Thought

Crisis Update – “Musings from the Couch”

Quick view from the couch (literally!)…Based on a whole bunch of calls and conversations this week with many people who are a lot smarter than me!

Wow, what a difference three weeks makes.  What the heck happened??!!  Here’s a mixture of what we have learned in the last few weeks…

• Observations:
  • Ask me in an hour! Never seen such a rapidly changing market…although starting to settle a little bit.
  • Predictions? Yea, right.  My opinion…no worthwhile opinions until we can get a remedy to the virus, a vaccine, or a vision of when everyone can leave their home.
  • ONE thing we’ve learned? All companies and institutions who can, NEED to be able to IMMEDIATELY “flip the switch” from “bricks & mortar” operations to online.
  • Trying to do a deal? You like the game of dominos?  Well, then you’ll love this!
    • Deals that survive will need extensions.
    • Need a town approval…not so fast.
    • Need a town permit…not so fast.
    • Need a public hearing…not so fast (and, if online, will it be legal?)
    • Need a mortgage approval…not horrible…but not fast!
    • Designer, architect, etc. needed… not horrible…but not fast!
    • Need an appraisal or inspection…actually, decent turnaround.
  • It’s the law!
    • Time to change antiquated laws that prevent online services.
    • Thought you knew what your lease said…think again!
      • Force Majeure!
  • You’re not covered!
    • Time to change insurance company rules that don’t give coverage for things like online consultation!
    • Business Interruption. Most people have no idea if they are covered.
  • It’s not the building!! Please, tell me why our public institutions (Town Halls, Schools, etc.) are thought of as brick buildings? They are institutions…NOT buildings! Still FAR too many services not available (or allowed) online!
• Retail:
  • Serious stuff! Hardest hit of all sectors…including Hospitality.
  • Real questions…Who makes rent payments in April…who survives…how long will it take the survivor to recover?
    • Looking like landlords are working with tenants for reasonable, short-term solutions. Deferred payments.
  • Then what? If the rent payments aren’t made…what about the landlord’s mortgage?
    • Looking like most lenders are working with their borrowers for solutions.
    • Deferred payments…making it up on the backend.
  • Ouch! Rumors in some markets of 25%-50% survival rates.
• Multi-Family:
  • Keep it going! Construction on new projects still happening. Albeit at a slower pace!
  • Get the three-D Goggles! Virtual tours for prospective tenants.
  • Expecting tenant defaults.
    • Halts on evictions
    • No rent increases for 90 days
    • Payment plans for those who have been laid off.
•  Office:
  • The lights are on…kind of! Most office buildings 100% vacant or greatly reduced due to “stay at home” orders.
  • Hit the remote: Amazing how many companies or functions within companies aren’t (or weren’t) set to operate remotely.
  • Homework!
    • You thought you liked working from home…just how much?
    • You like hanging out with your kids and your spouse…probably not 24/7!!
    • Don’t talk to me! Turns out we DO like human interaction (at least a little bit!)
    • Questions abound re: the future of working from home. The crisis WILL change the office market landscape in the future!  Just not sure for better or worse.
  • Lease transaction volume?
    • Predominately slowed or on hold.
    • Deals with deadlines moving forward but slowly…
    • Lease renewal appears to be moving forward.
• Industrial:
  • Think “toilet paper”! If you didn’t know what supply chain was then…you sure as heck know now!
    • How do we get the parts to make the product?
    • How do we get the product from the plant to the consumer?
    • Kimberly Clark says they have enough toilet paper. Problem is it isn’t on the shelf…Which is all you care about!
    • Supply chain starting to balance.
  • Winners:
    • E-Commerce (good for us)
    • Food products (good for us)
    • Grocery Stores (good for us)
    • Internet Communications (good for us)
  • Losers:
    • Aerospace/Airlines (not good for us)
    • Automotive (not so good for us)
    • Gambling industry (not good for us)
    • Oil & Gas

Hope you’ve enjoyed the update!

Keep smiling (stay positive!)!

Mark

COVID-19 Resource Center

Lots to navigate these days. Lots of facts. Lots of opinion. And lots of stuff that is just plain not true! So I am hesitant to offer COVID-19 advice that strays anywhere outside our wheelhouse. The good news is we do have a resource you can access for how the COVID-19 crisis is affecting commercial real estate. Brokerage, Property Management, Construction Management, Residential Investment, ownership, tenants… it’s all included. We will continue to update you all on a one-off basis, but please use this as a collective resource.

