the boma magazine - january/february 2011
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The BOMA Magazine is the official magazine of the Building Owners and Managers Association (BOMA) InternationalTRANSCRIPT
january/february 2011
Leading the Future
Plus:The Personal Touch in Tenant Relations
Best Practices in Allocating CAM Charges
Break the Germ Transmission Chain in Your Building
2010 Year in Review
From Capitol Hill to City Hall
Reflectivity Updates Required for Traffic and Other Signage
The time for assessment, making improvements is drawing near.
Just over a year remains for building owners and property managers to assess the traffic signage at properties and devise a replacement plan in order to get in line with new traffic sign standards geared around reflectivity. For sites under construction, building owners and property mangers should plan to use these new rules now to avoid replacing traffic signage later.
Why the new regulations?The new regulations were created in early 2008 by the Federal Highway Administration (FHWA) to improve safety on the nation’s roadways. The push is largely due to an ever-changing driving environment caused by an increase in aging drivers, altered headlamp performance and varied vehicle sizes.
Who is affected by these new regulations?If your property has paved areas including roads open to the public, private roads and parking lots for shopping malls and restaurants, office complexes, apartment and residential developments, sports and recreational facilities and other businesses open to the public, you will be affected when the regulations go into place.
What are the suggested reflectivity levels for traffic signage?• Parking signs should use engineer-grade or better.• Street signs and other traffic control signs should use
high-intensity grade or greater.
Why does reflectivity matter?Studies show that highly reflective signage significantly reduces the number of injury collisions. Conformance with the new standards provides a better position to defend against litigation should someone get hurt on your property.
Information provided by Grimco.
SIGNARAMA is ready to help you evaluate your site to ensure it is aligned with the new regulations. Contact your local SIGNARAMA for more information. Find your nearest store at www.signarama.com/locations or call 1-866-360-7446.
Advertorial
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1 Source: “The Total Financial Impact of Employee Absences Survey Highlights”. Kronos Consulting & Mercer LLC. October 2008. Article: Nationwide article
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January/February 2011 The BOMA Magazine 5
January/February 2011 Volume 7, No. 1
For advertising rates and information, contact Paul Hagen at Stamats Business Media 866-965-4205.
21
DEPARTMENTS
Volume 7, No. 1 The BOMA Magazine Janu-ary/February 2011, (ISSN 1532-4346), Copy-right 2011. The BOMA Magazine is published bimonthly in January/February; March/April; May/June; July/August; September/October; and November/December by the Building Owners and Managers Association (BOMA) International, 1101 15th St., NW, Suite 800, Washington, D.C. 20005; Telephone 202-326-6300; Fax 202-326-6377; www.boma.org. Periodicals Postage paid at Washington, D.C. and additional mailing offices.
POSTMASTER: Send address changes to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Undeliverable U.S. copies should be sent to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Return undeliverable Canadian addresses to: PO Box 875, STN A, Windsor, ON N9A 6P2.
Connect with BOMA
Join BOMA on Facebook
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See BOMA on YouTube: www.youtube.com/bomainternational
Follow BOMA on Twitter:
BOMA Chair Ray Mackey @ rhmackey
BOMA President Henry Chamberlain @ HenryBOMA
BOMA Vice President Lisa Prats @ LisaPratsBOMA
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6 MESSAgE FROM ThE ChAiRNew Year’s Resolution.
8 LEgiSLATivE UPDATERepublicans make historic gains in mid-term elections; “lame duck” Congress passes tax extenders; BOMA comments on proposed lease accounting standard.
12 STATE & LOCAL UPDATEBOMA helps defeat onerous Amendment 4 in Florida; plus, what the new political landscape will mean for CRE.
14 CODES & STANDARDS UPDATEICC code hearings produce the next generation of energy codes; BOMA and NMHC appeal possible voting irregularities at ICC hearings.
16 LEADiNg ThE WAyJen C. Suddreth, RPA—young professionals’ advocate, Hollywood extra.
18 AROUND ThE iNDUSTRyBOMA local association executives discuss strategy and governance; “A Vision for CRE in 2020”; trends from the ULI conference.
2010 Year in ReviewLindsay TiffanyHelping property professionals navigate real estate’s “new normal”—with the industry’s best advocacy, networking, resources and education.
Thinking Outside the LavatoryLaura HorsleyWhere germs are actually hiding in your building—and how to break the transmission cycle.
The Personal TouchStephanie J. Oppenheimer, APRThe shortest path between average and exceptional tenant relations is personalized service.
Lessons in Mixed Use ManagementLindsay Tiffany Confused about CAM charges? A new BOMA publication offers case studies and best practices for managing mixed use properties.
On the Cover: Richard W. Greninger, managing partner, Carr Services, represents BOMA International before Congress in testimony on building maintenance best practices.
30 gREEN SCENEDan RoseFour steps to a better recycling program.
31 RESEARCh CORNERDo you submit your building data to the EER? Seven reasons why you should.
34 EyE ON EDUCATiONNeil CarolanHealthcare reform, aging infrastructure and capital constraints pose challenges for medical office buildings.
36 TRENDS TRACKERIs it time to dust off the hard hats? Predictions for construction starts in 2011.
37 TRADE TOOLSA technology park transforms a former hospital into a “green” showcase.
38 CONFERENCE CONNECTiONFive reasons why you can’t afford to miss BOMA 2011.
6 The BOMA Magazine January/February 2011
Message froM the Chair
Publisher: Lisa M. Prats, CAE
editor: Laura Horsley
associate editor: Lindsay Tiffany
Contributing editors: Karen W. Penafiel, CAE, Ronald Burton, James Cox, Lorie Damon, Ph.D., Tracy Glink, Liz Hazleton
Designer: Amy Belice
Published by: Building Owners and Managers Association (BOMA) International
BOMA International OfficersChair and Chief elected officer Ray H. Mackey, Jr., RPA, CPM, CCIMStream Realty Partners, LP Dallas, Texas
Chair-electBoyd R. Zoccola Hokanson Companies, Inc. Indianapolis, Ind.
Vice Chair Joseph W. Markling CB Richard Ellis, Inc. Los Angeles, Calif.
secretary/treasurer Kent Gibson, CPMProperty Reserve Inc. Salt Lake City, Utah
President and Chief operating officer Henry H. Chamberlain, CAE, APRBOMA International Washington, D.C.
The cost for The BOMA Magazine is $75 a year for subscribers and $50 a year for BOMA International members.
Publication of advertising should not be deemed as endorsement by BOMA International. The publisher reserves the right in its sole and absolute discretion to reject any advertisement at any time submitted by any party. Material contained herein does not neces-sarily reflect the opinion of BOMA International, its members or its staff.
Ray Mackey, Jr., RPA, CPM, CCIM
Chair and Chief Elected Officer
Call for Nominations: Vice Chair, Secretary/Treasurer and Executive Committee MembersBOMA International’s Nominating Committee is seeking candidates for the positions of vice chair, sec-retary/treasurer and for five mem-bers of the Executive Committee to the Board of Governors. For further information, contact Ann Coslett at [email protected].
New Year’s ResolutionHappy New Year! I’m not one for making New Year’s resolutions, but
this year, I think I’ll make an exception. This is a collective resolution, and one that requires the resolve of every BOMA member reading these words. This New Year’s resolution is all about optimism.
The past couple
years have been a
challenge for com-
mercial real estate
and BOMA members.
Development has all
but halted; the banks
have put the choke
hold on lending;
and building man-
agers have had to
run buildings on big
expectations and lean
resources. So, why so
optimistic? After all, few economists
predict a full recovery before 2013 at the
earliest and we certainly have our work
cut out for us in the year ahead.
I’m optimistic because when I look
back at the enormous market challenges
we faced, and more importantly how we
faced them, I have every confidence that
BOMA members are the best prepared to
seize the market opportunities ahead of
us. You have made excellent use of the
BOMA business network, and that has
made all the difference.
This summer, that powerful network
meets again in D.C. for what could be
our most important annual conference
in years. BOMA 2011 has all the tools,
education and networking you need
to gain advantage as the industry turns
toward recovery. The programming is
outstanding, with headliners David Ger-
gen, Sam Zell and Dr. Peter Linneman,
not to mention the industry’s best educa-
tion with more than 40 sessions. The Every
Building Show® will offer the solutions you
need for any operational challenge. And,
the premier conference facilities at the
Gaylord National® Resort & Convention
Center are truly exceptional: It doesn’t hurt
that it’s all located within the most excit-
ing new mixed use complex on the East
Coast—National Harbor on the shores of
the Potomac River. Check out “Conference
Connection” on page 38 for full details.
Another reason for my optimism in 2011
is that we are building on a very active and
successful 2010. “The Year in Review” on
pages 21-24 lays it all out—from enhancing
asset value through programs like BOMA
360 to releasing an entire suite of floor
measurement standards to the vital work
on Capitol Hill and in city halls across the
country. BOMA’s advocacy victories con-
tinue to propel the industry. We helped
defeat a carried interest bill in June that
would have cost our industry billions and
quashed entrepreneurial investment when
we need it most. And, at the end of 2010,
we helped pass critical tax extender leg-
islation and tax cuts to drive the engine
of recovery.
Our accomplishments show us that opti-
mism is a New Year’s resolution we can all
get behind and stick to. So, get ready; it’s
going to be an exciting year.
Thank you for supporting this great
industry!
www.ScientificConservation.com116 New Montgomery, Suite 635 San Francisco, CA 94105 (415) 625 4500 [email protected]
Selected as a Business Partner in GE's ecomagination Challenge 2010
8 The BOMA Magazine January/February 2011
legislative UPDate
Continued on page 10
ON NOVEMBER 2, 2010, voters went to the polls, with the economy on the forefront of their minds—and in a very anti-incumbent mood. The result, as you probably have heard several times by now, was that the Republicans made substantial gains in the Senate and his-toric gains in the House, taking control over that chamber. What does this mean for real estate?
Some experts predict that the next session of Congress will bring “more of the same”—meaning more dysfunction and party-line bickering. Though many key Democrats and Republicans are pledging to work together and to give members of the other party a mean-ingful opportunity to participate in the drafting of legislation and the hearing process, the proof will be in the pud-ding. But, what we do know for sure is that nothing will get through Congress without the full cooperation of leaders of both parties.
Cooperation did occur in the Decem-ber “lame duck” session, when Con-gress passed tax extensions (see article: “Congress Passes Critical Tax Legisla-tion”). When the new Congress gets to work, BOMA expects lawmakers to address broader tax reform issues. We also anticipate that House Republicans will hold hearings once the new ses-sion gets under way to address some of the regulatory issues on BOMA’s plate, including lead-based paint and storm water management issues currently in play at the U.S. Environmental Protec-tion Agency (EPA). Congressional over-sight on these issues would definitely be
a benefit to the commercial real estate industry, though a divided Congress may not reach resolution.
