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How Retail Leases Will Change In A Post-COVID World

In the post-COVID world, retail leases will need to change and adapt. Several provisions will need to be changed and added to account for the possibility of a pandemic and the mandated shuttering of businesses. This includes adjustments to force majeure and insurance provisions as well as use of common areas, common area caps, alterations, and rules and regulations, all of which should be adjusted to reflect the new market.

“These modifications will likely put landlords in a better position to respond and react to the new normal that will exist until a vaccine is developed and widely distributed,” Dan Villalpando, a partner at Cox, Castle & Nicholson, tells GlobeSt.com.

In regards to the common areas, most leases are currently too broad to account for usage and social distancing. This is one of the first areas that will need to be addressed in leases.

“Landlords should make sure that the language in the Control of Common Area provision found in most leases is broad enough for landlords to respond and adapt to pandemics and similar emergencies, such as by installing items to improve health and safety conditions and making other, perhaps currently unforeseeable, changes to the common area to comply with recommendations or requirements of the Center for Disease Control and Prevention, World Health Organization, or state or local authorities,” says Villalpando.

In some instances, common areas may need to be converted into dining and retail spaces to accommodate social distancing guidelines, and landlords will need to comply.

“As a result of physical distancing and store-capacity requirements, tenants may need the right to use portions of the common area (like sidewalks) for customers to form lines outside the stores,” says Villalpando. “A landlord should not decline a request by a tenant to use the common area for queuing. Nevertheless, a landlord can condition such use upon tenant fulfilling certain prerequisites, such as giving the landlord prior written notice of such intent and the expected duration, peak times, and specific area the tenant wants to use. Additionally, landlords may want to specifically require that the tenant cleans up the area used for queuing on a daily basis.”

In addition, these changes to common areas do not apply to increase caps, according to Villalpando.

“In leases where a landlord provides a tenant with a cap on increases in common area costs, such cap does not typically apply to uncontrollable costs,” he says. “Following COVID-19, landlords should consider expanding the list of “uncontrollable” costs. For example, costs associated with a pandemic and the related health or safety measures the landlord takes, for example the installation of hand sanitizing stations, upgrades to automatic doors, use of more personnel to administer cleaning and to make sure guests comply with social distancing requirements, should be deemed uncontrollable and not be subject to any cap.”

In addition, landlords should also take the into account the cost structure, particularly during a pandemic.

“If it turns out that the “base year” for setting the “floor” for common area costs occurs during a year when the common areas are used less because of a pandemic or related outbreak, the landlord should consider including a “gross up” concept to bring the “floor” up to a number that is more reflective of what common area costs would have been but for the pandemic,” says Villalpando.

Villalpando also suggests that landlords can modify the cap during the lowest period.

“Another alternative would be to modify the cumulative versus non-cumulative nature of the cap for any period during which common area costs are artificially low,” he says. “Basically, with a cumulative cap, when the common area costs for a particular year exceed the cap, the landlord can apply any unused portions of the cap from previous years to make up the difference.”

 

Source:  GlobeSt.

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Will The Pandemic Kill Demand For Micro Units?

For the past five-plus years, micro-units have been an intriguing subplot in the grand saga of commercial real estate. As demand for housing has boomed, especially in rent-burdened cities like New York and San Francisco, developers gambled that tenants would tolerate tiny units — some as small as 220 SF — for the chance to access cool neighborhoods at affordable rents. Now, though, some real estate experts wonder whether the coronavirus will kill, or at least cripple, the concept.

“Prior to COVID, there was a big surge in the urban areas, urban core, everyone wanting to live in micro-units, and now it looks like everyone wants to move to the suburbs, buy homes, get out of apartments,” FM Capital Principal Aaron Kurlansky said during a Bisnow South Florida webinar last month.

Social distancing is the antithesis of the tight-knit living style that micro-units and their cousin, co-living, promote. With bars and restaurants shuttered and remote work gaining more acceptance, renters may see fewer reasons to remain in city centers, where most micro-unit properties are.

Integra Investments principal Victor Ballestas said his company was considering developing micro-unit projects in the Wynwood and North Beach areas of Miami.

“You sort of have to go towards the micro-market in order to make the numbers work, because the overall rent was pretty high,” he said. But in the wake of the coronavirus, “those are the ones that we’ve probably pulled back the quickest.”

“We always had a little heartburn over the micro-unit model,” he continued. “And then [we] started hearing through the grapevine also that people that are moving into micro-units are, you know, moving out after the year. It’s pretty much like 100% turnover rate, which obviously impacts performance significantly.”

