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Leaders in Commercial Real Estate

September/october 2009

The Power of the BOMA Network Inside the BOMA Conference

Plus:

The BOMA 360 Value Proposition

EER 2009—The Numbers are In TOBY Winners Take the Stage


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September/October 2009 Volume 5, No. 5

22 24

The Power of the BOMA Network on Display in Philadelphia

These Buildings are Claiming Competitive Advantage

BOMA International’s Nominating Committee is seeking candidates for the position of vice chair and for five members of the Executive Committee to the Board of Governors.   For further information, please contact BOMA International, c/o Ann Coslett, BOMA International, 1101 15th St., NW, Suite 800, Washington, D.C. 20005, telephone (202) 3266325; fax (202) 408-2699; e-mail acoslett@boma.org. Volume 5, No. 5 The BOMA Magazine September/October 2009, (ISSN 1532-4346), Copyright 2009. The BOMA Magazine is published bimonthly in January/February; March/April; May/June; July/August; September/October; and November/December by the Building Owners and Managers Association (BOMA) International, 1101 15th St., NW, Suite 800, Washington, D.C. 20005; Telephone 202-326-6300; Fax 202-326-6377; www.boma.org. Periodicals Postage paid at Washington, D.C. and additional mailing offices. POSTMASTER: Send address changes to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Undeliverable U.S. copies should be sent to The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Return undeliverable Canadian addresses to: PO Box 875, STN A, Windsor, ON N9A 6P2.

About the Cover: Heifer International’s Platinum LEED-certified headquarters building in Little Rock, Ark., took home the 2009 Earth Award during the annual TOBY Awards Banquet.

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Leaders in building operations and management are honored in Philadelphia.

Market survival and the path to recovery was on the minds of BOMA Conference attendees. Learn what they learned.

A case study of how to stand out in a down market.

Call for Nominations: Vice Chair and Executive Committee Members

A Cut Above—TOBY International Winners

Laura Horsley

Lindsay Tiffany

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28

DEPARTMENTS 6 8

12

16

Message from the Chair The BOMA Idea Exchange

Legislative Update Board of Governors approves new policy positions, Fed and Congress get focused on liquidity issues, the latest on climate change legislation.

Sector Watch Weak trade is taking its toll on the industrial market, but better days may be ahead for those well-positioned.

36 Trends Tracker

Cheryl English and Karyn Gayle

Intelligent lighting trends can be found at the crossroads of energy efficiency and functionality.

State & Local Update BOMA/Chicago’s smart grid initiative, budgets dominate legislative agendas, BOMA/Greater Minneapolis caps off successful legislative year.

40 Green Scene

Codes & Standards Update

42

ICC and AIA initiate green building code effort, changes to code development procedures, revised floor measurement standard completed.

18

32

Leading the Way Upcoming State Government Affairs Chair Susan Engstrom offers tips for talking to politicians and dishes on her big plans for the 7-Point Challenge.

“Green shoots” abound at The Office Building Show.

44

Research Corner Despite the credit crisis, office building owners and managers report modest income gains in the BOMA Experience Exchange Report (EER).

Eye on Education Financing structures, operating trends and healthcare reform top Medical Office Building Conference topics.

20 Around the Industry

H1N1 revisited, a new Public Buildings Commissioner for GSA, BOMA remembers two leaders, meet Wendy Williams. September/October 2009  BOMA  5


Message from the Chair

The BOMA Idea Exchange As you read through this issue of The BOMA Magazine, you will notice that the features and many of the columns are dedicated to highlights and news from the BOMA International Conference held this past June in Philadelphia. I encourage you to enjoy a close read because these stories go beyond a mere recap; they tell the story of how BOMA members from across the country and overseas came together to share information and seek out opportunities to harness the power of the BOMA Network. Check out the insights from the Sunday General Session panel on ways to find value in a declining market (pages 24-27) or the takeaways from Henry Chamberlain’s State of the Industry address— you’ll see that our tough road ahead also includes green shoots of opportunity (page 40). I especially encourage you to read about the new BOMA 360 Performance Program designees honored during the Conference. There are terrific BOMA 360 buildings listed on pages 22-23 that demonstrate how these folks are taking a holistic approach to building operations and management as they differentiate their buildings in a tight marketplace. In my last “Message from the Chair,” I said that great ideas don’t happen in a vacuum and that a few thousand minds working hard to solve a problem are always better than one. Now, I would like to take that thought one step further and ask that each of you reflect back on what you learned at the BOMA International Conference and make a point to put at least one of those ideas into action. Many of you are already doing this and are seeing results, but many of us may have become bogged down in e-mails and deadlines and haven’t had that chance yet to act on what we learned. Now is the time. Because information sharing doesn’t begin and end with the Conference, please share your success stories with your BOMA peers. Simply e-mail me at JPeck@boma.org and tell me how you are seeing results from a good idea you acted on from the BOMA Conference.

6  BOMA  September/October 2009

We will share these success stories in The BOMA Magazine and through other means of communication. The point is to keep the “BOMA Idea Exchange” churning as we problem-solve together. We also count on our BOMA Network to come together on important legislative and regulatory issues. And there are many before us now. Be sure to take a look at “Legislative Update” (pages 8 and 10) to read about BOMA’s new policy positions on cap and trade, energy performance labeling and some of the financial and liquidity challenges we now face. Not only are we preparing for one of our biggest battles on the energy front—ensuring that a voluntary, incentive-based marketplace sets the tone on energy efficiency—but we also have a huge tax battle before us. A healthy commercial real estate industry is the backbone of a healthy economy; the one thing that will halt recovery in an instant is an unfair tax burden on our industry. It would be disastrous, and we won’t let it happen. We clearly have our work before us, but we also have the best team to get the work done. Speaking of the health of our industry, please remember to keep your emergency preparedness and contingency plans up to date as we head into flu season. The experts are predicting a reoccurrence of the H1NI strain. Get the information you need at BOMA’s Pandemic Flu Resource site at www.boma.org. Thank you for your continued commitment.

James A. Peck, RPA, FMA Chair and Chief Elected Officer

Publisher: Lisa M. Prats, CAE Editor: Laura Horsley Associate Editor: Lindsay Tiffany Contributing Editors: Karen W. Penafiel, CAE, Ronald Burton, James Cox, Noel Popwell Designer: Amy Belice Published by: Building Owners and Managers Association (BOMA) International

BOMA International Officers Chair and Chief Elected Officer James A. Peck, RPA, FMA CB Richard Ellis Albuquerque, N.M. Chair-Elect Ray H. Mackey, Jr., RPA, CPM, CCIM Stream Realty Partners, LP Dallas, Texas Vice Chair Boyd R. Zoccola Hokanson Companies, Inc. Indianapolis, Ind. Secretary/Treasurer Kent Gibson, CPM Zions Securities Corporation Salt Lake City, Utah President and Chief Operating Officer Henry H. Chamberlain, CAE, APR BOMA International Washington, D.C.

The cost for The BOMA Magazine is $75 a year for subscribers and $50 a year for BOMA International members. Publication of advertising should not be deemed as endorsement by BOMA International. The publisher reserves the right in its sole and absolute discretion to reject any advertisement at any time submitted by any party. Material contained herein does not necessarily reflect the opinion of BOMA International, its members or its staff.


legislative UPDATE

BOMA’s Board of Governors Approves Five Policy Positions AT THE BOMA INTERNATIONAL CONFERENCE, BOMA’s Board of Governors approved five new policy positions, paving the way for BOMA’s advocacy team to continue to voice the concerns of the commercial real estate industry as we confront new challenges from Capitol Hill. Congress is currently in the process of considering sweeping legislation on energy and climate change, including a cap-and-trade program for emissions reduction (see related article, this page). The Board of Governors approved a position in support of voluntary and incentive-based programs for reducing greenhouse gas (GHG) emissions. BOMA believes the value of GHG reductions will accelerate building energy-efficiency investments most efficiently if the benefits accrue directly to the building that makes these investments. In its current form in the House-passed bill (H.R. 2454, the American Clean Energy Security Act of 2009), however, the cap-and-trade program would not reinvest sufficient funds into building energy efficiency and we feel it will increase costs to business without reinvesting to effectively accomplish its environmental objectives. The second policy position supports the creation of a voluntary national model building energy performance labeling program, based on the EPA ENERGY STAR® Portfolio Manager benchmarking platform, which promotes knowledge of building energy performance without hindering real estate transactions. As part of any such program, utilities should be required to provide whole building benchmarking

8  BOMA  September/October 2009

Incoming Chair of BOMA’s Government Affairs Committee Judy Purviance-Anderson delivers BOMA’s five new policy positions during the Board of Governors Meeting.

data to building owners and managers, and disclosure should be limited to parties directly involved in the transaction. The third position is supportive of incentives to promote investment in water-efficient products for commercial buildings, such as toilets, urinals, faucets, showerheads, re-landscaping, site irrigation systems and applicable HVAC systems. The final two positions are intended to enhance BOMA’s ability to advocate on the financial and liquidity challenges that are confronting our industry. The first simply states that credit capacity and liquidity must be restored to the commercial real estate industry. BOMA’s advocacy staff will continue to work with Congress, the Federal Reserve, the Treasury Department and others to enact regulations to help ease the credit crisis. The second supports amending the Real Estate Mortgage Investment Conduit (REMIC) rules to make securitization more attractive to commercial borrowers by allowing common modifications to property once the loan has been securitized. Full text of all of BOMA’s policy positions can be found on the BOMA Web site at www.boma.org.

Fed and Congress Focus on CRE and Liquidity Issues In an effort to infuse capital into the commercial real estate market, the government began extending funds in June to investors interested in applying for TALF (Term Asset Backed Securities Loan Facility) loans backed by newly issued, AAA-rated commercial-backed

securities (CMBS). The plan also makes the TALF eligible for so-called “legacy CMBS” (CMBS issued before Jan. 1, 2009), which started in July. The TALF program for CMBS is designed to help prevent defaults on economically viable commercial properties, increase the capacity of current holders of maturing mortgages to make additional loans and facilitate the sale of distressed properties. In multiple hearings in both the House and Senate, the state of commercial real estate was one of the most asked about subjects in questioning by lawmakers in Chairman Bernanke’s testimony on the economy. Additionally, the Joint Economic Committee held a hearing on Capitol Hill, examining the growing financing problems facing the commercial real estate market and potential solutions to the credit crisis. On August 17, the Federal Reserve and U.S. Treasury announced that they would extend TALF for CMBS. The original sunset date of Dec. 31, 2009, was extended to June 30, 2010, for newly issued CMBS, and to March 31, 2010, for other asset-backed securities and “legacy CMBS” sold before Jan. 1, 2009.

