The idea of building “green” has increased exponentially in popularity over the past several years. The concept may initially evoke visions of high up-front costs and following a set of complicated guidelines, but green building is actually well worth considering and is so much more than just a price tag. The U.S. EPA defines green building as, “The practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life-cycle from sitting to design, construction, operation, maintenance, renovation and deconstruction.” The key take-away from that statement is efficiency. Investing some time and energy into your building right now can have long-lasting benefits to both the sustainability of the structure, the environment and your wallet. Let’s look at nine key ways that green building can have a positive impact.
1. Lower Maintenance and Operational Costs
One of the biggest perks to green buildings is the drastic reduction in maintenance costs over the life of the structure. While building green might incur initial charges that are higher than traditional building, these costs are easily recovered over the years. These savings can be largely attributed to the various design elements that work to reduce water and energy use, thus lowering bills by up to a third. Maintenance and operational costs such as these traditionally account for up to 80% of expenses over the lifetime of the structure, showcasing the long-term benefits of this investment. Materials traditionally used in green building are also notably more durable than those that are not. Yes, it may be a bit more costly to build green or to convert your existing property, but the long-term financial benefits speak for themselves.
2. Vastly Improved Indoor Environment
Our surroundings have a huge impact on our overall experience of a space. Green building factors such as improved lighting sources, air quality, upgraded ergonomic features and thermal conditions have been proven to drastically reduce stress levels and increase the quality of life. Work environments that have embraced green technology have produced employees that are much more efficient and happier. According to a 2015 study done by SUNY Upstate Medical School, workers in these kinds of spaces recorded a 101% increase in their brain function and the American Academy of Sleep Medicine reported in 2013 that “employees in offices with windows slept an average of 46 minutes more per night”. This showcases how green building benefits go beyond just individual experience to have a more communal impact. Workers that are happier and more relaxed are proven to have a higher output and will stay at their jobs longer.
3. Saving Water
According to the World Green Building Council, green buildings that have received LEED certification are noted to consume up to 11% less water than those that are traditionally built. This is attributed to the installation of water-efficient plumbing. High-quality water purifiers can also allow green buildings to make use of natural resources, such as rainwater, and to recycle water, as well. This, again, has a significant impact, not only on the building but on the environment, overall.
4. Saving Energy
The World Green Building Council also reports that LEED certified buildings worldwide consume approximately 25% less energy than non-green buildings. Additionally, the Indian Green Building Council (IGBC) has shown that green structures in India can result in a 40-50% reduction in energy costs. Being that these structures are designed to draw energy from natural sources (such as sun, wind and water) over oil and coal, energy use is largely reduced. Just the introduction of solar paneling can save literally thousands over the lifetime of the structure.
5. Better Overall Health for Occupants
Whether living or working in a green building, occupants can experience a lot of incredible health benefits. With the absence of harmful organic materials and plastics that have been proven to release toxic carcinogens into the environment, those spending their time in green buildings are reducing their exposure to many items linked to allergies, respiratory issues and even certain types of cancers. Above and beyond just physical health, mental health is equally as impacted through the implementation of green building practices. In fact, a survey by Cundell determined that the natural elements within a green building created a 16% higher perception of well-being and a COGfx study showed that they performed 131% better when it came to crisis response and working under pressure. The inclusion of natural light in green spaces has also been proven to reduce the onset of seasonal affective disorder (also known as winter depression).
6. Lower Impact on Shared Resources
With the many energy and water-saving features applied to green buildings, builders are fighting back against a multitude of threats to our shared resources. This has global impacts, as well as local, and creates the possibility that we may preserve some of these resources for future generations.
7. Environmental Benefits
The use of sustainable materials and energy sources allows green buildings to reduce their carbon footprint exponentially. UNEP reported in 2009 that this “building sector has the largest potential for significantly reducing greenhouse gas emissions compared to other major emitting sectors”. In 2016, UNEP also relayed that it “has the potential to make energy savings of 50% or more in 2050, in support of limiting global temperature rise to 2 degrees Celsius (above pre-industrial levels)”.
8. Material Efficiency
Green buildings also commit to using as few materials as possible, while still maintaining the quality and integrity of the final outcome. They rely on many recycled and repurposed materials to reduce waste and preserve many natural resources. This also contributes to a reduced carbon footprint and helps to improve the outlook for our environmental future.
9. Long-Term Durability
Lastly, you can’t underestimate the durability of green structures. The sustainable materials that are used to create such buildings have been proven to last longer, on top of all of the other benefits they create. Recycled roofing and decking, for example, can be exposed to the elements for years without needing replacement and with minimal upkeep. Additionally, seeing as they are often not treated with chemicals, they further contribute to a healthy environment, both on the micro and the macro level.