That prompted him to focus on multifamily deals on larger parcels instead, he said. Allen Morris Co. CEO Allen Morris, who also spoke on the webinar, said he shared Ballestas’ concerns.

“People do sometimes tend to move out after a year. They say, ‘Great, look how much money I’m saving!’ and then they say, ‘I can’t stand it! Get me out!’ So, it becomes like student housing — they all move out at the end of the year.”

Kurlansky said the small apartment complexes his company owns in South Beach and Miami Beach have underperformed compared to the larger units farther from downtown in his portfolio, which he attributed to unit size.

“People are in, then they’re out,” he said. “As we’ve played in the student housing space, as someone from my office told me, it’s like convincing your wife every year that she loves you. You go from 100 to zero to back to 100, so it’s an exhaustive process, and, you know, micro-units, it seems to me, are going to follow that kind of trend where you’re just kind of [going to] be in constant lease-up.”

 

Source:  Bisnow

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Survey: Patients Strongly Prefer Off-Campus Healthcare Experiences

In an effort to uncover critical insights into patient behavior and serve as thought leaders within the healthcare real estate industry, Physicians Realty Trust (the “Company”) commissioned an independent survey in five of the Company’s largest markets to better understand consumer perceptions of healthcare facility safety within the context of the COVID-19 pandemic.

CVR and Carmichael & Company, healthcare consultants based in Indianapolis, conducted the panel-based survey for the Company, surveying the AtlantaDallasLouisvilleMinneapolis, and Phoenix markets. A total of 2,018 respondents were surveyed, resulting in an average margin of error of 2.19% across the five markets.

Strong Consumer Preference for Off-Campus Medical Facilities

The research revealed that when seeking medical treatment, the overwhelming majority of respondents prefer to receive care in an off-campus medical facility located a mile or more from a hospital campus. Based on survey results, this trend is likely to continue for the foreseeable future due to COVID-19, especially given concerns regarding a possible resurgence of the virus later this year.

“The findings affirm our long-term observations in consumer attitudes and validate the Company’s continued investment strategy targeting off-campus medical office buildings,” said John T. Thomas, President and CEO of Physicians Realty Trust. “As thought leaders in the healthcare industry, we commissioned this research to advance our understanding of COVID-19’s impact on our business, as well as provide insight and guidance to our healthcare partners.”

In the report, respondents also provided insights on enhanced safety and hygiene protocols, spokesperson preferences for COVID-19 communication, and other shifting perceptions of healthcare highlighted by the pandemic.

“For many years, consumers and physicians have been seeking services at locations convenient to them and their homes, often away from hospital campuses,” Thomas added. “This study verifies that especially in light of COVID-19 safety and cleanliness concerns, consumers strongly prefer medical office facilities located away from the hospital campus.”

The Company is sharing these findings with its healthcare partners and stakeholders to increase awareness and better understand healthcare consumers’ decisions.

To access the report, go to www.docreit.com/research.

 

Source: PRNewswire

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Multifamily Remains Strong Amid Health And Economic Uncertainty

As cities and businesses begin to reopen following weeks or months of stay-at-home orders, many sectors of the economy face the reality of a downturn. Amid that climate of uncertainty, multifamily remains strong as an investment opportunity.

Backed By History

Multifamily real estate has a long history of weathering economic storms. Last year, CBRE analyzed the effects of the past two recessions on the commercial real estate market and found that “multifamily outperformed office and industrial in the 2001 recession and all major property sectors (office, industrial, retail) during the 2008-2009 recession. Multifamily generally had lower total rent decline and more rapid post-recession rent recovery.”

Following the 2001 recession, multifamily recovered more quickly than other CRE categories and reached a much higher rent growth (10%) beyond its historical peak than either industrial or retail (4.3% and 5.7%, respectively).

The 2008-2009 recession sparked a steep decline in homeownership and demand for single-family homes, which has bolstered the multifamily market for the past decade. That demand has not shown signs of slowing in recent months.

The market has been predicting a downturn for the past several quarters. Although few could have expected a pandemic as the cause, industry experts have been ready for the shift from growth to maintenance for some time. The sector’s strong history of withstanding recessions gives those of us in multifamily confidence that we will bounce back and fare well in spite of challenges. In fact, my firm wrote about the subject in a 2019 newsletter, highlighting some fundamentals that contribute to multifamily success in all economic climates, including location, value-add investments and underwriting.

Effects Of The Pandemic To Date

While the market can expect a dip in occupancy following the pandemic, experts anticipate that it will be short-lived. Multifamily fundamentals will contribute to its ability to react to short-term fluctuations and long-term recovery. Covid-19 has had an impact on multifamily, but we can expect that the sector will continue to demonstrate its resilience.

