Your commercial building is affected by uncontrollable elements – both internal and external. Each year it’s affected by backlash from shifts in weather, energy waxes and wanes, construction projects, repair needs, tenant fluctuations, and new regulations. Even some of the toughest structures are susceptible. Being more aware of changes in these areas that are predicted to take place in 2015 can help you, help your commercial space prepare and withstand.
By now we all know that climate change is real, it’s across the globe and it’s very obvious in California, the nation’s most populous state. California routinely deals with wildfires, landslides, mudslides, drought, flooding, El Nino, Santa Ana winds, winter storms, severe freezes and tsunami waves. Over 80 major disasters have been recorded in California since 1953. Even Southern California’s sunny San Diego has undergone weather-related problems. Ten-year climate projections for San Diego include warmer temperatures, more drought years, more storms and extreme weather conditions, and higher ocean levels.
What will this mean for your commercial real estate? There is uncertainty as to how the changing climate conditions may ultimately undermine the meteorological data we use to design buildings and infrastructure, but the below issues are likely to be seen.
- Increasing health and safety risks for tenants caused by a reduction in the quality of the indoor environment.
- Premature or accelerated deterioration of the building as a whole.
- Potential reduction of effectiveness in safety measures set in place.
- Reduced service life and functionality of components and systems.
- Increased risk for catastrophic failure of systems.
- A rise in repair, maintenance, reserve fund contingencies, and energy costs.
- Escalated service disruptions and emergencies.
- A spike in insurance liability as a result of premature aging or deterioration.
Your commercial structure is very likely built to code, and that’s great, but it’s important to not rest on that fact alone. Rain, wind pressure and flung debris are all real threats to your building. While you cannot control the weather, you can mitigate the effects that the general climate and weather swings have on your space by making sure you and your commercial property management team keep apprised of systems maintenance, energy usage, air quality, building construction weaknesses, fire hazards, and the surrounding grounds cleanup. By instituting safety drills and policies, and preventative maintenance on a regular schedule, you may be able to avoid bigger catastrophes.
Data shows that it is very likely that your asset will undergo at least three property improvement projects each year. Whether they are large capital improvements or smaller tenant improvements, they all affect the general stability of your commercial real estate. By making sure each project is properly managed, you will ensure that your building can take a punch and stay upright. This is an area that an experienced commercial property management firm understands and excels at. Before you start project planning, call your commercial property management team. They can add value through their knowledge of building products, building costs and techniques, their knowledge of general contractors and subcontractors, their negotiating expertise which allows them to verify products and quality, and their organizational skills that allow them to monitor and ensure completion of each phase of construction. Additionally, they will conduct a closeout assessment at project completion that includes a final punch-list and a portfolio of pertinent documents including any needed warranties and instructional materials.
Besides capital improvements, building renovations, and build-out of interior improvements, there is another type of construction that can affect your commercial asset – road and other city-related construction. This can impact your tenants’ commute and ease of access.
Below are two San Diego-specific websites to help monitor these risks and to keep your tenants informed:
- Scheduled Road Closures and Traffic Controls – This is managed by The Department of Public Works.
- Keep San Diego Moving – This site keeps you updated on highway projects, transit and rail projects,regional bike projects, and environmental programs.
Staying informed of changes in energy costs and mandates can be a full-time task. But no matter how troublesome, being aware of all regulations and available incentives can pay off quickly.
There are organizations that supply commercial property owners with tips and step-by-step methods to practice wise and cost-effective energy consumption.
San Diego has a very active chapter of the U.S. Green Building Council (USGBC), who promote sustainable design and represent over 100 organizations active in “green” building design throughout the region. The USGBC’s website states, “there are more than 60 LEED Accredited Professionals in San Diego. LEED stands for Leadership in Energy and Environmental Design. LEED’s Green Building Rating System® is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings.”
Commercial real estate owners can also embrace more energy-efficient technologies. According to The Harvard Business Review, property owners can “measure the sources and levels of their own greenhouse gas emissions; identify potential impacts of new regulations or products, droughts, and storms, etc.”
According to EnergyStar, a U.S. Environmental Protection Agency (EPA) voluntary program that helps businesses and individuals save money and protect our climate through superior energy efficiency, commercial buildings in the United States consume 21% of the nation’s energy at a cost of more than $100 billion per year. These buildings also generate 17% of our country’s greenhouse gas emissions, which ultimately becomes a climate change factor. However, EnergyStar also notes that, by 2035, 75% of all buildings will be new or renovated, opening up a great opportunity for builders to install green systems as they construct. A recent study of architects, engineers, contractors, owners, and consultants also shows that 53% of U.S. firms expect to be dedicated to green building by the end of 2015.
According to a Deloitte report, the right focus on energy and technology has an affect on tenant retention as both elements may impact space supply and demand in and after 2015. “Tenants, more so than ever, are really incorporating technology demands and sustainability considerations in their leasing decisions. Properties that can’t support the technology needs of their tenants, or aren’t sensitive to their sustainability goals, won’t perform as well,” states a Deloitte official. This can apply to the performance of commercial space as well.
There are new regulations on the horizon for 2015 that commercial property owners need to watch out for. Visit your city’s website to find out what these new regulations, codes,and requirements are, and how they might affect your asset.
Your commercial building is an asset with a personality all its own. By hiring a professional, third-party, commercial property management company, you will be able to keep an eye on it from all angles. Tim Meissner, a Principal with Meissner Jacquet Commercial Real Estate Services, who has been in commercial real estate for 35 years, says “an experienced commercial property management team can help property owners prepare for and control many seemingly uncontrollable issues that can threaten the longevity of commercial assets.” So instead of waiting for the next repair, improvement, or regulation, take action today by understanding your options.
California Association of Realtors
San Diego County – Department of Public Works
Keep San Diego Moving
City of San Diego Development Services Department
Meissner Jacquet Commercial Real Estate Services