interesting to see how investors are doing due diligence virtually, where a lot of that really wasn’t happening before,” said Barbara Rea, founder of Rea Advisory Group. Traditionally, investors expected to come in and meet in person, build some trust and forge a stronger relationship. With that being taken away this year, lenders and investors are relying on technology such as virtual meetings, a rare...

The findings of the first BOMA International COVID-19 Commercial Real Estate Impact Study reveal that the death of the office is greatly exaggerated. While many tenants are reassessing the use and the size of their physical offices, a strong majority (74%) see their in-person office space as vital to conducting successful business. The nationwide survey of more than 3,000 office space decisions-makers and influencers gauged tenant sentiments relating to COVID-19, including its impact on their business and their attitude towards the physical work environment and office space decisions going forward. It was conducted in September and October of 2020 in conjunction with Brightline Strategies, with a grant from Yardi. The study’s key findings include: 65% of commercial office decision-makers continue to see significant value in on-site business operations, particularly as it relates to collaboration, coaching and culture. The economic headwinds on office tenants are far reaching, with 33% of respondents saying they have experienced at least a 25% revenue decline since the onset of the pandemic. While a strong majority see office space as vital, 61% of respondents across all tenant sizes report they will reassess space needs. 78% approve of the response their current property owner/operator has implemented during COVID-19. 47% of all tenants say their landlord’s coronavirus response exclusively has made them more likely to renew. 77% are confident they understand how to reduce and manage risk in their physical office. At the outset of the survey, 55% of respondents said they plan to renew their leases, unsurprisingly lower than the Brightline Strategies six-year national index of 78%. However, renewal likelihood increases 11 points — rising to 66% — if properties implement operational changes including new services, features and physical spaces in response to the pandemic. This uptick indicates a true inflection point, showing that a change in operations helps assure and retain tenants. Maximization of fresh air is the “most important” measure for properties to adopt, according to tenants. Additionally, more than 40% of respondents indicated that they would pay supplementary fees for disinfecting stations and twice-daily full office disinfecting. The collective sentiment toward amenities is changing too. There is less focus on traditional built-ins, like onsite gyms and cafes. Almost half say they are seeing more value in personal relationships with their property management company/teams. “Our collective charge was to help owners and operators better understand, mitigate and proactively address emerging industry trends, shifts in workplace priorities and tenant preferences resulting from COVID-19, as well as changes in market attitudes towards the physical work environment and their impacts on office space decisions going forward,” said Robert Teel, vice president of global solutions, at Yardi. Although COVID-19 continues to be a disruptive force for the office sector and its tenants, the value of the office as a key ingredient of business success remains strong. “We have seen a steady and significant rebound in the perceived value and utility of physical office environments since the onset of the pandemic, with nearly 75% of all tenant decision-makers across the country affirming that in-person offices are operationally vital to their businesses, long-term growth and sustainability,” said Henry H. Chamberlain, APR, FASAE, CAE, president and COO of BOMA International. “As our ‘new normal’ emerges, we will become increasingly focused on the form and function of office environments in a post-pandemic world.” Explore more survey data in the BOMA International COVID-19 Commercial Real Estate Impact Study executive summary, including renewal forecasts and space reduction estimates by renewal horizon. Read the press...