According to one Globe St. writer, “Demographic trends favor continued multifamily demand. In addition, many businesses are now operating remotely so flexible shelter or renting versus owning remains desirable. And, graduating students with high debt will most likely choose to rent because securing a mortgage remains challenging.”

Recent reporting shows that renters in Class A and B properties have, in large part, kept up with their rent payments through the months of stay-at-home orders, in part because many residents in luxury to midtier apartments have a greater ability to continue their work remotely from home because many of these renters work in information- or technology-centric fields. Apartment communities located near strong professional business centers will continue to attract renters.

In our experience, professionally managed properties also have a greater ability to flex and meet the needs of those remote workers with high-quality technology investments, as well as creative solutions to in-unit and on-site workstations.

In addition, the following will support continued apartment demand:

• Interest rates are at record lows.

• With fewer people able to afford homeownership, tenants who under different circumstances might have become homeowners will remain apartment renters.

• With projected decreases in both homeownership and multifamily apartment deliveries, the current multifamily supply shortfall will increase.

• Resident turnover will lessen as people seek stability.

• Properties that have already deployed technology for marketing, leasing and resident services will be at an advantage in retaining and attracting renters in this environment.

Even as consumer spending tightens and retailers downsize or close entirely during downturns, people continue to need homes. Demand for apartment homes continues throughout all economic cycles. As the economy corrects in 2020, investors should feel a higher level of comfort with their multifamily investment than other investment products.

 

Source:  Forbes

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Pandemic Transportation Changes In Miami Could Become Permanent

Miami-Dade’s transportation picture has been in flux since the onset of the coronavirus pandemic, and many changes – including new safety strictures, increased telecommuting and a rise in non-motorized mobility – could prove permanent, experts say.

“This is a lifetime event that’s really going to change a lot of things, including transportation, how people work and where,” said Javier Betancourt, executive director of the Citizens’ Independent Transportation Trust. “And if anyone tells you they know for sure what’s going to happen, they’re lying to you.”

That’s not to say there aren’t indicators of where things are going. Following a nationwide shutdown to stem the spread of the virus, once-bustling workplaces have been replaced – either temporarily or permanently – by home offices connected digitally through email and apps like Zoom and Slack.

Working remotely, or telecommuting, has increased in recent years, but Covid-19 accelerated what would have been a much slower evolution. Only 7% of US workers telecommuted at least once weekly prior to the pandemic, according to the Pew Research Center. Once the virus hit, the figure shot up to 50%, an analysis by research group Brookings Institute found.

If a significant portion of people continue to work from home, Mr. Betancourt said, Miami-Dade’s transportation decision-makers must take a hard look at whether some transit and roadway expansion projects should proceed as previously planned.

“All these capacity-building projects need to be examined in light of reduced demand,” he said.

A directive to launch the first such examination here is incoming, said Aileen Bouclé, executive director of the county Transportation Planning Organization (TPO).

On June 18, the TPO Governing Board, comprised of every county commissioner, elected representatives from nine cities and a school board member, will consider an item from Dennis Moss and Rebeca Sosa that, if approved, will order a study of how telecommuting could reduce congestion across Greater Miami.

“They’ve made a very next-step request for us to start seeing what that looks like and if we can adopt any guiding principles or policies to help even out the demand on our infrastructure over a long period of time – where we can reduce the peak demand and congestion and have a better overall picture of a congestion-reduction strategy,” she said.

Another potential change that comes as a result of fewer cars on the road is fewer cars in driveways and garages, said Transit Alliance Miami Executive Director Azhar Chougle, whose nonprofit advocacy group has spearheaded the Better Bus Project to redraw Miami-Dade’s Metrobus route network.

Because driving to and from work is often the primary utility of a personal vehicle, he said, it becomes an unnecessary expense once that need is no longer there.

“Most cars are idle for more than 90% of the day,” he said. “Miamians who are used to just driving, even for the smallest possible trips, when you take the work trip out of the equation, there are interesting possibilities.”

One possibility already gaining traction is broader bicycle use across the county. But the shift from cars to bicycles and e-scooters isn’t as simple as swapping one mode for another. While some small pockets of the county have proper accommodations for so-called micro-mobility modes – bike paths, widened sidewalks and programs with bike- and scooter-share companies like Citi Bike and Jump – most of Miami-Dade is still inhospitable to non-motorized travel.

Before the pandemic, those deficiencies and others across Miami-Dade – including many parts of the county’s unincorporated area, where sidewalks on major roads are frequently nonexistent – were largely the concern of habitual bicyclists and residents who didn’t own cars.

