Health & Safety: CRE’s Most Important Amenity

As the country began to understand the realities of COVID-19 in early March, many things started to happen. People limited their trips to public places, like stores, bars and restaurants. They started washing their hands a lot more. And, they began hoarding sanitizing wipes, soaps and even toilet paper.

Commercial real estate owners also needed to secure this personal protective equipment. But the job often proved too big for one person. Like a number of companies, Wood Partners, an apartment developer, owner and manager in Atlanta, set up a special task force focused on procuring much needed supplies for its apartment communities.

But even with Wood’s buying power and relationships, finding supplies wasn’t easy. Items like electrostatic sprayers and masks were incredibly hard to find.

“We had four people calling every vendor during business hours,” says Steve Hallsey, executive vice president of operations for Wood Residential Service, which is Wood’s property management company. “We were hitting every supplier we could think of—medical suppliers, apartment suppliers and commercial suppliers.”

With Wood’s corporate offices closed, many company associates took delivery of supplies at their homes.

“They had all of these supplies out in their driveway,” Hallsey says. “They would put it together, have a driver come and pick it up, or they would take it to the UPS store and ship it. It was just an amazing adaptation to a critical situation.”

Adaption was a critical skill for many CRE firms throughout the pandemic. Companies had to hustle to get the supplies to protect their employees and residents. While science says these low-tech solutions, like masks, can help combat the spread of COVID-19 and other pathogens, the pandemic is causing many landlords to take a step back. They’re not only thinking about what can protect their occupants from COVID, but what high-tech investments can make their buildings healthier in the future.

MOBILIZING FOR SAFETY

Wood Partners wasn’t alone in setting up task forces. In March, Village Green, an apartment management company based in Southfield, MI, convened a group that included CEO Diane Batayeh and its heads of national procurement, risk management, people services (human resources), sales and marketing and facilities management.

Early on, the team tapped into its national relationships with suppliers to secure needed PPE, centralized its procurement and did an audit of the protective equipment that it had at its sites.

“Many of our sites were using masks and gloves for doing turns, drywall, painting and those sorts of things,” Batayeh says. “In the beginning, we wanted to get our arms around what inventory exists. We saw where there were shortages and moved inventory around internally. Then we placed orders early.”

AMLI Residential, an apartment owner, developer and manager based in Chicago, charged its procurement team with securing products while also checking to ensure they were on the list of approved products to combat COVID.

“We dug through what was effective in disinfecting versus what was only optics or a feel-good thing,” says Maria Banks, president and CEO of AMLI Management Co. “We didn’t want to create a false sense of safety.”

Beyond cleaners, AMLI secured face masks, booties and other supplies for its onsite teams when they entered residents’ apartments.

When Wood reopened its leasing offices, it also installed Plexiglass and rope barriers, like the ones the airlines use. “They made the walkways well-delineated, and there was separation,” Halsey says. “We spent a lot of money trying to think through customer service and the customer experience.”

Before things reopened, Batayeh says Village Green posted signage that limited capacity in amenity areas and opened sanitation stations at each of its properties.

But even stocking the sanitation station could sometimes be challenging in some areas.

Like many office operators, Dallas-based Lincoln Property Co. put hand sanitizer in its lobbies. Typically, companies can refill the hand sanitizer dispensers by just snapping in a new cartridge when the old one is empty. But those cartridges aren’t refillable. If you can’t find the cartridges, the entire system is useless.

Fortunately, other businesses redirected their operations to fill the sanitizer need, often selling it in gallon jugs. To support local business, Lincoln bought sanitizer from a local brewery. But to accommodate that sanitizer, it needed to purchase basic dispensers.

“We had to back away from technology and just go to a basic machine that didn’t use cartridges,” says Lincoln’s senior vice president of management services Shane Froman.

OFFICE CHALLENGES

Apartment operators weren’t the only ones who had to scramble. While apartment residents stayed in their units when COVID hit, many retailers shut down, and office workers stayed home.

The uncertainty around when those tenants would return presented a challenge for companies like Lincoln. Early on, the company relied on mass communication systems to connect to via voicemail, text and email. As COVID played out, the company used online surveys to understand how its tenants were approaching reopening.

