By Reid Wiggins, Commercial Division Manager, WaFd Bank
For the Idaho commercial real estate community, 2020 opened on a high note. Like the broader economy, the industry appeared on solid footing. The vacancy rates of commercial real estate clients were trending lower across multiple sectors, and demand remained robust as many communities were continuing to attract new residents and enterprises. The swift intrusion of COVID-19, however, has upended outlooks for industries across the board. Although demand for commercial space remains strong in Boise and across the Treasure Valley, the long-term outlook is uncertain. Meanwhile, formerly peripheral concerns have taken center stage. Workplace safety will be key to reopening places of business, and commercial landlords will likely need to collaborate with anxious tenants — and their own lenders — to formulate viable solutions.
Solutions start with enhanced cleaning and behavioral changes
Businesses are working overtime to determine how to best proceed while remaining current with ever shifting guidelines from state, county and city governments as well as from federal and global health agencies. Building management professionals and commercial landlords are doing the same. Many are adopting new policies and practices for managing disinfection of public spaces within their properties, such as entrances, lobbies, elevators, stairwells, bathrooms and even parking areas.
Additionally, commercial real estate professionals are working closely with tenants to establish and enforce, if necessary, new safety protocols for their private, leased spaces. Research indicates that poor ventilation and air circulation could prevent viral particles from dissipating quickly and increase risk of infection in areas that are more confined or where individuals may be in close proximity. While some behavioral modifications — such as properly wearing face coverings, practicing regular handwashing and maintaining social distancing — may still reduce the spread of disease, businesses will need to provide employees with more assurances that their health and safety won’t be compromised when returning to the physical workplace.
At WaFd Bank, we’re working with our customers to keep their businesses moving despite significant adjusts to their daily operations. While many have implemented new technologies to enable staff to work from home, many businesses are not able to support a predominantly remote workforce on a more permanent basis, such as those in manufacturing. These businesses must find flexible strategies to enable a safe return to the office. Some have hired designated cleaners to ensure high-touch surfaces and common areas are regularly sanitized. Others are restricting sharing of space, tools and equipment. Still others are making use of our great outdoors for larger meetings, providing more space between individuals and better airflow.
Temporary solutions are welcome, but as the pandemic will likely extend into the winter and beyond, organizations will need to employ more long-term strategies.
Addressing key building characteristics is inevitable
As researchers learn more about COVID-19 and its transmission, new science is emerging around how long the virus can survive while airborne in closed indoor environments. Findings are already having an impact on how landlords and tenants are viewing workspaces, from how offices and workstations are laid out to nuances around airflow and filtration. For instance, our Boise team is beginning to see a movement away from open office environments, which have been favored in recent decades. Additionally, tenants are making alterations to existing or planned projects, such as requesting larger conferences rooms, lobbies and waiting rooms to ensure more separation among occupants.
Certain building characteristics previously considered selling points may now be considered ill-suited for a post-pandemic era. Newer buildings have increasingly been constructed with an eye toward energy efficiency, not necessarily air quality of the level necessary to cope with a pandemic. HVAC systems, for instance, may not provide ample indoor-outdoor airflow, while filtration systems may lack the sophistication and grade of systems common to more sterile environments, like hospitals or laboratories.
For projects already in motion, apprehension about design choices may be a bigger driver of delays than economic uncertainty. While many businesses now feel more comfortable supporting remote workers than ever before, the vast majority will still require physical space for teams to collaborate and for a subset of employees whose roles require them to be on-site. Flexibility has become increasingly important, and CRE project managers should work closely with key partners to answer any emerging challenges with a building’s design or internal layout.
Tackling safety upgrades to remain competitive
Given the uncertainty around how long COVID-19 will be with us and what it may mean for businesses as they seek to resume regular operations, commercial real estate operators should be ready to respond to shifting demands from the marketplace. Just as our home builder clients are seeing heightened interest in functional home offices as droves of employees work from home, commercial clients are likely to field more questions about building health and safety concerns among tenants and prospects.
To remain competitive and profitable, commercial operators might consider re-evaluating their spaces and establishing a dialogue with tenants and prospects to identify challenges and implement satisfactory solutions. In addition to bringing in design, engineering and HVAC experts, commercial real estate professionals may find it beneficial to involve their banker in the process. They will likely be able to offer valuable perspective on trends happening across the industry and within particular sectors and markets, giving commercial owners and operators greater insight to evolving expectations, as well as practical solutions.
In tackling safety upgrades, commercial owners and operators may find themselves modeling various scenarios to address tenant concerns. Most likely, each option presented will be accompanied by a unique price tag. Having a collaborative banker involved can provide clarity about financing options early in the process, especially if costs appear to exceed anticipated budgets. At WaFd Bank, our portfolio lender status allows our bankers to provide customized financing solutions ranging from buildout to upgrades and at times, even working capital.
Flexibility should contribute to success
If COVID-19 has taught us anything, it is that flexibility may be one of the most important qualities in dealing with a pandemic and its fallout. The future may be more uncertain than ever, but Idaho businesses and commercial real estate professionals offer a glimmer of hope as they adapt to changing guidelines, rethink their business models and reconfigure their workplaces to keep the economy moving. The state remains a desirable place to live and work, and by making some adjustments to reassure workers about maintaining their health and safety, the industry will be better poised for the future.
About the author:
Reid Wiggins is a banking industry veteran and has nearly two decades of commercial banking experience. He serves as the commercial banking division manager in Idaho for WaFd Bank, where he has worked for the last 12 years. He has been an active volunteer with United Way and College of Western Idaho. All loans subject to credit approval. WaFd Bank, MEMBER FDIC