Congress Passes Critical Tax Legislation
On December 16, Congress passed an $859 billion tax bill that includes pro-visions that will strengthen commer-cial real estate and economic recovery. The legislation includes two tax exten-sions that will greatly affect real estate: the 15-percent tax rate on capital gains through 2012 and the 15-year timeline for depreciating leasehold improve-ments, retroactive to Jan. 1, 2010, and through December 2011. The bill’s pas-sage comes at a critical time, providing needed tax relief for a still fragile com-mercial real estate industry.
BOMA International’s advocacy team worked diligently to educate members of Congress about how the legislation would affect commercial real estate. In a December 9 letter to Congress, BOMA explained that, “with the commercial real estate sector still grappling with an unprecedented liquidity challenge, now is not the time to increase the cost of investment and operation of commer-cial properties.” Citing a special report issued by the Congressional Oversight Panel in early 2010, BOMA stated that approximately $1.4 trillion in commer-cial real estate loans will expire between 2010 and 2014; in nearly half of those cases, the borrower owes more than the underlying property is currently worth.
BOMA Submits Comments on Lease Accounting Standards Changes
Last year, the Financial Account-ing Standards Board (FASB) and Inter-national Accounting Standards Board (IASB) issued a standard that, if imple-mented, will completely revamp the way leases are accounted for by both lessees and lessors. Generally speaking, the pro-posed changes would move the cost of operating leases from a disclosure in the footnotes onto the balance sheet. Rami-fications of the proposed changes could prove to be very far-reaching to the com-mercial real estate industry.
BOMA International joined forces with a broad business coalition, which included the Real Estate Roundtable and the U.S. Chamber of Commerce, to sub-mit comments to FASB. BOMA Interna-tional also put together resources on the
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10 The BOMA Magazine January/February 2011
legislative UPDate
issue and encouraged members to sub-mit original comments to FASB before the Dec. 15, 2010, due date. The coalition offered critique of the exposure draft and also called for FASB and IASB to extend the deadline for implementation to ensure the final standard is sound and thoroughly vetted. The Washington Post also ran a commentary by BOMA about the issues (see page 19 for details). Visit www.boma.org for more information.
BOMA Joins Real Estate Coalition to Submit Comments on Lead Paint
On Dec. 6, 2010, BOMA International joined forces with several other national real estate associations to submit com-ments to the Scientific Advisory Board Lead Review Panel on the U.S. Envi-ronmental Protection Agency’s (EPA’s) approach for developing lead dust haz-ard standards for public and commer-cial buildings. The coalition stressed that, as EPA itself has noted through its Advanced Notice of Proposed Rulemak-ing issued in Summer 2010, the develop-ment of lead hazard standards for pub-lic and commercial buildings is fraught with uncertainty, due to the minimal data available regarding the prevalence of lead dust in these types of buildings and other factors critical to the develop-ment of a reasonable standard.
The coalition also noted that Con-gress required EPA to conduct a study to determine which of the “various types of renovation and remodeling activities … disturb lead and create a lead-based paint hazard on a regular or occasional basis” before promulgating any regula-tions concerning renovation, repair and painting activities. The coalition is also concerned about what appears to be the EPA’s predominant focus on risks to young children. While young children may be the principal population of con-cern, any lead dust hazard standards for public and commercial buildings that are based on exposures in young chil-dren may be largely inapplicable to a wide range of public and commercial buildings, such as office buildings, which are visited only infrequently by children.
The real estate coalition strongly encouraged the Scientific Advisory Board, and EPA, to more thoroughly research the issues at hand and fill in the gaps before beginning down the path of regulation.
BOMA believes the solution is to impose new requirements upon the util-ity to provide aggregate whole-building energy consumption data upon request, and ideally, to have that data automati-cally imported directly into EPA ENERGY STAR®’s Portfolio Manager.
The new coalition is comprised of real estate associations, building owners and managers, environmental groups, state regulators and state energy offices, among others.
GAO Federal Leased Space Study Identifies Challenges; Recommends Guidelines
In April of last year, the Interagency Security Committee (ISC), comprised of 47 federal agencies and departments, issued new building security standards for federal facilities, also known as the Physical Security Criteria for Federal Facilities. Congress directed the Gov-ernment Accountability Office (GAO) to review the standards for leased space and ultimately released a report (www.gao.gov) on Sept. 22, 2010, that identi-fies challenges that exist in protecting leased space and examines how the new standards address these challenges.
The GAO study ultimately recom-mends that ISC establish a working group to determine guidance for work-ing with lessors, and to incorporate this guidance into a future ISC standard. BOMA International will work to provide comments to the working group and keep you up-to-date on its findings.
BOMA, USGBC Form Coalition to Address Data Collection Issues
Under the leadership of Transwest-ern’s Al Skodowski, chair of BOMA International’s Energy Committee and a board member at the U.S. Green Building Council (USGBC), BOMA and USGBC have joined forces to advance the joint goal of resolving the data collec-tion issues often encountered in multi-tenant, separately metered buildings.
Buildings with separately metered tenants often do not have access to tenant energy consumption data, and, without permission from the tenant, the utility or energy distribution company will not provide it due to ownership and privacy concerns. This leaves building owners unable to benchmark the prop-erty and without reliable data upon which to make educated retrofit deci-sions. And more and more, it is leaving building owners unable to comply with some new state and local benchmarking and disclosure laws that are making their way across the country.
12 The BOMA Magazine January/February 2011
state & local update
FLORIDA’S REAL ESTATE AND BUSINESS INTERESTS scored a huge victory in Novem-ber with the defeat of Amendment 4. If passed, Amendment 4 would have required the state’s voters to approve all local comprehensive land-use planning changes, rather than having those changes approved or rejected by city or county commissions. The amendment needed 60 percent of the vote; however, 67 percent of voters rejected the measure. If voters had approved the measure, its implications were expected to set a national precedent for other states to adopt such legislation or consider such ballot initiatives.
BOMA International and BOMA Florida leveraged Industry Defense Funds to join other real estate organizations in Citi-zens for Lower Taxes and a Stronger Economy, a coalition of more than 200 organizations that oppose the initiative, to pro-tect commercial real estate’s interests. Other members of the
coalition include NAIOP (the Commercial Real Estate Develop-ment Association); the American Resort Development Associa-tion; NAIOP of Florida; the Florida Apartment Association; and other business groups.
Spearheading the campaign to get Amendment 4 approved was a group of environmental lawyers who founded Florida Hometown Democracy, a special interest group. More than half of its funding comes from Floridians for a Sustainable Popula-tion, a population control group. Had the amendment passed, it is estimated that the average voter would be expected to decide about 200 to 300 intricate land-use planning amendments each year. Local governments would be forced to use taxpayer dollars to fund additional elections or would have to wait until the next election to list out all of the changes proposed to a comprehen-sive land use plan.
GOP to Reshape Political LandscapeRepublicans made historic wins in the November 2010 state
elections, putting the GOP in control of redrawing congressional and state legislative districts. The party took control of 18 cham-bers in 12 states, including both houses in Alabama, Maine, Min-nesota, New Hampshire, North Carolina and Wisconsin. They made significant gains in both the Midwest and the South. In total, Republicans gained over 675 legislative seats, the biggest gain by either party since 1966.
The GOP also gained 16 governorships in November. Democratic governors were term-limited out of office in four
BOMA Helps Defeat Amendment 4 in Florida
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January/February 2011 The BOMA Magazine 13
Republican leaning states (Kansas, Okla-homa, Tennessee and Wyoming), and Republicans easily won those seats. They also took over open seats in Michigan, Pennsylvania and Wisconsin, while defeating incumbents in Iowa and Ohio.
According to the National Conference of State Legislatures, these new lawmak-ers face a collective budget shortfall of approximately $72 billion for FY 2012. Some estimates place this figure higher at between $112 billion and $140 bil-lion. These budget deficits may prevent lawmakers from keeping their campaign promises of not raising taxes. Commer-cial real estate advocates will need to be vigilant this year to prevent any onerous tax increases.
BOMA/Portland Launches New Sustainability Initiative
In an effort to further challenge Port-land’s commercial real estate industry to reduce costs and its environmental impacts, BOMA/Portland launched a new voluntary energy competition. Dubbed Carbon4Square, the competi-tion encourages building management teams to benchmark their environmen-tal performance using EPA ENERGY STAR®’s Portfolio Manager, analyze the data and implement strategies that lead to greater efficiencies and reduced oper-ating expenses.
In most existing buildings, carbon emissions can be attributed to waste generation, water usage, electricity usage and transportation. The program shorthands the list as the four W’s: watts, water, waste and wheels. Directly or indi-rectly, these four “squares” are the major components of a commercial office building’s carbon footprint. Focusing on these four categories gives participants a simple framework to assess, analyze and
prioritize strategies for overall environ-mental performance.
The program focuses on carbon, as it can be viewed as a proxy for overall energy and environmental performance, linking various building operations—energy, water, waste and recycling and transportation—through a common framework. Carbon emissions and the impact on climate continue to be a major public policy and cultural focus in the Portland community.
Commercial building owners and property managers in Portland have until the end of January to register for the program, which will provide par-ticipants with free advice and technical support to achieve sustainability goals. Participants will also receive their own “4Square Coach” to coordinate resources and assist in developing building sus-tainability initiatives (a scoping study to identify operational areas to save energy) and access to an array of resources through city and regional sustainability programs. Prizes will be awarded at the end of the program, which runs from February 2011 through March 2012.
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14 The BOMA Magazine January/February 2011
Codes & standards Update
THE MOST SWEEPING CHANGES ever made to model building codes will be included in the 2012 edition of the Inter-national Energy Conservation Code as a result of proposals approved at Inter-national Code Council hearings last October. These changes will result in a whopping 25- to 30-percent increase in energy efficiency over earlier code edi-tions, depending on building type.
Proposals to modify the entire IECC commercial building section to achieve efficiency gains of approximately 25 per-cent over the 2006 code were submitted by a coalition of groups led by the U.S. Department of Energy, the New Build-ings Institute and the American Insti-tute of Architects. Primary support for these proposals was also provided by the Energy Efficient Codes Coalition, a group of product manufacturers and non-profit organizations primarily focused on building energy issues. While
International Code Council Hearings Produce Next-Generation Energy
windows as the “life of the structure,” currently calculated at 50-plus years, were also approved. This virtually elim-inates any rational cost/benefit calcula-tion for these measures, making project financing and long-term project viability decisions much more difficult or even impossible. BOMA will work to elimi-nate this language when code adoption is considered at the state and local level.