Now, with half of the county’s workforce homebound, the absence of a safe, comprehensive route network for pedestrian and two-wheeled travel is glaring, Mr. Chougle said.

“Everyone has realized biking infrastructure here is terrible,” he said. “What we’ve discovered is just outright, major government failure.”

That failure, he said, is most pronounced in Miami and Miami Beach, the subjects of Transit Alliance’s most recent study, “Build it – Bike it,” which shows both cities have sorely undelivered on promises to create safe, usable, interconnected bike paths.

Miami Beach, which in 2015 adopted a comprehensive bike master plan, has to date built just 0.1 miles of protected bike lanes and has 3 miles of shared paths still under construction. Transit Alliance recommends 6.8 miles of protected lanes and 3.7 miles of shared paths.

Miami, which in 2009 adopted a similar plan, still has miles of its core network incomplete, with missing links between key arterial roadways across the city and no protected bike lane across the Venetian Causeway.

“Whoever is in charge of this network in the City of Miami, and whoever was responsible for the 2020 objectives in Miami Beach and them not having been completed, should be fired,” Mr. Chougle said. “It’s at the point where, can our decision-makers hold anyone responsible for these major failures, or are they just going to be looking at the same map 10 years from now?”

The good news, Mr. Betancourt said, is that the countywide pause everyone is experiencing provides a rare chance to rethink and refocus priorities and, compared to other infrastructure projects in the developmental pipeline, bike-specific enhancements are much cheaper.

“Transit and roadway expansions are investments that take billions of dollars to see through and decades to come to fruition,” he said. “Telecommuting and first-last-mile connectivity is low- to no-cost and can be done in short order. And people have now gotten used to it. There’s really a potential to continue that and build it up.”

Critical roadway and transit improvement projects will still come, including transit upgrades to six key commuting corridors outlined in the countywide Smart Plan. But questions of future capacity and ridership have made many local transportation experts rethink advocating for more expensive modes.

Talks on the subject among county, state and federal transportation officials are ongoing, according to Ms. Bouclé, who said a federally required transit ridership study planned for the fall will further help to inform the TPO of what demand will be for different transit modes.

“From where I’m standing today, the range of that demand is really something we have to focus on,” she said. “It’s a fair statement that our pre-Covid forecast may be quite different moving forward.”

Even if ridership never returns to levels prior to the pandemic, Miami-Dade will still need a transit system to serve a core ridership dependent on its services. In mid-April, roughly a month into pandemic-related closures, ridership on Metrobus, Metrorail and Metromover fell 80% below normal.

As of last week, according to figures provided by the county Department of Transportation and Public Works, ridership across the three modes combined, at 110,000 between June 8 and 12, is about 47% of what it was the same time last year.

Director Alice Bravo said her department is bringing on additional vehicles to accommodate the ridership increase while still providing enough space to minimize the spread of Covid-19.

“In terms of trains, when our numbers really fell off, we went to nine trains per hour but have now increased that to 14 and can increase it to 19 trains as demand grows,” she said. “In terms of buses, we’re going to bring some through vendors … for the I-95 express service and other vehicles to intersperse between ours on routes where ridership is increasing and they’re needed for social distancing.”

Many of the protective measures put in place – from disinfecting transit vehicles multiple times daily and nightly, maintaining hand sanitizers in all vehicles and at train stations, social distancing at county facilities, and installing vinyl curtains and polycarbonate doors to isolate bus drivers and their ventilation systems from riders – will likely continue “for a long time,” she said.

Ms. Bravo’s department is also experimenting with one possible solution to low ridership on some Metrobus routes: Go Nightly, a partnership with Uber and Lyft in which the companies provide rides in lieu of buses that before ran on eight nighttime routes.

Rather than take buses, transit users are instead asked to follow instructions posted at bus stops along the routes to use a smartphone app or call a number to get a voucher-paid ride along the routes and within a quarter-mile radius of the corridor.

“This is maybe something we can explore to provide some type of transit connectivity in areas where density is too low to provide bus routes,” she said.

As for other answers, Mr. Chougle said, the county may do well to examine how other large metropolitan areas proceed in improving transit in the wake of the coronavirus.

Miami-Dade has “responded really well” to the pandemic, he said. The question for every leader here is whether the county will emerge with a stronger or weaker transportation and transit system than before.

“Right now,” he said, “it’s not clear how that will go.”

 

Source:  Miami Today

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COVID-19 Will Accelerate Property Repurposing

In many ways, COVID-19 is accelerating transitions that had already been occurring in the commercial real estate world.

“People think we should open up the economy sooner,” says Newmeyer Dillion partner Mike Krueger. “But I don’t think anybody’s saying that this isn’t going away anytime soon.”