Climate Change Clears House; Senate Action Anticipated in Fall On June 26, the House of Representatives mustered the votes to pass legislation that would reduce greenhouse gas emissions through a cap-and-trade program. The far-reaching legislation Continued on page 10


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legislative UPDATE

includes several other energy-efficiency provisions that would directly impact the commercial real estate industry. BOMA supports language that would provide tax incentives for increasing the energy efficiency of buildings; however, we continue to strongly oppose a mandate that would require future versions of ASHRAE 90.1 to meet extremely aggressive and arbitrary energy-efficiency targets. If the prescribed targets are not met through

the consensus standard writing practice, the Department of Energy would be tasked with writing the standard. Action is now under way in the Senate. The Senate Energy and Natural Resources Committee has already approved energy language, and the Environment and Public Works Committee is working on the climate change provisions. Senate Majority Leader Harry Reid has set September 28 as his target date to complete action. At this time, it appears that the Democrats are going to have an extremely difficult time getting enough votes to pass a cap-and-trade program. If the climate change package is not successful in the Senate, we fully anticipate that a standalone energy bill will be Congress’ backup plan.

Legislation Would Require that Employers Provide Sick Leave The U.S. House of Representatives Workforce Protections Subcommittee held a hearing in June on H.R.

2460—The Healthy Families Act (HFA), a bill that would require employers to provide employees with up to 56 hours of “paid sick time” each year. Supporters of the legislation claim the mandate is needed to ensure workers are not forced to choose between their jobs and their health or the health of their family. They also claim that providing employees with paid sick leave increases morale and productivity and reduces the possibility of “presenteeism,” a phenomenon where employees show up to the workplace sick, thereby prolonging their own illness or spreading illnesses to coworkers and the public. Opponents of the measure say that a one-size-fits-all mandate, like the HFA, limits an employer’s flexibility in designing compensation and benefits packages that meet the needs of its unique workforce and that a debate over an expensive mandate is not appropriate at a time when employers are struggling to avoid layoffs and business closures. BOMA International will continue to follow this bill as it moves through Congress.

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What is Green Construction? It’s something we’re all focused on. The Painters and Allied Trades LMCI in conjunction with the International Union of Painters and Allied Trades and the Finishing Contractors Association is continually presenting programs designed to improve knowledge and standards in the construction industry. These programs address worker awareness to LEED AP exam preparation. Practicing “green” construction not only helps the environment, but can also improve profits and stakeholder relationships, all while making a healthier, more comfortable space for building occupants. Through more efficient materials, better energy consumption, and reduced human impact on the environment, we’re working to ensure more successful green buildings, and that benefits us all.

The Painters and Allied Trades Labor Management Cooperation Initiative GREEN Construction programs are the result of a partnership with the Finishing Contractors Association, International Union of Painters and Allied Trades, Cuyahogo Community College, and the Finishing Trades Institute. For more information, call toll-free at (888) 934-6474 or (202) 637-0798 or visit us online at www.LMCIonline.org.


state & local update

BOMA/Chicago Leverages Stimulus for Smart Grid BOMA/Chicago has initiated plans to develop the first commercial office building smart grid program in the United States. In August, the organization applied for $92.7 million in matching funds from the U.S. Department of Energy’s Smart Grid Investment Grant Program, which was formed under the recently passed American Reinvestment

and Recovery Act, to help finance the $185.4 million program. The BOMA/Chicago smart grid initiative will revolutionize how buildings manage their energy consumption and spending by delivering a utility-scale, clean virtual generator through implementation of smart grid technology in more than 260 commercial buildings

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in downtown Chicago. This represents more than 80 percent of the square footage and an estimated 1,000 megawatts of peak demand. The program will upgrade the buildings’ electric metering infrastructure with smart meters that will communicate with a BOMA/Chicagorun Network Operating Center (NOC). The NOC will analyze electricity demand and pricing fluctuations and send suggested response strategies to the buildings for immediate implementation. The economic and environmental benefits of BOMA/Chicago’s smart grid program are significant. The program will demonstrate that demand-side resources, such as commercial buildings, can provide operating reserves, frequency regulation and capacity in wholesale grid markets. It will also create or retain more than 2,000 jobs, reduce carbon emissions by approximately 300 million pounds annually and provide a replicable blueprint for how other BOMA International affiliates can adopt similar smart grid programs in their markets.


Budgets Dominate 2009 Legislative Agendas The recession became the dominant issue faced by state lawmakers this year, as FY 2009 proved to be one of the most difficult fiscal years since the ’90s. And, according to a new report by the National Conference of State Legislatures, it’s only going to get worse for FY 2010 and subsequent years. State legislators were forced to close a $113.2 billion budget shortfall for FY 2009 due to a severe decline in revenue. As bad as things were for FY 2009, the picture worsened as legislatures prepared their FY 2010 budgets with a cumulative gap of more than $142.6 billion to fill. Eight states failed to meet the July 1 deadline to enact their budgets. The report notes that at least 11 states raised taxes to eliminate budget gaps. Corporate tax breaks were cut or reduced, while incentives for sustainable innovation were scaled back. Other states tapped their rainy day funds or reserves. California faced an arduous time this session as it worked to close

a FY 2010 budget gap of $38.9 billion. Governor Arnold Schwarzenegger and the state’s legislature became locked in a contentious budget battle, forcing the state to issue IOUs to its vendors. Many states turned to funding provided by the American Recovery and Reinvestment Act (ARRA) of 2009 to close gaps in their FY 2010 budgets. According to the report, 24 of the 25 states that provided information used stimulus funds to close more than 20 percent of their budget deficits. Texas and Nebraska used the largest percentage of funds, with 96.7 percent and 88 percent, respectively. Looking forward, states will continue

to grapple with budget issues in FY 2011 and FY 2012. Of the 30 states that foresee a FY 2011 budget gap, 24 provided preliminary estimates to the researchers of $58.5 billion. Florida’s shortfall is expected to fall in the $5 billion range, while Maryland is projecting a $2.3 billion deficit. Of those states that prepare long-term economic forecasts, the report shows that 15 are projecting budget gaps for FY 2012. The report cites three concerns that will impact states in these years: recessions increase state spending for safety net programs; the loss of ARRA funds; and the residual impact of the national recession on state revenues.

BOMA/Greater Minneapolis Caps Off Successful Legislative Year Throughout 2009, BOMA/Greater Minneapolis successfully represented the interests of its members and the commercial real estate industry on a broad range of legislative and regulatory issues at the state and local levels. BOMA fought a mandate that would Continued on page 14

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state & local update

BOMA fought a mandate that would have required all new parking facilities to be equipped with charging stations for electric vehicles. have required all new parking facilities to be equipped with charging stations for electric vehicles. Although the association supports the promotion of electric vehicles, the bill’s authors were persuaded that these requirements were too premature to be considered at this time. On a vacant building registration proposal, BOMA objected to a provision that would define as “vacant” any commercial property with vacant ground-floor storefront space of 30 percent or greater and subject it to a $6,000 annual fee. The association then successfully pushed

14  BOMA  September/October 2009

to exempt properties within the city’s Downtown Improvement District if the owner agrees to comply with guidelines established by the District for marketing and maintaining the appearance of firstfloor street-facing property. In response to objections raised by BOMA and others, a proposed city building registration fee ordinance, designed to fund cyclical fire inspections of all commercial buildings, had its fee schedule reduced to a maximum of $910 annually applying only to buildings over two million square feet. The original proposal would have applied to buildings at 150,000 square feet. Responding to a component of the federal stimulus package targeting the construction of high-speed rail service in the United States, the Minnesota Senate added funding for a plan to study the feasibility of building a rail line from Chicago to the Twin Cities. Following a lastminute amendment to the bill specifying the route under study would end in St. Paul rather than proceed to Minneapolis, BOMA joined with a coalition of business leaders to urge local legislators to

object to the amendment and succeeded in having it removed on the Senate floor prior to the bill’s passage. The association also negotiated a favorable clarification from the state’s Department of Labor and Industry Elevator Inspection Department regarding minimum fire service operation requirements for existing elevator installations. This new interpretation allows building owners to retain and upgrade existing elevator control systems, subject to certain parameters, without triggering a comprehensive modernization or upgrade—resulting in a significant cost savings for its members.

Want to see your state and local advocacy victories in print? Share your success stories and we’ll share them with BOMA International members. Contact James Cox, director of State & Local Affairs, at jcox@boma.org for more information.


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Codes & standards update

ICC and AIA Initiate Green Building Code Effort THE INTERNATIONAL CODE COUNCIL and the American Institute of Architects are spearheading an effort to develop yet another green building code document, the International Green Construction Code (IGCC). A 29-member committee

met for the first time in Chicago in late July to initiate work on a draft document, with a goal to have a completed draft by Spring 2010. The draft will then be submitted within the ICC code development process for consideration and

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modification, with publication of the first edition scheduled to be included in the 2012 editions of the ICC codes. BOMA is involved in the development of a green building code sponsored by the American Society of Heating, Ventilating and Air-Conditioning Engineers, the U. S. Green Building Council and the Illuminating Engineering Society of North America—ASHRAE 189.1— which is scheduled for completion and publication early in 2010. The effort to develop the 189.1 green building code was launched in 2007, and the 34-member development committee, including BOMA representation, is currently vetting comments on the third public review draft. Both the IGCC and ASHRAE 189.1 are intended to cover all buildings except low-rise residential buildings and apply to new construction, additions and major renovations. Both cover all aspects of green/sustainable construction, including site development, energy and water efficiency, indoor environment and materials and resources. Both also are being developed in code format and language and are intended for consideration by governmental jurisdictions for possible adoption and enforcement of green and sustainable construction projects.

ICC Announces Changes to Code Development Procedures In response to past concerns and, in particular, to address what some viewed as voting and procedural irregularities during the final action hearings of the 2007-2008 code development cycle, the International Code Council (ICC) has initiated a series of changes to its code development procedures for the 2009-2010 cycle. ICC announced these changes are intended to: • Reduce the length of the Code Development and Final Action Hearings.


• Maintain the current three-year publication cycle and the ICC Governmental Consensus Process. • Reduce costs. • Increase electronic processing. • Schedule Code Development Hearings at one central recurring location. The changes include: • Dividing the codes into two groupings, with separate Code Development and Final Action Hearings during the first two years of the publication cycle.

Committee approved a final draft of revisions to the industry’s premier floor measurement standard. This revision to the 1996 edition of the standard includes updated definitions, procedures and graphics, making this the most userfriendly version to date. The revised standard is currently being evaluated by the American National Standards Institute for certification as an American

National Standard. The revised Standard Method for Measuring Floor Area in Office Buildings is now available for purchase on the BOMA Web site (www. boma.org). For more information on any of these stories, contact Ron Burton at rburton@ boma.org.

