CREJ

Page 26 — Retail Properties Quarterly — August 2020 www.crej.com University of Denver A NewYorkTimes headline recently caught my eye: First All-Female Spacewalk Can- celed Because NASA Doesn’t haveTwo SuitsThat Fit. Hours frommaking history, it was determined that the on-board spacesuits were too large, which could have led to life- threatening injuries.These suits are vital to expeditions beyond our planet’s atmosphere – providing astronauts the tools to perform intricate duties while keeping them alive and well in the vacuum of space. All that effort to make history to later be halted by one very preventable error. It’s hard to com- prehend, considering the amount of planning, preparation and millions of dollars that went into this mission. It’s a perfect example of howminor flaws can cause significant harm to elaborate processes. Wondering where I am going with this? First, as it relates to industrial tenants, they too require just the right conditions to operate at the highest level. Second, with dual fascinations for space exploration and commercial real estate, I’ll always take the opportunity to come up with an eccentric connec- tion. A workspace is a tenant’s space suit – it’s flexible and efficient and gives the occupant the tools to survive and succeed.The tricky part for developers is designing these sorts of spaces to accommodate a wide range of spe- cific uses. It’s a game of cast- ing the widest net possible, especially building without a tenant in tow; commonly referred to as speculative development. It’s often said in this business, “Whatever you build will be wrong.”This phrase is meant to make light of removing and/or reconfiguring existing elements of the newly built space to satisfy tenant-specific needs. Developers generally are satisfied when they are only “slightly wrong” and end up with a quick and relatively seam- less lease-up period.To design a perfect speculative space is difficult, but tak- ing time to thoroughly research tenant trends to avoid substantial rework costs is entirely doable. A flaw I frequently see in specula- tive development is poor site planning. Speculative developers often are too focused on maximizing building square footage and less focused on the needs of their target tenants.They tend to let go of the reins and squeeze as much allowable space onto their site as pos- sible. More space could mean a larger tenant, which could mean more rent, but does that cast the widest net? In some cases, no. For example, with the eruption of e-commerce, numerous last-mile delivery companies have flooded into our (what is considered) secondary market. A prevalent office developer in my area became aware of the flour- ishing demand for industrial space and built a warehouse that covered 42% of the site; a state-of-the-art facil- ity with all the building amenities a sophisticated industrial user could ever need. After completion, the space sat empty in a market with a historically low 2.1% vacancy rate.The issue didn’t involve the building but rather the area surrounding the building.With this extra-large-sized structure squeezed into a medium-sized site, there wasn’t adequate room for tenants with heavy truck traffic to effectively maneuver around the building and in and out of loading areas. In addition, there was no room to accommodate trailer drops, staging areas or yard space. Unfortu- nately, the developer – successful with office space – built industrial space that didn’t effectively target today’s indus- trial user. Again, minor flaws can cause significant harm to elaborate processes. As an owner, I am delighted when a prospective tenant asks us to install an additional dock door or warehouse fan, or requests dedicated fenced yard space; that’s music to my ears.That says that our net was large enough to attract solid interest and the important space elements were right. I’ll always be satisfied when we are most of the way there, or “slightly wrong.”We’ll happily pay, relatively minimal costs, for these sorts of requests in exchange for a long-term lease and a mutually advantageous relationship. Amistake in design can leave prime industrial space vacant – and prevent astronauts from doing a spacewalk. In either example, one mistake wasted the planning, preparation and millions of dollars invested to achieve the end goal. Understand the tenants that you want to serve and the astronauts you need to equip. s How to design with today’s industrial users in mind M ost of us will interact with a contractor on a project at some point in our lives. This relationship can be extremely difficult for indi- viduals who are not accustomed to the process.The owner/contractor relation- ship can be hard to navigate, even for seasoned professionals. Establishing a great working relationship between the owner and the contractor can be beneficial for both parties and have tremendous upside if given the oppor- tunity to flourish. Every project should become an opportunity to develop a successful relationship. Over time, there comes the prospect of integrating the project design by including the contractor’s wealth of experience during the early stages of the project life cycle. Getting a contractor to commit to this early effort requires a good past experience and a trusting working relationship. On any project there is a trio of proj- ect stakeholders: owner, architect and contractor.The owner must thoroughly communicate the expectations for a construction project to the architect and, ultimately, the contractor. Prior to beginning any construction project, the owner must establish the project’s function, the size of the proj- ect and the expec- tations for project performance.This is called “the pro- gram.”The owner must firmly estab- lish the program for