“For any given building that might have 15, 20 or 30 tenants in it, we were trying to understand what each of those companies was planning to do [as far as reopening],” Froman says. “We also put together information about each tenant and what type of business they do to understand whether they were essential.”

Gaining knowledge was only part of the battle.

Lincoln’s office management team spent a lot of time thinking about the basics—how frequently high-touch point areas needed to be cleaned and how to create pathways for people and deliveries to enter and exit buildings. Along with sanitizer, it put out directional signage in the lobbies.

“This wasn’t high tech,” Froman says. “It was going back to the basics of property management.”

With employees wearing masks and social distancing and Plexiglass barriers to protect cashiers, the safety investments are obvious in retail.

Doug Schneider, executive vice President of operations at Bayer Properties, a Birmingham, AL-based company that owns and operates retail and office space across the country, thinks these safety upgrades are giving retailers a boost.

“What is important to the retail customer is that they can visually see you are making an effort to keep them safe,” Schneider says. “A store might have the technology, like UV lighting or MERV filters, but a customer isn’t going to see these precautions or take the time to read about them. They want to observe that an employee has a face mask, there’s hand sanitizer available and there’s plexiglass protection at the cash register.”

Retailers and restaurants also began using their parking lots for sales. Early in the pandemic, between April 1 and April 20, curbside pickup jumped 208% compared with a year earlier, according to Adobe Analytics.

“I think that kind of retail experience—where you can use your car as a buffer between you and other people—is successful,” says JLL’s managing director of property and asset management Randy Fink. “Drive-throughs are going gangbusters right now.”

During the first six to eight weeks after COVID, Schneider says deliveries or curbside pickup drove most of his retail and restaurant tenants’ sales.

“Right now, we’re trying to retrofit existing parking lots,” Schneider says. “You can designate parking spots or build curb cutouts where consumers can pull in and get immediate access to the retailer or restaurant. With restaurants, we have already allocated a certain number of parking spots to curbside pickup.”

With the increasing adoption of parking apps, where customers can reserve a parking spot as they arrive, Bayer is also looking at numbering these pickup spots.

CLEANING THE AIR

Worrying about air quality is nothing new to AMLI Residential. The company has a long track record of building LEED Certified buildings with MERV filters.

Now that COVID has put a focus on air quality in commercial buildings, other CRE developers and owners could soon adopt those practices. Froman says air quality will be a massive consideration in Lincoln’s office portfolio.

“The operating procedures for filtering your return air, outdoor air intake and exhaust air on each floor are all being re-evaluated,” he says.

But there are some potential hang-ups. Froman worries MERV 13 or higher filters could hinder a building operator’s ability to cool and remove humidity out of the building appropriately because they lower the air changes per hour on these floors.

“While we want to have some of this technology and put in these filter systems, we cannot negatively affect the building’s design,” Froman says. “That could cause other problems, like tenant discomfort, mold, and excessive humidity and other issues like that. We’re walking a fine line of how much do you want to implement to be cautious and protect against COVID or similar health-related concerns.”

COVID is also shining a spotlight on HVAC systems and precisely where they spread air. In many buildings, the air moves from one room to another, which can increase the risk of transferring airborne infections, according to Cynthia Curtis, senior vice president of sustainability at JLL. She advocates improvements to existing ventilation systems in a recent article on the company’s site.

In its office and residential portfolio, Bayer is thinking about the same things. The company is studying HVAC systems that can create better air circulation and filtration systems to eliminate bacteria or smaller microscopic particles. “That’s something we will look at on recent developments,” Schneider says.

Ultraviolet technologies that can kill viruses in the circulating air are also gaining a lot of momentum. In some buildings, ultraviolet UV-C light technology is placed inside light fixtures or within HVAC systems.

These are the kinds of technologies that Bayer is considering.

“There is a light product that will disinfect,” Schneider says. “An employee can’t sit under it while it’s on. However, at night when no one’s present, this light product can be very effective at eliminating a virus and bacteria.”