It is quite obvious to see that the benefits of green building far outweigh any perceived detriments. Embracing the idea of building green has impacts that extend beyond just the structure itself, all the way out into your local community and even on a global scale. As more and more builders around the world begin to adopt green technology into their designs, we can expect that these benefits will only continue to grow. It may well be worth considering, even if the upfront costs may be a bit higher.
A common question people ask in the commercial real estate industry is “How do brokers get paid?” Although the payment to a broker is involved with every commercial real estate transaction, it seems many people lack clarity on the subject. Truth be told, the process of getting paid as a broker can get a bit complicated. The fact that commission rates can vary also contributes to the confusion around how brokers get paid. Whether you’re interested in becoming a broker one day or you’re thinking you might want to work with one, this blog post will explain how brokers get paid for their work.
How do CRE Brokers Get Paid?
What many people do understand is that commercial real estate brokers get paid based off commission. The commission is typically paid by the seller of the property, but the buyers of the property may also owe the broker a payment as well. Who pays the commission depends on who the broker is representing in the transaction. When representing both parties, both the seller and buyer will pay the broker a commission fee. If there are two brokers involved with the deal, they will split the commission between each other. However, the amount in which the broker is paid varies due to anti-trust laws.
Due to anti-trust laws, it is illegal to set a commission rate across a market or industry. This means the commercial broker and their client need to negotiate a commission rate before agreeing to work together. Negotiating a price for a commission can be great for both the client and the broker, as the costs of different properties vary greatly. Additionally, some properties are easier to find than others, which changes how difficult the broker’s job is. According to our partners at SVN | Southgate Realty, most commercial brokers get paid between four percent and eight percent of the sale price from the property. However, this may increase or decrease based on the complexity of the deal. So, be sure to consider how hard the broker will need to work when negotiating their commission rate.
How Does Commission Work?
In commercial real estate, a property can be sold or leased. The amount a commercial real estate broker earns is based on the price of the property. So, if the broker and the seller agree on a seven percent commission rate and the property purchased was $1,000,000, the broker would earn $70,000. However, if another broker was involved to represent the buyer of the property, the $70,000 would be split between the two.
For commercial real estate, because leases are typically paid on a monthly basis, there is a different way to calculate the commission of a broker. With leases, the broker is paid based on the length of the lease agreement and the monthly rate. For example, if a property is leased for three years at $15 per square foot, and it is 2,000 square feet, the lease value would be $90,000. We find this from 3 years x ($15 x 2,000 SF). If the seller and broker agreed on a seven percent commission rate, the broker would make $6,300.
How Do Brokers Get Paid on a Lease?
Assume that Corporation X just leased 3,000 square feet to Landlord Y’s Shopping Center. The lease is for 4 years, starting at $15 per square foot with $0.40 annual rent escalations. Here is how you break this deal down.
Year One: $15 PSF x 3,000 SF = $45,000
Year Two: $15.40 PSF x 3,000 SF = $46,200
Year Three: $15.80 PSF x 3,000 SF = $47,400
Year Four: $16.20 PSF x 3,000 SF = $48,600
The total lease consideration from all four years amounts to $187,200. If a broker gets a 6% lease commission for this deal, this percentage is multiplied by the total lease consideration amount. The total commission is $11,232. The landlord and tenant representative brokers split the commission 50/50, receiving $5,616 each. Also assume that the broker gets a 60/40 split with the brokerage firm. The broker then walks away with $3,369.60, or 60%, from this deal.
What Goes Into Sales Transactions?
In most cases there are usually two kinds of brokers involves in a sales transaction. You have the seller’s agent and the buyer’s agent. Commercial real estate sales usually have a longer timeline than what you would expect, so expertise on the property and area should be extensive. There are differences between investment sales and owner occupied deals. Sale transactions involve the title, inspections, environmental conditions and entitlements. It is important to note that closing on a commercial real estate sale cannot occur under 60 days. It will often take 3 to 6 months until all parties reach an agreement.
Brokers that represent sellers will have a pre-negotiated listing agreement in place with commissions already revealed. Commissions from a sales transaction will range from three to six percent, but it isn’t uncommon for sellers to only pay their own brokers, and not the buyer’s broker, on larger investment sales. In this scenario, commissions may be lower, such as 2%.
Do Independent Contractors Have Advantages?
It must be understood that most commercial real estate brokers will work as independent contractors. This means that they are contracted employees. They have a written contract in place with a brokerage company and will be paid accordingly as a W-9 employee. However, the brokerage firm will not withhold taxes, holding independent contractors responsible for addressing matters related to the IRS. These matters include taxes, social security, medicare, and health insurance. Independent contractors are self-employed, though the brokerage firm will still have significant input.