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• Holding Code Development Hearings at the same central location every April/May. • Holding all Final Action Hearings at the ICC Annual Conference at locations that will continue to rotate through the four quadrants of the United States in late October/early November. • Making a successful assembly action at the Code Development Hearing, with the standing motion to be considered at the Final Action Hearing. BOMA is especially concerned with making assembly action the standing motion at the Final Action Hearings. Assembly action at the Code Development Hearing can be initiated and balloted by anyone in attendance regardless of their affiliation or ICC membership, and BOMA believes there is the potential for special interests to “load” the audience to achieve a desired outcome. Previously, the recommendation of the Code Development Committee that presides at this hearing was the standing motion at the Final Action Hearing, requiring a two-thirds vote to overturn. Initiation of these changes will begin with the Code Development Hearings to be held in Baltimore, Md., October 24-November 11. BOMA will continue to monitor the impact of these changes on proposals of primary concern to the commercial real estate industry and keep BOMA members apprised of developments.

BOMA Completes Revision of Floor Measurement Standard for Office Buildings At the 2009 BOMA International Conference in Philadelphia, BOMA’s Standard Method of Floor Measurement

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leading the way

Political Savvy Susan Engstrom, Senior Real Estate Manager Tiarna Real Estate Services, Inc.

SUSAN ENGSTROM IS A SENIOR REAL ESTATE MANAGER with Tiarna Real Estate Services, Inc. and has worked in property management for more than 26 years. A BOMA member since 1995, Engstrom is extremely active on the local level, serving on the Board of BOMA/ Greater Phoenix and as president in 2004 and 2009. She is also president of Arizona BOMA, a coalition between Tucson and Phoenix BOMA members to promote advocacy and education. She has served on several BOMA International committees, and, in 2010, she will begin her term as chair of the State Government Affairs Committee.

Any good takeaways on how to deal with politicians?

You were instrumental in getting Phoenix Mayor Phil Gordon to sign onto the 7-Point Challenge. How did you make that happen?

I’m so excited about chairing the committee. At my first meeting I’m going to challenge everyone to reach out to two cities in their state to get 7-Point Challenge endorsements. Having 100 mayors signed on would create tremendous momentum. We also plan to encourage all states to have advocacy days. We have an advocacy day every year and we combine our efforts with other groups like NAIOP, ICSC, IREM and IFMA. This helps us come together as a whole commercial real estate organization to bring our issues to the state legislature. Beyond that, every state has different challenges, especially with issues that just keep coming back, such as property taxes and forced access. BOMA now has a toolkit on how to work with owners to combat forced access, which is based on a template of how Arizona BOMA won a forced access battle in 2006.

It would seem daunting to approach the mayor of a large city like Phoenix, but Mayor Gordon is just a person like you or me and he was very interested in environmental issues. I knew about his green commitments for Phoenix, but it can be difficult when you live in a desert where it’s hard to cool buildings efficiently and effectively. But there are low-cost, nocost methods, and I was determined that Mayor Gordon needed to hear us out. When we discussed the Challenge and showed him the market transformation document, he was impressed with our aggressive 2012 timeframe. It was a great moment for us when we got the endorsement letter from the mayor and the City of Phoenix. Now, we’re setting up appointments with the mayors of all our surrounding cities.

18  BOMA  September/October 2009

There’s nobody who won’t listen to you if you have a point to make. With the mayor, we weren’t asking for money, we were asking him to review what BOMA is doing because we feel like we lead the industry.

You will be chair of the State Government Affairs Committee in 2010. What are the grassroots priorities for BOMA going forward?

You have been extremely active on the local level with BOMA/Greater Phoenix. What drives you to volunteer and your interest in government affairs?

Advocacy is a huge interest of mine and I’ve always been fascinated with politics. I worked for Arizona’s Department of Racing early in my career, which was a very political organization, so I got to see how politics work firsthand. I remember when I was a young girl, my father let me stay home from school when we thought Kennedy had lost to Nixon in the 1960 election; that’s how devastated I was, until the recount, of course, showed that Kennedy won. When I joined BOMA, it made sense to be on the Government Affairs Committee. At that time, the committee was just getting off the ground and I wasn’t that confident that I knew the issues so I just dug in and figured it out. Nobody sets out to be a property manager; I could never pretend to know everything there is, and it’s easy to run across an issue you’re unfamiliar with. Being involved with BOMA means you can always keep learning. We have a great group here in Phoenix; everyone works for the common good.

What do you get most out of your BOMA membership? You can call somebody at BOMA International and they will put you in touch with someone who has your same issue. The members are a terrific group of people who network and aren’t afraid to help each other. People will be honest about the problems they face and will ask for help. It is the best organization for anybody in commercial real estate.


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Around the industry

Image courtesy of the CDC

GSA Appoints New Commissioner of Public Buildings

H1N1 Revisited— Are You Prepared? WHEN THE H1N1 FLU VIRUS dissipated this summer and took a hike to the Southern Hemisphere, many breathed a sigh of relief, but building owners and managers should be gearing up for a possible round two of the pandemic this fall. Experts expect that the virus will move back to the Northern Hemisphere as schools reconvene, and it could mutate into a more dangerous strain. The Centers for Disease Control and Prevention (CDC) recently came out with these tips to help businesses protect employees: • Encourage infection control practices in the workplace, such as providing alcohol-based hand sanitizers and sufficient facilities for hand washing.

The U.S. General Services Administration has appointed Bob Peck to serve as the commissioner of Public Buildings. Peck, who previously served as the commissioner of Public Buildings during the Clinton Administration, will be responsible for managing the federal government’s building portfolio. He will oversee nationwide asset management, design, construction, leasing, building management, security and disposals for 354 million square feet of government-owned and leased space accommodating one million federal workers. Peck most recently served as managing director of Jones Lang LaSalle, where he advised corporations, governments and nonprofit institutions on real estate portfolio strategy and on publicprivate, mixed-use developments.

Kimberly-Clark Commits to Stronger Fiber Sourcing Standards Kimberly-Clark Corporation has adopted stronger fiber sourcing standards that will increase global forest conservation and make the company a leader in sustainably produced tissue products. Kimberly-Clark worked with Greenpeace on the revised standards, which reinforce the company’s long-standing ban on the use of wood fiber from illegal sources; add a preference for post-consumer recycled fiber; encourage the expansion of recycling initiatives; and support the identification and protection of areas that are potentially endangered or “high conservation value” forests. Kimberly-Clark has also set a goal of obtaining 100 percent of the company’s wood fiber for tissue products from environmentally responsible sources.

BOMA Mourns Passing of Two Leaders The commercial real estate industry recently lost two leaders and long-time BOMA members. Allan Bancroft Heaver, a managing member of Heaver Properties in Lutherville, Md., and a member of BOMA/Baltimore, passed away July 2. He was involved with the creation of BOMA’s Regional Owners Council, was extremely active in legislative affairs and encouraged countless people to get involved with BOMA. He was also a member of the American Lung Association’s Task Force For Indoor Air Quality Control. Mark Patrick Gillin, founding president of BOMA/Ottawa, passed away in Ottawa on July 18. Gillin was instrumental in expanding BOMA Canada and championed professional education and research during his tenure. BOMA/Ottawa has established The M. Patrick Gillin Award in his memory to recognize excellence in commercial real estate and dedication to BOMA/Ottawa.

• Share flu-related policies and plans with employees and clearly communicate expectations. For more information, visit BOMA’s Pandemic Flu Resources site at www.boma. org.

We’ve got Your News If you haven’t checked out BOMA’s e-News in a while, be sure to take a look at the next issue. We took the advocacy and industry news you need and made it even more timely, compelling and concise. Look for e-News in your inbox the first and third Thursday of the month and check out the e-News archive at www.boma.org/news/ enewsletters.

20  BOMA  September/October 2009

BOMA International Staff Lend a Hand to D.C.’s Homeless BOMA International staff recently dedicated a morning to volunteering for D.C. Central Kitchen, a local nonprofit organization devoted to solving poverty, hunger and homelessness. BOMA International’s 30-plus staff members spent the morning assembling toiletry kits for D.C. Central Kitchen’s First Helping program, a street-level outreach initiative with the goal of empowering people to address the complex issues at the heart of their personal challenges. Toiletry kits are just one of the tools First Helping uses to strengthen bodies, empower minds and build communities. Find out more about D.C. Central Kitchen at www. dccentralkitchen.org.


Member Spotlight:

Wendy Williams Wendy Williams, general manager, Vector Property Services, LLC and member of BOMA/Denver Metro, talked to The BOMA Magazine about why BOMA is like public television and how she communicates the value of membership to her owner. TBM: What do you see as the most important benefit of your BOMA membership? Wendy: If I had to choose one thing, personally, it is the education. All of the knowledge and information from the various courses and seminars over the years have really made me better at what I do. To owners, I think the most important benefit of BOMA is the advocacy on the local, state and national levels. The advocacy work BOMA does ends up saving owners a lot of money. I sort of look at it like I do public television: Everyone benefits from it. Becoming a member and supporting the organization is simply the right thing to do.

TBM: How has the economy changed your business? Has it changed the value you see in BOMA? Wendy: It has meant that property managers are asked to do more with less— fewer staff and smaller budgets. I know of owners who have cut membership to industry organizations to save money. What I always point out is that BOMA membership dues are much less than all the money you save by being a BOMA member—on the advocacy front, staff training, etc. It is the responsibility of property managers to communicate to their owners the value of BOMA and the savings passed on to them through membership.

been extremely helpful and I have hired several people that way. Other BOMA resources like the EER and the BOMA/ Denver Metro Salary and Wage Survey are very valuable. I’ve been recruited for my last four jobs. I think in some way that is reflective of my involvement in BOMA.

TBM: Besides the education, how has BOMA membership helped your career? Wendy: The networking through BOMA makes my job easier. When I’m facing a particular issue, I have a group of people I can reach out to for advice. When I am filling positions, I always e-mail my “BOMA buddies,” as I call them. It has

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September/October 2009  BOMA  21


“[The BOMA 360] program, unlike others, looks at all aspects of a building and a building management team.” Robert L. Carlen, CPM, Vice President of Property Management, Crescent Real Estate Equities

Claiming Competitive Advantage By Lindsay Tiffany

BOMA 360 Building—Rosewood Court, Dallas, Texas, managed by Stream Realty Partners, L.P. BOMA 360 Building—One Gateway Center, Newark, N.J., managed by Advance Realty Management, Inc.