LIMITING TOUCH

The science behind COVID is developing. Early on, there was a hyper-focus on how to limit the spread of the virus via surfaces. While recent research has shown that the virus is transmitted through the air, many CRE executives are focused on how to limit contact with high touch surfaces, like elevator buttons and door handles, in their buildings.

“We’ve certainly been exploring different types of keyless entry systems,” AMLI’s Banks says. “In some of our renovations, we have technology where you can unlock doors from your cell phone. But then you still have to pull or push on the door to open it. So one of the things we’re exploring is if we can get a no-touch door.”

Wood is also looking at separating elevator corridors and adopting buttonless elevators, which Hallsey says will be an “incremental cost” in new development. “It’s changing how we’re underwriting,” he says.

Touchless technology is nothing new in class A office buildings. But Fink expects it to expand. He sees elevators that apps can control on the horizon. And, he expects more touchless adoption in older buildings, though he says there hasn’t yet been a financial “trigger” where tenants are demanding it.

“Tenants are asking what we’ve done for COVID, but they’re not pushing us to do new things,” Fink says. “They’re documenting what we have in place.”

TOO FAR, TOO FAST?

While existing tenants may not be pushing landlords to do new things, CRE companies are implementing new technologies to court new tenants. Firms across multiple sectors have adopted virtual leasing technology, which allows prospects to tour spaces without risking in-person interactions with leasing staffers.

“Everybody implemented virtual leasing and a lot more online capabilities to capture new customers rather than rely on [in-person] tours,” says William Spransy, CFO of Chapel Hill, NC-based apartment owner Eller Capital Partners.

While the industry has adjusted on the fly to meet the demands imposed by COVID, many are looking into their crystal ball to figure out what new safety technology could be on the horizon. As they do this, they’re looking to Asia, which is more accustomed to dealing with airborne diseases than the US.

For instance, when people enter many buildings outside of the US, they walk past a thermal camera that measures their temperature. While that may never be widely adopted in the US., the system has been installed in one of Lincoln’s managed properties in Norcross, GA.

“There is a main entrance where employees come in, and a temperature scanner has been installed there,” Froman says.

Schneider is intrigued by other technologies, such as a Japanese system that sprays a fine mist on children as they walk into the school. But he thinks there might be a limit to what Americans accept.

As the debate over masks has proven, Americans aren’t always as accepting of protective measures—whether they’re high tech or low tech—as citizens of other countries, especially when they see them as intrusive.

“It would be interesting to see whether the US customer will be as accepting of this approach,” Schneider says.

WIDE OPEN SPACES

For a decade now, developers of class A apartments have been waging the amenity wars. As developers continued building apartments, they started outdoing each other with more sophisticated common spaces, whether it was high-tech gyms, coffee lounges or pet parks.

When COVID hit, they suddenly had to shut down those spaces, often leaving the crown jewel of their building sitting vacant. As those spaces reopened, apartment operators needed to come up with creative solutions to ensure residents observed social distancing regulations.

“In some places, we removed pool furniture to ensure compliance with government guidelines,” Maria Banks, president and CEO of AMLI Management Co. “For fitness centers, we’ve shut down certain pieces of equipment to allow for social distancing. In the business centers, some spaces may be closed off to ensure that people stay separate from one another.”

The movement to more open spaces won’t be a change for apartment REIT Camden. Camden CEO Ric Campo thinks his REIT’s amenity design was helpful for social distancing.

“With amenities and clubhouses, we’ve been using big open spaces and then using furniture to define the spaces,” Campo says. “I think that has helped with social distancing. So we can move our furniture around easily and put partitions between things as opposed to having to reconfigure full rooms and knock walls out.”

Village Green CEO Diane Batayeh thinks COVID will accelerate the adoption of even more extensive open amenities spaces, though they will be outside.

“My prediction is that we’re going to see more open-air amenity spaces when it’s possible from a climate perspective,” she says.

Inside, Batayeh thinks amenity areas might shrink. When residents are working from their apartment community, which will probably happen a lot more after COVID, she thinks they will use more private areas.

“We’ll see fewer communal gatherings and more privacy-driven amenity designs,” she says. “We may also see more of a trend toward larger unit styles because I think more people will work from home. So they’re going to need that extra space for offices.”