The relationship between brokers and independent contractors must remain steady. If both sides correctly follow the terms of the Independent Contractor Agreement for Sales Associate (TAR 2301) and the Statement of Understanding (TAR 2302) they can reduce their risk of facing penalties from the IRS. The rights and obligations of a broker and an agent will be defined by the Independent Contractor Agreement. Provisions that clarify the agent is not an employee will be outlined in this document. The agent must agree to terms provided in the Statement of Understanding, which will help legally confirm the independent contractor relationship. It is recommended to annually complete this document to reaffirm between brokers and independent contractors.
Should You Have a Tenant Representative Broker?
If you are looking to save money by acting as your own representative in a real estate deal, then you will be disappointed. If you do not have a tenant representative broker before going directly to the landlord, you can expect the end result to be the landlord saving money and you losing money. Without expert knowledge of the market or the many traps that are part of commercial leasing, the landlord can manipulate negotiations and take advantage of you. Tenant representative brokers guide you through the process of finding property space and will negotiate with the landlord for the best deal that works for you.
What Is the Broker Opinion of Value?
If you know how appraisals work, then you will discover that a Broker Opinion of Value (BOV) is very similar to an appraisal. An assessment of a property’s value is known as an appraisal, which analyzes the condition of the property as well as its amenities, location and comparable sales in the area. A Broker Opinion of Value is a general estimate of value for a single commercial property. Investors, property owners, lenders, accountants and real estate attorneys are just some of the real estate professionals that will use a BOV. The level of a BOV ranges from a simple document of two to three pages to a more complex book of 40 to 50 pages. Brokers can get paid by banks anywhere from $250 to over $1,000 to publish an opinion of value on a property.
Who Pays the Broker?
The person who usually pays the broker(s) involved with commercial real estate transactions is the property owner or landlord. Almost always, the seller or landlord will pay both brokers who are representing clients in the commercial real estate transaction. This is because the landlord wants to get the property off their hands and needs the help of the broker to do so. If you are looking to purchase a property, do not skip out on using a broker because you think you will get a better deal. Brokers are very resourceful, and you typically won’t spend any money on their services when you are buying the property.
Looking for a Commercial Real Estate Broker in Salt Lake City?
We hope this blog post cleared up any confusion you had about how brokers get paid. If you are looking to buy or sell a commercial property in Salt Lake City and need assistance from a broker, please feel free to contact us. Our highly skilled and experienced advisors will help you get an excellent deal and can answer any questions you may have. We always strive to make the transaction process as easy as possible for our clients. So, please feel free to reach out so you can work with one of our advisors today!
Thinking of investing beyond residential and retail real estate? Try industrial property investing! Industrial properties are large allotments of real estate and infrastructure that are used for a variety of warehousing, manufacturing, and commercial purposes.
And they make excellent investments for a multitude of reasons. Almost everything we use on a daily basis—food, shampoo, clothes, laptops, showers, ovens, toys, bikes, cars, and so much more—come from industrial properties!
Industrial properties are stable investments for two reasons. The first reason industrial properties make sound investments is because they cater to a variety of applications. Some popular uses for these spaces include manufacturing and production, distribution, retail, and office space. Whatever your industrial investment goals or needs, there is definitely an existing space to help you get started.
The second reason that makes industrial properties excellent investments comes from the perpetually high supply and demand for industrial processes and employment. With food, sanitation, and infrastructure at the heart of every city and suburbs, there will always be a huge workforce ready to rent and run industrial projects on your site.
If you’re thinking of purchasing an industrial property, this article is for you. We’ve compiled a no-nonsense guide to industrial properties to help you exactly what you need! Read on to learn about 10 critical factors to consider with industrial properties.
1. The Industrial Property Class
Knowing the class of an industrial property will give you surface-level insights to the value of the investment at hand. Industrial real estate is graded with an A, B, or C classes according to their age, condition, and location. Classes are also graded according to the social and economic factors and predictions of the property’s location. Property classes can help you manage your expectations when it comes to planning for future renovations, tenants, and business traffic. Take a look at each class and how its grade pertains to the property quality.
Class A Industrial Property
Class A Industrial Property is the highest grade of industrial property. In this class, you will find the most expensive, pristine, and desirable properties. Class A real estate is new or recently renovated, is in excellent physical condition despite its age, is situated in a great location, and is bustling with economic activity. These types of properties generally rent to high-earning tenants in locations that experience very low vacancies. It is common for these types of properties to be professionally managed.