The full economic impact of these historic changes to the national model baseline energy code will be substantial and will surely make the adoption of the 2012 IECC much more contentious. Add the concerns of municipal officials about potential negative impacts on the fragile construction industry recovery in their area, and acceptance of this code by far fewer state and local governments than would otherwise be anticipated seems likely.
BOMA and NMHC Appeal Possible Voting Irregularities at ICC Hearings
BOMA and the National Multi
these proposals were, in large measure, approved, BOMA’s code advocacy team was successful in securing concessions to eliminate major concerns for the com-mercial real estate industry, including:
• Withdrawal of a proposal mandat-ing installation of renewable energy systems on all existing commercial buildings.
• Alternatives to mandatory renewable energy system requirements for all new buildings.
• Defeat of a proposal to require per-mits and inspections for replacement of more than 10 percent of the lighting fixtures in existing buildings.
• Reductions in several onerous addi-tional building envelope insulation and window provisions.
Changes to define the useful life of such products as insulation and
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January24-26 Fundamentalsof FacilityManagementFebruary21-23 Design,OperationsandMaintenanceIIMarch14-17 EnvironmentalHealth&Safety+ EthicsApril18-20 RealEstateInvestment&FinanceMay16-18 Budgeting&AccountingJune13-15 FacilityPlanningJuly11-13 Leasing&MarketingAugust15-17 ManagingtheOrganizationSeptember12-14 AssetManagementOctober17-19 Law&RiskManagementNovember14-16 TechnologiesforFacilitiesManagementDecember5-7 Design,OperationsandMaintenanceI
January/February 2011 The BOMA Magazine 15
Housing Council filed a joint appeal to the ICC Board of Directors, challenging the validity of the voting process during International Energy Code hearings last fall. BOMA’s chief concern is the poten-tial impact of direct financial contribu-tions on the outcome of the hearings—specifically, financial assistance provided to ICC voting members to attend the hearings in support of the more strin-gent code provisions. These concerns had previously been brought to the attention of an ad hoc committee devel-oping recommendations for improving the ICC code development process, as well as to the ICC Board. BOMA’s appeal urges immediate steps be taken by ICC to address these concerns. Regardless of the outcome of this appeal, BOMA’s efforts to greatly reduce the influence of those with a financial interest in the outcome of the code development proc-ess will continue. A hearing of the ICC Appeal Panel to consider the BOMA/NMHC appeal will be scheduled early in 2011.
BOMA to Co-Host Seminar at ICSC’s ‘University of Shopping Centers’ in Philadelphia
In early March, Bill Tracy, vice-chair-man of BOMA’s Standard Method Floor Measurement Committee, and Dave Tyree, BOMA’s director of codes and standards, will present a program on the recently published 2010 BOMA Retail Standard at the ICSC University of Shop-ping Centers in Philadelphia.
The BOMA Retail Standard is the first to document how to measure gross leasable area in accordance with con-sensus industry practices. This seminar will benefit those leasing and managing space in shopping centers and will cover how the BOMA standard was developed, when and how to apply the measure-ment concepts in the standard, key ter-minology and the 12-step method for measuring retail buildings.
For more information, contact Dave Tyree at [email protected].
BOMA Promotes Official Floor Measurement Standards Interpreters
Visit the BOMA website, www.boma.org, for an introduction to the official BOMA Standards Interpreters—building measurement professionals, or metrolo-gists, who assisted in the development of the BOMA standards and are rec-ognized by BOMA as experts that can assist BOMA members with building measurement needs. The interpreters primarily serve the commercial real estate industry, have a proven track record, participated in the development of BOMA standards, met BOMA’s strin-gent requirements and make important contributions to the industry through their experience and knowledge.
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16 The BOMA Magazine January/February 2011
leading the way
Jen C. Suddreth, RPA
JEN SUDDRETH IS REGIONAL MAN-AGER with Grubb & Ellis Realty Inves-tors, where she directly oversees oper-ations for Tenants in Common (TIC) investors throughout Texas, Colorado and Southern California. Suddreth is an active leader for Texas BOMA and Houston BOMA, serving on the Texas BOMA Board of Directors, Nominating Committee and Advocacy Day Commit-tee. She has also served as chair of the Houston BOMA Membership Commit-tee and co-chair of the Education Com-mittee. She is currently serving as the 2010 Houston BOMA President and as a member of BOMA International’s Execu-tive Committee.
your position as regional manager for grubb & ellis requires you to understand g&e properties from both the management and owner perspectives. how are these skills complementary?
The daily focus of the property man-ager is operational. He or she needs to keep everything running, keep tenants happy and create budgets to get the most value at the least cost. It’s a bigger picture from the owner/asset manage-ment perspective. We trust the manager to take care of the operations side, which allows us to look at the income side, such as leasing and renewals. We also keep an eye on economic conditions to know the best time to sell or hold and to maintain property value in a difficult economy.
Having worn both hats, I understand the importance of value from both per-spectives, and how that affects invest-ment potential. To hold property value, the maintenance must be kept up and tenants must be renewing. The property manager and asset manager must work in sync.
young Professionals’ advocate, hollywood extra
you are a role model for young professional members in the houston real estate community. Recruiting and retaining young talent in property management is a challenge; how does the industry tackle this issue?
I’m very passionate about young pro-fessionals being a part of BOMA and the industry. The last few years, Houston BOMA has done an incredible job of growing the young professionals pro-gram. It’s a matter of getting the word out at the college level so when students first get to college they are aware of this career choice. Like so many people, I was not aware of the commercial real estate industry but sort of fell into it. If I could have studied for this industry, I could have been that much stronger that much sooner.
Where I see a big hole is in mentoring. We’re missing out by not mentoring a lot of good, young talent. Young profession-als come in excited and full of energy, and then they are dropped into a prop-erty, given some small instruction and often left somewhat abandoned. They need mentors to take them through the ropes. BOMA could be a great link between bringing in the new generation and taking advantage of the experience and wisdom from the older generation.
at houston BOMa, you recruited the most new members for three consecutive years (2005-2007). what was the secret to your success? any recruitment tips?
Any time you’re part of an associa-tion you really believe in, recruitment becomes a lot easier. BOMA is the net-working association for commercial real estate. When I talk to a property manager or service provider, I always ask if they are a member of BOMA. If they aren’t, I tell them what they’re missing out on—all the benefits of membership. For a property manager, BOMA is where you can talk about the problems you’re hav-ing in your building with another man-ager who may also be having a similar problem. For service providers, having that core relationship makes it so much easier.
Plus, the advocacy benefits are incred-ible. BOMA is the leader on advocacy, from the city level to the national level. You don’t get that anywhere else. It’s a great opportunity to get the informa-tion you need on different issues and to draw on BOMA’s strength in numbers. The recent carried interest tax victory is a perfect example. It had a local and national impact. BOMA came forward as a leader with a voice that allowed us all to be heard. You can’t do that on your own.
what is something that most people don’t know about you?
I grew up in California, and when I was home from college on summer break one year I decided to take my shot at acting. I landed a part as an extra in the Disney move “Newsies” with Chris-tian Bale. Sometimes when you’re an extra, you don’t actually get to be on the screen, but you can really, very clearly see me [check out the last 10 minutes of the movie to see Jen’s close up!]. That was my Hollywood moment. It was a great job and it paid $80 a day—not bad for a teenager’s summer gig.
it’s where i can see you and you can see me and we become so much more than connected.
this is together unlike we’ve ever experienced before.
it’s where there is more humanity in all of technology and where video changes everything… the way we work, live, play and learn.
Visit cisco.com/go/realestate
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Cisco_RealEstate_Ad.indd 1 12/7/10 2:37 PM
18 The BOMA Magazine January/February 2011
Around the industry
COMMERCIAL REAL ESTATE VISION-ARIES from both academia and industry painted a fairly optimistic picture of what the industry will look like in the next years at a recent thought leader symposium, 2020: A Vision for Commercial Real Estate. The event, held November 9 in Washing-ton, D.C., was presented by the BOMA Foundation and the Georgetown Univer-sity School of Continuing Studies and its Masters of Professional Studies in Real Estate Program. Their predictions point to a future in which property management is increasingly important, buildings are carbon-neutral and shifting demograph-ics create a greater demand for real estate.
During “The State of Commercial Real Estate” address, BOMA International President Henry Chamberlain, APR, CAE, and Lowe Enterprises, Inc. Senior Vice President Katya Naman, CCIM, dis-cussed current industry conditions and stated that, while the market has bot-tomed out, real recovery may not be felt until 2013. Both emphasized the impor-tance of asset value enhancement, and, in turn, the demand for skilled property managers.
A lively panel of real estate finance veterans discussed the future of com-mercial real estate finance in the session “Real Estate Finance in the Year 2020.”
Michael Grupe, executive vice presi-dent of research and investor outreach, National Association of Real Estate Invest-ment Trusts, noted that re-equitizing assets is a top priority, adding that public financing will likely replace some lend-ing activity previously handled by CMBS markets and commercial banks. Freddie Mac Vice President and Chief Economist Frank Nothaft said that 12 to 15 million new households will be created over the next decade, citing immigration and a rise in the birth rate as drivers.
“The future of sustainability is now,” remarked Anik Jhaveri, AIA, LEED AP, principal, HDR Architecture, Inc., dur-ing the panel “Environmental and Energy Issues in the Year 2020.” He likened sus-tainability to the Americans with Dis-abilities Act (ADA), explaining that accessibility features quickly went from being optional to required. David Bor-chardt, chief sustainability officer, The Tower Companies, pointed out that the real challenge of the next decade will be retrofitting the existing building stock. He also underscored the need for lease changes that allow landlords to benefit from green retrofits.
To view a free recording of the program, visit www.boma.org.
ULI Conference Highlights Modest Signs of Market Improvement for 2011
At its annual conference this past October, the Urban Land Institute (ULI) released Emerging Trends in Real Estate® 2011, a forecast that hints at hopeful signs of tempered commercial real estate market improvements. The report, pro-duced in collaboration with Pricewater-houseCoopers (PwC), is the result of a survey among commercial real estate investors and professionals.
The report’s theme, an “era of less,” emphasizes that current market con-ditions are creating a flight to quality. “As we enter an ‘era of less,’ an extreme bifurcation persists, as the capital flight to quality creates a greater separation between the trophy and trash assets,” commented Mitch Roschelle, partner, U.S. Real Estate Advisory Practice, PwC. “The best properties have cash flow and that’s what buyers and lenders want. As a result, prime apartments and office buildings in gateway cities are generat-ing the most attention from the increas-ing pent-up sidelined capital.”
