Bob Schneiderman said that with the coronavirus looming over U.S. commercial property, he can’t remember a time in his more than 30 years as a real estate broker that some tenants have felt less secure in their offices. Now landlords are responding.
Commercial property owners across the nation are hiring for positions such as “experience ambassadors,” hygienists and even an on-staff medical doctor to help make returning to the coronavirus-era workplace feel as safe and seamless as possible for companies.
“I think these things will help and they might make a difference for some tenants,” Schneiderman, executive managing director for office services with brokerage Colliers International in Boca Raton, Florida, said in an interview. “But are they going to stick and hold, or are they a bit of window dressing that people could potentially forget about? The buzz word right now among tenants is 'anxiety.' There’s so much uncertainty.”
The pandemic has created a whole new category of jobs for the commercial real estate industry in an effort to reduce the risk that the disease will force them to close their buildings again to millions of office workers around the country. Office landlord Onyx Equities has hired workers to monitor office lobbies and elevators, with rules aimed at preventing the spread of the coronavirus. Landlord Crocker Partners hired an on-staff medical doctor with a background in infectious diseases to oversee its office reopening program. CBRE Group, the world’s largest real estate services company, is recruiting managers and technicians with expertise in industrial hygiene and hazardous materials handling.
The efforts, which can cost tens of thousands of dollars in each building, come as landlords work to keep their spaces filled. Owners are watching closely for the effect on demand as companies that rent their office space report success in adapting to a work-from-home environment during the pandemic, with some tenants saying they may let workers remain at home indefinitely or permanently.
Landlords are noting that some companies are looking to cut costs, and leasing has slowed since the pandemic began disrupting businesses in March, causing the U.S. office vacancy rate to surpass 10% for the first time since 2017, according to CoStar’s latest national office report. The national office vacancy rate is expected to peak at above 11% next year as the downturn drags on, but that’s well below the more than 13% vacancy after the Great Recession. And the report estimates that tenants may need to keep their same office footprint even if some staff works from home because physical-distancing requirements could remain in place.
Onyx, based in Woodbridge, New Jersey, said it wants to make its tenants’ transition to a coronavirus-changed world as seamless as possible, and the firm’s property management executives have found that crowded elevators raise some of the biggest health and safety concerns about the spread of the virus. So, the company decided to post “experience ambassadors” in the lobbies of its office properties in New York and New Jersey to encourage safe social distancing, including making sure that only two people at a time ride an elevator car, Kristen Pappas, Onyx senior vice president of property management, told CoStar.
The company hired four new workers as experience ambassadors to monitor new equipment, such as thermal scanners to take employee temperatures and touchless entry for doors and elevators, and reallocated several security staff members to fill the role across its portfolio, which includes New Jersey buildings in Newark and Paramus, as well as in Jericho, New York, Pappas said.
“We wanted it to be this 1920s, almost concierge type of individual who in a delicate way enforces the two-person-per-car elevator limits, enforces the social distancing, queues people through the thermal cameras we have here in Newark … [who] sort of eases people back into the new operational changes they haven't seen before,” Pappas said.
Crocker Partners, Florida’s largest office landlord, took perhaps the most dramatic step in the industry to help ensure the perception of health in its buildings. Crocker, based in Boca Raton, Florida, in July hired Walter Okoroanyanwu, a physician with a degree in public health administration, as the company’s newly created position of director of environmental health.
Okoroanyanwu’s mission is to improve the indoor health and environment at Crocker’s 22 offices across Florida and near Atlanta. Crocker Managing Partner Angelo Bianco told CoStar that Crocker is the first office landlord in the country to hire a medical doctor.
The effort may pay off for some. Potential tenants in the COVID-19 era have started vetting landlords by asking about their building’s sanitation and safety precautions as well as the monthly asking rent, making the health protocols an important issue for owners to address, Bianco and Schneiderman agreed.
“A healthier environment creates less absenteeism, higher employee morale and lower turnover, and the cost of turnover dwarfs the cost of occupancy for tenants,” Bianco said. “We hope to create environments where companies will actually be saving money because of the difference in employee retention and attracting new talent and personnel.”
Schneiderman said he recently represented a tenant in the lease of a full floor that requested a recommendation for a janitorial company to supplement the landlord’s routine cleaning measures.
But despite all the cost and precautions, risks still exist and the restrictions present their own challenges.
Bianco said roughly 20% to 30% of Crocker’s 11 million square feet of office space is occupied in Florida and Georgia, which have both experienced a recent spike in COVID-19 cases. Most of the company’s tenants, including Crocker’s own corporate staff, aren’t expected to return to their offices until the number of cases declines for a sustained two-week period under guidelines established by Okoroanyanwu.
The behavior of tenants and office visitors toward social distancing is likely to range across the spectrum from very cautious and mindful to very reckless, he said.
“Even if I create the healthiest environment, if the guy sitting next to you in the office is going to bars every night, it won’t matter,” Bianco said. “There’s nothing I can do or anyone can do about that. But we’re doing the best we can, and our tenants know that.”