Class B Industrial Property
Class B Industrial Properties are secondary to Class A when it comes to age and/or quality of the property. Class B properties may be older, may contain less desirable amenities, and may be situated in less economically active locations. The tenants in this property grade generally earn less than Class A property tenants. Although it’s more common for these properties to managed by retail investors, professional management is not unheard of.
It is important to note that Class B properties can be re-graded to Class A properties after renovations. Some investors apply to rezone these properties during the renovation process as mixed-use real estate to hedge their risk and expand their application. The practice of rezoning industrial properties is common in emerging cities experiencing booming population and economic growth.
Class C Industrial Property
Class C Industrial Property score lower in all possible grading factors compared to Class A and B properties. Class C properties are almost always old—at least 20 years or older—and are inferior in physical condition and amentitiy availability. Class C real estate is located in rundown or undesirable areas. These types of properties need a lot of maintenance, renovation, or in some cases, complete remodels. These types of properties have high vacancy rates and low-income tenants.
If at first you are dissuaded by this property gradeI, we urge you not to overlook Class C properties. These types of properties may be promising investments for seasoned real estate investors looking to cataylze growth in a particular area. Just like Class B properties, Class C real estate can be re-graded, although they will require larger time and financial investments.
Lastly, this type of property may prove advantageous for a real estate investor who owns and operates their own business. If you intend to conduct your own business on the property, you don’t have to worry about renovations, resale value, or rental value right away. You can forego a lot of renovations and run your business as you please.
2. The Industrial Property Type
Just like how there is a class associated with each industrial property, there is also a type associated with each property. Industrial properties are classified into 8 types according to their physical condition, layout, and amenities. The type of industrial property will dictate the types of tenants you will rent to, as well as the businesses they own. Here is a quick overview of the different types of industrial properties.
Bulk Warehouse Properties
Bulk Warehouse Properties are massive plots of land with lots of building square footage. Bulk warehouses are used for storing for inventory. They have high ceilings for installation or movement of large equipment. They can also have many delivery ports for trucks, trains, trailers, or planes.
Flex Warehouse Properties
Flex Warehouse Properties are a lot like bulk warehouses, except they are generally smaller in overall square footage and ceiling height. The main difference with flex warehouses is they can serve several applications in addition to storage, such as manufacturing, office space, and more. These types of properties are great for start up companies, small companies, etc.
Heavy Manufacturing Properties
Heavy Manufacturing Properties are intended for ongoing, high-capacity productions. Heavy manufacturing real estate often has heavy-duty manufacturing infrastructure built into the building. Such infrastructure includes electric power sources, water lines and filtration, ducting and ventilation, storage tanks, and exhaust. These facilities may or may not come with built-in production equipment like cranes, production lines, lifts, compressors, and more.
Light Assembly Properties
Light Assembly Properties are used for assembling products made on heavy manufacturing sites. Light assembly properties are a less intense version of heavy manufacturing properties. They may have comparable infrastructure and tools, but these properties focus more on assembling ready-made components instead of processing raw materials. This type of property tends to have less production machinery and instead more quality-checking, packaging, and distribution equipment.
Cold Storage Properties
Cold Storage Properties refer to large facilities with freezer and refrigeration spaces. This type of real estate is mostly used for food storage and distribution, but can also be used to store other perishable goods. Like warehouses, these types of properties tend to have many ports for various types of delivery vehicles.
Telecom and Data Centers
Thanks to cloud computing, e-commerce, and data security, Telecom and Data Center Properties are a booming type of industrial real estate. Telecom and data centers are enormous properties equipped with large-scale electrical, power, and ventilation systems to maintain an optimal environment for computers, servers, and electrical equipment.
Industrial Showroom Properties buildings are a unique amalygmation of retail inventory and display. These spaces are commonly rented to tenants that sell and store large retail equipment like gun cases, refrigerators, furniture, and more.
Research and Development Space
Another great type of industrial investment property are Research and Development Properties. Research and Development properties are expected to remain in high-demand as software, computing, and electronic technology continues to be popular. This real estate appeasr similar to flex warehouses, except they usually are situated in large campuses or parks with landscaping and huge parking lots. Research and Development may have specialized equipment built-in or incorporated onto the property, such as computers, servers, or laboratory equipment.
3. The Industrial Property Location
This aspect is an extension of the class and type of property that really needs a lot of consideration. Location plays a huge role in the current and future value of your property, as well as the future success of the business that will take place in your industrial property.
It is important to the logistical factors of location, like nearby employers, workforce, industry supply and demand, and projected economic growth.
It is essential to research the economic activity and expectations of the area by which your property resides. Understanding the growth and activity of the local economy will give you an idea of how future construction and infrastructure projects will affect prospective tenants, customers, and employees who need to travel to your property. Informing yourself of the infrastructure and nearby construction will also give you realistic insights regarding how your suppliers, customers, tenants, or employees will reach your facility.
