COVER STORY, AUGUST 2006

DEVELOP A PROPER APPROACH
Avoid the development blues; consult your property manager.
Lynda Clarke

Clarke

1) Does the site plan really address all critical operational functions? A property manager will analyze the site plans from a different viewpoint. Part of the evaluation will include issues such as ingress/egress, traffic flow through the parking lot, location of visitor and accessible parking in relationship to building entrances, turning radius concerns that may result in damaged curbs, dark areas in parking lots, grade concerns that may create trip hazards, and more. If the development is an industrial project, carefully reviewing the truck turning and parking layout is critical. Reviewing the interaction of trucks with passenger cars — and pedestrians — is also crucial.

Another vital factor in a parking lot layout is service areas such as the trash enclosure location and layout, as well as access into the trash enclosure for both the trash hauler and the janitorial or retail staff. Although trash enclosures are typically required under the design review process, projects have been developed that do not contain a trash enclosure area, creating an obvious management and nuisance concern. As recycling and sustainability issues become more pervasive, ensuring the trash enclosure area is large enough to hold multiple trash bins for different types of products is also important. Better yet, having a recycling area designed for each floor of a building, or within each tenant’s suite, should be considered.

Many jurisdictions now require an appropriate number of bicycle racks or storage units. A property manager can work with your architect to research the different options to meet the bicycle parking ratio. Another area of great importance — particularly with the increased security concerns about identity theft — is where tenant mailboxes are located. Tenants are now demanding locked, heavy-duty mailboxes that are located in well-lit areas. A property manager can help identify the best location for the boxes, and can work with the local postal carrier to ensure a reasonable location is selected. Good quality, secured mailboxes will cost more than a standard bank of mailboxes, but the initial up-front investment will pay off in reduced operating expenses down the road.

If there is a parking structure associated with the development, or even just a surface parking lot, another must is ensuring adequate lighting. Your property manager can work with the project architect to confirm that the specified lighting fixtures are placed in areas that are the most meaningful to adequately light walkways after dark.

2) Are your proposed operating expenses realistic? Your property manager can provide comparable operating expense data to you and can obtain preliminary bids for ongoing maintenance of the development early on. Property mangers can coordinate with landscaping vendors, HVAC maintenance vendors, parking lot sweepers, window cleaners and janitorial vendors before the project’s groundbreaking. Evaluating the finish materials for ongoing maintenance procedures is also important in understanding ongoing operating expenses. A property manager will be able to help evaluate ongoing costs such as marble flooring protection, cleaning/sealing exterior brick, epoxy injection in parking garage slabs, or maintenance of a bio-swale/detention pond. These potentially hidden costs could impact the return on the development.

During the lease-up phase of a development project, leasing agents need to know and understand the effects of operating expense projections. Whether the leases are anticipated to be triple-net or full-service, the leasing agents and prospective tenants will want a solid comfort level that the anticipated operating expenses are accurate or have been adjusted to represent a fully stabilized asset.

3) How are you going to commission the development after it is complete? If a property manager has been involved in the development meetings along the way, he or she will know when to bring in vendors to start setting up contracts. Initial bids can be obtained off the development drawings. However, materials and planting locations can sometimes be changed or altered during the construction process; so, it’s a good idea to obtain updated pricing a few months before the development project is completed. Construction delays can also cause pricing to increase as well.

4) How sensible are the lighting locations and in-building services for ease of maintenance? There are many office buildings or other projects that have light fixtures located in areas that are extremely difficult to reach for replacing light bulbs or for general cleaning purposes.

Some office buildings have been constructed without having a location for janitorial closets, slop sinks or an area for general building supplies. While it’s true that it adds to the construction costs to build out a janitorial closet on every floor, the ongoing additional operational expenses may outweigh the short-term expense. If a janitorial crew has to haul its cleaning supplies from one central room to multiple floors in a building or if it can’t get to water on every floor, the bid to maintain the building will reflect the additional labor costs.

5) How are you managing the tenant improvement process? Allowing a property manager to be involved in coordinating all of the individual construction projects is critical to securing a smooth transition from development to stabilization. If future tenants have a well-organized process during their construction build-out, they will start out their tenancy with a good feeling about their new space. The property manager is integral to successfully managing ongoing tenant-improvement projects that may occur after the first few tenants move in and occupy the newly developed building. Those first few tenants will need to endure the noise, smells and potential disruption being generated by the next wave of new tenants. The property manager will be able to coordinate the communication, construction schedules and impacts on the current and future occupants of the building.

These are just a few of the ways a property manager can add value to the overall success of a development. Involving a property manager in the development process from the ground up will help any developer catch problems that may not be considered in the plans. A property manager can create value for a developer on both the short-term process of evaluating the underwriting assumptions in the overall construction cost budget, as well as evaluating and forecasting realistic, long-term, stabilized operating expenses and leasing, and capital expenditure assumptions for a developer. The end result will be a more profitable development, satisfied tenants and a real estate development that has a positive impact on the overall environment.

Lynda Clarke is a senior vice president for NAI Norris, Beggs & Simpson in Portland, Oregon.

©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.