As always, please call any of our real estate professionals if you have any questions we can help you with. These are difficult times for our world… we are here to help.

SIOR COVID-19 Resource Center

Keep smiling (be positive!),

Mark Duclos, SIOR, CRE, FRICS

Coronavirus Tips for Property Owners – Don’t just do nothing!!

Three types of people out there: Those who WATCH things happen.  Those who MAKE things happen.  Those who WONDER WHAT happened!  I don’t know if people are overreacting or underreacting to the Coronavirus challenges but let’s all agree…don’t be the person who watches and certainly don’t be the person who wonders!  If you are a building owner, a landlord or a tenant, you need to Make things happen.

I was a participant in a Connect Media podcast on Tuesday afternoon.  One of nine industry leaders (their words, not mine!) who discussed how building owners can keep their tenants and visitors safe.  Some excellent points that might help you work your way through these trying times. Have a listen (https://www.connect.media/video-news-2/).  I have also summarized some of the highlights of the podcast, in case you don’t have the 37 minutes to listen:

While there are certain nuances to handling different types of properties, here are the overarching themes:

• OVER Communicate with your tenants.  In writing and in person.
  • Tell them you are there for them and that you are monitoring the authority’s recommendations (CDC, WHO etc.).
  • CDC Guidelines: https://www.cdc.gov/coronavirus/2019-ncov/about/prevention.html
  • WHO Guidelines: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/technical-guidance
  • Provide your tenants REAL, timely info from the authorities (helps calm their fears).
  • Let them know who to speak with in the event one of THEIR own employees comes in contact with the virus.
• Plan:
  • Have an incident response plan.  Now, not when it happens!
• Post in your building a list of best practices for healthy living.
  • Wash your hands…often.
  • Remind your tenants to remind their employees to wash their hands!
  • Avoid close contact.
  • Wear a mask if you are sick.  Actually…If you are sick, stay home!
  • Clean and disinfect.
• Increase…
  • The amount of cleaning supplies.
  • The number of sanitizing stations.
  • The amount of times your employees clean the space/property.
  • The surfaces you clean (doorknobs, elevator buttons, handrails etc.)
• Visitors?
  • Vigilantly maintain a visitor’s log.
• Common Areas?
  • Post signs reminding tenants and visitors of the need to clean used surfaces.
  • Trouble maintaining them at the required level?  Possibly close them temporarily.

Hope this helps!

Mark

Debates on the “Average Spec” Continue

Debates continue on the “average spec” for an E-Commerce building.

How deep a building…How wide…How high!

Well, it looks like the last question (height) has a definitive answer!  In 2018 the average height was 33.6 feet! Per JLL, that is an 18.1 percent increase in a year!

Read the full JLL article on this topic: https://www.us.jll.com/en/views/snapshots/industrial-clear-heights-rising-with-e-commerce-gifts

The Value of Relationships in CRE

Going beyond business is what develops lasting relationships in commercial real estate. Our team at Sentry Commercial values the relationships created, and the trust acquired with our clients and partners. We believe that optimal results form from relationships like these – and that it’s true for just about every business.

Curt Gemme, our Director of Business Development, mirrors this to our team and throughout his leadership. “How a client feels about me matters. Good CEOs make more effective decisions based on who they are working with,” Gemme explains.

Patiently getting to know and understand the people that we are working with at a human level is top priority, bottom line. 

In order to facilitate these significant relationships, we build upon the following:

• Creating rapport
• Earning trust
• Putting ego aside
• Having charisma
• Being authentic
• Remaining vulnerable
• Working collaboratively 
• Demonstrating care and support  

Sentry Commercial does business with the people, not the buildings. The recommendations and referrals often derived from previous profound relationships have resulted in great success. Despite that, we are the gatekeepers to the very services and offerings that our clients desire, the relationships created are an integral part of our clients’ and partners’ success stories.

Is It Really the Best Time to Purchase Commercial Real Estate?

According to Forbes’s recent article the “Best Time In A Generation To Purchase Commercial Real Estate,” there are a handful of reasons, regardless of the economic climate, that argues why small business owners should purchase their commercial properties.