Survey respondents indicated that they expect the debt markets to loosen somewhat in 2011, as banks strengthen their balance sheets and increase lend-ing. Fully leased assets with strong net operating income will have improved chances to obtain financing, while assets with weaker qualifications will increas-ingly face the likelihood of foreclosure.
Washington, D.C. topped the report’s markets where commercial and multi-family investment remains strong, fol-lowed by New York, San Francisco, Aus-tin and Boston. Secondary and tertiary markets remain weak, as big corporate space users consolidate their opera-tions in coastal gateway cities. Survey respondents indicated a lowering of per-formance expectations and anticipated high single-digit returns for core proper-ties and mid-teen returns for higher-risk investments.
Katya Naman of Lowe Enterprises and Henry Chamberlain of BOMA International discuss the state of com-mercial real estate.
Experts Foresee a More Promising Future for Real Estate
January/February 2011 The BOMA Magazine 19
BOMA Local Association Executives Discuss Strategy and GovernanceBy Liz Hazleton
The economy was still the most pressing issue facing BOMA members at the 19th
annual BOMA Association Executive (BAE) Leadership Conference, where BAEs gath-ered to discuss local initiatives and programs. The meeting, held Oct. 21-23, 2010, in Philadelphia, Pa., provided an opportunity for BAEs to network and share information. Strengthening governance was at the core of the discussion, as were strategic planning and briefings on new BOMA initiatives.
BOMA Chair Ray Mackey and BOMA President and COO Henry Chamberlain opened the program on a positive note, discussing the year ahead in terms of leadership and
strategic initiatives, as well as the best in association governance tools. “There is hope that things might be getting better. We are beginning to see transactions happening and banks reconciling their balance sheets; 64,000 new jobs have been added and more than a million will be added by year-end,” said Mackey. “We are entering the era of the property manager. Fine-tuning your team, proactive asset management and staying close to clients are keys to success.”
Brian Green, chief financial officer, BOMA International, presented an update on PCI compliance and the Sarbanes-Oxley Act. The Payment Card Industry (PCI) Data Security Standard details security requirements designed to ensure that all organiza-tions maintain a secure environment for the processing, storage or transmittal of credit card information. The Sarbanes-Oxley Act, also known as the Corporate and Auditing Account and Responsibility Act, has its own set of requirements for associations.
Ed Able, CAE, president and CEO of Non-Profit Consulting Services, presented Gov-ernance: Key to Achieving Organizational Potential, a session designed to help BAEs ensure their boards are being as effective as possible. “Governance is becoming the Achilles heel of associations,” said Able, stressing that boards should not neglect governance. “Too many board meetings listen and listen and never talk about any-thing on the strategic level.”
The program also included sessions on local education programs, leadership and association success. Robert Skelton, CAE, chief administrative officer and in-house
council for the American Society of Association Executives, presented Seven Measures of Success: What Remarkable Associations Do that Others Don’t, which reviewed the seven factors of success common among non-profits. BOMA International Senior Vice President Pat Areno, CAE, discussed associate member partnership programs, explain-ing how to construct benefits and deliver buyer satisfaction.
Able opened his presentation by asking “What works, what doesn’t and where are the pitfalls in your association?”
BOMA Voices Concern over FAS 13 in The Washington Post CommentaryThe Washington Post’s Capi-tal Business section recently ran a commentary by BOMA President Henry Chamberlain expressing concern over the proposed change to Financial Accounting Standard No. 13, or FAS 13, which capitalizes all leases and will require lessees and lessors to make projections on lease extensions and apply these projections in a com-plex calculation to determine the assets and liabilities to be recorded. Currently, lessees do not have to account for possible extensions.
BOMA explained that the pro-posed change would adversely affect both tenants and land-lords in a sickly economic cli-mate where lending is already difficult to obtain. “The new standard will fundamentally change the way commercial real estate operates,” noted Cham-berlain in the article. “Both land-lords and tenants holding leases longer than 12 months will be required to apply the standard to their leases whether new or existing—no grandfathering. It is expected that tenants will no longer want a typical 10-year lease with a five-year extension option, due to the debt that will need to be recorded on their balance sheets.”
For more on FAS 13, see “Legis-lative Update” on pages 8-10.
Looking for the strategies and solutions that matter most in the changing commercial
real estate environment? Attend the 2011 BOMA International Conference and The Every
Building Show®, the one event of the year that brings together the foremost experts
and resources in the industry. Come together with building owners and managers the
world over to grapple with current trends and learn firsthand what industry leaders are
doing to stay ahead. BOMA 2011 is conveniently located at the Gaylord National® Resort &
Convention Center, just outside of Washington, DC. Learn more at bomaconvention.org.
We’re Leading the Future. Make pLans to join us.
BOM076 Print Advert / Pub: BOMA Magazine / Issue: November 2010 / Size: trim = 7.875” x 10.875”, bleed = 8.125” x 11.8125” / 4c
January/February 2011 The BOMA Magazine 21
2010 Year in ReviewBy Lindsay Tiffany
Continued on page 22
Join BOMA on Facebook
Join BOMA on LinkedIn
See BOMA on You-Tube: www.youtube.
com/bomainternational
Follow BOMA on Twitter:
BOMA Chair Ray Mackey @ rhmackey
BOMA President Henry Chamberlain @ HenryBOMA
BOMA Vice President Lisa Prats @ LisaPratsBOMA
Communicating ValueIn addition to communicating the latest news and information to members via mediums like e-News, The BOMA Magazine and www.boma.org, BOMA also used social media tools like YouTube, Facebook, LinkedIn and Twitter to connect with the industry. Anyone can subscribe to the magazine or e-News by visiting www.boma.org/news.
Commercial real estate continued to feel the burden of the recession in 2010. Unemployment hovered near 10 percent, creating double-digit vacancies in many markets. With some assets val-ued as low as 40 percent below peak values, financing remained difficult to obtain and “extend and pretend” became the motto for many banks hoping to avoid defaults. All of BOMA’s offerings
in 2010 focused on helping property professionals survive the downturn and prepare for success once the economy recovers. Throughout the year, BOMA rolled out a series of webinars and articles offering information and best practices for tenant rela-tions, leasing, escalations, bidding service contracts, tax assess-ments, managing assets in receivership and more. BOMA also continued to help property professionals enhance their career development through the BOMA/SelectLeaders Career Center and Rx—Resource Exchange, a portal on the BOMA website link-ing to books, on-demand programming and interactive tools for professional development and networking.
From Capitol Hill to City HallIn a distressed economy, it was more important than ever to make sure legislators and policymakers heard the voice of commercial real estate. One important tool BOMA developed in 2010 to ensure decision-makers understood the value of the industry was The Contribution of Office Buildings Operating Outlays in the U.S. and States’ Economies in 2009, a new report detailing the impact of commercial office buildings on the national and local economies.
In 2009, the five billion square feet quantified in the report generated $40 billion in annual expenditures, which contributed a total of $118.4 billion to the U.S. economy. It generated a total of $37.6 billion in new earnings and supported a total of 994,728 jobs while housing 21 million workers within the 91 office market areas presented in the report and their respective state economies. This is in addition to the more than one million jobs supported directly as a result of these outlays for office building operations. The research, funded through BOMA International’s Industry Defense Fund, was used to augment BOMA’s advocacy efforts at all levels of government.
BOMA members throughout the United States came to Washington in early February to take commercial real estate´s message straight to legislators on Capitol Hill during the 2010 Winter Business Meeting and National Issues Conference. BOMA members collectively met with about 250 Senate and House offices—a BOMA record—to discuss how issues like energy, carried interest and leasehold depreciation have a tremendous impact on commercial real estate and the broader
Navigating Real Estate’s ‘New Normal’
Richard Greninger, managing part-ner, Carr Services, represents BOMA before Congress in testimony on build-ing maintenance best practices.
2010 BOMA Year in Review
BOMA President Henry Chamberlain, Senate Real Estate Caucus Co-Chair Ben Cardin and BOMA Chair James Peck at the National Issues Conference.
Capitol Hill to City Hall, Continued from page 21
economy. Attendees also heard from Senate Real Estate Caucus Co-Chairs Johnny Iskason (R-Ga.) and Ben Cardin (D-Md.), Rep. Danny Davis (D-Ill.) and political pundit Charlie Cook.
In March, BOMA was called to testify before Congress on building mainte-nance best practices in the private sec-tor, as the Congressional committee that oversees the U.S. General Services Administration (GSA) considered how to allocate funds for the maintenance of fed-eral buildings. Richard W. Greninger, managing partner, Carr Services, represented BOMA International, describing the type of maintenance plans commercial build-ings in the private sector have to maximize equipment life and optimize building operations. He also noted that, according to BOMA data, federal buildings are often more expensive to maintain than private-sector buildings and urged Congress to grant GSA sufficient funding for federal building maintenance.
In early summer, BOMA and its industry partners launched a successful effort to inform lawmakers of the negative implications of a proposed tax increase on carried interest. In addition to Capitol Hill and grassroots lobbying efforts, BOMA engaged in a targeted coalition media campaign that underscored the industry’s contribution to the economy.
Commercial real estate faced another fight in 2010 as proposed changes to the Financial Accounting Standard No. 13, or FAS 13, threatened to negatively impact the industry. In October, The Washington Post ran a commentary by BOMA President Henry Chamberlain expressing concern
over the proposed change, which capitalizes all leases and would require lessees and lessors to make projections on lease extensions and apply these projections in a complex calculation to determine the assets and liabilities to be recorded. BOMA urged members to voice their opposition to FAS 13 in a letter writing campaign to defeat the proposed changes.
In December, Congress passed two important tax extensions for the industry: the 15-percent tax rate on capital gains, extended through 2012, and the 15-year timeline for depreciating leasehold improvements, retroactive to Jan. 1, 2010, and extended through December 2011. It is estimated that the leasehold depreciation extension will save members of the industry $3.6 billion dollars over 10 years. The capital gains tax extension helped stimulate prudent investment and promote an expan-sion of construction activity.
BOMA played an active role in representing commercial building owners and managers in the codes arena. During the International Code Council final action hearings for the 2012 code development cycle, BOMA supported proposals by DOE and others to modify the entire International Energy Conservation Code commer-cial section to achieve approximately 26-percent efficiency gains over the 2006 code after securing modifications to these proposals to eliminate major concerns. BOMA also persuaded DOE to withdraw a proposal mandating renewable energy systems on all new and existing commercial buildings.
BOMA International’s political action committee, BOMAPAC, is critical to BOMA’s legislative success in Washington. Funds raised through BOMAPAC help support political candidates who understand the issues facing real estate. In 2010, BOMA members raised nearly $40,000 and supported 19 members of Congress.
