Dallas Office Summit < Continued from Page 26
have resulted in cautious lenders; LTVs have dropped to 50-55% maximum debt available; non-recourse is the norm with these levels of equity; lower debt has resulted in fewer foreclosures of office buildings as owners are better able to ride out market shocks; lenders favor existing relationships and it is harder now for new developers to get a project up and started, raising equity and finding debt • Most attractive markets for office are now Uptown and suburban enclaves like Allen, Plano, McKinney, Frisco—all northern suburbs; young single workers are drawn to Uptown • Large existing master developments are moving forward, but new developments are largely on hold, except if self-sponsored by well-heeled developers; in this climate, some large, older buildings are being repurposed, but this is very expensive because these buildings need to be finished out to compete with brand new buildings; 100% spec new buildings are not happening right now; pre-leasing is fixed a requirement to get a new office development out of the ground • Most tenants and landlords and developers are avoiding making longterm decisions based on current market conditions, which are in such flux; smaller tenants with up to 20,000 occupied SF are itching to go back into the office, while larger employers are more hesitant for legal liability reasons • It is hard for developers to make money on small one-story or two-story buildings so there are fewer of them • As existing space is absorbed, the pressure will mount to bring new space out of the ground • Even with COVID-19 threats diminishing, there may be a slight trend to making all new buildings “healthier and more germ free,” just as LEED standards have been increasingly adopted by developers; one day there may be “COVID-certified” buildings • COVID-19 will remain in the back of peoples’ minds with respect to offices and public transit, just as 9/11 did in terms of personal security in public places; because of COVID-19, we can expect increasing high-tech in office buildings—restrooms, elevators, etc. • So far COVID-19 language is not being added to leases, and insurance claims and payments because of COVID-19 are still fuzzy in the law, since many regard COVID-19 affliction in the “force majeure” category • Timely construction and renovation have been interrupted on occasion by crews getting sick, making it more difficult for landlords and owners to make firm predictions on occupancy of space How COVID Has Impacted Tenant Improvements Moderator: Todd
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Phillips, RE Journals. Panelists: Cherrie Wysong, Gensler; Rachel Rouse, HOK. • Interiors and their design are at the forefront of today’s discussions; there has been a radical adaptation in the last twelve months from 100% working in office to almost 100% working now from home in some companies; what the new norm will be remains to be seen, so tenants building out space now are leaving their options open with regard to mix of private versus open workspace layouts • Work-from-home will remain on some basis, but in-person client meetings are crucial, especially if your firm finds out your competitors are starting to do it; traditionally interiors professionals need to display proposed interior finish materials to their clients for their approval and this is challenging to do online • In addition, interior designers must also go in person to construction sites to supervise some installations—doing this by facetime is not convenient • The “year of COVID-19” has brought some “super-cool” tech tools to the forefront, however, and some of these may remain in use as COVID-19 restrictions fall away • Firms have found that using tech has been cost-effective in many instances, such as replacing expensive travel to the client’s town, with associated air and hotel costs • Connecting personally with clients and assessing their needs and the kind of space that will work for them personally is one of the big challenges for the interior designer, and this is a bit more difficult if the client is six feet away and wearing a mask, or if the only contact is online; matching the client with the interior product that is right for him is the ultimate goal of all successful interior professionals • Companies will have to adapt to and respect what will be a wide range of health beliefs going forward in the real world; companies and the workspaces they create will have to take this wide range into account, respecting the individual’s health and safety fears • Current thinking is to provide non-dedicated desks to employees whose work is mainly digital, and who wish to continue to spend significant hours continuing to work from home; if work-from-home subsides, these desks and work areas can easily be converted to dedicated desks for the employees • A year from now there is likely to be big relaxation on current spacing “requirements;” plastic panels and six-foot distance markers on floors will go away, but people who have become used to the COVID-19 protocols may continue to remain a little distant from coworkers • We are headed into a vibrant new era, and business will be fun again