To contrast considering how the local economy will affect the value of your property, we urge you to think also about your residential neighbors. Consider how your industrial business may affect nearby residences, if any, as well as natural habitats.
4. The Condition and Maintenance of the Industrial Property
These components are also extensions of the class and type of industrial property that need in-depth consideration. You will need to assess the class and type of your industrial property to ensure your property will be a responsible, safe, and productive place to conduct business. In addition to knowing the amounts you’ll have to pay for routine care, you’ll also have to have an idea for how often you’ll need to maintenance, inspect, lease, and renovate your property. Just remember—keep a detailed log of all the work done to your property. Having thorough records will help you through future instance claims and appraisals.
5. The Legal Implications of the Industrial Property
There is an endless number of legal issues to consider before purchasing an industrial property. Identifying the class and type of the property will help you out a lot when it’s time to legally safeguard yourself with code renovations and industry-specific insurance.
To eliminate the chance of future lawsuits, set yourself up for success by assessing the safety conditions of your workplace. Some common legal issues associated with industrial properties include ADA compliance, as well as noise, light, or environmental pollution.
Before renting out your industrial site, ensure your property is up to date with American Disabilities Act codes and regulations. This is a simple, but huge way to avoid the headaches of a discrimination lawsuit.
And when it comes to pollution of any kind, you need to perform your due diligence by inspecting the machinery, refuse, and sanitation processes of your facility. Performing noise and light pollution due diligence means considering the type of tenant you expect to lease to and how their productions will affect the surrounding residential quality of life. Note there may be noise and light ordinances in place where your property may be located. Performing environmental due diligence means informing yourself of the property’s past usages and any possible environmental accidents such as chemical spils. Your job afterward would be to complete any cleanup or renovations that would prevent further environmental harm.
6. Industrial Property Taxes
Property taxes are pretty straightforward and easy to calculate for a given area, but it does require some initiative on your part. You can investigate the property taxes of your city by exploring the local government’s website.
In short, the local government will assess the value of your industrial property and tax it accordingly. This brings us back to how crucial it is to understand how the class and type of an industrial property affects its value. A property that is overvalued with accrue high property taxes, and inversely, an undervalued property will have lower property taxes.
An interesting and sometimes overlooked aspect of this is tax breaks for your industrial property. There are several cases in which your property could benefit from a tax break, including depreciation deductions, non-mortage deductions, and more.
7. Industrial Property Insurance
Considering the many use cases for industrial property, there is no doubt you will need at least one type of insurance for your property. Whether it be manufacturing, storage, or research and development, there is always the chance for something catastrophic to happen. Survey the types of insurances you are required to have as well as the types of insurance available to you. You’ll need to carefully determin the amount of coverage you need for the land, building, and machinery located on your property.
Some common industrial insurance packages include fire, flood and water damage, electrical outage, machinery accident, lessor’s risk, commercial property, and commercial general liability insurance.
And just like with condition and maintenance tasks, don’t forget to keep a record of any renovations and maintenances to fulfill insurance qualifications.
8. Industrial Property Loans and Financing
A loan for an industrial property has specific processes and requirements that differ from other real estate loans. For example, an industrial property loans are typically given to business entities with a loan-to-value ratio between 65% – 80%. Industrial property loans also have widely-varied repayment lengths with long-term amoritization schedules. Of course, there are other aspects particular to industrial property loans that will require further investigation.
9. The CAP Rate of the Industrial Property
Taking all of the above factors into account will give you a very realistic insight into the CAP rate of your industrial investment property. The Capitalization Rate (CAP rate) of a property refers to the financial returns you expect to receive from your real estate investment. If you plan on investing seriously in industrial real estate, you’ll want to consider properties that have promising returns given the value, location, and market demand for the property. You can calculate this rate using a CAP rate calculator. This calculation will take into account the revenue, expenses, vacancies, and value of the property.
10. Your Risk Tolerance
Now that you’ve assessed all the possible factors concerning industrial property investments, it’s time to take a realistic look at your own risk tolerance. Industrial properties are large capital investments that can easily be destroyed by in-house accidents, natural disasters, lawsuits, or financial mismanagement.
For every dollar you decide to put into an industrial property, ask yourself if you are willing to lose it. If the answer is yes, proceed with caution. If the answer is no, consider investing in another, perhaps less risky type of real estate, like duplexes, AirBnBs, or real estate investment trusts (REITs).
Industrial properties are an exciting venture, but require lots of planning and a thorough understanding of the local economy, industrial use, and financial responsibility. We hope this article has helped you cover your bases when it comes time to consider a future investment in industrial real estate.