A recent survey of BOMA 360 desig-nees indicates that designees are able to document operational savings and efficiencies, tenant acquisition and reten-tion, community recognition and other benefits from their BOMA 360 designa-tion. Here is what one designee has said about the program:
“We strive to be the best at all times, but certainly during a down econ-omy, you can’t afford to be less than your best. Having the BOMA 360 designation is proof that we excel at all aspects of property management and operations.”—Edward Fallon, RPA, Vice Presi-dent of Operations for the New York Region, Brookfield Properties
BOMA 360 designees were honored at the BOMA Conference.
BOMA 360: Enhancing Asset Value and Recognizing ExcellenceBOMA continued to build on the suc-cess of the BOMA 360 Performance Program in 2010, a unique designation that recognizes all-around excellence in building management and operations. The designation distinguishes properties with excellence in six key areas: building operations and management; life safety/security/risk management; training and education; energy; environment/sustain-ability; and tenant relations/community involvement.
Since the program’s launch in May 2009, more than 180 buildings have earned the designation, making it a criti-cal tool for property professionals trying to differentiate their assets in a tough market.
22 The BOMA Magazine
2010 BOMA Year in Review
CORNeRSTONe PARTNeRS
AlliedBarton Security ServicesCiscoIngersoll RandKimberly-Clark Professional*NaylorThyssenKrupp elevatorTraneWaste Management
LeAdeRSHIP CIRCLe PARTNeRS
IB Roof SystemsOrkin Commercial ServicesValleyCrest Landscape Maintenance
SuPPORTINg PARTNeRS
Acuity Brands LightingChemsearchISS Facility ServicesugL unicco
Thank You BOMA 2010 Partners
Solutions and Standards 2010 was a milestone year for BOMA standards, as three new ANSI-approved standards hit the market to help real estate professionals measure every type of property in their portfolios. The entire BOMA suite of standards now includes:
• Office Buildings: Standard Methods of Measurement (ANSI/BOMA Z65.1 2010);
• Industrial Buildings: Standard Methods of Measurement (ANSI/BOMA Z65.2 2009);
• Gross Areas of a Building: Standard Methods of Measurement (ANSI/BOMA Z65.3 2009);
• Multi-Unit Residential Buildings: Standard Methods of Measurement(ANSI/BOMA Z65.4-2010); and
• Retail Buildings: Standard Methods of Measurement (ANSI/BOMA Z65.52010).
In addition to the new suite of standards, BOMA introduced the Guide to Developing a Standard Operating Procedure Manual, a step-by-step primer on how to develop a standard oper-ating procedure manual for commercial buildings. BOMA also developed Allocating Common Area Maintenance (CAM) Charges in Mixed Use Properties to guide real estate profession-als in determining how to allocate common area maintenance charges in mixed use developments. The manual provides case studies and best practices to help property professionals allocate expenses associated with utilities, life safety, security and access control, parking garages, loading docks and more.
At year’s end, BOMA re-released two best-selling publications. First published in 2008, The Guide to Writing a Commercial Real Estate Lease, more widely known as the “BOMA Green Lease Guide,” was updated to include the newest best practices for writing a commercial real estate green lease. BOMA also released a third edition of its popular Preventive Maintenance publication—Preventive Maintenance Guidebook: Best Practices to Maintain Efficient and Sustainable Buildings—which contains greater emphasis on predictive maintenance, sustainability, commissioning, use of electronic tools and resources, and renewable and recovered energy.
Building Smart, Sustainable StrategiesBOMA continued to build on its reputation as the industry’s green leader in 2010. In March, BOMA received the U.S. Environmental Protection Agency’s (EPA’s) 2010 ENERGY STAR® Award for Sustained Excellence, BOMA’s fourth consecutive year being honored for energy-efficiency initiatives by ENERGY STAR. BOMA remains the only commercial real estate association to receive the award.
The primary initiative BOMA was honored for was the 7-Point Challenge, a unique pro-gram which calls on BOMA members to reduce energy consumption by 30 percent by 2012 across real estate portfolios, as measured against an average building measuring a 50 on the ENERGY STAR benchmarking tool. Since its launch in 2007, the 7-Point Challenge has been widely embraced throughout the marketplace, with more than 120 member companies and local associations representing more than three billion square feet of office space endorsing the challenge.
In 2010, BOMA announced an addendum to the 7-Point Challenge that calls on BOMA´s associate members—providers of products and services to the commercial real estate industry—to institute sustainable practices in their business operations.
BOMA also introduced a new three-part webinar series, Strategies for Supporting Sus-tainable Building Operations, which helps property professionals implement green practices to enhance asset value and net operating income, improve tenant satisfaction and benefit the environment.
Performance MattersBOMA’s income and expense bench-marking report, the Experience Exchange Report® (EER), proved to be a key tool for industry professionals look-ing to enhance asset values. The 2010 report encompassed more than 4,200 buildings and 768.8 million square feet of office space across 110 cities, mak-ing it the leading source for office build-ing income and expense data. Thanks to a collaboration with leading industry research firm Kingsley Associates that brought the report online in 2009, gen-erating reports and analyzing the data is easier than ever before.
The BOMA Magazine 23
Allocating Common Area Maintenance (CAM) Charges in Mixed Use PropertiesAnd Other Strategies for Managing Live-Work-Play Developments
Robert Shovan, CPM®, RPA, LEED® AP
24 The BOMA Magazine January/February 2011
Building Owners and Managers Association International, 1101 15th Street, NW, Suite 800, Washington, dC 20005, (202) 408-2662, www.boma.org
A Vision for Commercial Real EstateBOMA strives to provide forward-looking pro-gramming to help its members successfully pre-pare for the challenges and opportunities ahead. In November, the BOMA Foundation collabo-rated with georgetown university’s School of Continuing Studies and its Masters of Profes-sional Studies in Real estate Program to present 2020: A Vision for Commercial Real Estate, a thought leader symposium held in Washington, d.C.
during the symposium, commercial real estate visionaries from both academia and industry painted a fairly optimistic picture of what the industry will look like in the next 10 years. Their predictions point to a future in which property management is increasingly important, buildings are carbon-neutral and shifting demographics create a greater demand for real estate.
Throughout the year, BOMA also supported the Real estate Associate Program (ReAP), an indus-try-backed, market-driven program that finds and trains career-changing minority professionals for positions in commercial real estate. BOMA donated meeting space, contributed education materials and instructors, including the textbook for BOMA’s popular “Foundations of Real estate Management” course, and offered free registra-tion to program participants interested in attend-ing BOMA’s annual conference.
Strength in Membership Membership remained solid in 2010, despite the challenges posed by a distressed econ-omy. Several new associations were added to BOMA’s robust network in 2010: local asso-ciation BOMA/greater Huntsville, state associa-tions BOMA Washington and BOMA New York and international affiliate the Chinese Building Owners and Managers Association. BOMA also strengthened its international presence through its active International Region Committee.
Leading the Future Leaders in the commercial real estate industry assembled in Long Beach, Calif. in June for the 2010 BOMA International Conference and The Every Building Show®. Attendees tapped into the power of the BOMA network over the course of the conference by connecting with colleagues, exchanging ideas and infor-mation, meeting with solutions providers and hearing industry leaders share strategies for success.
During the 2010 State of the Industry address, Kurt Padavano, chief operating officer of Advance Realty Group, and Henry Chamberlain, president of BOMA International, stated that, despite a host of challenges, there are opportunities for high-performance assets. Renowned economist and humorist Ben Stein offered wit and insight into the state of the economy and commercial real estate, noting that building owners and managers, in particular, have persevered through the worst of the downturn.
Attendees took in the industry’s best education by participating in more than 40 education sessions offered across five strategic tracks designed to help property professionals optimize building performance and take advantage of existing opportunities. More than 50 college and graduate students also took
part in a special student program. They met with men-tors, explored career opportunities, attended education sessions and visited the tradeshow.
The industry toasted the best of the best during The Outstanding Building of the Year (TOBY®) Awards, spon-sored by Securitas Security Services USA, by honoring 14 properties for excellence in building operations and man-agement in categories based on asset type or size. Ray H. Mackey, Jr., RPA, CPM, CCIM, was formally sworn in as the 2010-2011 chair of BOMA International during the ceremony. Other 2010-2011 BOMA International officers elected were Boyd R. Zoccola as chair-elect; Joseph W. Markling as vice chair; and Kent C. Gibson, CPM, as secretary/treasurer.
The industry’s best products and services were on display at The Every Building Show®, which was filled with indus-try professionals looking for innovative ways to deal with today’s toughest operational challenges. The green carpet was rolled out for attendees who visited the Green Pavilion and ENERGY STAR® Showcase, as they saw firsthand the solutions to increase efficiency and save money.
BOMA’s 2010 Medical Office Buildings and Healthcare Facilities (MOB) Confer-ence had record attendance, as nearly 600 medical office building owners and managers, developers, brokers, lenders, investors and healthcare executives took part in the conference held in May in Chicago. Healthcare reform topped the agenda, with experts predicting an increase in demand for medical office and other ambulatory healthcare facilities in both the short- and long-term.
BOMA International 2010-2011 Chair Ray H. Mackey, Jr.
A panel at the BOMA Foundation’s inaugural thought leader symposium discussed how sustainability issues will shape the next decade.
2010 BOMA Year in Review
January/February 2011 The BOMA Magazine 25
When cold and flu season kicks in,
employers’ concerns about absenteeism
and the resulting loss in employer pro-
ductivity also kicks in ... and with good
reason. According to a 2005 study by
Free Health Inc., employers lose $1,320
per person annually to absenteeism;
multiply that number by 10, 25, 100 or
several thousand, depending on the size
of an organization, and absenteeism can
quickly make a real dent in a company’s
bottom line.
A recent program launched by Kim-
berly-Clark Professional*, called the
“Healthy Workplace Project,” takes
a comprehensive approach to end-
ing germ transmission in buildings by
expanding the knowledge of where and
how germs are transmitted and provid-
ing tools, resources and products to help
improve tenant wellness and produc-
tivity. According to Peter Leahy, LEED
GA, customer marketing manager with
Kimberly-Clark Professional*, property
professionals need to think outside the
lavatory when offering guidance to ten-
ants. “Most people’s idea of germ con-
trol starts and ends in the restroom,”
explains Leahy, “but the average office
desk and common areas, such as con-
ference rooms and kitchenettes, have a
much greater germ load.”
Elevator buttons, stair railings, door
handles, keyboards, phone handsets—
chances are these hot spots harbor more
germs then a stadium full of crowded
restrooms, and the typical office kitchen
is an absolute nirvana for germs. Leahy
tells us that the average ATP [adenosine
triphosphate] result for a germ test is
under 200, whereas Kimberly-Clark Pro-
fessional* tested one refrigerator handle
at over 2,700.