22  BOMA  September/October 2009

The game has changed. In the wake of the financial crisis, strategies that were once considered rules for success in commercial real estate no longer hold. Owners are holding buildings longer, tenants have the upper hand in leasing negotiations and to say that budgets and resources are stretched is an understatement. All of this means that property management is more important than ever. Exceptional customer service, efficient operations and excellence in building management are what will attract tenants and result in bottom-line success. But how can property managers demonstrate to tenants, prospective tenants, owners and stakeholders that their buildings are market leaders? For several companies, the answer is the BOMA 360 Performance Program, which demonstrates that their buildings meet industry best practices on every level. The program is an online self assessment that evaluates properties in six major areas: building operations and management; life safety, security and risk management; training and education; energy; environment and sustainability; and tenant relations and community involvement. The holistic nature of the BOMA 360 Performance Program means that every aspect of building performance is assessed, with scores based on how buildings measure up to an extensive checklist of best practices. Crescent Real Estate Equities was among the first companies to apply for the designation, representing 10 out of the 25 buildings conferred with the inaugural class of BOMA 360 designations in June. The 10 buildings are part of Greenway Plaza and total 4.3 million square feet of office, residential, hotel and entertainment space. Crescent’s

Vice President of Property Management Robert L. Carlen, CPM, who manages the complex, saw the program as a natural extension of the company’s management philosophy and decided to get all 10 buildings designated at once. “We give our managers autonomy,” says Carlen. “Each of our building managers has total responsibility for his or her buildings. This program, unlike others, looks at all aspects of a building and a building management team.” Carlen also notes that BOMA 360 stands out from other industry designation programs, making it a must have for high-performance buildings. “First and foremost, it is specific to our industry. LEED is just a piece of the whole when it comes to recognizing excellence, in my mind. BOMA 360 adds to the energy consumption piece by including all other aspects of building management—from certificates of insurance to occupancy to customer service to cleaning, security, parking and much more.” William F. Moebius, senior vice president and director of energy and sustainable operations with Stream Realty Partners, likes that BOMA 360 fills a void when it comes to designation programs. “There really aren’t any comprehensive building performance measurement programs for properties today. ENERGY STAR® deals with energy efficiency; LEED focuses on sustainability; TOBY is an award for the single best building in a category; and other professional designation programs are generally for individuals rather than buildings,” he explains. Stream Realty recently had three buildings designated: 3811 Turtle Creek, Rosewood Court and The Tower at Cityplace, all in Dallas, Texas. For Moebius,


the stamp of excellence the designation implies is why his company chose to participate. “The most important benefit of the program is that buildings are recognized for incorporating a very broad range of best practices,” says Moebius. “Owners and tenants can take comfort in the fact that the management team has excellent, industryleading systems and practices in place.” RREEF also had two buildings earn the designation, 555 Market Center and 575 Market Center in San Francisco, Calif. Lisa Vogel, vice president and district manager for RREEF, says the company’s primary motivation for participating was to demonstrate that its buildings are best in class. “We participated in the BOMA 360 Performance Program to illustrate that Market Center provides our tenants with property management services that rank among the best in the industry,” she says. “The BOMA 360 designation provides Market Center with an unbiased rating based on specific criteria, giving prospective tenants an idea of what they can expect in terms of attention and service, which, in the current market, can assist them in evaluating

the wide array of available properties and management companies.” Ginny Carita, RPA, vice president of property management for Advance Realty Group, concurs that the designation gives her buildings a competitive edge. “Being one of the first buildings designated shows our tenants that they are in the right building and signifies to future tenants that this is the building they should be moving into. It shows that, as a company, we are staying ahead of the industry.” Advance Realty Group’s One Gateway Center, a half-millionsquare-foot tower in Newark, N.J., was among the buildings in the first class of BOMA 360 designees. The acknowledgement the 360 designation gives to property managers is also a significant benefit. Says Carlen, “Right now, industry conditions are tough. I looked at this as an opportunity to showcase our managers and as an opportunity for them to feel good about what they’re doing.” Adds Carita, “From a management perspective, it’s great to acknowledge what our property management team does on a daily basis. As managers, we

often take for granted the things that we do every day. The designation confirms that property managers are being creative, innovative and they are making themselves stand out from the rest.” The designees expect BOMA 360 to give them a competitive edge even when the industry turns the corner for recovery. “No matter the market conditions, the designation is an effective tool, both for us to evaluate how we compare to our peers and to provide our current and prospective tenants with a tool to evaluate how Market Center rates among various properties and their landlords in the market,” notes Vogel. Carita is excited about more Advance buildings applying for the designation in coming months. “The building that was recently designated [One Gateway Center] was our largest property. We believed that, if we can get this building certified, we can get them all certified.” Applications for the BOMA 360 Performance Program may be made at any time throughout the year, with designations conferred quarterly. For more information, visit www.boma.org/ GetInvolved/BOMA360.

CONGRATULATIONS to the inaugural class of BOMA 360 Performance buildings:

Eleven Greenway Plaza, Houston, Texas

3811 Turtle Creek, Dallas, Texas

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Managed by: Stream Realty Partners, L.P. Owned by: Metropolitan Life Insurance Co.

One Greenway Plaza, Houston, Texas

Twelve Greenway Plaza, Houston, Texas

Managed by: Advance Realty Management, Inc. Owned by: Advance at One Gateway, LLC

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Two Greenway Plaza, Houston, Texas

125 East John Carpenter Freeway, Irving, Texas

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Managed by: Transwestern Owned by: Equastone

Three Greenway Plaza, Houston, Texas

200 Kimball Drive, Parsippany, N.J.

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Managed by: Grubb & Ellis Company Owned by: Principal Real Estate

280 Plaza, Columbus, Ohio

Four Greenway Plaza, Houston, Texas

Managed by: CB Richard Ellis Owned by: Nationwide Mutual Insurance Company

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Five Greenway Plaza, Houston, Texas

555 Market Center, San Francisco, Calif. Managed by: RREEF Owned by: RREEF American REIT III Corp F

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

575 Market Center, San Francisco, Calif.

Eight Greenway Plaza, Houston, Texas

3800 Buffalo Speedway, Houston, Texas

Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Nine Greenway Plaza, Houston, Texas Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

Managed by: RREEF Owned by: RREEF American REIT III Corp F Managed by: Crescent Real Estate Equities Limited Partnership Owned by: MS Crescent Greenway Plaza SPV, LLC

One Gateway Center, Newark, N.J.

Bank of America Plaza, Charlotte, N.C. Managed and owned by: Behringer Harvard

Denver Financial Center, Denver, Colo. Managed by: Transwestern Owned by: U.S. Premier Office Equities, L.P.

Granite 190—Building One, Richardson, Texas Managed by: Granite Properties, Inc. Owned by: GPI-M190A, LP

Granite Park One, Plano, Texas Managed by: Granite Properties, Inc. Owned by: Granite Park I, LLC

Granite Park Two, Plano, Texas Managed by: Granite Properties, Inc. Owned by: Granite Park II, LLC

Parkway Corporate Center, Montvale, N.J. Managed by: Grubb & Ellis Company Owned by: TCAM Core Property Fund Operating LP

Rosewood Court, Dallas, Texas Managed by: Stream Realty Partners, L.P. Owned by: Rosewood Court, LLC

The Tower at Cityplace, Dallas, Texas Managed by: Stream Realty Partners, L.P. Owned by: Dallas CPT Fee Owner, L.P.

September/October 2009  BOMA  23


The Power of the BOMA Network on Display in Philadelphia

By Laura Horsley

BOMA members throughout the commercial real estate industry gathered in Philadelphia, June 28-30, for the BOMA International Conference and The Office Building Show, the industry’s premier gathering and perhaps BOMA’s most important conference in years. For three packed days, attendees networked; shared information and ideas; and were connected to the experts and strategies to help them survive one of the most difficult market cycles in recent memory. Sunday General Session panelists discuss marketplace realities and strategies.

Panelists Discuss Marketplace Realities and Opportunities

Sunday General Session Highlights Mayor Michael Nutter Welcomes BOMA to Philadelphia Philadelphia Mayor Michael Nutter helped kick off the BOMA International Conference by welcoming BOMA members to the city of brotherly “and sisterly” love and thanking BOMA for its leadership in Philadelphia and across the country. Mayor Nutter also recognized BOMA’s leadership in energy and sustainability during the opening general session of the conference.

24  BOMA  September/October 2009

Panelists participating in the “Searching for Value in all the Right Places” Sunday General Session, sponsored by Yardi/SiteStuff, pulled no punches about the stress the credit crisis has had on commercial real estate. Perry Schonfeld, principal with LBA Realty LLC, noted that a “lack of clarity and confidence” in the economy is holding back potential deals. Panelists agreed that asset management is more important than ever to stakeholders and will be key as the industry works toward recovery. The session was moderated by Andrew C. Florance, president and CEO of CoStar Group. Significant takeaways from panelists included the following:

“We have to stay close to clients and find out what they need. This is where it will be won or lost.” Chip Akridge, Chairman, Akridge “While we think the development side will be frozen for some time, we believe capital will be used on the acquisition side. The fundamental side is not healthy, but it’s going in the right direction. I like 2010.” William Hankowsky, Chairman, President & CEO, Liberty Property Trust

“Innovation and creativity will be key, especially with this group, because asset management is more important to more stakeholders … lenders are very interested in operators.” Perry Schonfeld, Principal, LBA Realty LLC “Get in front of tenants earlier to restructure leases and be ready to make deals … be proactive.” T. Patrick Duncan, Chairman & CEO, USAA Real Estate Company


Chamberlain Delivers State of the Industry During his annual State of the Industry address at the Monday General Session, BOMA President Henry Chamberlain discussed the good, the bad and the ugly playing out across the marketplace in response to the capital credit crisis. Key takeaways from the State of the Industry address included: • Vacancy rates are now close to 16 percent and look to be headed to 20.

Monday General Session Highlights Dr. Fareed Zakaria Offers Insight on New Global Marketplace During the Monday General Session, sponsored by ThyssenKrupp Elevator, renowned economist Dr. Fareed Zakaria discussed the political, economic and technology transformations that have redefined the global marketplace. Dr. Zakaria also told attendees that the recovery will not be shaped by the predictions of academics, but by the 300 million unpredictable responses from individuals across the country.

• Negative net absorption, totaling 18.4 million square feet, continues to push vacancy rates higher. • The billions in capital dollars waiting on the sidelines could spur recovery once we push beyond this difficult cycle. • Even firms that have strong balance sheets are finding it difficult to navigate the current climate. Many firms are conserving their cash as they revise their hold periods and five-year plans for each asset in their portfolios. • Besides the government, healthcare is one of the few industries with positive job growth. The Medical Office Building market continues to be a sought-after asset class. • Because commercial real estate was late to the recession, we can also expect it to be late to the recovery. 2010 will most certainly be another tough year for the marketplace, but look for signs of growth in 2011. • The Treasury Department recently made commercial mortgage backed securities eligible collateral for TALF loans, which should help prevent defaults on economically viable commercial properties, increase the capacity of current holders of maturing mortgages to make additional loans and facilitate the sale of distressed properties. • More and more state and city governments are requiring leases in green buildings or new green building standards. We’re seeing this in places like D.C., Boston and San Francisco.

BOMA Vice Chair Ray Mackey (fourth from left) introduces the inaugural class of BOMA 360 designees.

