How Can CRE Survive the Impending Recession?

SAN FRANCISCO—The economic outlook post-COVID-19 will include unknown obstacles for many companies. However, for the commercial real estate industry, there are clear, actionable changes property owners and facility managers can implement today to save money tomorrow, recouping some of those lost costs as a result of the pandemic, according to Matt Ganser, executive vice president of engineering and technology at clean tech company, Carbon Lighthouse.

The first way is to build a stronger remote infrastructure to better manage operations within empty buildings.

“CRE has fallen behind technologically. COVID-19 highlighted that even more,” Ganser tells GlobeSt.com. “The vast majority of building management systems are not modernized and cannot support remote operations. On-site teams are limited in optimizing building operations under normal circumstances, much less amid COVID-19 or even after tenants return and occupancy continues to shift.”

Ganser says modernizing building management systems is a critical first step to bridging that gap. That way, owners and operators have more current and accurate data on energy use. This will allow owner/operators to make more informed and strategic decisions within portfolios.

The second area is staying competitive when it comes to attracting the right investors and/or tenants in office buildings. Post-COVID, this could mean upgrades such as touchless entry and spaced out workstations or next-gen HVAC systems for safer air filtration.

“Tech-enabled agility to pivot with changing needs and opportunities will be key in attracting tenants,” Ganser tells GlobeSt.com. “Simultaneously, the market will increasingly demand data-backed investments including environmental, social and governance investments to ensure ROI and track cost savings. It’s more crucial than ever before that investments generate a visible, proven financial or environmental impact.”

Ganser says data indeed plays a huge role in future-proofing the CRE industry. However, that is only possible with the right set of actionable data.

“If you have the right data to demonstrate that impact, it can be huge for coming out of the recessionary environment successfully. Advanced building management systems and equipment that pulls and analyzes data across a portfolio can empower owners and investors to make more strategic decisions, including identifying efficiency reserves or wasted energy across your portfolio,” Ganser tells GlobeSt.com. “When every dollar counts, data-backed insights will ease red flags for owners and investors. After we move past the recession, data will continue to streamline operations and identify hidden inefficiencies holding you back.”

Even now, most CRE decision-makers are cutting capital expenditures and operating costs, and attempting to drive liquidity. But, given that most economists are predicting the country will likely face an economic recession as Americans adapt to life after COVID-19, Ganser says there are several other ways to prepare or pivot now.

“If CRE decision-makers get creative today, they can recoup some costs ahead of the impending recession,” he says. “Focus deeply on controllable costs like utilities, which are tied for the highest percentage of controllable costs for building owners. The cost of energy efficiency is a mere $0.025/kWh, compared to upwards of $0.10 to $0.30/kWh utility rates in regions like New York and Hawaii. Longer term, energy efficiency can even increase NOI. It’s a business no-brainer.”

The drastic adoption of remote work in response to COVID-19 has demonstrated the workplace structure is flexible. This will impact how work will be performed in the future. As such, Ganser says there are several lessons learned for remote CRE operations.

“Post-COVID-19, our new normal could mean different leasing structures, multi-use office spaces, new operational and financial challenges,” Ganser tells GlobeSt.com. “With so much uncertainty right now and ahead, agility and flexibility are critical. Modern building technology can help ensure operations across portfolios can pivot with changing needs and demands. For example, any of the potential shifts in office space can mean a significant impact on energy use. Having the ability to track shifts in energy use can help uncover hidden opportunities to cut costs in the near term and inform longer-term operational strategies and investments.”