Feeling safe at work should be a must! Workplace safety “refers to the working environment at a company and encompasses all factors that impact safety, health and well-being of employees.” For both building owners and tenants, safety should be of the utmost importance. But how can you be sure that this is true?
In commercial spaces, sometimes this can, unfortunately, end up lower on the priority list. Let’s be sure this isn’t the case! Of course, no one wants for it to happen, but it’s best to be prepared for the worst of scenarios. Here are some helpful tips for workplace safety.
Find People Who Will Respect Your Building
When talking about workplace safety, a critical aspect to consider is people. As a building owner, it is absolutely crucial to find tenants that will respect the workplace. Because your tenants will be in the space without your supervision, you need to trust them. So, do your due diligence and make sure your tenant is trustworthy and ask your broker for their opinion about the tenant. Experienced brokers have seen it all, and they can give some insight on if they think a company would be a good tenant.
On the other hand, as a tenant, be sure you find employees who will respect the space as much as you. After a few years in a space, a bit of wear and tear is normal. But, employees need to understand your company is leasing the space and help you by keeping the space in order.
Cleanliness is Key
When an area is dirty, more germs and dust can be in the air. This can be harmful to the occupants. This can create a stuffy environment that may be hard to concentrate in and can increase illnesses. So, as a building owner, it’s important to either hire a cleaning crew, or require your tenants to clean their space themselves.
As a tenant, we recommend adding hand sanitizing stations around the office, warehouse or mixed-use space. Right now, germs are definitely a top concern for employees who come to work. So, having hand sanitizer readily available can be a great workplace safety precaution. Also, making sure soap dispensers are always filled is important as well.
Cleaning Up Clutter as a Tenant
When an area is cluttered, it is more likely that someone will trip or injure themselves. With injury comes complications (like lawsuits!), so it is important to maintain clear pathways. Stowaway any unnecessary items and provide employees with the proper workspaces.
Pro tip: Clean as you go! Whether it’s another day at the office, or the floor is being remodeled, never leave the clean-up for just the end. By maintaining it throughout the day or project, you are ensuring that it will never get out of hand. This provides safety for everyone that is occupying the space.
Provide Proper Equipment for Employees and Tenants
Depending on the role and industry, an employee may be required to operate tools or equipment. They should be provided proper training for all aspects of their job, but it is crucial for them to be comfortable using the equipment. This can help maintain a safe workplace. As a tenant, use this opportunity to give the employees proper training. It can help deem the workplace as a safe one and avoid any troubles. Other employees will also feel safer knowing that their colleagues are properly managing their equipment. This is only half of the battle, though. Employees need to be sure they are using the correct equipment for the job. If they need a tool that they don’t have access to, effectively communicating this to their managers can help. No employee should be asked to complete a task without the proper resources. It not only creates tension but can make an unsafe environment.
Workplace and Equipment Safety For Building Owners
As a building owner, specifically for warehouses and mixed-use spaces, it may be in your interest to make sure any equipment is properly functioning. Even if your tenants have proper training, broken equipment can cause significant injuries. So, before switching tenants, consider getting an inspection done on any equipment you have in your space. Whether this be an automatic garage door or production line equipment, make sure it’s safe for your tenants.
Fire Safety Tips
Fire drills seem to always come at the most inconvenient of times. Right before that important meeting, while you settle in after lunch, or as you make that extra cup of coffee midday. Still, these are the simple procedures that can really make a difference when it comes to safety in a corporate building.
Unfortunately, a fire can start in an instant, and completely inhibit the safety of employees. Buildings should be up to code and inspected by fire safety professionals frequently. As a building owner, this is a highly important task for you. If your building doesn’t have the necessary number of fire exits or there are fire hazards, you may be putting your tenants at risk. So, contact a fire safety professional to inspect your property as often as necessary. We recommend making sure they are certified by the National Fire Protection Association before hiring them.
Workplace Safety For Both Business Owners and Tenants
There is definitely a lot to consider when it comes to workplace safety. In this instance, it is best to be over-prepared. Safety is never a joke and isn’t something that should be taken lightly. In commercial spaces, a lot can go wrong. By following these tips and creating a plan to make sure everyone is on board, whether they be your employees or your tenants, will keep people safe.
After the 2020 peak of the coronavirus pandemic, the commercial real estate market is ready for positive change and growth. This year, we expect to see auspicious changes within office, retail, industrial, multifamily and colocation spaces. All of these rely on investor abilities to adapt their spaces and services using technology. In this two-part series we are sharing seven exciting insights for 2021 commercial real estate predictions based on CBRE’s and Deloitte’s Market Outlook reports. In this first part, we will cover the first three insights. Part two will be published on February 11.