The key to breaking the germ trans-
mission cycle is to know the hot spots
and to take action by washing or sani-
tizing hands and wiping down surfaces.
“You could touch one to 100 people or
places with the flu virus on any given
day, but if you go to a hand-sanitizing
Thinking Outside the LavatoryWhere Germs are Actually Lurking in your Building
station or wipe down an infected sur-
face, you’ve broken the chain of trans-
mission,” says Leahy.
The comprehensive information pro-
vided by the Healthy Workplace Project
makes it easier for tenants to break the
chain of transmission in the workplace,
while benefiting employers trying to
break the trend of costly absenteeism.
Another trend related to absenteeism
affecting worker productivity is what
some in the industry have coined “pre-
senteeism,” which Leahy defines as “lost
productivity that results from going to
work sick,” not to mention that individ-
uals who go to work sick are continuing
to spread germs.
The Healthy Workplace Project has
been put into practice in office build-
ings across the country and is even
percolating into other building sectors,
including a manufacturing plant in Lit-
tle Rock, Ark., that has 25-percent fewer
employees than two years ago due to
recent automation changes and layoffs.
“The idea of losing even one employee
for any period of time is devastating for
this company,” explains Leahy. “They
were interested in tools, techniques and
products to help reduce absenteeism
and were onboard immediately.”
Ultimately, Leahy hopes the Healthy
Workplace Project will live beyond the
cold and flu season and have a lasting
impact on the way tenants think about
germs and transmission in the work-
place. “We continue to refine, update
and measure so we that we can chal-
lenge people to change their behavior;
that’s our goal.”
Break the Germ Transmission Chain in Your BuildingBOMA International is using the Healthy Workplace Project to reduce the spread of germs. Check out what BOMA President Henry Chamberlain has to say about the project and learn how you can help your tenants reduce ab-senteeism and improve productivity at www. healthyworkplaceproject.com. Healthy Workplace education is available from Kimberly-Clark Profession-al* in several BOMA local markets. Check with your BOMA local association to learn more.
Germ Hot Spots in Office Buildings
Doors
Copy stations
Water cooler/kitchen space
ATM in lobby
ReceptionLobby areas
Conference tables
Elevator buttons
Stair railings
By Laura Horsely
26 The BOMA Magazine January/February 2011
When a disgruntled client created a serious security situa-
tion at an affiliate office of Williams Financial Group (WFG)
in Dallas, Texas, staff members at WFG’s headquarters on the
other side of town were unnerved; but with no obvious threat
to their personal safety, there was not much cause for alarm
when it came to the security of their own building. So when
property managers immediately dispatched the head of secu-
rity to meet with staff, placed an officer outside their suite door
and provided additional security screening for WFG’s visitors
that day, headquarters staff was duly impressed.
The response resonated with Maggie Moore, executive
administrator for WFG, as a shining example of excellent ten-
ant relations.
“Their responsiveness stands out,” Moore recalls, “as the
right way to handle a shocking event. As we were trying to
get a handle on what happened, knowing they were on top of
it—to the point of having someone standing guard outside our
door—was phenomenal. They provided more than security
that day … they provided peace of mind.”
Don’t Wait for the Tough TimesThis may be an extreme example, but it speaks a simple
truth: When you think about good customer service, what
comes to mind? A list of automated voice-mail options, or a live
person answering the phone? An annual survey, or a quarterly
lunch to talk face-to-face? Almost without fail, it’s the personal
touch that turns average into outstanding.
And with a still-struggling economy and national vacancy
rates hovering around 18 percent, standing out from the com-
petition through exceptional service is a must, but it can’t be
rolled out only when times are tough.
Mike Kent, president of U.S. Real Estate Management Serv-
ices for Colliers International, agrees, explaining, “It scares me
when people say, ‘We’re focusing on customer service now.’ It
must be the most basic service you provide, and you can’t be
the only one involved. If there’s only one person focused on a
client, he or she will either have a rapport or they won’t—there
is no in-between. So, have multiple contacts; if you can’t put
your engineer out in front of tenants, or if you can’t ask your
accountant to walk through financials with them, it’s going to
be next to impossible to address their needs.”
Another way to prioritize tenant relations is to always think
of tenants as king, regardless of market conditions.
Jim Arce, executive managing director of client solutions for
Cushman & Wakefield of California, Inc., views tenant reten-
tion and recruitment as being about service first and bricks
and mortar second. “It’s all about service and how you relate
to tenants,” he says. “Your building may not be the newest or
the best in town, but I’d rather be in an older building that is
better managed. Since real estate is so competitive, service is
what differentiates you.”
In order to quantify your service over the competition’s,
Kent recommends touring the five most competitive proper-
ties quarterly in order to “know what your tenants are seeing
firsthand. The knowledge you’ll gain will give you the ability to
be nimble … and will remind you why the expense of moving
is almost never a deterrent.”
David Williams, COO of WFG and someone who recently
moved offices after outgrowing the former space, agrees, say-
ing, “We place a premium on a responsive management team,
and we’ll move to get it. We want to work with people who
care about us as tenants. Even if the answer to a request is
ultimately ‘No,’ we want someone who is willing to work with
us to find a solution rather than someone who looks to the
lease for an answer.”
Nancy Pinson, an administrative office manager in Korn
Ferry’s Dallas office and a primary contact for her building’s
property manager, points to the “above and beyond” moments
The Shortest Path Between Average and ExceptionalBy Stephanie J. Oppenheimer, APR
The PersonalTouch
January/February 2011 The BOMA Magazine 27
that help differentiate great property managers from aver-
age ones. “My company was celebrating its 40th anniversary
and, being a global firm, we were asked to send photos of our
office location. We wanted to get a photo of the Dallas skyline
from the roof, but we couldn’t do that because of safety rea-
sons. Rather than just say, ‘No,’ however, our property manager
checked with other tenants who had balconies on upper-level
floors and arranged for a photo shoot. Maybe it’s not a huge
thing … but it’s a good example of their willingness to go the
extra mile for us.”
Money Makes the World Go ’Round?Understanding financials is also a key component to dif-
ferentiating a management team’s ability to service clients.
Just as meeting personally with tenants and getting to know
their needs is important, so are face-to-face meetings to talk
financials.
“Sit down with decision-makers at least quarterly,” advises
Kent, “and find out how they’re performing. Tenants are very
receptive; people want to talk about what they do, and it’s sur-
prising what they’ll share. You’ll gain good intelligence, which
will allow you to play a bigger role within your own company.
We’re here to add value and add net operating income (NOI)
to the bottom line, and this is one way to demonstrate that
you’ve explored options and can say, ‘This is what I recom-
mend, and here’s why.’ ”
Having insider information will also give managers more
negotiating power when it comes to renewals and financial
concessions, a more common occurrence in today’s economy.
“Tenants are looking for someone who can relate to the chal-
lenges they’re facing,” adds Arce. “They need someone who
will listen, consider alternatives and be flexible. We’re seeing
blend and extend deals [dropping rent in the short-term but
extending the length of the lease], straight rent reductions and
the provision of amenities in exchange for retaining a tenant.
But in order to do any of it, you have to know their financials.
Be rational and do your due diligence.”
How Important is Green?One of the final pieces of the puzzle is a firm understand-
ing of tenants’ expectations when it comes to sustainability.
Is interest waning? Do tenants really just care about lowering
operating costs, which reduces their rent? Or is it merely a
way to leverage social responsibility in marketing materials?
Obviously, the answer depends on the tenant … but sustain-
ability is still relevant. “Green is a hot button for tenants,” Kent
notes, “and owners cannot afford to put it on the back burner
because they feel priorities have changed in these economic
conditions.”
Arce points out that tomorrow’s workforce will continue
to drive green: “Just as we’re trying to attract and retain ten-
ants, employers are trying to attract employees … and the
new generation has grown up in a far more socially conscious
environment. Sustainable consciousness has to be in the top
three of any CEO’s list. Our clients are seeking ENERGY STAR®
and LEED® certifications; and, although they can’t charge a
premium for it, they have to provide it as part of the standard
package.”
Bob Best, a LEED-accredited professional with Jones Lang
LaSalle in Chicago and director-sustainability markets, is striv-
ing to make the company one of the world’s most sustainable.
“Sustainability is good business,” he says, “and it’s important
to tenants. A 2009 survey of our tenant representative brokers
showed that, five years ago, people might not have considered
it in a space decision, but a year ago, it was a factor one-third
of the time. Today, it’s more like half the time.”
“One of the most enduring aspects of sustainability is that
it’s the one area in which everyone is in agreement,” Best adds.
“In lease negotiations, you typically have people sitting on
opposite sides: One wants maximum rates for services; another
wants maximum services for minimum rates. There’s conflict
everywhere … except with sustainability. We all want to use less
energy and less water and be more environmentally respon-
sible. It’s the one point where everyone wants to cooperate.”
About the Author: Stephanie J. Oppenheimer, APR, formerly the assistant vice president of communications for BOMA International, is principal of Skylite Communications, a freelance writing and editing company based in Falls Church, Va.
“We place a premium on a responsive
management team, and we’ll move to get
it. We want to work with people who care
about us as tenants. Even if the answer to a
request is ultimately ‘No,’ we want someone
who is willing to work with us to find a
solution rather than someone who looks to
the lease for an answer.”
-David Williams, COO, Williams Financial Group
28 The BOMA Magazine January/February 2011
Mixed use development has been on
the rise over the last decade and real
estate experts predict that the trend will
continue. Contributing to an increase
in mixed use buildings are such factors
as the rising cost of land and the need
for localities to reduce traffic conges-
tion, which have resulted in incentives
for mixed use projects from some local
and state governments. While a boon to
end-users who are able to live, work and
play under one roof, the projects create
a bevy of challenges for real estate pro-
fessionals charged with managing them.
Mixed use property managers deal
with multiple ownership entities, a
diverse group of tenants (each with
their own requirements and needs)
and complicated accounting proce-
dures. Allocating common area main-
tenance (CAM) expenses is, perhaps, the
most challenging task for managers of
these properties. CAM expenses are the
expenses required to maintain building
common areas and common building
systems, such as lobbies, parking lots
and loading docks. With several different
entities, tenants and owners using com-
mon areas and building systems, it can
be a time-consuming and often confus-
ing process for property professionals.