Ultimately, Krueger predicts that COVID-19 will force “some very creative repurposing of properties.”

“We’re going to see very creative developers come in and repurpose those properties for their next use,” Krueger says. “At this stage, we don’t even know what the best use of some properties will be.”

Krueger says that is already happening in malls. In some places, they’re being repurposed by medical organizations.

“You may have a J.C. Penney’s in a huge building that could be perfect for an oncology department or maybe perfect for outpatient medical treatment,” Krueger says. “The rest of the stores might still be vacant, but that one building is great for that a medical use.”

Malls may have other advantages for conversion to other uses. For instance, a large mall will be ADA compliant.

“It’s going to have elevators and escalators,” Krueger says “Maybe an abandoned mall is a perfect opportunity to put a nursing home or some assisted living facility because you already have all these access points.”

Malls, which are also near public transit and bus lines, would also provide plenty of space to create completely independent units that are not on central air, if ventilation is a concern, according to Krueger.

“I think we’re still waiting on a lot of guidance,” Krueger says. “The insurance companies are really going to be the ones that are going to dictate this.”

But malls are just one example of how COVID-19 could change spaces.

“We are now looking at a complete revolution in what retail and commercial spaces are going to look like, especially in the restaurant industry,” Krueger says. “Depending on where you are, you’re going to have different counties with different restrictions. At least in the Bay area, we know that the post-COVID-19 restaurant experience is not going to be the same as pre-COVID-19, namely and the occupancy space.”

Offices are another place ripe for change. While teleworking had been growing steadily as a trend for a while, Newmeyer Dillion partner Mike Krueger thinks the news that Twitter is allowing its employees to work remotely indefinitely will spark discussions at a lot of large firms in The Bay Area.

“For large tech companies that are renting out giant spaces in downtown San Francisco or anywhere in the Bay area, anywhere where commercial real estate is very expensive,” Krueger says. “Now, all of a sudden, you see some of the most visible tech companies out there saying, ‘We don’t even need our commercial space.’ I think you’re going to see a significant change around what that space is going to be useful and how that space is being used.”

 

Source: GlobeSt.

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More Tech Firms Eye Miami As COVID Carries On

In late February — before Covid-19 became a pandemic — Spotify inked a lease for 20,000 square feet to house its South Florida headquarters in Miami’s Wynwood neighborhood.

The music streaming service’s deal for all of the office space and large courtyard at the mixed-use development Oasis at Wynwood on North Miami Avenue was another sign of momentum for TAMI (technology, advertising, media and information) companies taking office space in South Florida.

But then coronavirus hit, prompting nearly half of the American workforce to set up shop in their homes and leading Twitter and Facebook to announce work-from-home policies that could lead to a potential void in the office markets in New York City and Silicon Valley.

South Florida, however, could benefit from the pandemic.

As residential brokers in the area report an uptick in sales and rentals largely fueled by homeowners fleeing dense markets like New York, office brokers say they’re starting to see a similar trend play out among tech firms.

Cushman & Wakefield’s Brian Gale, who was part of the leasing team that closed the deal with Spotify at 2335 North Miami Avenue, said he’s given five virtual presentations to major tech brands to take large spaces at 830 Brickell — one of South Florida’s largest office projects under construction.

OKO Group and Cain International are building the 57-story tower, which the developers say will be anchored by WeWork, with an expected delivery date of 2022. The property will have 490,000 square feet of office space, and will mark the first major office building to rise in Miami’s urban core in the last decade.

Facebook, Apple, Google, Uber and Chewy are among the many companies that already have a presence. Tech firms take up nearly 3 million square feet in South Florida. Broward has the largest share, with nearly 1.7 million square feet, compared to about 765,000 square feet in Miami-Dade and just under half a million square feet in Palm Beach County, according to CoStar data provided by CBRE.

As with most office landlords and leasing agents in other cities, South Florida’s office brokers aren’t convinced that working from home will become a long-term result of the pandemic. Companies that were looking to take advantage of the tax benefits, weather and more favorable housing costs are still planning moves to Florida, according to local real estate players.

“Companies like Twitter put their foot in their mouth too early. I believe that it’s really hard for people long term to work from home,” said Daniel de la Vega, whose firm One Commercial is marketing Creative HQ, an office condo in downtown Miami.

“Only the really wealthy ones would move in the past, the Barry Sternlichts of the world,” he added. “But now people our age want to get out of the major cities and they want to come to Miami and Fort Lauderdale.”