At Sentry Commercial, we represent a number of small-midcap companies that are always struggling with this decision, to own or not to own!

This article actually breaks down the reason for owning but then makes the ultimate statement in the final paragraphs…The reality is that market conditions will almost always make it tempting to own your property BUT, as they said, owning is NOT for everyone!

Access to capital, access to debt, flexibility, expansion, liquidity, etc. are all considerations in this undertaking. That said, it’s a good read and small businesses should take into account all variables before making the consideration for purchasing.

Read the full article here! 

As Industrial Booms, Local Brokers Become Global Consultants

This article originally appeared on Bisnow online

By: Benjamin Paltiel

When he first entered the world of industrial brokerages 33 years ago, Mark Duclos, SIOR, CRE’s responsibilities were fairly straightforward.

“A client would just call up and say ‘I need this amount of square footage,’ and you went and found it in your market,” said Duclos, incoming president of SIOR Global and the founder of Sentry Commercial, an independent commercial real estate services company based in New England.

Today, Duclos’ clients expect him to have contacts in dozens of domestic and international markets and to advise them on commercial real estate as it relates to their strategic plans.

As industrial real estate has grown into one of the largest and most exciting asset classes for investors and developers, industrial brokers have begun to take on roles much more akin to consultants. To meet clients’ expectations, brokers now have to immerse themselves in their clients’ business models, provide up-to-the-minute insights and establish a network of brokers in far-flung markets.

For Duclos, the key to developing those insights and contacts has been his membership in SIOR, the Society of Industrial and Office Realtors. Duclos’ participation in SIOR has both afforded him access to a broader network and provided him with opportunities to expand his knowledge of the market.

“People often say they want to join these organizations to make deals, and there certainly are deals to be made, but I joined to establish relationships and get access to markets and education that an independent firm typically might not have,” Duclos said.

That competitive edge has become crucial in today’s cutthroat industrial market. Industrial vacancy is at an all-time low. With costs rising and inventory running out, companies need to make the most of each square foot of warehouse space. The imperative to do more with fewer assets has vaulted the role of the industrial broker from local player to global expert and business consultant.

“Back when I started, an industrial broker in commercial real estate was the low man on the totem pole,” Duclos said. “Now, good industrial brokers are in a class of their own. They’re revered and looked up to.”

That transformation has paralleled changes in the nature of the industrial market. E-commerce and reverse logistics are overhauling how much space companies need and what they use it for, while a push for more inventory is squeezing industrial occupants into buildings that might not be suited for their needs. Keeping abreast of those changes, Duclos said, is a large chunk of the benefits of being part of SIOR.

Duclos currently serves as president-elect of SIOR, in his second year of a four-year leadership commitment for the organization. He will step into the role of president at SIOR’s Fall World Conference, on Oct. 17-19 in Portland, Oregon. The conference will feature panels, classes, outings and, of course, times for members to build the networks they need to thrive in the current business climate.

These conferences have become increasingly important as the world of industrial brokerage continues to shrink. With many independent firms being folded into larger conglomerates, maintaining strong relationships with his peers in SIOR has become the source of much of his new business.

“These aren’t just cocktail parties,” he said. “The information that you gather from the educational sessions and from these one-on-one interactions over the three-day conference really deepens the relationships and paves the way for more business and more deals.”

While SIOR has been the engine behind some of the biggest deals in Duclos’ career, some of the most meaningful deals have been the smallest. He described how one of his close colleagues and friends from SIOR called him up on behalf of a client looking for a mere 2K SF of space in Hartford, Connecticut, Duclos’ home market.

“He explained that this was a very important client,” Duclos said. “As a fellow SIOR, of course I said ‘No problem.’ We closed just a couple of weeks ago.”

When it comes to leading SIOR itself, Duclos’ top priority is attracting the next generation of brokers. He sees great potential from the younger brokerage community, he said, but wants to make sure that they enter the market the right way, by establishing relationships first and seeking out deals second.

“You can’t take shortcuts as an up-and-coming broker,” he said. “You have to think about tomorrow, build your plan and build your network. Surrounding yourself with the right people is the first step.”

This feature was produced in collaboration between Bisnow Branded Content and SIOR. Bisnow news staff was not involved in the production of this content.

