CREJ - Property Management Quarterly - May 2015
Do property managers feel compelled to toil over the smallest details like door hardware and ceiling tiles these days? After all, it’s clearly a landlord’s market and that is not changing anytime soon. Rental rates metrowide are at an all-time high. Tenants are competing for office space in a leasing environment hovering at 11 percent vacancy. Out-of-state investors are snapping up office buildings at above-market prices. So is it logical to assume that property managers and the landlords they represent dial back on any kind of building improvements? Hardly; in fact, it is quite the contrary. Property managers are always aware of the details, in every market cycle, through every peak and trough. Some managers do this more than others, which can distinguish one property class from another. While a great many office buildings are upgrading high-profile areas like lobbies or landscaping, just as many are choosing to punch up building and tenant standards, like lighting, doors, frames and myriad other features that tenants and visitors often find easy to miss. Think of a 20-year-old car in good running condition. Would you take note of the front bumper every time you glanced at the vehicle before getting in? Most of us probably would not. However, would you notice if one day that same bumper was suddenly a different color and brand new? Let’s assume that you would pick up on that. Building and tenant standards can have a similar impact on prospective tenants and buyers. Individually, these improvements rarely make a splash. But if properly packaged and upgraded, a tenant standard “program” can significantly raise the aesthetic profile of a building. The majority of office buildings in Denver across all submarkets and classes were built in the mid- to late- 1980s. The condition of these buildings varies, depending on location, ownership, tenancy, demographics and a dozen other factors. But they are all considered “functionally obsolete.” That does not necessarily have to be a bad thing given that most of these buildings still perform reasonably well and are good candidates for regular facelifts in tenant and common areas. The best time to start in existing buildings is when a new tenant moves in. This is when the interior designer and property manager have those key discussions as to what will improve the standards of that particular suite without breaking the bank. Property managers need to ask themselves if the proposed finish materials are fresh and readily available? Do they appeal to a wide range of prospective tenants? Paint and carpet are the baseline. They typically provide the most immediate visual impact, and it can be dramatic. Designers must strike a balance between aesthetics and durability at a good value. Again, these are business office standards and are meant to appeal to a wide range of tastes for at least five years, if not longer. Doors, hardware and frames are also critical improvements. A prefinished, prefabricated door with a mainstream wood species is usually the best choice for cost and availability. Birch, oak and cherry are always good options. Hardware is a detail that can significantly enhance new doors and frames. The style and material must complement those materials and have long-lasting design appeal, as well as meet the demands of rapidly changing fire and safety codes. While door handle options are virtually limitless at any price point, they are worthless if not compliant with the American with Disabilities Act standards. This is true of all interior design, but a small detail like a door pull, if not compliant with current codes or not installed properly, can delay or derail a remodel timeline. And speaking of codes, many existing building suites still retain the deep-cell parabolic 2-by-4-foot fluorescent fixture, which is a dinosaur by any standard. This type of lighting does not comply with current energy codes and may have to be retrofitted during a remodel. Suitable substitutes include recessed indirect fluorescent fixtures or light-emitting diode models. Both are affordable, energy efficient and readily available. Additionally, property managers can apply for rebate benefits from power companies. This “free money” can take some of the sting out of the remodel tab. And just to be clear on sustainability, building owners and property managers almost always strive to upgrade to energy-efficient components and systems, even when they are not required by code to do so. Cost is an issue, of course, but property managers know the value of sustainability beyond the altruism and will make every effort to employ it when possible. A building does not have to have an Energy Star plaque affixed to a lobby wall to promote green technologies and to increase the value of the property. From an investment standpoint, it is up to the owner and property manager to decide how much upgrading to do. Improving common areas – aside from the lobby – can usually be completed quickly and with minimal disruption to tenants and visitors. Construction in empty offices can be undertaken with virtually no disruption, while venturing into occupied suites can cause a great deal of chaos, even when things run smoothly. There are very few ways around that. The point is, improving building standards can be generated from a single suite or across all common areas. Time and money usually dictate that dynamic. And property managers are keenly aware that their buildings are always in the process of improvement, whether it’s a landlord’s market or not.