Mariwyn Evans writes about commercial real estate for REALTOR® Magazine. You can reach her at firstname.lastname@example.org.
October 2009: Commercial News Round Up
News briefs to keep you in the know about the commercial real estate industry.
October 1, 2009
Time for New Lobby Lighting?
For property managers, improving the appeal of an office or apartment lobby doesn’t have to be complicated or expensive. The easiest and sometimes most cost-effective strategy is to update the lobby’s lighting, says Scott Spector, principal of Spector Group, a New York architectural and interior design company.
Pendant lights and indirect illumination washes the lower walls with light that helps to give any space a more welcoming feel, he says. The color and tone of the light—whether it’s the cool blue of fluorescents or the warm yellow of incandescent—also affects how tenants and visitors view your buildings. You may even want to change the lighting over the course of the day, brightening lobbies during the daylight hours so the transition from the outside won’t be so stark, and dimming lights at night, suggests Michael Castelli, a principal at HDLC, a New York architectural lighting design company.
A newer trend is to use multicolored lighting—a treatment that can work well in both older and more modern buildings, Spector says, citing the 1931 Burberry Building at 444 Madison in New York as an example. "The multicolored lighting creates a wonderful aesthetic," he says.
For continuity, lobby lighting and finishes should be carried through to the elevator lobbies on each floor and maybe even reception areas within tenants’ spaces. "It doesn’t have to be the same exact treatment, but making it complementary creates confidence and solidity," he says.
To take a lobby renovation a step further, Spector suggests replacing or refinishing reception desks. Your choice should depend on the image you want the building to convey; dark woods and granite express stability, while metals and lighter looks may be suitable for forward-looking tenants such as tech firms.
If space permits, add seating to the lobby to create a welcoming feel, says Spector. Hard-surface seating materials like wood or stone stand up to wear, making them more economical options over the long term.
Bankruptcy Won’t Save Your Property
A Chapter 11 bankruptcy may buy some time for commercial property owners facing a loan foreclosure, but it’s not the best option for those who are hoping to hang on to their property, says Christopher Grey, managing partner at Third Wave Partners, a Los Angeles real estate advisory company.
Why not? Chapter 11 was designed to help businesses continue to operate, but not necessarily to protect the interests of the borrower, Grey says. "In many cases, a bankruptcy affords little protection for a property held as a single asset in a special purpose entity," he says. In addition, ongoing attorney and advisory fees during a bankruptcy can impose a serious financial burden that may outweigh any benefit from the reorganization plan.
Grey advises troubled property owners to do all they can to arrive at a workout option with their lenders. "Borrowers should bring whatever they can to the table," Grey says. "There needs to be some justifiable reasons for the lender to consider giving concessions."
Hard-pressed borrowers should also try to ally themselves with the secondary, mezzanine lender to reach an agreement with the senior debt holder, Grey advises. This strategy is particularly useful when the property’s value has fallen below the amount of the first loan. A workout provides a better option for the secondary lender to be repaid.
Ultimately, most lenders don’t want to foreclose, Grey says. A workout that lets owners and lenders ride out the downturn is often the best option for all parties.
Strategies for Staying Alive
When times are tough, it’s important "not to get derailed by negativity," according to Andre van Rensburg, ALC, CCIM, president of Prudential Commercial Real Estate in Jacksonville, Fla. But at the same time, you have to be in tune with the very real challenges your clients face.
Help them evaluate their holdings and "plan your services around their plans," van Rensburg said during a recent webinar by the REALTORS® Land Institute. Learn about local real estate and business trends and translate them into business opportunities. For example, leasing brokers could approach tenants who need help renegotiating lease deals. "That won’t necessarily make you popular with landlords, but it will generate income," he joked.
It's also smart to focus on businesses that tend to do well during a recession. Those can run the gamut from supermarkets and liquor stores to funeral parlors, said van Rensburg.
Don’t neglect industries that are doing badly either. Begin conversations now with troubled property owners about their disposition needs. When the market improves, you’ll be there to broker the property. "Position yourself for the next turn. It will come," he said.
Now is also the perfect time to tap underused skills among your staff. "See what each person in your company can bring to the equation to generate business."
Until commercial real estate markets recover, van Rensburg’s solution for staying alive is simple: "Know your market and outwork the next guy."