Inaugural Class of BOMA 360 Performance Buildings Recognized Also during the Monday General Session, BOMA Vice Chair Ray Mackey announced the first class of BOMA 360 Performance Buildings. “With this recognition these designees are sending a message to their owners, tenants and prospective tenants that they are optimizing building performance at every level,” said Mackey. BOMA 360 Performance Buildings are listed on page 23.

• A major focus of the recent stimulus package is an investment of $3.2 billion in energy-efficiency and conservation projects in the nation’s cities, counties and states. BOMA President Henry Chamberlain tells it like it is during his State of the Industry address.

Find more information on the 2009 BOMA International Conference and The Office Building Show online at www.boma.org. Mark your calendars for the 2010 Conference and The Every Building Show, June 27-29, at the Long Beach Convention & Entertainment Center, Los Angeles County, Calif. Continued on page 26

September/October 2009  BOMA  25


Other Highlights

A Night to Remember at the TOBY Awards During The Office Building of the Year (TOBY) Awards, sponsored by Securitas Security Services USA, 14 commercial properties were recognized for excellence in office building management and operations in specific categories of building size or type (read about the TOBY winners on page 28-31). Other highlights of the evening included BOMA International Chair Dick Purtell honoring BOMA Secretary/Treasurer

Jim Peck takes the helm as 2009-2010 BOMA International Chair.

Dave Stucky with the annual Chair’s Award, and the announcement of three Outstanding Members of the Year from three local BOMA Regions: • Middle Atlantic Region, Louis J. Mantia, BOMA/New York; • Southern Region, Sally Elliott, BOMA/Atlanta; • Southwest Region, Karrie S. McCampbell, Dallas/BOMA and Texas BOMA.

BOMA members packed into the 40-plus Education Sessions, offered across five value-driven tracks, focusing on the strategies property professionals need to survive in today’s turbulent marketplace. Tracks included: Maximizing Asset Value; Building a Sustainable Bottom Line; Leading Effectively in Challenging Times; Going Lean: Managing With Less; and Optimizing Building Operations: Tools for Building Engineers. The Office Building Show was bustling with commercial real estate professionals looking for the cutting-edge, cost-effective products and services to ensure that their buildings stand out. The best minds, best products and best services were on all on display on the tradeshow floor, including the latest in energy-efficient solutions at the popular BOMA Green Pavilion and ENERGY STAR® Showcase. NOTE: The Office Building Show is now The Every Building Show; a new name for the industry’s premier show for every type of building.

James A. Peck, RPA, FMA, was formally sworn in as 2009-2010 BOMA International Chair during the ceremony. In his acceptance speech, Peck told BOMA members, “We have had many challenges in recent months and more may be on the horizon, but I’m confident that BOMA is uniquely positioned to strengthen all of our careers through our programs, education and advocacy.”

Attendees seek out cutting-edge building solutions at The Office Building Show.

Prior to the BOMA International Conference, nearly 450 healthcare real estate professionals (hospital executives, healthcare owners and managers, lenders, investors, developers) attended BOMA’s annual Medical Office Buildings and Healthcare Facilities (MOB) Conference in Philadelphia. Financing structures, operating trends and healthcare reform were among the MOB topics. Read a full recap of the MOB Conference in “Eye on Education” on pages 44-46.

26  BOMA  September/October 2009

BOMA/Philadelphia helped attendees connect with history and so much more during the Welcome Party at the National Constitution Center. Sensational entertainment, fabulous food and interactive exhibits and displays made it a night to remember. BOMA/Philadelphia also sponsored a popular “diamond heist” BOMAPAC fundraiser that raised more than $11,000 for the BOMAPAC.


During the Inclusive Membership portion of the meeting, Steve Ash, BOMA/Houston, and chair of the Local Association Services Committee, announced the winners of the Best Practices Awards. The winners were: BOMA Outgoing Chair Dick Purtell addresses the Board of Governors.

Board of Governors Meeting During the Board of Governors meeting, BOMA Vice President of Education and Research Lorie Damon and Vice President with Kingsley Associates Phil Mobley (pictured below) announced that the Experience Exchange Report (EER) has migrated online with greater functionality, cost efficiency and ease of use. BOMA members participated in live demos of the online 2009 EER throughout the tradeshow in the BOMA booth. Read about the new online EER in “Research Corner” on pages 42-43. The Board of Governors also voted to adopt the following five new policy positions on: • Voluntary Greenhouse Gas Emission Reduction; • Voluntary Model Building Energy Performance Program; • Investment Incentives for Water-Efficient Products; • Commercial Real Estate Credit Crisis; • Real Estate Mortgage Investment Conduits, or REMIC rules. Learn more about BOMA’s new policy positions in “Legislative Update” on pages 8-10. BOMA Incoming Chair Jim Peck reported on the BOMA Partnership Program, which is now in its sixth year. BOMA’s Cornerstone Partners include: • AlliedBarton Security Services, BOMA’s first Cornerstone Partner, joining the program in 2004; • IB Roof Systems, a brand new Cornerstone Partner; • Kimberly-Clark Professional, a partner since 2004; • Naylor Publishing, a partner since 2008; • ThyssenKrupp Elevator, a partner since 2004; and • Trane, a partner since 2007. • • • •

BOMA’s Leadership Circle Partners include: ISS Facility Services, a partner since 2005; SIEMENS, a partner since 2008; UGL Unicco, a partner since 2007; and ValleyCrest, a new partner.

BOMA’s Supporting Partners include: • Acuity Brands Lighting, a partner since 2008; • Nalco, a partner since 2006; and • Orkin Commercial Services, a partner since 2007.

• Marketing Communications category—BOMA/San Francisco for its Membership Brochure; • Communications Management category—BOMA/ Austin for its PR Initiative to reach out to the city of Austin on codes and energy-efficiency issues; • Communications Management category (honorable mention)—BOMA/Suburban Chicago for its first-ever “Green” Golf Outing; and • Electronic & Interactive Communications category— BOMA/Oakland-East Bay for its redesigned Web site. In addition, BOMA International’s newest officers and executive committee members (pictured) were approved during the Board of Governors meeting. New Officers are: • Vice Chair—Boyd R. Zoccola, Hokanson Companies, Inc., BOMA/Indianapolis; and • Secretary/Treasurer—Kent Gibson, CPM, Zions Securities Corporation, BOMA/ Utah. New Executive Committee members are: • Angelo J. Grima, Grubb &

Ellis Management Services, Inc., BOMA/New York; • Karrie S. McCampbell, CPM, Transwestern, BOMA/Dallas; • Laura T. Ragans, RPA, Manulife Financial, BOMA/Orlando; • Perry Schonfeld, MBA, CPA, LBA Realty, BOMA/Orange County; and • David M. Stucky, City of San Diego, BOMA/San Diego. BOMA welcomed several guest speakers during the Board of Governors meeting, including: • Nick Ridley, president, British Council for Offices; • Andy Fuhrman, CEO, OSCRE; • Patrick Finch and Terry Logue, Department of Energy, Commercial Real Estate Energy Alliance; • Adolf Zubia, president, International Codes Council Board of Directors; • Henry Green, president and CEO (pictured), National Institute of Building Sciences; and • Robert Wible, FIATECH.

September/October 2009  BOMA  27


A Cut Above

Industry Honors Standouts in Building Operations and Management in Philadelphia By Lindsay Tiffany Coming off a year full of challenges for commercial real estate, industry professionals gathered to celebrate achievement and excellence as 14 commercial properties were honored with The Office Building of the Year (TOBY®) Awards during the 2009 BOMA International Conference and The Office Building Show. This year’s competition was perhaps even more meaningful, as the winning buildings demonstrated how to deliver unsurpassed building management in the face of weak economic conditions.

The TOBY winners were recognized for excellence in office building management and operations in specific categories of building size or type. To win the international award, the office buildings first won both local and regional competitions. Judging was based on community impact, tenant/employee relations programs, energy management systems, accessibility for disabled people, emergency evacuation procedures, building personnel training programs and overall quality indicators. A team of expert industry professionals also conducted

The TOBY Awards are sponsored by Securitas Security Services USA. The largest provider of security officer services in the United States, Securitas provides security solutions, including uniformed security staff, consulting and investigations and security systems integration to building owners and managers nationwide. For more information, visit www.securitas.com.

a comprehensive building inspection. This year’s TOBYs were highly competitive, with 79 entries in 14 categories. The TOBY winners for 2008-2009 are listed below by category.

EARTH AWARD Heifer International

Little Rock, Ark. Managed by: Heifer International—Facilities Management Team Owned by: Heifer International The Earth Award recognizes excellence in environmentally sound office building management. Heifer International’s LEED® Platinum-certified world headquarters building is the largest brownfield clean-up by volume in state history. This four-story, 96,000-square-foot building is just 62 feet deep, so daylight penetrates the entire floor plate. Raised flooring improves ventilation and makes heating and cooling more efficient. Atrium floors are made from renewable bamboo, and the restrooms contain block glass walls to enhance natural light. Heifer International made a concerted effort to use resources found within a 500-mile radius to reduce transportation costs and fossil fuel emissions.

CORPORATE FACILITY Citi Campus—Jacksonville

Jacksonville, Fla. Managed by: Grubb & Ellis Management Services, Inc. Owned by: Citicorp Credit Services, Inc. The Citi Campus—Jacksonville, a six-building, 629,000-square-foot complex in Jacksonville, Fla., is committed to energy efficiency. To help reduce energy consumption, rooftop unit crossover ducts were installed and in two months they helped save more than $19,600. In 2007, the building challenged all employees to provide suggestions to reduce costs and green the property. To date, the challenge has had a cost savings of more than $250,000. Community involvement is also important to the owner and management team, and in 2008 Citi Campus—Jacksonville contributed more than 23,825 volunteer hours and raised more than $2 million for its community partners.

28  BOMA  September/October 2009


INDUSTRIAL OFFICE PARK Crosstown North Business Center

Brooklyn Park, Minn. Owned and managed by: Duke Realty Corporation Crosstown North Business Center is an 87-acre, eight-building industrial office park consisting of 1.186 million square feet of flex, warehouse and office space. Both building staff members and tenants receive training on the HVAC system during space turnover. Training includes the proper and efficient use of programmable thermostats and managing expectations with Xcel energy unit saver switches. Duke’s safety program is corporately sponsored, and all Duke employees participate in monthly safety conference calls to discuss new programs and ideas. Duke Realty Corporation also gives each of its associates two paid community service days annually, resulting in 400 hours of volunteer service.