Insight 1: 2021 Commercial Real Estate’s Technological Leap
Almost a year after shutdowns went into effect, many remote companies are still figuring out how to balance home and work life. With the coronavirus still looming in our everyday life, social distancing, thorough sanitization and virtual connectivity remain a top priority among investors. Not to mention, these are priorities to employers and employees. With vacancies and short-term tenancies abound, investors are looking for ways to increase the value and attractiveness of their assets. This is all while recovering losses from the previous year. In an effort to reduce inefficiencies, streamline processes and cut overhead costs, commercial real estate investors are virtualizing many in-person tasks. Such processes include the digitization and automation of property tours, access and security. Additionally, this helps with amenities and industrial jobs.
Prediction 1: Commercial Real Estate Needs Tech to Thrive
Commercial real estate companies will accelerate their use of technology within their assets to improve tenant experiences, overhead processes and building maintenance workflows. Such improvements include the integration of mobile apps and cloud-based tools. These will help improve tenant experience and assist property managers.
Insight 2: Rethinking Office Space
In 2020, we observed a multitude of businesses shift to remote workflows, with commercial office investors racing to keep up and offset torrential losses. For 2021 commercial real estate predictions, the modern office space stands between the crossroads of flexibility, functionality and quality. According to Deloitte, companies are “incurring higher operating costs because of the additional health and safety measures they are implementing . . . operating costs could increase by at least [$19.4] per square foot.” This equals 5.8% of the average annual office rents at the beginning of 2020.
Flexibility with 2021 Commercial Office Space Leasing
When it comes to 2021 commercial real estate predictions around office space, investors should be cautious. As vaccinations roll out and public fear of the pandemic diminishes, companies are rethinking how and when they will use office spaces. The lockdowns and shelter-in-place mandates of 2020 showed many companies their employees don’t need a full-time physical workplace. Still, companies realize they need a physical workspace to promote company culture, host innovation meetups and conduct critical face-to-face meetings. To future-proof their assets against long-term vacancies, investors and tenant companies alike will need flexible leasing terms. Ultimately, this means increased rent rates and short, shared lease terms.
Multi-Concept Office Functionality
Considering the shared nature of flexible leasing, offices need to be adaptable for use by a variety of companies. Investors are looking for new ways to maximize the use-case potential of their office spaces by creating simple, modular offices. If a commercial office investor wants to make the most use of his or her asset, they should aim to address the needs of multiple industries. But, these should include with accessible, shareable spaces.
Enhanced Office Quality
In a time where remote work blurs the lines between work and home life, companies are also rethinking teamwork processes to design cohesive culture across remote teams. Among all the types of spaces, Class A properties will have the most demand for quality improvements. Commercial office investors can attract lessee companies invested in their employees’ wellbeing. Typically, this can be done by enhancing their offices with modern, clean and premium amenities. After a pandemic, such features include:
- Rigorous sanitation schedules
- Impeccable, monitored air-quality
- Open, airy rooms with lots of light and sunshine
- Contactless food and beverage stations
- Contactless office tools
Prediction 2: Vacant Office Spaces Rebound by Catering to Company Culture Initiatives
Dense cities with tech firms like San Francisco and New York are expected to see a continued decrease in demand for office space since employees are working remotely and moving to more affordable areas. Despite the increase in remote employees, suburban commercial office usage is still expected to return to pre-pandemic normalcy as communities restabilize. However, urban areas will rebound at a slower pace than the suburbs. In order to stay relevant and desirable, office companies must present their locations as safe hosting options for team-building and collaboration across a variety of industries.
For 2021 commercial real estate, we expect to see commercial office space scale the quality and use-case potential of office spaces with a multifunctional design. The most notable changes in office space for 2021 concern future leasing flexibilities, rent increases (to compensate for flexibility and 2020 losses), and contactless technological amenities.
Insight 3: Retail’s Mixed-Use Pivot
The most interesting commercial real estate evolving during this period is in relation to malls. Before 2020, many retailers were already shifting to e-commerce platforms. Additionally, malls were already undergoing a rapid decline in popularity. Then, the virus forced lagging retailers to adopt the e-commerce models or go out of business.
Malls are immensely promising commercial ventures for urban areas. However, converting them into mixed-use spaces requires a good amount of zoning law workaround. For investors, mall storefronts may need to adjust their usage to improve community engagement to combat the losses and costs incurred by storefront vacancies and rent drops.