Property Owners: Make Sure Your Property Insurance is Cost Effective

Property insurance can appear to be a black hole. As insurance carriers become more discerning, it becomes harder to get competitive bids. So how do you get competitive, cost-effective insurance?

The answer is by having a 360-degree view of the property and how it’s run with the support of an experienced property management firm. This approach allows owners to recognize and change the issues that affect insurance carrier coverage and rates over time by using the following approaches:

• Insuring commercial properties for replacement costs, so that you end up with the same or better post-disaster structure regardless of fluctuating materials and construction costs.
• Plan property updates that take natural and man-made disasters into consideration to keep premiums low.
• Don’t put off roof, plumbing, heating, and electrical updates since damage that comes from faulty systems can raise premiums and cost more in the long run.
• Invest in property updates that keep tenants happy since a history of constant turnover can affect insurance rates.

Eliminate the potential for recurring water damage claims by looking for and remediating root causes before it leads to dropped coverage.
It’s not always easy to see how these things connect to higher insurance rates when you’re focused on day-to-day tasks. An experienced property management firm is better positioned to take the long view of the property to help you make strategic decisions that:

• Save more money over time
• Keep premimums and coverage costs as low as possible
• Avoid dropped coverage

This can’t be done with a property owner’s DIY approach, as it involves seeing complex connections such as: how to scrutinize budgets, projects, service vendors, and market rates that often elude even the most attentive owner. By partnering with owners, Sentry Commercial’s Property Management Division brings the experience, approach and expertise needed to help owners avoid extra expenses – saving them time, money and lots of headaches.

How To Really Win

French Tennis player Nicholas Mahut lost in the French Open in front of his family and his son ran onto the court to hug and console him. His opponent Mayer, who won, also got emotional and applauded. The whole stadium gave them a standing ovation as the father walked out tall holding his son’s hand…

We all compete every day to do our best and win! But the REAL win!!?? Having people who care about you. Wins are empty if no one cares. And losses can still be fulfilling if you are surrounded and supported by people who genuinely care about you and appreciate the effort… even in a losing cause.

Start with someone who cares!

Active Shooter Presentation

I attended a commercial real estate conference in NYC a few weeks ago and watched a very interesting presentation on Active Shooter risk management.

1) Do you have an active shooter plan for your company?

2) Do you understand the risk to your business in the event an incident occurs in or around your business (beyond the risk of human life)?

Click here for the attached Active Shooter presentation.  I encourage you to take a look…It’ll be worth your time!  Feel free to reach out directly to the Gallagher contact at the bottom of the presentation or to your own representative.

Mark

Trade War

Recent article from MassLive re: CRRC MA’s vocal response to President Trump’s trade war with China. CRRC. CRRC’s concern is the effect on the growth of their new plant in Springfield MA.

I have been asked by a number of people how the trade war is affecting the industrial real estate market in the region. The answer is…I am finally starting to hear more and more in the market that the proposed tariffs are putting a strain on growth and certain companies are taking their foot off the accelerator a little bit. In the words of one local company…we haven’t stopped our plans for growth but they (our plans) are tempered a bit until the trade wars settle down.

Certainly not putting the foot on the brake…but maybe starting to coast a little bit.  Time will tell if it has a significant effect on the industrial real estate market.

We’ll keep you posted!

Keep smiling!

Mark

See attached MassLive article:  Trump Tariffs

Sentry Commercial’s New Look

It’s been a long time coming (since 1991 to be exact!)!!!! I am pleased to announce Sentry Commercial has re-branded!! Same company with the same caring and talented people but with a new look and a renewed focus on who we are.  We are a company that first and foremost cares about our clients, our community and our people. Don’t get me wrong…we all know our stuff…but if you don’t start with a caring culture…what’s the point??

How do you pick your broker…adviser…property manager…construction manager?  How do you decide who you work for?  We believe there are a lot of good choices out there but you should first Start With Someone Who Cares.

Sam’s Closing Stores

I was at a surprise birthday party last night and the initial buzz at the table was our wives discussing the closing of the Sam’s Stores and how it affected their shopping habits (of course they were pretty excited when some of them learned that Sam’s was having a 25% off everything sale!).

