CREJ - Office Properties

January 2015 — Office Properties Quarterly —

Page 23

CREJ’S TOOLS & RESOURCES

Log on to CREJ’s website for the most comprehensive set of

commercial real estate resources in Colorado.

Search the

Industry Directory

for lenders, brokers, property managers, architects, contractors and more. Over 1,000 entries

with firm profiles, contact names, phone numbers and email addresses!

Research

Projects Under Construction & Planned

and stay current on which projects are underway, and the companies

building them.

Use our

Sales & Mortgage

tool to see who’s buying, selling and lending for properties over $500,000 in 13 Colorado counties.

Loan transactions include the names of the borrower and lender, plus the property address, loan type and closing date for each

mortgage. Sale transactions include the names of the seller, buyer, address and purchase price and closing dates.

Property Listings

for billions of dollars worth of available properties for sale or lease. Sort property results by city,

county, zip code, property name, rates, lot size, and space available.

Research

Market Statistics

by geographic region including rental & vacancy rates, absorption, etc. Find links to the most

recent, comprehensive commercial real estate market statistics and forecasts.

Find Financing

according to property type, location, loan size & loan type. Our financing tool lets you find lenders that match

your search criteria.

Use our

Loan & Investment Calculators

to determine monthly and annual mortgage payments based on loan amount, interest

rate, amortization period and term, or determine how much you can afford to invest in a property.

CREJ.com/tools

Design

that commanded by 83 percent of the

space in the core commercial area. This

suggests that there is upside tolerance

in the market if sleeping giants in the

core commercial area can successfully

reposition themselves.

4. Understand location and context –

Aging assets sit in dynamic urban

environments. Changes to the urban

context over the life of an asset often

provide new sources of value. Many

cities have introduced or extended

transit pathways through developed

areas such as Denver did with the 16th

Street Mall. Assets that are close to new

transit may realize value from rethink-

ing their connection to the street and

pedestrian access.

Similarly, when major destination

buildings have been inserted into

existing urban fabric near an aged

asset, owners can capitalize on the

activated street environment with

improved or incremental ground-level

retail. Like Denver, many cities are

actively improving their connection

to natural features like rivers, lakes

and even bayous. Older buildings with

proximity to these features may realize

value by opening up views or access to

the new attraction.

5. Deconstruct asset performance –

Often some parts of an asset perform

consistently better than others. Three-

dimensional visualization tools can

help to understand patterns in persis-

tent vacancies. Identifying space that

underperforms in its current configu-

ration or program suggests opportuni-

ties to unlock value by repurposing the

space. Incorporate market differentiat-

ing tenant amenities or reset as a mul-

tipurpose asset, introducing residential

or large impact retail.

6. Engage immediate partners –

Aging

assets can increase the reach and

impact of repositioning investment

by proactively coordinating with sur-

rounding initiatives. Local streetscape

improvements can be leveraged to add

value, and urban revitalization efforts

that target public space can dramati-

cally increase nontenant traffic around

a building while simultaneously mak-

ing the location more attractive for

tenants.

7. Establish the foreground –

Key to

taking advantage of the urban context

is attention to how the asset meets the

street. By activating plaza space, an

asset can achieve improved recogni-

tion and prominence as a place and

destination within the city. Careful

attention to the public realm has made

major urban destinations out of the

foreground of many corporate office

buildings nationwide.

8. Optimize brand identity –

While the

physical foreground of an asset can

shape experience of the place and

increase relative value in a market,

many buildings also establish a brand

identity through name identifica-

tion with a particular neighborhood

or address. In the 14 markets studied,

55 percent of the trophy buildings are

identified by their address on a specific

street. Including place names, 70 per-

cent of trophy buildings are branded by

their notable urban location.

9. Choreograph tenant experience –

Additional asset value can be unlocked

by focusing on the details of tenant

experience. While the street-facing

grand lobby appearance matters, the

tenant pathway from parking or tran-

sit, often through a secondary entry

and up into lease space, impacts how

it feels to work in the property. Also

consider the potential views from ten-

ant space. Accessible roof decks and

balconies can offer dramatic perspec-

tives onto the urban scene, and even

inaccessible spaces can be fine tuned

to improve the view tenants have onto

them.

10. Tailor design solution –

Material

and product selection is shaped by a

specific point in time. Key to tailor-

ing the design solution for an effec-

tive repositioning are to recognize

the time or timelessness of materials,

consider how enduring a specific trend

or approach will prove, and determine

howmuch intervention is required to

achieve a substantive difference in

asset perception.

Scale of Opportunity

Specific repositioning strategies vary

by building and market, but we calcu-

late that the opportunity is enormous.

While Chicago and NewYork represent

almost 40 percent of the national tro-

phy building stock, 70 percent or more

of the trophy buildings across 10 of the

14 markets we studied are at least 25

years old. The opportunity to unlock

value through strategic repositioning is

local and national. Put another way, 66

percent of buildings representing 73

percent of rentable area across major

U.S. markets fall in this category.

If older assets are repositioned to

their respective current market mean

lease rates, an additional $330 million

in annual rent could be garnered. In

Denver, the 23 buildings in the com-

mercial core designated as Class A

have a weighted average direct rent

in the $29-$30 per sf range. If each

of those buildings repositioned to

improve their lease rate just to the

overall market average (about $33),

the annual rental increase could be

more than $40 million.

The newly constructed trophy build-

ings are wired with Wi-Fi and broad-

band, power dense, sustainable, effi-

cient, VOC-free, daylight penetrated,

flexible, amenity rich and work-life

supporting. The question aging-asset

owners have to ask themselves is:

How will I unlock the trapped value in

my asset and remain competitive?

Downtown Denver development since 1980 and projected