Mr. Richard D. Baier
President, BOMA Int'l (Building Owners & Managers Assoc.
2000 Global Real
Looking ahead, 2000 will be a strong year for the commercial
real estate market in the U.S. Vacancy rates, rental rates, supply and demand
are the tightest they have been since the mid-1980s. And if you combine total
downtown and suburban properties built in the U.S. in 1998, we're only building half of
what was built in those peak mid-1980 years.
Future development will remain in check for most markets
because only well-planned, competitive projects are securing construction loans
and heavily congested states like New Jersey are introducing open space initiatives
and sprawl controls. In some markets, local governments are also buying up undeveloped
land and setting growth boundaries. Developers no longer have the pick of the
Consolidations and industry alliances will continue,
as well as international expansion by many firms. In 1998 alone, there were 10,401
mergers and acquisitions, totaling $1.3 trillion worth of real estate! Who you
work for today may very well not be who you work for tomorrow… So plan for it!
Make sure that your skills are up to date, and that your know-ledge base is as
broad as possible. Executive level education has never been so important; pursue
every opportunity out there to ensure that your skill set and credentials can
meet what tomorrow's employer will demand.
Internationally, keep your eye on the opportunities that
exist for our industry. But a note of caution… the ability to retain a local
flavor is what will separate great global firms from mediocre ones. Communicate
locally, and dig deep to understand the intricacies and differences between marketplaces
and tenant types. International owners and tenants are crying out for Western
ingenuity, high quality, technical system operations and consistency. Still,
understanding the local flavor is crucial. Expect culture shock. And remember
that you're really buying human assets - not bricks and mortar. Before bursting
onto the international scene, successful global organiza-tions do a lot of listening
to determine what a region needs and what employees expect.
Real estate market
trend in 2000:
An increased focus on customer service (in our industry's
case, the tenant), will continue to be a major industry trend in 2000. It's easier
and more cost effective to keep a tenant than attract a new one, so it seems
obvious that knowing what tenants want is the key to retention. But until recently,
no one was really paying much attention. That has started to change, as consumers
have become more savvy and, in turn, more demanding.
Through a survey conducted by BOMA and the Urban Land
Institute, we found that in alternative office strategies, for example, only
three out of ten respondents have imple-mented any type of alternative office
Overall, telecommuting - or working at home - is most
popular, with one out of four companies allowing it. This may be fine for our
tenants, but for us, it makes it difficult to build teams, and as owners and
managers, we need to keep that in mind.
Virtual officing - the ability to work in non-traditional
settings - comes next, with one out of five respondents using it. Only seven
percent use hoteling - reserving desk space at a central office for multiple
people - probably because employees like to feel as though they have a territory
that they can call their own, that they can personalize and that reminds them
they're an important part of a team.
Very few tenants report that using alternative office
strategies change the total amount of space they need, because most companies
need more shared or non-dedicated space for group activities like meetings or
brainstorming sessions. And, because creating a sense of offering amenities,
is crucial for retaining employees.
The survey also showed that "smart buildings" really aren't taking
over the industry. Only half of the respondents were in "smart buildings" with
any intelligent building systems. But of those with such features, HVAC systems
ranked first among top rated intelligent building systems, pointing out tenants'
strong desire for comfortable temperatures and the ability to control their
comfort. Rounding out the list were: wiring for the Internet and for high - speed
networks; local-area and wide-area network connectivity; filer optics capability;
and conduits for power, data and voice cabling.
In the area of features, amenities and services, 90 percent
or more of tenants give the following features a rating of very important:
Indoor air quality
Excellent maintenance work quality
Prompt management responsiveness
Management's ability to meet tenants' needs
Excellent acoustics and noise control
Virtually all of these top rated amenities suggest that
all tenants really want is control. Control over their temperature, control over
how quickly and how well building management responds, and control over their
personal office environment.
The most important amenities are all convenience related,
with food service, proximity to convenience and retail stores, and availability
of banking and ATMs. We live in a time strapped world, and anything we can do
to make our tenants lives easier is clearly appreciated.
BOMA has also noted several other important trends, including:
Innovations in Real
The Internet, and e-commerce, will play an enormous role
in the future of the industry. Property management firms are able to provide "virtual
tours" of their listed properties; software is being developed every day
to assist brokers in promoting space; office furniture stores have developed
online "stores"; BOMA International has made many of its valuable research
publications available for download on www.boma.org; and the trend toward e-commerce
has changed warehousing and distribution methods. We must be aware of the technologies
available, and ensure that our firms are utilizing them to their maximum potential.
Cautions for Valuers
Following up and settling any issues remaining from the
Year 2000 "millennium bug" issue. Property managers must continue to
communicate with their tenants about how their building systems fared during
the December 31/January 1 clock change-over, and reassure them that things will
continue to run smoothly in 2000, particularly during dates such as February
29, the leap year date. It will be important for property managers to continue
to develop contingency plans to prepare for any disruption in service throughout