For urban-dwellers, converting malls into community spaces like medical, grocery, recreation and cultural centers is an opportunity to address the growing demand for essential retail and housing, as well as create a safe gathering place to combat the isolation of social distancing. Some quick, adaptive features malls can put into effect immediately include:
- Contactless shopping flows like self-service checkouts
- Contactless entry and exit points
- Sanitation stations
- Delivery services for essential goods
Prediction 3: Urban Malls Repurposed and Suburban Shopping Resumes
There will be a decreased demand for retail space in dense cities and a moderate to large demand and growth for retail spaces in suburban areas. The difference in growth is largely due to the available amount of living space and population density.
Retail spaces in urban areas are expected to convert into essential retail storefronts within the next couple of years. With more room to spare, suburban areas should expect to see a natural rebound for all types of retail spaces, particularly experiential storefronts like shopping and dining throughout the year. There is no estimated timeline for malls to convert into mixed-use properties. Due to its complexity with zoning and local ordinances, it may be a long process that may outlast the hotel industry’s comeback (more on hotels starting at insight 6).
… Visit our blog again on February 11 to read the second half of this series. …
The term “tenant representative” is a common one in the commercial real estate world. You have likely seen brokers advertising their tenant representation services in the past. But, does everyone need a tenant representative? Perhaps you are highly experienced in commercial real estate purchases and are unsure if you need help. But, if you do need a tenant rep, the downside of not using one can be significant. To see if you truly need a tenant representative, continue reading this blog post.
What is a Tenant Representative?
First, what is a tenant representative? A tenant rep, also known as a tenant advisor, is a commercial real estate agent who helps tenants, not landlords. They help tenants find the best property for their needs. A tenant rep will also represent their client in a commercial real estate transaction. This way, the tenant doesn’t have to negotiate the terms with the landlord and their agent.
A tenant advisor also helps answer their client’s questions. These may include, “How much space do I truly need in a property?” Or, “What kind of property does my business require?” No matter what question a tenant has, their representative should be able to answer it. This can be incredibly helpful so you don’t get stuck in a deal that you regret later on.
Is Tenant Representation Required?
Many people wonder if tenant representation is a requirement in their state. The answer is, you do not have to use a tenant representative in any state. It is a right for every person in the United States to work with a tenant rep, but they do not need to use one. The decision to use a tenant representative is entirely up to you. But, this doesn’t mean you shouldn’t hire this help.
Investors or business owners shouldn’t overlook their right to use a tenant advisor. They can help you in numerous ways, and the return on investment is much higher than you may expect. There are several other benefits of using a tenant rep, so it is likely in your best interest to use one.
The Benefits of Tenant Representation
The primary benefit of tenant representation is they will be on your side and will work in your best interest. Most landlords know how important it is to hire someone to help them sell their property. Since they will have someone to represent them, you should have someone represent you as well. This will ensure the commercial real estate transaction will be successful. Some other benefits are listed below.
Find Properties More Easily
It can be very difficult to find your own property if you don’t know what to look for. Between the multiple different types of properties to the different locations you need to consider, expertise is necessary to make the right choice. You may have an idea of what type of property you need and where you would like it to be, but there may be better locations or properties available. So, they can bring all of the properties that suit your needs to your attention.
In addition to knowing what type of property you need and the best locations, they also have access to commercial real estate databases. There are several databases for only commercial real estate brokers. With the experience and knowledge tenant representatives have, they can help you find a property more easily.
Get a Better Deal on Your CRE Property
Tenant representatives help their clients negotiate a great deal with the owner of the property. Doing this yourself without any experience can be very challenging. The landlord’s representative is a skilled negotiator with likely many years of experience. So, going up against them yourself can put you at odds of getting a good deal on the property or your rent.
When you have a tenant rep on your side, they will do all the negotiating for you. They will use their expertise to lower how much you spend on the total purchase or on your monthly rent. This can potentially save you thousands of dollars. So, rather than taking the chance of doing the negotiating yourself, hire an expert to assist you. Not to mention, it will save you a considerable amount of time and stress.
Having a Tenant Representation is Free
Perhaps one of the best benefits of having a tenant representative is you don’t have to pay for their services. Rather, the landlord of the property you choose will be responsible for the payment. Because the tenant representative shows their client the landlord’s property, the landlord pays them. Even if they have their own representative, they have to pay them both for their services. But, your tenant representative is still on your side and will help you get the best deal possible. So, if you are considering working with a tenant rep, you have nothing to lose.
Need Tenant Representation in Salt Lake City?
A tenant representative has an unlimited return on investment because you don’t have to pay anything. They have your best interests in mind, and they are who you need on your side. So, it is in your best interest to work with one.
If you are in the Salt Lake City, Utah area, please feel free to contact us. One of our brokers can represent you in your commercial real estate deal. Our team is ready to take on new clients and are excited to work with you!