the project and should, whenever possible, stay within those guidelines. Establishing a well- defined program for projects big and small requires a dedicated time com- mitment and an understanding that all things may not be possible within the budget. Staying within the program reduces changes and, therefore, costs. Getting to the point where the program is accurate enough to remain constant throughout the project requires experi- ence that the owner and the architect may not readily have. One of the key fundamentals for suc- cessful project management is the con- cept of the integrated project deliver method.This concept upends the tra- ditional design-bid-build project man- agement and contract award model. With the design-bid-build project, the owner and the architect establish the program during the early phases of the project life cycle, and the contractor is brought in upon successful award of a hard-bid well after the design has been established. Integrating the project design is a critical concept of construction man- agement.This concept is a simple one: Bring all three of the major stakehold- ers of the project construction in as early as is feasible, or, in other words, get the contractor involved early in the planning stages of the project. Consider this: The contractor is usually the only member of the trio who has a wealth of experience physically construct- ing projects. Contractors can offer key insight into solving budgetary con- straints and avoiding potential pitfalls. The key to the IPD process is having a good, established working relationship with one or more preferred contractors. Having a good working relationship with a contractor takes some experi- ence and continuous cultivation. For the contractor, there must be an understanding that the owner expects high-quality work at the price given in a timely manner. For the owner, there must be an understanding that the contractor is in business to make money and that the contractor expects the owner to compensate the team fairly for their work. Both parties should strive for a healthy relation- ship that is founded on integrity and cooperation.This relationship has real value – the cost of which may be hard to measure, but the understanding that both parties will come to the table and negotiate fairly during critical times can lead to more successful outcomes. With a successful outcome comes a willingness on the contractor’s part to expend effort upfront to ensure that any project starts off on the right foot. By integrating the design, the con- tractor can assist with establishing an accurate and well-defined program. An accurate program can reduce changes, delays and cost.This effort can have real benefits for all involved: The architect is able to design a more accurate project, the owner gets a project with reduced changes due to design conflicts or specification errors, and the contractor gets the work.While no project is easy or perfect, good relationships nudge the curve in this direction. s The rewards of cultivating good relationships T here always has been a strong link between trans- portation and the real estate industry in the U.S. As noted in Donkers and de Wit’s 2017 report, many major cities originally were founded around ports, largely because this made it easier to ship and receive goods. As cities devel- oped, the introduction of street- cars allowed populations to start living along streetcar routes that extended from city centers. Then, urban sprawl became the new nor- mal with the advent of automobiles because they made it possible to develop areas that were previously difficult to access. All of these inno- vations impacted real estate devel- opment. The adop- tion of fully auton- omous vehicles will follow suit. Auto manufac- turers and tech companies, such as Tesla, GM, Ford, Uber, Lyft and Google have invested tens of billions of dol- lars in develop- ing autonomous vehicle technology. Approximately 80% of all miles driven in the U.S. will be by shared autono- mous vehicles by 2040, according to Donkers and de Wit’s 2017 report. It is likely that companies will man- age large fleets of vehicles, hopeful- ly providing a more seamless expe- rience than current public transpor- tation options, and a less expensive option than owning your own vehicle or using current Uber or Lyft services. Two other important ben- efits are that autonomous vehicles will allow drivers to recoup time and are projected to reduce acci- dents. In 2017, the U.S. Department of Transportation reported that 94% of fatal accidents are caused by human error. By removing a human driver, the number of accidents and deaths will be reduced dramatically. With all of these advantages, a shift away from private vehicle owner- ship seems imminent. As a result, there will be changes in real estate development and use because of it. Some areas that most certainly will be affected are downtown parking garages, vehicle sales and service centers, and household garages. n Downtown parking garages. Per- sonally owned vehicles are the life- blood of downtown parking garages. People who use public transporta- tion simply don’t have any use for them. When automated vehicles become more readily available, fewer people will need them. When it gets to the point that the majority Autonomous vehicles are about to drive RE values Harrison Sawyer Development associate, Strider Group LLC, and master’s candidate, Real Estate and the Built Environment, University of Denver Erik Senseney Senior project manager, Interstate Electrical Contractors, and graduate student, Construction Management Program, University of Denver Garrett Blair Franklin L. Burns School of Real Estate Master of Science candidate, University of Denver Please see Blair, Page 27