Changing Industrial Hygienists Role
Industrial hygienists in commercial buildings have typically been contacted infrequently by landlords to test the heating, ventilation and air-conditioning systems, or to act as a referee in battles between office workers over the thermostat.
Now, they are helping owners confront the very real threat of a potentially deadly and financially crippling reemergence of a virus, for which there is not yet a vaccine or accurate way of detecting it in the air or on surfaces, according to Tom Burgess, an industrial hygienist for T&M Associates, a Middletown, New Jersey-based environmental, engineering and construction consulting company.
Burgess and other industrial hygienists are working with landlords to set up and enforce social-distancing and sanitation programs as they install technology to prevent human virus vectors from making people and buildings sick, Burgess said.
“In the past, the hazard was something already in the building, like mold or poor ventilation,” said Burgess, whose company works with commercial landlords and property management companies. “Now, people are the source of the building hazard. And they may bring it with them every time they come to work."
Developing trust between property staff and tenants that a building is healthy and safe is the basic covenant that may make or break the commercial property industry, Burgess said.
“This is the only time in my career where anyone has cared that I’ve had classes in epidemiology,” he said. “One of my concerns for building managers is that concerns will get magnified because of fear, dread or perception. Air quality and filtration are kind of mysterious. People are worried about invisible things that can hurt them.
“A germ-coated door handle isn’t mysterious and it doesn’t generate fear, but it should,” Burgess said.
Tangram Interior of Santa Fe Springs, California, has shifted from interior painting and flooring work for tenants and landlords to more technical services such as cleaning crews clad with personal protective equipment and versed in building sanitation, said David Teper, the company’s general manager of construction solutions and flooring.
The company, which works with high-rise office buildings, hotels and medical facilities, recently started a new workplace sanitization program in response to requests from clients, Teper said.
“Instead of doing carpet and paint refreshes, we’re putting together workplace solutions that will help businesses structure their offices to allow more social distancing and reduce cross-contamination of surfaces,” Teper said.
Brokerages, REITs Staff Up to Battle Virus
For years, the largest commercial real estate services firms that manage buildings and other facilities for owners have hired concierge and workplace staff for such tasks as booking conference rooms, helping tenants gauge their office space requirements and overseeing initiatives from fitness activities to bring-your-pet-to-work programs.
CBRE, based in Los Angeles, is now looking for job candidates with licenses in industrial hygiene, occupational safety and hazardous materials handling for such positions as health, safety and environmental managers and technicians. Duties include giving health and safety training, monitoring for potentially ill workers and reporting “findings, concerns and deficiencies” to building management, according to CBRE’s recent job listings.
Building health, hygiene and other reopening issues have been among the hottest topics on recent corporate conference calls. Executives for publicly traded real estate investment trusts and other companies that typically focus on quarterly financial performance are now addressing such questions as how many people at a time can safely ride an elevator.
“There will be a potential advantage for shorter buildings versus taller buildings, just because of travel times and elevators, the whole social-distancing thing,” said John Kilroy, CEO of real estate investment trust Kilroy Realty, during a recent company earnings call.
“Buildings that have greater separation, which is higher ceilings, greater ventilation systems, wider stairwells, added elevator capacity, in most cases are going to perform much better if they’re in the right location compared to older buildings,” Kilroy said.
Executives for Kilroy, one of the largest office landlords in Los Angeles and on the West Coast, said the company recently recruited a hygienist and formed a 12-member task force to prioritize office health. Kilroy is approaching building wellness in much the same way that the company became an industry leader more than a decade ago in prioritizing energy efficiency and environmental sustainability, John Kilroy said.
Brent Smith, CEO of Piedmont Office Realty Trust, said the office REIT has “tripled down on sanitation, hygiene and housekeeping.”
“Our people are striving to make our building safe and helping our tenants communicate to their employees to ensure they're doing everything they can to social distance, to remain 6 feet apart throughout the building's lobbies, elevators and other common areas as well as their offices to prevent the spread of infection," Smith said in a recent earnings call.
Onyx’s Pappas said the new systems and personnel are not just about employee wellness and getting in and out of the building without catching the virus.
The company’s ambassadors are part of a collection of policies and procedures put in place, working with Hillmann Consulting, to prepare its properties for the return of tenants. Perhaps the most dramatic was the installation of thermal cameras at the three office towers at Gateway Center in downtown Newark that Onyx acquired in December 2018 for $325 million.
The scanners measure an individual’s temperature from 6 feet away, rather than taking the “invasive” approach of holding a thermometer to everyone’s forehead, Pappas said. Onyx is spending between $50,000 and $70,000 for each building to make all the coronavirus-related adjustments, including signs, hand-sanitizer stations and new equipment, she said.
“It’s about the whole experience. It’s about you being a tenant in these high-rise buildings or even a low-rise building and coming in for the first day of work and being like, ‘Now what? How am I going to be safe? How do I know that someone from the third floor is going to wear his mask?'" Pappas said. "How do I know that six people aren’t going to jump on the elevator? We wanted our tenants to know we have control of the experience.”