BOMA hopes to alleviate much of the
confusion with the recently released
Allocating Common Area Maintenance
(CAM) Charges in Mixed Use Properties
and Other Strategies for Managing Live-
Work-Play Developments, a new publi-
cation that highlights the complexities
of managing mixed use projects and
offers guidelines for allocating CAM
expenses. Authored by Robert Shovan,
CPM®, RPA, LEED® AP, senior portfo-
lio manager, Management Services,
Transwestern, and vetted by a team
of industry experts, the book features
best practices and seven in-depth case
studies on everything from restaurant fit
outs to parking garages. It also includes
chapters on utilities, life safety/security
and access control, insurance and gen-
eral day-to-day management of mixed
use properties.
“Talking to the other collaborators
about their experiences in managing
mixed use projects, I found we had one
thing in common: We all had a situation
when our client needed us to sort out
an issue and we didn’t have all of the
information to provide a recommenda-
tion,” says Shovan. “This publication is
a summary of those experiences, with
examples of how these problems were
solved. It also offers ideas on what type
of information to look for and how to
access it, which is especially helpful
when managing a mixed use property
for the first time.”
Although every mixed use project is
unique in design and operation, good
management practices are universal.
The guide emphasizes that communi-
cation with tenants is essential. Ten-
ants may not understand the benefits
or purpose of common areas, and it falls
on the real estate manager to educate
them on how common area expenses
are allocated. In cases where it is unclear
how tenants should be charged for CAM
expenses, it is the property manager’s
responsibility to offer advice to the
owner about how best to allocate those
expenses.
From Planning to Operations
During the planning and develop-
ment stage of a mixed use project, it
is ideal to have a real estate manager
involved to help forecast operating
expenses and how they will be allocated.
Doing so accurately will help in the leas-
ing and marketing efforts of the project
and will ultimately affect net operat-
ing income and the profitability of the
project for investors. Changes during
the construction process can also occur,
ultimately affecting easement and cost-
sharing agreements. Understanding any
changes that occur after the original
planning will help the property manager
properly allocate CAM charges once the
building is operational.
For example, a case study in the pub-
lication summarizes a situation where a
high-rise apartment shares a courtyard
with an office tower. Both entities have
the right to use the courtyard, though
a cost-sharing agreement between the
office and apartment entities left it up
to the office tower’s owner to determine
how expenses for the space would be
shared. The office tower owner and
apartment owner agreed to an alloca-
tion based on a ratio of square footage
between the apartment tower and the
office tower.
It was later discovered that the electric
power for the courtyard was provided
through the apartment owner’s main
electric service, without the apartment
owner’s knowledge and with no reim-
bursement from the office tower. Upon
further investigation, it appeared that a
construction change may not have been
communicated back to the team that
developed the cost-sharing agreement.
The property manager tasked with sort-
ing out the issue recommended install-
ing a submeter to determine the precise
By Lindsay Tiffany
New BOMA Publication Clarifies Confusion about CAM Charges
Lessons in Mixed Use Management
energy costs for the courtyard, which
would then be split between the entities
based on the existing allocation percent-
ages. Based on the submeter readings,
the owners of the office and apartment
towers agreed on a reimbursement
amount for past expenses and amended
the cost-sharing agreement to reflect the
new arrangement.
Utilities and Energy Conservation
One of the most challenging jobs fac-
ing managers of mixed use buildings is
allocating utility expenses. Each prop-
erty is unique and energy consumption
will vary greatly depending on the ten-
ants and end-users, making allocations
based on simple square-footage calcula-
tions insufficient in most cases.
Submetering, a best practice in both
single use and mixed use buildings, is
an important tool for accurately allo-
cating utility expenses. In addition to
water and electric submeters, BTU
meters are also used when condenser
water or hot water is provided by district
energy providers or a central plant. The
book contains an entire chapter on how
to manage the submeter infrastructure
to ensure all entities are being charged
fairly and correctly.
Energy conservation is another best
practice for managing commercial
buildings, but can be complex due to
the different users in mixed use projects.
BOMA’s new CAM publication recom-
mends establishing an energy conser-
vation committee comprised of various
volunteer members for each of the dif-
ferent entities in the building, with the
goal of reducing energy consumption
and promoting sustainability initiatives
within the project.
Leveraging Economies of Scale
One major advantage in mixed use
properties is that property managers are
able to leverage economies of scale. By
offering a larger overall scope of work
for a bid, managers can save money,
create efficiencies and often receive a
higher level of service. Building security
is one example. It is common in mixed
use properties for a single life safety/
security team to service the entire proj-
ect. Equipment can be standardized to
reduce costs and minimize training.
When equipment is standardized, ven-
dors commonly prepare service agree-
ments for the entire project. In such
cases, the pieces of equipment can be
totaled per entity in the project and
costs can be allocated on a percentage
basis.
In BOMA’s CAM publication, a case
study on loading docks offers insight
into how to allocate costs associated
with economies of scale in more compli-
cated instances. Loading docks require
a variety of different expenses, includ-
ing security, lighting maintenance and
janitorial services. This is another case
where a simple allocation based on
square footage may be insufficient, as
different entities use the loading dock
to different degrees.
The case study tells of one such
instance at a major urban mixed use
project with eight different owners,
where the loading dock was handling
5,000 truck deliveries per month. In
order to develop an allocation method
that all parties could agree on, the real
estate manager proposed a two-pronged
solution. First, the manager determined
each entity’s share of expense based on
the amount of deliveries made to the
entity. Trash expenses were treated
separately. The manager hired a trash
consultant, who determined the over-
all quantity of trash disposed by each
entity. From there, they established a
base line allocation percentage for each
entity, with adjustments made monthly
based on any change in the project’s
occupancy.
While managing a mixed use property
can be complex, foundational experi-
ence in many different property types
and an in-depth knowledge of how the
project is used by tenants are critical to
success. It is important that the man-
agement team be creative, flexible and
fair in order to serve tenants and help
the project owners reach their goals.
Look For It: More Mixed Use SolutionsBOMA International is in the process of developing a floor measurement standard for mixed use buildings. The publication, available in June 2011, will enable users to identify and mea-sure gross floor areas that consti-tute office, industrial, retail and multi-unit residential components using measurement standards published by BOMA for those use components.
Allocating Common Area
Maintenance (CAM) Charges
in Mixed Use Properties
And Other Strategies for Managing
Live-Work-Play Developments
Robert Shovan, CPM®, RPA, LEED® AP
Finally, a Strategy for Managing Live-Work-Play DevelopmentsAllocating Common Area Mainte-nance (CAM) Charges in Mixed Use Properties and Other Strate-gies for Managing Live-Work-Play Developments is now avail-able (visit http://shop.boma.org). This comprehensive guide includes:• The Real Estate Manager’s Role
in Mixed Use Developments;• Mixed Use Common Areas
and Expense Allocations;• Managing Utility Expenses;• Life Safety and Security Access
Control;• Allocation of Property Owner
Insurance;• Day-to-Day Management of
Mixed Use Properties; plus• Seven Mixed Use Case Studies.
30 The BOMA Magazine January/February 2011
Green Scene
AN OFFICE RECYCLING PROGRAM is a central element to a building owner or manager’s sustainability strategy. An effective recycling program engages ten-ants, visibly demonstrates the property owner or manager’s commitment to sus-tainability and improves building opera-tions. Here’s how to make your recycling program a success.
1. Waste AuditThe first task is to conduct a waste
audit in order to identify the materials in your building’s waste stream and esti-mate the amount of recyclable materials being generated. Identifying the types and amounts of materials generated in the office establishes baselines for mea-suring success of the campaign. The pri-mary recyclable materials in any office building are paper, cardboard, plastic, aluminum, fluorescent bulbs, batter-ies, ballasts, electronic equipment and food waste. Understanding the mix and quantity of recyclable materials in your building will enable you to develop the most effective recycling program.
2. Tenant EngagementThe success of any office recycling
program depends on tenant participa-tion. A key first step for property own-ers and managers is to work with tenant companies to identify internal champi-ons for the recycling program. Tenant champions provide a strong internal push when starting a recycling program by encouraging the required behavioral changes. Property owners and managers can work with tenant champions to con-duct recycling education and training programs, promote participation and monitor the program’s success. Champi-ons can drive participation by hosting a kick-off event, sending regular newslet-ters, holding a contest among employees
to reward participation and publicizing successes when goals are met. Employee education results in high participation rates and less contamination of recycled materials—critical components for a successful program.
3. Program Development
All successful office recycling pro-grams have one common element: Tenants have easy access to clearly marked recycling containers through-out the workplace. Single-stream recy-cling, because of its simplicity, is the easiest program to implement. Single-stream recycling is a program in which the primary tenant-produced waste streams (paper, cardboard, aluminum and plastic) can be comingled in a sin-gle recycling container. The best recy-cling programs have several centrally located recycling containers on every floor with clear signage that identifies items that are (and are not) recyclable. Common areas for containers are kitch-ens and break rooms, cafeterias, training rooms, conference rooms, copy rooms, mail rooms and near exits. It is also a best practice to place traditional waste containers nearby to reduce contamina-tion in the recycling containers. Effec-tive placement of waste and recycling containers can also lower janitorial costs by reducing cleaning service needs in individual offices.
Four Steps to a Successful Recycling Program
4. Vendor SelectionThe final element of developing a
successful office recycling program is choosing a company to partner with to execute the program. The critical selec-tion criteria centers on the recycler’s ability to accommodate your building’s recycling needs. Your recycling partner should be able to collect and process the primary recyclable materials com-ing from your buildings. A site visit and survey of a recycler’s material reprocess-ing facility is a terrific means of evalu-ating a potential partner. In addition, a recycling partner should be able to support building owners and managers in developing an effective program and provide recycling education, recycling containers and training materials.
Final ThoughtsWhen beginning a comprehensive
office recycling program, plan to start small and let it grow. Allow time for recycling to become a habit with ten-ants. Invest the time and effort to edu-cate and train your staff and tenants up front. Office recycling programs that are launched effectively will build momen-tum and become sustainable programs.
About the Author: Dan Rose is the Midwest commercial property sales director for Waste Management. Dan has been with Waste Man-agement for 15 years, and for three years of his tenure, Dan served as the Midwest recy-cling director for Waste Management Recycle America. Contact Dan at [email protected].
By Dan Rose
January/February 2011 The BOMA Magazine 31
reSearch corner
THE CURRENT COMMERCIAL REAL ESTATE CLIMATE could be the indus-try’s toughest since the 1990s, and it’s not expected to improve any time soon. In this market, measuring building perfor-mance is key—not just to surviving but thriving. For nearly a century, BOMA’s Experience Exchange Report® (EER) has helped property professionals evaluate the income and expense performance of their buildings compared to their market peers. From small suburban office parks to lively urban towers, building manag-ers have turned to the EER to benchmark their properties and identify key indus-try trends.