GOVERNMENT BUILDING Sandra Day O’Connor United States Courthouse

Phoenix, Ariz. Owned and managed by: U. S. General Services Administration The Sandra Day O’Connor United States Courthouse is a six-story, 832,000-square-foot building in downtown Phoenix. By utilizing natural light, approximately two-thirds of lighting fixtures in public spaces have been de-lamped. In other spaces, ambient light sensors adjust lighting depending on conditions. As a result, the Sandra Day O’Connor U.S. Courthouse received an ENERGY STAR® rating of 89. GSA’s Good Neighbor Program helps revitalize the economic and civic livelihood of communities, while improving work environments for federal employees.

MEDICAL OFFICE BUILDING Arnold Pavilion

Seattle, Wash. Managed by: CB Richard Ellis Owned by: 1221 Madison Street Owners Association Arnold Pavilion is a high-rise medical office building on Swedish Medical Center’s campus in Seattle. The building has a demonstrated commitment to environmentally sound building practices. The team worked with designers and builders to save 30 tons of material from going to the landfill during roof replacement. The new overlay is ENERGY STAR® rated with energy-saving reflective material. Building management also conducted a waste audit, which helped identify an additional 30 percent of trash that can be recycled.

HISTORICAL BUILDING Toronto College Park

Toronto, Ontario, Canada Managed by: GWL Realty Advisors Inc. Owned by: Toronto College Park Ltd. Built in 1928, Toronto College Park is a Canadian architectural landmark located in downtown Toronto. The management team developed a detailed building emergency and disaster plan that includes Web-based support features and manuals on emergency response procedures. Building management is committed to a three-percent reduction in energy consumption, with the team bonus directly tied to achievement. To meet this goal, real-time monitoring equipment was installed, allowing the team to maximize efficiency. Toronto College Park received Go Green Plus certification in November 2007.

Continued on page 30

September/October 2009  BOMA  29


SUBURBAN OFFICE PARK, MID-RISE Pearson Corporate Centre

Etobicoke, Ontario, Canada Managed by: Bentall Limited Partnership Owned by: Westpen Properties Ltd. Environmental stewardship is an important focus at Pearson Corporate Centre, located in the Toronto area. The Bentall management team launched “ForeverGreen—Responsible Property Management,” a program through which management partners with tenants to reduce the property’s environmental footprint. Pearson Corporate Centre recently took the “Commuter Challenge” during the Canadian Environment Week, encouraging tenants to use public transportation, bike, walk or carpool to work. Recycling is also a cornerstone of its sustainability plan. A waste audit conducted in 2008 showed that, through its efforts, Pearson Corporate Centre saved more than 1,200 trees in a calendar year.

RENOVATED BUILDING 100 Park Avenue

New York, N.Y. Managed by: SL Green Realty Corp. Owned by: SL Green Realty Corp. and Prudential Real Estate Investors This 36-story, 887,000-square-foot building underwent a $70 million renovation, transforming the building in just three years and resulting in a Silver LEED® EB rating. 100 Park Avenue was designed with 13 green roofs, a first in a New York commercial high-rise, collectively removing 18 tons of CO2 from the air annually. The building is fully compliant with local mandates requiring low-flow water fixtures. As a result, water consumption has been reduced by 50 percent, equivalent to nearly one million gallons of water per year.

UNDER 100,000 SQUARE FEET West 101 Gateway

Phoenix, Ariz. Managed by: Opus West Management Corporation Owned by: Opus Real Estate AZ VII WG, LLC

SUBURBAN OFFICE PARK, LOW-RISE Carlson Center

Minnetonka, Minn. Owned and managed by: Carlson Real Estate Company Carlson Center is a multi-tenant office park located in suburban Minneapolis. The complex includes office, industrial, residential, retail, recreational, dining, medical and lodging properties, as well as a park. All five buildings in the Carlson Center complex are ENERGY STAR® benchmarked. The management team is also in the process of obtaining LEED® EB certification for the properties. To further their sustainability efforts, the management team hosts twice-annual commuter fairs, which promote alternative commuting options. Carlson Center was awarded the Property Management Commuter Choice Award from Metro Transit for its efforts.

30  BOMA  September/October 2009

West 101 Gateway is a two-story, 50,500-square-foot, multi-tenant, Class A office building. The staff at West 101 Gateway uses ENERGY STAR® Portfolio Manager to track energy performance, and in 2008 the building achieved an energy performance rating of 96. The management team practices “sensible sustainability,” leveraging design and construction practices that maximize building performance and reduce the impact of buildings on the environment. The management team is committed to community stewardship and contributes 10 percent of their pre-tax profits and countless employee volunteer hours to dozens of nonprofit organizations.


500,000 - ONE MILLION SQUARE FEET MGM Tower

Los Angeles, Calif. Managed by: JMB Real Estate Services, Inc. Owned by: Constellation Place, LLC

100,000 - 249,999 SQUARE FEET Whole Foods Market World Headquarters Building

MGM Tower, a Class A, 775,000-square-foot, 35-story building in Los Angeles, is LEED® Silver certified, the first existing office building in LA to receive this designation. Recently, the management team installed solar panels on the roof of the parking structure, which generates enough energy to offset more than 12 percent of annual energy use and reduce daytime demand by up to 29 percent. MGM Tower has a successful tenant relations program in place that focuses on exceptional customer service, quick response time and effective communications between tenants and the management team.

Austin, Texas Managed by: Schlosser Development Corp. Owned by: LSA/WF Project Ltd. The Whole Foods Market World Headquarters Building, located in the heart of Austin’s downtown Market District, pays homage to an agrarian past while celebrating its vibrant urban community. Emergency preparedness and security are priorities for the owner and building management team. The Building Emergency Safety Team (BEST) was created in 2005 to involve tenants in emergency preparedness. Multiple meetings are held annually, which focus on safety and emergency preparedness. To complement energy conservation programs already in place, building management works with employees to identify conservation ideas that benefit the building and the environment.

OVER ONE MILLION SQUARE FEET Fifth Street Towers

Minneapolis, Minn. Managed by: Carter Owned by: Strategic Real Estate Advisors Fifth Street Towers, a two-tower Class A office complex, is located in downtown Minneapolis. Fifth Street Towers participates in the local utility’s voluntary load reduction program, a cooperative energy curtailment program that has resulted in approximately $90,000 savings in annual operating expense. Both towers have ENERGY STAR® certification and scored impressive ENERGY STAR ratings of 92 and 96 in 2008. The Fifth Street Towers team is also active in their community, collaborating with local organization The Caring Tree on its annual back-to-school campaign by collecting supplies and funds to ensure that low-income students have adequate school supplies.

250,000 - 499,999 SQUARE FEET 601 Tower

Minnetonka, Minn. Managed by: CB Richard Ellis Owned by: TIAA-CREF 601 Tower, a 15-story Class A+ high-rise, is a landmark that can be seen for miles in the Minneapolis metropolitan area. Community involvement is important to the management team and the tenants, and, to date, they have donated more than 10,000 pounds of food to Second Harvest Heartland Food Shelf. Building management carefully tracks energy use and has received an ENERGY STAR® rating of 90. 601 Tower implemented a food recycling program, which reduced its trash load by approximately 10 percent.

September/October 2009  BOMA  31


Sector watch

Thehardest hardest hit markets far The hit markets thus far thus in 2009 Continued pain from occupancy losses Continued pain from occupancy losses

Industrial Snapshot

The nation’s two largest industrial markets account for more than one-third of YTD negative net absorption

32  BOMA  September/October 2009

Northern New Jersey Rents down -4.9% from a year ago -4.0MM SF YTD net absorption Vacancy: 7.9%

Chicago Rents down -5.4% from a year ago -16.0MM SF YTD net absorption Vacancy: 9.4%

By Laura Horsley MUCH OF THE FOCUS OF THE CREDIT CRISIS and ensuing recession has been concentrated on the collapse of the residential real estate market, the deterioration of retail and rising vacancy rates in commercial office space. Although the industrial market may appear to be holding its own somewhat compared to other areas, recent declines in global GDP and trade, along with continued job losses, are definitely being felt in warehouses across the nation. CB Richard Ellis (CBRE) reports national net absorption of -80,296 million square feet (msf) for the first quarter 2009 (1Q09), a steady decline from a year ago when absorption was just entering negative territory at -28,117 msf and well off the 2006 numbers when absorption was well-established in positive territory at nearly 65

in 2009

Philadelphia Rents up 0.5% from a year ago -3.5MM SF YTD net absorption Vacancy: 10.6%

Denver Southern California Rents down -7.3% from a year ago -13.8MM SF YTD net absorption Vacancy: 6.7%

Rents down -3.5% from a year ago -0.4MM SF YTD net absorption Vacancy: 7.7%

Phoenix Rents down -8.4% from a year ago -3.1MM SF YTD net absorption Vacancy: 15.8%

Dallas/Fort Worth

Atlanta

Rents down -2.4% from a year ago -1.2MM SF YTD net absorption Vacancy: 12.0%

Rents down -3.8% from a year ago -2.4MM SF YTD net absorption Vacancy: 12.7%

Houston Rents up 5.4% from a year ago 0.4MM SF YTD net absorption Vacancy: 6.6%

Source: Jones Lang LaSalle

msf. CBRE also reports that the national availability rate has risen in the past year, with 2Q09 at 13 percent—an increase from 10.4-percent availability in 2Q08. The California ports are among the regions hardest hit. According to Louis Tomaselli, executive vice president with Voit Real Estate Services, the ports of Long Beach and Los Angeles (which handle approximately 40 percent of trade for

Orlando Rents down -10.1% from a year ago -2.8MM SF YTD net absorption Vacancy: 12.3% * Marketed rents

the country) are 40- to 50-percent off of the highs from 2006, which has a direct impact on warehouses in that region. “It’s pretty scary that the ports are down 40 percent and aren’t due to recover for possibly three or four years,” says Tomaselli. “The question becomes: ‘How are we going to fill the vacant space?’ ” Available industrial space in Orange County Continued on page 34


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sector watch is at roughly 11 percent, a 58-percent increase from last year. The pain, however, does not reside on the West Coast alone. Jones Lang LaSalle (JLL) reports that rents are down in several markets across the country, including Atlanta, Orlando, Phoenix and New Jersey (see illustration, page 32).

Panama Canal Effect

It may take more than a recovery to put the wind back in the sails of the West Coast ports. Many firms are expanding or positioning their services in Gulf Coast and East Coast port areas to be ready for the predicted influx of supply once the widening of the Panama Canal is complete in 2014 (which will mean that ships bearing up to 10,000 containers will be able to pass through, opening up the eastern U.S. to more trade from Asia and South America). Jones Lang LaSalle is expanding its services into the industrial market to leverage its platform across a spectrum of real estate beyond office. Greg Grainger, a managing director at JLL

overseeing national industrial management services, is eyeing markets all along the East Coast and Gulf Coast—New Jersey, Philadelphia, Atlanta, Miami, Houston—as the 2014 Panama Canal timeframe draws closer. “One of the biggest beneficiaries to the canal expansion will be the Texas Gulf Coast, where there is a lot of port expansion. This should correlate with an economic recovery across the global real estate market.”