Sams’ says it’s managing their real estate for their ever-transforming business. Of course part of their “transforming business” is the relationship between Walmart & Sam’s. Walmart has successfully increased its online presence and is making great strides in E-Commerce. Could it be that their Sam’s Clubs are more profitable now as “last-mile facilities” than they are as clubs?

Industrial is the new retail!

See attached CoStar article: Sams Club Abruptly Closes 63 Stores

Keep smiling!

CBIA

CBIA held its Economic Summit yesterday morning. Great networking, good content. Not much surprising news. Same concerns about the CT economy. I am the first person to be critical of the State of CT (and thankful we spread our wings to do business outside the state a number of years ago) but I thought to myself while listening to the, at best, tempered view of 2018. We have been on tour the last three days for two 100,000,000 SF-125,000 SF requirements… In the last 2 weeks North Haven just signed a 130,000 SF chemical company lease and Bristol just signed a 200,000 SF manufacturing lease.  It can’t be all that bad!

Nice to listen to Chris Swift, the CEO of The Hartford, with a thoughtful, balanced view of our region!

Keep smiling!

Mark

Happy New Year!

2017 is going out in a deep freeze in Southern New England! Hope we don’t say the same about our economy! I don’t think we will. Our markets are still showing incredible resilience.

For those of you who want some light (and quick) reading on what to expect in 2018, see the link below. This is an overview of 2018 as published in the Hartford Business Journal this past Friday.

Realty inventory shortages, pickier tenants will drive 2018

Wishing you all a very happy and safe New Year. Thanks to all of you for your support throughout the years! It is a very much appreciated. We look forward to continuing to work with our clients, our colleagues and our community to create a successful 2018 for all.

Keep smiling!

Mark

Robotics

Keeping it simple on this post. Everyone has heard about robotics and how robots are affecting our warehouses. See link below for just what that looks like. This is a clip of an Alibaba warehouse. Amazing! (and yes, very efficient).

Alibaba Warehouse Robotics

Keep smiling!

Views from SIOR Chicago Fall World Conference

Just returned from a short week in Chicago, site of the SIOR Fall World Conference. Just about 1,000 attendees and lots of opinions!

• Overwhelming opinion is this industrial real estate run has lots of legs left to it. In fact, at the risk of sounding overly-optimistic, most people don’t see an end in sight (of course, isn’t that the time you should start cashing out!!??).
• Nationally, vacancy rates are at an all-time low and rates continue to rise. Speculative construction in many markets is having a tough time keeping up with demand.
• E-Commerce continues to be the driver. Biggest challenge is to get closer to the customer (last mile). Imaginative ideas even include multi-level warehouses (Prologis – Seattle & San Francisco). Redevelopment of urban sites. Re-use of previously thought to be obsolete real estate.
• Lots of cash out there still. Investors chasing less product. Driving returns lower.
• Regionally? Still seeing a product shortage in high quality industrial real estate. Most of what is being built is just about spoken for (few exceptions). Bifurcated market however. Less-than-high grade space continues to struggle to be absorbed. Don’t see that changing in the near future. Distribution center construction market continues (Trader Joe’s/Bloomfield and recently announced 234,000 SF auto parts deal at New England Tradeport).

We’ll keep you posted!

Connecticut industrial market update

Good morning everyone! See link below re: a CT industrial market update I was asked to do for Northeast Real Estate Business – Quick snapshot of the local market. Enjoy!

CT’s Tight Industrial Market May Limit Growth

McMahon new CEO at CT Main Street Center

Patrick McMahon, Director of Economic Development at the Town of Suffield, has recently accepted the CEO position at CT Main Street Center. Good for CT Main Street Center. Tough news for the Town of Suffield. Patrick is a great example of how important a good economic development officer is for a town. Great representative of its interests and assets. Good luck in your new venture Patrick!

See related article: CT Main Street Names Patrick McMahon New CEO

$60M innovation hub at UTC East Hartford

At a time when Connecticut has had its share of bad news, nice to see some good news coming from one of our major employers. UTC unveiled its Innovation Hub on Friday afternoon. A $60 million dollar investment into 185,000 SF of new and existing office and laboratory space. “Global innovation at UTC begins right here at the Research Center in East Hartford” said David Parekh, corporate vice president of research and UTRC director.

Thank you UTC!

See Hartford Business Journal article: $60M innovation hub debuts