Ripe for the picking

Commercial brokers are negotiating a number of “blend and extends” where the landlord offers some free rent or concessions in exchange for longer leases. And for new leases, prospective tenants with the budget to do so are more concerned with building measures and office floor plans that follow the latest public health guidelines.

“Unless a landlord has got a lot of capital saved, it’s an ideal time for tenants to restructure leases. We’re going to see the markets change in favor of tenants.”

Keith Edelman, Colliers International

Carpe Real Estate Partners’ Erik Rutter, one of the developers behind the Oasis at Wynwood, said larger spaces and the ability to be outside will prevail, he argued.

“There will still be a demand for office space. The growth of Miami will continue, if not be propelled by, this pandemic,” Rutter said.

While some brokers believe there will be hesitation about returning to a high-rise office building versus a suburban, low-rise corporate campus, Gale said he’s negotiating nearly 200,000 square feet of proposals at 830 Brickell. Those conversations include one with a major tech tenant that is “very serious” about opening an office in Miami, he noted,

“People now are looking at new buildings as having better air quality, giving tenants the ability to really plan out how they’re going to look post-Covid,” Gale said, adding that many “are concerned with mass transportation and being on top of people” in New York City.

Local entrepreneur Brian Breslin echoed that point.

People who run their own tech startups or work remotely for larger companies are increasingly relocating to South Florida, said Breslin, the founder of Refresh Miami, a nonprofit that focuses on tech networking in the city. He said he believes more companies will follow recent WFH policies put in place by Twitter, Facebook and Shopify.

“Most people don’t have it in their budgets to space out employees six feet apart,” Breslin noted. “It would be unwise for us to think this is a short-term thing. A lot more of the traditional tech companies are rethinking their hiring processes.”

Keith Edelman, executive managing director of Colliers International South Florida, said most long-term deals are on hold as companies evaluate their office setups, which could put pressure on rental rates.

Edelman, who recently returned to his office, had been working remotely for more than two months, speaking with The Real Deal from his car. He said he believes work from home culture could take a toll on camaraderie and collaboration among employees — giving office tenants an incentive to be proactive in their leasing negotiations.

“Landlords are scared,” Edelman said. “Unless a landlord has got a lot of capital saved, it’s an ideal time for tenants to restructure leases. We’re going to see the markets change in favor of tenants.”

More pouring in

The wave of companies moving to South Florida isn’t limited to just tech, industry sources say.

Investment firms, insurance companies, hedge funds and family offices have also been making the move, driven by the lack of a state income tax.

Sandy Rubinstein, CEO of New Jersey-based digital marketing and advertising firm DXagency, bought a two-story office building just north of Wynwood for $2.25 million during the pandemic.

The Miami native plans to make the 2,678-square-foot property at 3634 Northwest Second Avenue the new headquarters for her firm, which counts Mastercard, Univision, NBC, Viacom and Green Valley Organics among its clients.

“A lot of our employees up here have asked if they could transfer,” Rubinstein told TRD in April. “Miami is such a good market for talent so I also want to take advantage of that now.”

 

Source:  The Real Deal

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How COVID-19 Could Inform The Future Of Medical Office Design

Imagine the last time you went to the doctor. You likely rode up an elevator and sat in a lobby or waiting room, elbow-to-elbow with other patients. You probably filled out paperwork, either with a pen and paper or maybe a touch screen device. Unless you were sick, you probably didn’t wear a mask.

The next time you go to the doctor, the experience is likely to be quite different. As a result of COVID-19, how medical office space—and office space in general—is used is going to change.

As physical offices are beginning to reopen and elective procedures are allowed, we are starting to have a better understanding of what a doctor’s visit could look like in the future.The next time you go to the doctor, the experience is likely to be quite different. As a result of COVID-19, how medical office space—and office space in general—is used is going to change.

Instead of waiting in a crowded reception room, patients may be asked to remain in their cars as a means to physically distance until they are called via text or phone by the physician’s office. They may fill out and submit paperwork online leading up to their appointment, a day or two before. And check-in and check-out are also being completed by phone when possible, and perhaps in the exam room itself, when not possible before the visit.

While protocols will vary by building, most of our healthcare physician clients have started screening patients by phone in advance and asking them if they have had a fever, other symptoms, or have tested positive. Temperature checks may occur before a patient is admitted into the space.

The medical office and traditional office will align in several ways going forward.

The number of people allowed in an elevator at any one time will be limited, and buildings will probably need to provide separate ingress and egress, and perhaps create “one-way” traffic through common areas.

Because of the need for physical distancing to prevent infection spread, future office space design may entail larger rooms, hallways, and reception areas.

The need for additional sanitation and other infectious disease precautions may increase janitorial costs, which leads to the question of whether or not these services will be provided as building amenities or paid for by tenants through CAM charges.