Ripe for Rail?

One company that isn’t letting the recession deter development plans is CenterPoint Properties. The Chicagobased industrial development and management company recently broke ground on a $2 billion intermodal center in Joliet, Ill. The project is expected to generate more than 14,000 jobs and, when combined with its sister intermodal center in Elwood, Ill., will create the nation’s largest inland port with more than 6,000 acres and multiple 1,000-acre Class 1 railroad intermodals, as well as 30 million square feet of industrial facilities.

  

34  BOMA  September/October 2009

“It will be the greenest, most modern intermodal in the country, designed to eventually handle 3.5 million containers per year,” says CenterPoint’s CEO Mike Mullen. The Joliet intermodal is scheduled to open in Fall 2010. Mullen and his team strongly believe the future of industrial business is going to be proximity to rail hubs as transportation costs are much greater than rent. “We’re not building new highways and the highways we do have are congested with trucks,” he explains. “It’s much greener and more efficient with rail. With one gallon of fuel, you can move 1,000 pounds of freight 429 miles by train; you get less than 100 miles by truck.” Government stimulus funding for infrastructure projects could also nourish the green shoots industrial is looking for as those projects (roads, bridges, rail) tend to require warehouse products. And, although there is debate as to whether the stimulus is shovel ready or shovel broken, intermodal and other industrial projects could certainly benefit when the “digging” begins.


An Energy Audit Of Your Building Will Outline Savings Options

A brief from NECA’s Electrical Design Library Issue 4, 2009

E

Even in our current economic situation, energy forecasters are confident that electricity demand will, over time, continue to grow. That’s just one reason renewable energy sources are such a popular news topic today. As you may have read recently, solar photovoltaic panels and wind turbines are valuable new technologies for generating electricity without adding toxic emissions to the environment. However, improving energy efficiency offers an even greater energy resource, at a much lower per-kilowatt (kW) cost. In other words, it’s a bargain. In the words of Stephen Chu, the Nobel-prize-winning Secretary of Energy: “Energy efficiency is not just low-hanging fruit; it is fruit that is lying on the ground. And energy efficiency means money back in your pocket because you pay less on your energy bills.”

Audits involve measurement! For owners of existing buildings, improved efficiency also means lower overhead expenses. Resulting savings increase available capital for more productive uses, including funding installation of solar or wind – which could further reduce your energy costs.

Keep reading or download this FREE report at www.ElectricalDesignLibrary.com Brought to you by the

National Electrical Contractors Association A NECA Contractor is your single source for all electrical and integrated building systems—a local professional who understands what your facility needs and provides innovative solutions based on the latest technologies. A NECA Contractor delivers results you can rely on.


trends tracker

Intelligent Lighting Trends Finding the Crossroads of Energy Efficiency and Functionality By Cheryl English and Karyn Gayle LIGHTING SOLUTION DECISIONS have become even more critical in recent years as more and more buildings undergo energyefficient renovations and green certifications. New technologies and intelligent lighting approaches promise both energy savings and increased functionality for building occupants and owners.

Solid State Lighting and LEDs The emergence of solid state, semiconductor-based lightemitting diodes (LEDs) shows all the signs of changing the way people light their spaces. Over the last several years, white highbrightness LEDs have realized exponential growth in useful life and light output, making it possible to develop lighting fixtures that consume one-third of the energy of an incandescent version, with 10 to 20 times the life. At present, the cost of LEDs is higher than traditional sources; however, consumers can sometimes offset the higher initial costs through energy and maintenance savings in certain applications. Looking towards the future, the price/performance gap is closing rapidly as LED technology continues to advance.

RT5TM Volumetric Recessed Luminaires from Lithonia Lighting shine down on the offices of CHG Healthcare in Salt Lake City.

Office Lighting Renovations There are several hundreds of millions of office lighting fixtures installed in the United States, most of which are 10 to 25 years old. Nearly all are extremely costly to operate when compared to newer, more energy-efficient alternatives. In the past, lighting renovation decisions required a tradeoff between energy reduction and aesthetic enhancements. This is no longer the case. New retrofit lighting and control solutions address both requirements and are more cost effective than ever.

Warehouse Renovations Traditional technologies, such as linear fluorescent and highintensity discharge (HID) lamps, have also benefitted from a focus on greater energy management. For indoor applications, fluorescent and newer HID technologies are still among the most efficient sources around, and integrating lighting controls (such Continued on page 38

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trends tracker as occupancy sensors) can generate even more energy savings. For example, a large national electronics retail chain recently replaced its outdated HID high bay lighting in hundreds of its stores with energy-efficient, dimming-enabled, electronic HID luminaires. The result was a savings in excess of 25 percent of their lighting load. Similarly, a large distribution center in the southeastern United States reported a 43-percent reduction in its energy usage after replacing metal halide HID fixtures with a fluorescent lighting system utilizing occupancy sensors.

Lighting Controls for Interiors and Exteriors The simplest form of lighting controls is the act of manually turning lights on and off. Automating this process, however, can yield significant energy savings, and some degree of lighting automation is now required for new construction in most states. Modern systems offer features—occupancy sensing, timebased scheduling, daylight harvesting and dimming control—for almost any lamp type, although special dimmable ballasts are usually required. Interior lighting controls solutions range from simple wallswitch replacement occupancy sensors to advanced and highly customizable systems with graphical computer interfaces. Selecting the best system depends on the goals of the building owner or operator. Depending on the equipment installed and application, lighting energy savings of 20 to 50 percent can be realized over manual control. Many lighting controls systems have also become easier to commission and operate, adding intelligence to lighting fixtures and controls components to

38  BOMA  September/October 2009

optimize them for energy management. Intelligent plug-andplay lighting systems are flexible and automate many setup, calibration and programming tasks that must be performed manually on other systems. Changes to the use of a building no longer require reprogramming or re-commissioning of the control system, a welcome departure for most users. Some new approaches to outdoor lighting controls include the use of wireless controls devices that not only adjust light levels, but also include feedback mechanisms to report diagnostic information and energy use for each fixture. Through the use of software, a facility manager is now able to instantly assess the on/off status and working condition of all of the lights in a parking garage from a laptop located anywhere in the world. Wireless outdoor monitoring systems eliminate visual patrolling and repeat maintenance trips for crews, resulting in improved efficiencies and reduced operating costs. With new technologies and financial incentives for energyefficient lighting, the time has never been better to renovate your building’s lighting.

About the Authors: Cheryl English (Cheryl.English@AcuityBrands.com) is vice president of market & industry development for Acuity Brands Lighting. She is responsible for energy and environmental activities, marketing and education. Karyn Gayle (Karyn.Gayle@AcuityBrands.com) is director of business development for Acuity Brands Lighting and specializes in strategic partnerships and other corporate development initiatives. Look for it—View an Acuity Brands Lighting case study in the resources section at www.boma.org. Click on “Articles and Tools.”


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Green Scene

Suppliers Spotlight Sustainable Solutions at The Office Building Show ECO-FRIENDLY PRODUCTS STOLE THE SHOW at BOMA’s The Office Building Show this past June in Philadelphia, where top industry suppliers showcased the latest green solutions and services. Over the past few years, sustainability has gone from an emerging trend to a critical element in operational excellence in commercial buildings. As building managers strive to compete in a down market, they are increasingly partnering with vendors who help them harness the power of “green.” Here are just a few of the sustainable solutions that were on display at The Office Building Show …

Going Green, from the Roof Down IB Roofing Systems, an industry leader in roofing, featured its line of sustainable roofing solutions at the tradeshow. Operating by a set of principles based on environmental stewardship, IB Roof Systems has developed high-performance PVC membrane roofing products that are at the forefront of sustainable roofing technologies. Its roofing product design maximizes long-term reflectivity and a special top finish keeps roofs cleaner longer to increase their reflective properties, thereby cooling the roof, reducing energy consumption and diminishing the urban “heat island effect.” IB Roof Systems also briefed attendees on how its products could optimize the performance of other green applications. The company partnered with experts in the solar energy field to develop a membrane proven to support

40  BOMA  September/October 2009

solar panels for the long term, ensuring that the cost savings of solar systems are not offset by early roof replacement. It has also ensured that its products are durable enough to support the conditions of a “green” roof or a rooftop garden. IB Roof’s membranes are impenetrable to strong root systems, resistant to acidic soil conditions and offer proven leak-free performance for at least 30 years. Learn more at www.ibroof systems.com.

Taking Benchmarking to a Higher Level Experts at the Nalco booth spoke to attendees about how their Nalco 360 Service™ water system monitoring program saves money and makes buildings more efficient. With the Nalco 360 Service program, a team of professionals vigilantly monitors a building’s water system 24 hours a day, seven days a week. In addition to checking for problems and responding within minutes to system alarms and emergencies, Nalco’s team conducts comprehensive assessments to ensure that water systems are operated in accordance with industry best practices. Based on those observations, Nalco then makes recommendations for operational improvements, saving water, energy and money. Nalco also demonstrated the advanced reporting tools they use to communicate water system performance trends to building managers. The sophisticated system provides users with direct,

on-demand access to system information and allows users to create customized reports based on a variety of data specifications. Monthly reports include trend graphs for key parameters, icons to facilitate instant interpretation of results and a summary of actions taken by Nalco experts to optimize efficiency. Learn more at www.nalco.com.

Sustainable Hygiene Solutions High-quality, low environmental impact was the mantra at Kimberly-Clark Professional’s booth, where attendees got a handson look at the company’s sustainable hygiene solutions. With a focus on recycled content and reduced packaging, Kimberly-Clark displayed a variety of tissue, towel and skincare products ideal for property professionals interested in enhancing their building’s sustainability quotient. In addition to the environmental benefits, many of the products last longer than standard hygiene products. Among the solutions on display was the Scott brand 100-percent recycled fiber line of paper products, which recently earned the Green Seal™ Certification. Perfect for use in buildings seeking green certification, the Scott brand 100-percent recycled fiber offerings include three kinds of paper towels and two types of bathroom tissue. Kimberly-Clark also featured its Kleenex Naturals facial tissues, made with a blend of virgin fiber and 20-percent post-consumer recycled fiber. The new blend is soft and durable, and also exceeds the U. S. Environmental Protection Agency’s (EPA’s) minimum standards for post-consumer fiber content in facial tissue. Learn more at www. kimberly-clark.com.


