What’s Next, Ep. 27: Q2 2021 Office MarketBeats

By Gary Tasman Property values are soaring, and interest rates are at near record lows. It’s no wonder many commercial property owners are considering selling their assets to take advantage of one of the strongest sellers’ markets in recent history. Much like preparing to sell a home, commercial properties need to be appealing to potential buyers. But unlike your home, which might be improved significantly with some simple landscaping and a fresh coat of paint, commercial properties need more than just a physical facelift. They also need fiscal preparation. Physical Preparation for the Sale On the physical side, sellers often focus on the interior of their building and forget to pay attention to a buyer’s true first impression: the parking lot. Fresh striping, neatly placed curb stops, and a pothole-free parking area are some of the most important details that are overlooked by commercial sellers. Although few commercial sellers would consider their roof part of a first impression, today’s buyers conduct their own research online, which includes looking at aerial imaging via Google Earth and other apps. Sellers need to check these services to see the condition of their roof when the most recent satellite images were taken. If a roof was in poor condition at the time of the image, special attention should be given to improvement to convince sellers that the needed repairs have been made. Major cosmetic changes aren’t necessarily essential when preparing a building’s interior for sale. Many buyers will want to change an interior layout or design after purchase and are ready to absorb that expense. Some issues, however, are important to repair. Obvious water damage or cracked flooring, for example, might lead a prospective buyer to believe that a building has significant structural damage. Fiscal Preparation for the Sale While presenting a physically appealing building is important, offering a fiscally appealing investment is absolutely vital to selling your commercial property. Smart investors are aware that it’s easier to cure deferred maintenance issues than it is to cure financial issues. Buyers will look closely at financial documents and pay close attention to the property’s income and expenses before making the decision to buy. For a potential purchaser, a steady income stream is likely to be a top priority. A property with high quality tenants committed to a lengthy lease translates into a predictable income stream. Owners should think strategically before making the decision to sell and shore up their lease terms with tenants before listing a property on the market. While the financial documents related to the property’s income are important, buyers may also want to see the financial documents of the tenants currently housed in the commercial property. Potential purchasers will want to see strong and organized financial documents for a facility’s tenants, including the tenant’s income stream through multiple business cycles and even personal financial data on the tenants. This data will provide peace of mind that the property will produce income over the long term. Smart buyers will also be inquisitive about a property’s expenses. These expenses can fall into two categories: controllable and noncontrollable. Some operating expenses are completely unavoidable. Property taxes, insurance and utilities represent noncontrollable expenses. While insurance rates can be negotiated and utility payments may fluctuate slightly, these expenses are fairly consistent and necessary costs. While noncontrollable expenses are a concern for any investor, a seller’s attention to controllable expenses will definitely make a property more marketable. A building without costly upcoming maintenance expenses will be more appealing to buyers. Additionally, features like recent capital improvements designed to produce long-term savings will be appreciated by prospective purchasers, especially if the improvement eliminates a costly monthly lease. Replacing a leased HVAC with a new system or removing troublesome trees that require constant maintenance would be appreciated by potential buyers. The first step in preparing your property for the market is to consult with an experienced commercial real estate professional. The expert team at Cushman & Wakefield | Commercial Property Southwest Florida is prepared to evaluate your property and guide you to decisions that will properly position your commercial real estate as you prepare to sell.  Contact us at 239-489-3600 or by contact-us.

By Gary Tasman Review the financial statements of nearly any location-based business and you’ll see a similarity. In most cases, the company’s most significant investment will be its real estate.  Whether that business leases a small office or owns a 500,000 square foot warehouse, its land, buildings, and improvements will account for some of the largest numbers in its operating budgets. To protect that investment, most businesses either employ or outsource facilities managers—professionals who oversee building-related tasks like maintenance, cleaning, security and more.  For decades, many companies looked at facilities management as simply an assortment of a la carte services, often retained only when needed. However, a shift to more strategic facilities management has recently started, and this change has accelerated in part due to the coronavirus pandemic. Today’s facilities managers do more than coordinate plumbers, cleaning crews, and building renovations. According to the International Facility Management Association, these professionals “ensure functionality, comfort, safety and efficiency of the built environment by integrating people, place, process and technology.” This definition acknowledges that facilities are integrated and interconnected systems, and not individual stand-alone parts. Bryan Jacobs, President- Global Integrated Facilities Management at Cushman & Wakefield, says that the facilities management profession, or FM, may need a rebranding to reflect its role more accurately. “FM is really almost needing a change in definition,” he says. “A change in term, more to what I call ‘workplace operations.’ It’s the operating and delivery of services in the workplace.” Modern facility managers are responsible for ensuring that a building’s physical space and technology are used effectively and efficiently, and that employees feel safe, comfortable and engaged in their workplace. Each of these areas have become substantially more relevant for businesses since COVID-19 changed our world in Spring 2020. The use of physical space in a workplace has never been more critical, thanks to social distancing guidelines during the pandemic. For those businesses that stayed open, employee and customer proximity and traffic flow needed to be modified for safety without sacrificing functionality or efficiency. Ingrid Fenn, president and CEO of SIREAS (Strategic International Real Estate Advisory Services), says companies have traditionally been inefficient with their space. The pandemic, she adds, simply further exacerbated the issue. Businesses that were unable to continue operations at their facilities quickly learned the value of workplace technology and its role in keeping their teams connected. Despite the fact that their facilities may have been closed, facilities managers were integral in providing the right supplies and organizing efficient processes to the virtual doors open for business. As employees continue to return to the office worldwide, the role of facilities managers in helping to establish and reaffirm workplace culture has become more relevant. The pandemic has placed a stronger emphasis on employee health and well-being, and facility features ranging from air filtration systems all the way down to restroom soap dispensers play a role in staff safety. The facility manager’s role in employee satisfaction and retention is equally as important, and again, the pandemic has also underscored this need. “People… want to feel good about work because they realize they can work anywhere,” says Fenn. “If you’re going to have me– or force me– to go into the office, provide me with an environment that’s not stifling.” To improve office environments, Jacobs has shifted his hiring philosophy when looking at his global facilities teams. “We’ve actually started to hire a lot of people with a hospitality background,” says Jacobs. These team members are focused on providing a positive brand experience in his facilities. Facilities, and the companies that use them, are ecosystems. Employee and customer experiences are interconnected with the environments that surround them. As our world continues to change, our workplace experiences are also evolving, and so too is the field of facilities management. To continue providing value and positive experiences, businesses need to shift their thinking of facilities management. No longer just a series of basic functions, facilities management is the strategic gatekeeper of the overall business experience. Does your facility nurture positive employee engagement and experience? Cushman & Wakefield’s Experience per SF™ is a proprietary tool that uses data-driven insights to help you retain employees, improve operational efficiency, bolster employee engagement and productivity and increase your bottom line. If you’re searching for ways to make your workplace more efficient and engaging, Cushman & Wakefield | Commercial Property Southwest Florida (CPSWFL) offers full-service property management that address an entire spectrum of services ranging from “physical” to “fiscal.” Learn how CPSWFL can help you achieve your business goals and objectives by contact-us.