Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/732258
38 • October 2016 • Western Real Estate Business www.REBusinessOnline.com OPPORTUNITY LIES IN RECOVERY IN PHOENIX'S OFFICE MARKET By David Krumwiede, Executive Vice President, Lincoln Property Company There may be no other time in history when so many im- portant responsibili- ties have converged onto the shoulders of the commercial real estate property manager. This was emphasized during the recession, when tighter budgets had many property managers acting as the sole guardian of a property's op- erational and financial well-being. While budgets have improved along with the economy, the expanded role of the property manager remains. This is particularly true in Phoe- nix, where owners and investors are enjoying a recovered office market, and many are actively preparing their buildings to exceed expectations for the remainder of the cycle. In this post-recovery environment, property managers offer a critical advantage, embedding themselves in a team that might include an owner, asset man- ager, architect, contractor and leas- ing broker. In this role, they provide unique market insight that helps their team capitalize on strong market fun- damentals and make strategic deci- sions about repositioning a building. Although the Phoenix office market is fully recovered, we were also one of the most impacted by the recession. Because of this, we still have time in the cycle for owners, investors and property managers to make the most of their value-add assets. Since core buyers want turnkey assets, reno- vations are now designed to meet institutional quality standards and provide a stabilized financial model showing strong occupancy, at-market rents and staggered lease expirations. Lincoln Property's primary focus is on repositioning through renovations, rebranding and rent rolls. Although these factors are always somewhat custom to the personal- ity of a submarket, common ground exists. A smart renovation needs to address a range of items that may include comprehensive lobby, corri- dor and restroom upgrades, exterior paint, new signage, enhanced land- scaping and streetscapes, new com- mon area furniture, and the creation or enhancement of modern tenant gathering areas. It also often includes the repair or replacement of critical building systems (HVAC, electrical, etc.) and the creation of spec suites, a major advantage that allows building teams to sign tenants who need ready- set-go space. In each of these cases, the prop- erty manager is essential. Using their strong relationships with tenants, they serve as a main point of contact during construction events, advise on new amenities and provide clari- fication during lease renegotiations, when rents may increase or terms may change based on building and market improvements. This role be- comes even more important in our now-recovered market, when value- add buildings are being actively re- positioned to meet the needs of the modern user and the modern buyer, and building strong momentum for the remainder of this cycle. UNTRADITIONAL CREATIVE OFFICE AMENITIES ATTRACT TRADITIONAL OFFICE TENANTS By Tim Lee, Vice President of Corporate Development and Legal Affairs, Olive Hill Group Nowhere are we seeing greater opportunities for transformation and value creation when it comes to commer- cial real estate than in the office sector. Fueled by the grow- ing demand for cre- ative workspaces, the office sector con- tinues to make strong gains as owners redevelop and reconfigure traditional office buildings into dynamic and col- laborative work environments. While it's no secret that creative office spaces generally cater to users in the tech, media and entertainment industries, demand for these types of workplaces is transitioning into other industries as well. This is attracting a host of corporate tenants seeking flexibility, community-oriented floor plans for team building, and environ- ments that foster creativity and inno- vation. Today's business owners under- stand the value Millennials place on a company's work culture and en- vironment, and are seeking creative amenities that cultivate a work/play lifestyle. These additional amenities significantly aid in recruiting this Mil- lennial demographic. They also drive employee retention, which, in turn, bolsters the stability of an asset's ten- ant base and delivers long-term value for property owners. Based on Olive Hill Group's expe- rience acquiring and repositioning value-add office properties through- out the Greater Los Angeles region, here are several "untraditional" cre- ative office amenities that are quickly gaining traction among "traditional" office tenants. UNDER MANAGEMENT Property managers have become more vital than ever, thanks to the stiff competition among the West's in-demand tech crowd. Below, two experts outline the trends occurring in their markets, and how to upstage the competition. Lee Krumwiede Biltmore Commerce Center enjoys a prime location in the Camelback Corridor. It was purchased by LPC and Oaktree Capital Management in 2015. Located in downtown Phoenix, Luhrs City Center is a two-tower mixed-use property listed on the Phoenix Historic Property Register. The "historically modern" building includes renovated interiors and is being further enhanced with new streetscapes and street- level amenities, including renovated restaurant and retail space. LPC and Oaktree Capital Management owned and repositioned Camelback Square in Old Town Scottsdale between 2011 and 2015. The full rebranding included a name change, new logo and property upgrades that expanded the asset's position in the marketplace. Gainey Center in Scottsdale is a Class A executive office project now undergoing a full renovation that includes lobby, corridor and restroom spaces, landscaping, signage and spec suites to meet the needs of the high net-worth communities of the market. Renovations are underway at Promenade Corporate Center in the North Scottsdale/ Kierland submarket. These include a full lobby renovation, exterior paint and tenant common area spaces.