Overall, the construction costs for new development and renovation may also increase, especially for mechanical, electrical, and plumbing systems if requirements for more sophisticated HVAC filtration systems emerge. Accordingly, because of the increased operating expense and construction cost, rents may increase, or yields will decrease.

The new normal will dramatically affect both the healthcare and commercial real estate industry. Our best recommendation is to make sure both landlords and tenants read their leases and understand what those documents say.

While they likely won’t include pandemic protocols, other clauses and provisions will likely apply, and resuming “normal business operations” or “patient visits” may require implementing some new protocols that will require that landlord and tenant collaborate to ensure patient, occupant and visitor safety.

Open communication between the parties to discuss what healthcare tenants plan to do to ensure patient safety (as well as that of other tenants) and to understand what measures the landlord is taking to assure occupant safety are vital to both parties and should help to ensure that the patients can receive care safely.

 

Source:  DMagazine

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New Children’s Hospitals In Texas Signal Pickup In U.S. Medical Building Demand

Several new hospitals are in the works for Austin, Texas, as national healthcare construction is expected to reach its highest growth of the past five years, a positive sign for the U.S. economy and real estate industry in the pandemic.

Texas Children’s Hospital is building a $450 million hospital in North Austin in what is planned be its first hospital outside of its hometown of Houston, while Dell Children’s Medical Center of Central Texas has about 34 acres teed up for a $200 million hospital and medical office building in the same area. Both hospitals are planned for Williamson County, where iPhone maker Apple broke ground on a $1 billion campus in November 2019 that has the capacity to house up to 15,000 workers.

The new hospital and expansion projects represent hundreds of millions of dollars in real estate and construction costs and point to expectations that further population gains in the Texas capital and other cities could buoy economic activity during the downturn.

The healthcare industry is in a financial crunch because eliminating elective procedures in most cities and states to help slow the spread of the coronavirus during the height of the pandemic dealt a financial blow to many hospitals, prompting layoffs and furloughs among healthcare workers. However, construction industry analysts said the pandemic could spur a burst in demand for healthcare systems to expand their surge capacities using funds from the federal government’s coronavirus relief package.

After two years of negative or flat growth, Dodge Data & Analytics, a construction data company, is projecting healthcare building starts will rise 6% across the country this year, hitting $29.7 billion in new projects nationwide. Building starts are expected to rise 13% between 2020 and 2021 for a total of $33.6 billion of new projects, the highest growth for new healthcare building starts since 2016.

“Over the short term, there will certainly be financial issues due to the cancellation of elective procedures, particularly in place where COVID hit particularly hard, but at least we did see in terms of the fiscal stimulus $175 billion set aside to shore up finances of hospitals,” said Richard Branch, chief economist at Dodge Data & Analytics, in a May 21 webinar. “We do think that, as the cycle starts to progress this year and beyond, there will be significant investment starting to flow into that surge capacity, particularly on the in-patient side as opposed to the clinic side.”

Much of those investments could come in expanding cities such as Austin, where the metropolitan area was the third-fastest growing in the nation for population in the past decade. Its population grew about 30% from 1.7 million residents in 2010 to 2.3 million residents in 2019, according to Census Bureau data.

Planned Construction

Texas Children’s, based in Houston at 6621 Fannin St,, listed total assets of about $5.4 billion at the end of 2017, including $1.3 billion in buildings and $131 million in land, according to its most recent federal form 990 filed for tax-exempt purposes. The nonprofit health system closed two land deals in December for its first hospitals in Central Texas.

Texas Children’s plans to build a $450 million freestanding children and women’s hospital at the intersection of North Lake Creek Parkway and Texas Tollway 45, east of Lakeline Mall in northeast Austin in Williamson County. The 360,000-square-foot hospital is expected to create 400 jobs.

The 48-bed hospital, which does not yet have a name, is expected to be complete by the fourth quarter of 2023 with 1,200 parking spaces. Texas Children’s bought 24.5 acres for the hospital for an undisclosed price from seller Austin 129 LLC in December, according to Williamson County deed records. There isn’t an official address yet for the hospital, but Williamson County records list the land at 10520 Lakeline Mall Drive with an assessed value of $8 million.

Dell Children’s, which is owned by Ascension and affiliated with the Dell Medical School at the University of Texas at Austin, opened its first and only hospital in 2007 at its Mueller campus in Central Austin. Now it is planning to build its second hospital in North Austin as part of a $192 million project on 34 acres. Plans call for building a 135,000-square-foot children’s hospital at Avery Ranch Boulevard in Williamson County. Construction on the 36-bed hospital is expected to start in February 2021 and be complete by November 2022. Plans also call for a 60,000-square-foot medical office building and parking garage, which could cost at least an estimated $47 million, according to state filings.