Photo Credit: Long Beach Area Convention & Visitors Bureau

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Research corner

Despite Credit Crisis, Office Building Owners and Managers Report Modest Income Gains Online EER Rolls Out with Easy Access to More Data By Noel Popwell 30

Figure 1 • 2007-2008* Income Comparisons

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Net Operating Income

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Although 2008 saw deterioration in real estate performance due to the crisis in the financial markets and the ongoing recession, office building owners and managers in the EER survey sample reported modest gains in their revenue streams (see Figure 1). Comparing the same properties year to year, office income (7.0 percent), total income (5.4 percent) and rental income (4.2 percent) all increased in 2008 compared to 2007. Retail income, however, fell from $23.39 per square foot (psf ) to $20.45 psf—a 12.6-percent drop—reflecting lower consumer demand brought on by the economic downtown. In 2008, net operating income (NOI) increased from $13.57 psf to $14.21 (4.72 percent). It should be noted that not all properties that report expenses also report income; therefore, data for NOI should be interpreted accordingly.

* 2007 dollar values are equal to 2008 dollar values because of a reported 0.0 percent net change in the CPI-U for all of 2008.

2008

Figure 2 • 2007-2008* Expense Comparisons

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Reflecting financial constraints, office building expenses were relatively low in 2008 compared to 2007 (see Figure 2). Total operating expenses increased modestly, from $7.51 in 2007 to $7.99 psf in 2008 (6.4 percent). The highest increases were in roads/grounds (23.5 percent); administration (10.5 percent); security (8.3 percent); and cleaning (7.0 percent). Of note, utility expenses decreased marginally, dropping from $2.31 psf in 2007 to $2.28 in 2008 (1.3 percent). This decline may reflect the fall in energy prices in the second half of the year, as well as energy conservation efforts by commercial property managers. Fixed expenses, including items such as real estate taxes, personal property taxes and building insurance, increased from $3.96 psf to $4.14 psf (4.5 percent).

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2008 Private Sector Expense Ratios (All Buildings) Security 6% Roads/ Grounds 2%

Administrative 11% Fixed Expenses 34% Utilities 21%

Repairs/ Maintenance 15%

42  BOMA  September/October 2009

Cleaning 12%

Private-Sector Office Building Total Expense Ratios For all U.S. private-sector buildings, fixed expenses, most notably real estate taxes, have consistently been the largest component of expenditures for commercial office real estate (34 percent in 2008). Utilities, which are almost all energy costs, are the second largest component of total expenses (21 percent). EER data for 2008 indicates that commercial property owners and managers managed to report modest gains while keeping operating costs under control. But the economic outlook remains uncertain for 2009 and 2010. Commercial real estate tends to lag other industries during times of recession, meaning the industry is impacted by the recession later and recovers later.

Access the EER by following the steps outlined on page 43.


Easy Access to the Online EER The new online EER, brought to you by BOMA International and Kingsley Associates, allows you to access 15 million data points in 40 seconds or less, and it has never been easier. Simply follow this two-step process: First, set up a subscription: • Go to www.bomaeer.com. • Create an account by entering your login ID and password (new users will need to create an account). • Click on “Order 2009 Data” at the top of the screen. • Select “I would like to purchase subscription service for myself” and click “Continue.” If you are purchasing multiple subscriptions, select additional users now and add their names and e-mail addresses.

About the EER

• Make your market selections. • Proceed to “Review Order” and “Payment Info.” • Enter your payment information. • Receive your confirmation e-mail. Second, run the reports for the market(s) selected: • Click on “2009 EER Reports,” which should now appear at the top of the screen. • Make parameter selections and run reports.

This year, the EER survey was conducted entirely online by BOMA International and Kingsley Associates. The 2009 BOMA Experience Exchange Report contains operating income, expense and other data for nearly 4,500 office buildings. Data for a total of 110 markets across the United States and Canada are included.

Remember: Buying the EER is more affordable, flexible and easier than ever. Customize and buy your subscription based on your and your entire staff’s needs— all in one easy transaction. Visit www.bomaeer.com to get started. Ask about group and company-wide subscriptions—call (202) 326-6314 or (202) 326-6346. RS09078 BOMA Print Ads

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September/October 2009  BOMA  43


Eye on Education

Financing Structures, Operating Trends and Healthcare Reform Top MOB Topics By Laura Horsley NEARLY 450 HEALTHCARE REAL ESTATE PROFESSIONALS (hospital executives, healthcare owners and managers, lenders, investors, developers) attended BOMA’s annual Medical Office Buildings and Healthcare Facilities (MOB) Conference in Philadelphia, June 25 and 26. Thought leaders from healthcare real estate companies and hospital systems addressed key issues before the industry, such as the financial wherewithal of health systems, whether the “recession-proof” label many have given healthcare real estate is valid, “clinic” models for ambulatory care, emerging hospital-employed physician models, CMS reimbursements and the effects of potential healthcare reform.

CFO Perspective The MOB Conference kicked off with a topic on everyone’s mind—the bottom line—during “Gauging the Health of Healthcare Systems: A CFO Roundtable.” Financial executives Chick Boyle, Universal Health and Universal Health Realty Income Trust; Robert H. Lux, Temple University Health System; and James Foley, Shore Memorial Hospital, discussed operating trends, access to capital and monetization. Lux focused on issues in the urban market in his system’s Philadelphia region, including physician shortages and flat or declining revenue, noting that there continues to be a shift to outpatient services to offset costs. “You have to be laser focused on cost and productivity,” stressed Lux.

44  BOMA  September/October 2009

At Shore Memorial Hospital in Southeast New Jersey, an acceleration in unemployment due to a decrease in the casino employment base has had a significant impact on the hospital, according to Foley, where cost of care is “at or more than revenue” and more and more uninsured people are using the ER as their primary care. Foley also noted that there is pressure on the expense side as hospitals lose endowments and that there are more pension expenses due to stock market declines. Boyle explained that insurance companies are looking at declining enrollment with the economy as a plaguing factor. On the flip side, he noted that the poor economy has at least helped control costs, with more stabilization as nurses come back into the workforce.

Deal Diagnosis This year’s MOB Conference featured a two-pronged look at deals in healthcare real estate, with back-to-back sessions focusing on deals from the equity and lenders’ angles. During “Deal Diagnosis: Equity Perspective,” a panel of leading healthcare real estate executives discussed equity strategies for MOB deals and whether the market is prime now for deals or if the “wait and see” attitude is still en vogue. PJ Camp, with Shattuck

Hammond Partners, provided some optimism, remarking, “The markets caught us all off guard, but we have reasonable parties to discuss strategies going forward. We are seeing markets loosen up and deals happening.” Clint Hinds, with Kennedy Associates Real Estate Counsel, LP, added that MOBs are more accepted today as an asset class as transaction volumes are up for this sector. “The appetite is there. The key is pricing. Investors are looking for doubledigit returns.” “Deal Diagnosis: The Lenders’ Perspective” looked at risks and opportunities that banks and lenders see as the lending market begins to loosen. “There are people lending,” said panelist Timothy J. Cobb, with Heavenrich and Company, Inc. “The true gems are the smaller regional and local banks,” he noted, adding that today most banks are looking for a significant banking relationship of five to 10 percent of the loan amount. Jack Dudick, with Lillibridge, stressed the importance of knowing what the “hot buttons are” and that being proactive is essential to getting deals done. Said Dudick, “There is a market out there; it just takes understanding.” The panelists did emphasize that there are still potential non-starters. For instance, if the guarantee isn’t there with a substantial percentage down, loans will be tougher to acquire; also, many lenders are skeptical about off-campus locations.

Economic Emergency During the Keynote Luncheon sponsored by GE Healthcare Financial Services, renowned Wharton School of Business Economist Dr. Peter Linneman told attendees that healthcare was the only sector of the economy, besides the government, not shrinking. Speaking to the collapse of the financial markets and the ensuing recession, Dr. Linneman stated that the collapse came about because the United States “threw out the economic rules.” He predicted a weak recovery for the remainder of 2009 if we can find stability, but also stressed that we are all living through an unprecedented monetary policy experiment that will probably result in inflation. On a somewhat positive note, Dr. Linneman anticipated that the “stimulus effect of spending the trillions of dollars waiting on the sideline could be stunning.”


R

HCRE Trends Back by popular demand, healthcare real estate executives gathered for “Vital Signs: Trends in Healthcare Roundtable” for a discussion of several key topics, touching on everything from mergers and acquisitions (M&A) to information technology to the outlook for the financial markets. David Whelan, with Stroudwater Associates, noted that there is a significant increase in M&A activities as well as regional and statewide consolidation: “Drivers of consolidation include access to capital; systems tend to have more access to capital than hospitals.” IT discussions focused on the integration challenges of converting medical records from hard copy to electronic, a priority for the Obama Administration and many hospital systems. Warren L. Lyons, with Temple University Health System, said some physicians are saying that electronic records are sometimes less useful because it changes workflow, adding that the “cost for installation can escalate quickly and surpass budget projections” but that eventually it will be a competitive advantage. Hospital financing was a hot topic throughout the MOB Conference. During the “Vital Signs Roundtable,” participants agreed that, although access to capital has been difficult, the market is restoring that access, that the focus on credit ratings is paramount, that there is much more appreciation today for risk and details and that the fixed rate will continue to modestly improve. Andrew Majka, with Kaufman, Hall & Associates, noted that, despite positive signs, there are still big wild cards to be concerned about, including the possible effect of healthcare reform on investment.

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More MOB Conference Insight

For even more news and trends from the 2009 MOB Conference, visit www.boma. org. And, mark your calendars for the 2010 MOB Conference, May 5-7, in Chicago. Continued on page 46

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September/October 2009  BOMA  45


Eye on Education ADVERTISING INDEX Company

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Education and Events Calendar Foundations of Real Estate Management courses are being offered by BOMA local associations throughout the country, from Orange County to Washington, D.C. Please view the education calendar at www.boma. org for more information or contact Emily Naden at enaden@boma.org. September 16: The Road to Renewals: Keeping Tenants Happy in a Depressed Economy, Webinar, 2:00pm ET October 7-9: IFMA World Work-

place, Orange County Convention Center, Orlando, Fla., www.world workplace.org October 14: No Mention of Money:

Understanding the Economic Impact of “Nonfinancial” Lease Clauses, Webinar, 2:00pm ET November 11: BEEP Course 2: How

to Benchmark Energy Performance, Webinar, 2:00pm ET December 2: BEEP Course 3: Energy-Efficient Audit Concepts and Economic Benefits, Webinar, 2:00pm ET February 1-4, 2010: Winter Business Meeting and National Issues Conference, Hyatt Regency Capitol Hill, Washington, D.C. May 5-7, 2010: Medical Office Buildings and Healthcare Facilities Conference, Hyatt Regency, Chicago, Ill. June 27-29, 2010: BOMA Inter-

national Conference and The Every Building Show, Long Beach Convention and Entertainment Center, Los Angeles County, Calif.

For detailed information on BOMA educational offerings, contact Emily Naden at enaden@boma.org or visit www.boma.org/ TrainingAndEducation

46  BOMA  September/October 2009


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48  BOMA  September/October 2009

The BOMA Magazine  

September/October 2009