The hospitals are near where Apple is transforming former ranch land into a sprawling 133-acre campus that’s expected to be built in four phases, according to permit filings with the city of Austin. The 3 million-square-foot campus at 6900 W. Parmer Land is about 14 miles north of downtown Austin.

Elsewhere in the Austin area, Texas Children’s purchased about 23 acres in South Austin, about 13 miles south of downtown and 3 miles north of Buda off Interstate 35 and Puryear Road near Old San Antonio Road, according to a statement. The hospital system bought the land at the site called the Estencia property for an undisclosed price from SLF II Onion Creek LP in December, according to Travis County records.

Dell Children’s second hospital is expected to open in north Austin in 2022. (Dell Children’s)

The Houston-based healthcare system has urgent-care and specialty-care clinics in Austin, but not any hospitals.

“Our promise to Austin remains strong — to deliver specialized care closer to you through our multiple locations across the city,” said Michelle Riley-Brown, executive vice president at Texas Children’s, in a statement.

Meanwhile, Dell Children’s plans to continue expanding its footprint in Central Texas over the next five years, the healthcare system said. It is expanding its Mueller campus and hospital with a 4-story tower with 72 beds. Three parking garages with 2,600 parking spaces also are planned for the campus. And the healthcare system broke ground in March on a 161,000-square-foot pediatric outpatient facility adjacent to the hospital. Called Children Specialty Pavilion, the outpatient facility is expected to be complete next spring.

“The ongoing challenges related to the COVID-19 pandemic have made it even more evident that we must continue to focus on expanding access to pediatric care so that families in Central Texas never have to leave home to receive exceptional care, especially for the most complex cases,” said Christopher M. Born, president of Dell Children’s Medical Center, in a statement.

For the Record

Texas Children’s hospital in Williamson County does not have a construction start date, but McCarthy Building Cos. is the general contractor and Page is the architect, a hospital spokeswoman said in an email. Public renderings of the hospital are not available.

 

Source: CoStar

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Survey: Healthcare Designers Look To Future Of Medical Facilities In Light Of COVID-19 Pandemic

The American College of Healthcare Architects (ACHA) has released the key findings of a survey of its members revealing their insights on the future of healthcare architecture and the role of design in the context of the COVID-19 healthcare crisis.

“The extensive experience of ACHA’s healthcare architects gives us unique insights into how this pandemic will shape the future of healthcare,” said Vince Avallone, AIA, ACHA, CASp, LEED AP, the ACHA‘s President. “These findings will influence the design of hospitals and healthcare environments for years to come.”

ACHA Coronavirus Survey Reveals Healthcare Designers’ Role In Addressing The Pandemic

The ACHA survey revealed:

  • Over 63% of respondents helped clients evaluate alternative care sites.
  • Over 60% of ACHA experts were called on to help healthcare systems increase capacity – 28% created over 100 beds.
  • Over 70% of respondents believe design for mass casualty patient surges will be an important element for hospitals in the future.
  • Over 80% of respondents thought the telehealth boom would have major impact on facility design.

ACHA surveyed 129 certified professional healthcare designers to reveal lessons learned from COVID-19 and the role of architects in addressing the crisis. Participants represent areas across North America, including many severely affected states such as New York, New Jersey, Illinois, Massachusetts, California, and Pennsylvania.

What Will Happen With Healthcare Facilities After The COVID-19 Pandemic?

The survey also identified the healthcare designers’ concerns about the future:

  • How can hospitals be designed so normal operations (such as elective procedures) can continue through a pandemic so as not to disrupt regular patient treatment and create financial shortfalls for providing institutions?
  • With the likely implementation of restrictions on patient/visitor traffic flow to control cross-contamination, how will this transform facility intake and entry design?
  • How will increased restrictions placed on patient/visitor traffic flow to control cross-contamination transform facility intake and entry design?
  • How can architects emphasize building flexible, adaptable facilities that can be easily modified to allow a quick response to changing medical priorities?
  • How can healthcare and non-healthcare facilities be designed to handle patient overflow in a more expedient fashion?

ACHA Member Represent The The Top U.S. Healthcare Design Firms

“ACHA certificate holders represent a majority of the nation’s top healthcare design firms,” said Avallone, a Vice President/Senior Medical Planner at SmithGroup. “These results show our continuing commitment to help develop solutions for future healthcare design challenges. ”

For the full results of the survey, click here.

 

Source: Building Design+Construction

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