What makes the EER the industry’s leading benchmarking resource? The thousands of income and expense submissions by property professionals from the United States and Canada. The 2010 EER contains income and expense data from more than 4,500 buildings in more than 110 markets, totaling more than 821.9 million square feet of com-mercial office space. What prompts so many building owners and managers to submit their building’s income and expense information? Here are the seven most important reasons:
1. To assure that market data is rep-resentative and accurate. Many own-ers and managers share their income and expense information because they rely on the EER to help them gauge their own performance and want to be sure that the data included is an accurate reflection of the market conditions in which they operate. Throughout the industry, building investors, owners and managers recognize that the EER pro-vides independent, third-party assess-ments of a market’s performance.
2. To create a powerful legislative calling card. Those who contribute data to the EER recognize that aggre-gating income and expense information gives BOMA a powerful calling card in addressing legislative and regulatory bodies. Representing more than twice as much office square footage as other industry expense studies, the EER serves as a powerful tool for documenting office
Seven Reasons Why YouShould Complete the EER Survey
building performance and for gauging the potential impact of proposed legisla-tion or code changes.
3. To demonstrate optimal asset performance. Widely used by owners and investors to evaluate asset perfor-mance, the EER can help demonstrate that an asset’s operations are optimized and that its management team is work-ing to control costs, enhance NOI and maintain the asset—even in the face of challenging market conditions. For developers, investors and owners who are moving into new markets, the EER can provide valuable market intelli-gence, helping to reinforce due diligence and corroborate information from local brokers.
4. Submitting data is easy and green. The EER survey is entirely online at www.bomaeer.com. Respondents have complete flexibility to begin the survey form and save their work as they go. The survey is open from January through March 31, giving respondents plenty of time to complete the form. Plus, the sur-vey is “smart”; it will automatically total all income and expense categories and check your work as you go.
5. Any office building, medical office building, financial building, corporate facility or government building can contribute data—BOMA member-ship is not required. That’s right: Any office building can share its performance data, regardless of whether it’s owned or managed by a BOMA member. The EER is the industry’s largest source, not only for commercial office data but also for medical office and financial office data.
6. Submitters get discounts and free stuff. Each submitter receives a complimentary Expense Performance Comparison, which assesses the sub-mitted building’s performance to three or four of its market peers. And, submit-ters can purchase EER subscriptions for individual markets or for all markets at nearly 50 percent off the list price.
7. It’s simply the best. First devel-oped in 1920, the EER has long been the industry’s go-to source for office build-ing performance data. It has remained true to its original purpose: providing valuable market data to those who have to use it to manage, buy or sell assets. Be part of a powerful tradition and submit today.
Play Your PartGo to www.bomaeer.com to start your EER survey today. Login if you have an EER subscription or have shared your data in the past. If not, create a login and password and get started. Need help? Contact Tracy Glink, BOMA’s manager of research, at (202) 326-6346 or [email protected].
By Lorie Damon, Ph.D., and Tracy Glink
32 The BOMA Magazine January/February 2011 32 The BOMA Magazine January/February 2011
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January/February 2011 The BOMA Magazine 33
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34 The BOMA Magazine January/February 2011
EYE ON EDUCATION
WITH THE ADVENT OF HEALTHCARE REFORM, healthcare systems in the United States are faced with many changes and uncertainty. As the end-users—and, in many cases, owners—of medical office buildings (MOB) and other ambulatory facilities, healthcare systems are dealing with a number of challenges that will impact their real estate decisions and their capacity to develop, own, lease and manage their medical office facil-ities. The challenges they face include ongoing capital con-straints; aging hospital system infrastructure; changes in lease accounting standards, commonly referred to as FAS 13; contin-ued scrutiny of the STARK law, anti-kickback and other regula-tory requirements; and the changes resulting from the recently passed healthcare reform legislation, the Affordable Care Act. And, there are no easy cure-alls.
Much of the existing hospital building infrastructure and its associated physical plants are quite old. Addressing the needs of aging, existing infrastructure and planning to build new replace-ments consume considerable capital, leaving little money for new medical office development or for renovating existing MOB space to accommodate changing physician practice needs and evolving diagnostic technologies.
In the face of these and other capital constraints, some hos-pitals have monetized their medical office assets, selling them to third-party owners, often healthcare REITs. Many moneti-zations were structured as sale-leasebacks and were typically “off balance sheet” transactions, allowing hospitals to protect their bond ratings. Bond ratings are significant for most health systems, because they allow them to raise capital at low rates;
however, the changes in lease accounting standards proposed by the Financial Accounting Standards Board and the International Accounting Standards Board will certainly create complications and may curtail monetization activity. The proposed changes require that all leases be recorded on the balance sheet. Hos-pitals who monetize their MOBs through sale-leasebacks have expressed concern that their bond ratings may be adversely affected, as these leases will now appear on their balance sheets.
Further complicating the matter is the growing trend of hos-pitals directly employing physicians. Many physicians no longer wish to maintain their private practices due to declining insur-ance reimbursement rates, uncertainty about the impact of the Affordable Care Act and changing dynamics among new phy-sician graduates. Health systems must be prepared to address this growing need.
What does that have to do with real estate? Instead of having medical office buildings filled with multiple physician practices, those physicians will be hospital employees and the hospital becomes the primary lessee in medical office space. This trend intersects with the proposed lease accounting changes and what results are new complexities that directly affect health systems’ real estate strategies. If health systems will increasingly employ physicians and need to be the lessor of record for their practices, does it make more sense for them to own their real estate? This is a 180-degree change from what has happened over the past few years. How will healthcare systems allocate already scarce capital for that purpose? How will their bond ratings be affected? And, what additional compliance requirements, from regula-tions like the STARK law and Medicare/Medicaid Anti-Kickback statutes, will hospitals need to comply with if they elect to own their real estate?
The Affordable Care Act adds still another layer of uncer-tainty. Although much of the legislation does not go into effect until 2014, most health systems have already begun to prepare. Moreover, despite Congressional posturing, most health systems believe that a repeal is unlikely; instead, they are trying to deter-mine how best to prepare for this legislation in the face of new uncertainties about which provisions will stand and which will falter, either through lack of funding or other maneuvers. Either way, health systems, especially not-for-profit systems whose charters require them to treat the un- and under-insured, expect to continue facing increasing numbers of patients, increasing costs of delivery and declining reimbursements from Medicare, Medicaid and private insurers. Add to this dilemma a potential addition of 35 to 50 million people entering the system with the Affordable Care Act and, collectively, these circumstances create one of the most challenging environments for healthcare systems. They also demonstrate how essential a well-designed real estate strategy is for health systems—both to take advantage of opportunities and to mitigate risks.
About the Author: Neil Carolan is vice president and chief physician de-velopment officer, Network Real Estate, Carondelet Health Network, and 2010-2011 vice chair of BOMA’s Medical Office Buildings and Healthcare Facilities Committee.
The Mother of All Headaches: Challenges Facing Healthcare Systems and Their Real Estate StrategiesBy Neil Carolan
Learn more about the trends and challenges confronting healthcare systems at the 2011 Medical Office Buildings and Healthcare Facilities Conference, May 4-6, 2011, at the Hyatt Regency in Dallas. For more information, contact [email protected].
YOUR WELL BUILDING EXAM CHECKLISTPreventive Maintenance Guidebook: Best Practices to Maintain Effi cient and Sustainable Buildings
The latest edition of BOMA’s top-selling publication provides maintenance practices and tools for creating, managing, monitoring and improving a preventive maintenance program. Look for additional information on predictive maintenance with more emphasis on sustainability, commissioning, use of electronic tools and resources, and renewable and recovered energy.
BOMA’S 2011 ALL-STAR LINEUP
Order Online Today at http://Shop.BOMA.org
Looking for market advantage in 2011? BOMA has you covered. Check out our three new publications to help you do your job even better in the New Year.
HELP FOR MIXED USE CAM ALLOCATIONSAllocating Common Area Maintenance (CAM) Charges in Mixed Use Properties and Other Strategies for Managing Live-Work-Play Developments
This resource guide helps demystify the complexities and confusion of CAM charges by outlining methods and guidelines that can be applied to existing or new mixed use projects. It is a best-practice resource including a number of real-world case studies for managing live-work-play develop-ments. This unique publication is a must-have resource for anyone involved in mixed use properties.
HIGH PERFORMANCE LEASE FOR HIGH PERFORMANCE BUILDINGSBOMA International Commercial Lease: Guide to Sustainable and Energy Effi cient Leasing for High-Performance Buildings
This update to BOMA’s best-selling Green Lease Guide includes more “green” clauses refl ecting the evolution of the market over the past several years as well as updates to the “non-green” clauses. This defi nitive guide helps property professionals execute a lease that addresses building operations and performance to maintain an energy effi cient and high performance property.
BOMA pubs_fullpg_FINAL.indd 1 12/17/10 3:58 PM
36 The BOMA Magazine January/February 2011
trends tracker
By Lindsay Tiffany
COMMERCIAL BUILDING CONSTRUCTION in the United States is expected to increase 16 percent in the next year, accord-ing to 2011 Construction Outlook, a report recently released by McGraw-Hill Construction. While the news is positive, the gains are modest compared to the significant decline the sec-tor experienced over the last three years. Construction starts for commercial buildings fell 17 percent in 2010, 43 percent in 2009 and 19 percent in 2008, adding up to a contraction of 62 percent in dollar terms.
During a presentation of the report’s findings at the Outlook 2011 Executive Conference, held in late October in Washington, D.C., McGraw-Hill Construction’s Vice President of Economic Affairs Robert Murray explained that tight credit conditions, high unemployment rates and a dearth of developer-driven projects mean that a recovery to pre-recession conditions is still a ways off. “Recovery is still struggling to gain footing,” said Murray. “In 2011, we’re seeing below-trend growth, though things will pick up slightly in the second half of the year.”
Concern about the Euro-pean debt crisis and the fact that many consumers and busi-nesses are deleveraging is fur-ther stalling recovery. The stim-ulus bill, the American Recovery and Reinvestment Act of 2009, did bolster construction in the infrastructure and public works sector as expected, but has not helped other sectors much. The devaluation of assets, combined with a lack of financing, has made turning the corner espe-cially difficult for commercial real estate; however, Murray noted that recently there have been early steps toward recov-ery in the CMBS market.
The report predicts that office building construction starts will increase by 13 percent
in 2011, following dramatic declines over the past three years. Starts for office buildings plunged 27 percent in 2008, 55 percent in 2009 and another 28 percent in 2010. With a lack of activity from developers, Murray predicted that growth will happen with corporate headquarters, data centers and government-funded projects, as was the case in 2010.
Construction was started on several large-scale commercial office projects in 2010, which bodes well for 2011. Most sig-nificant was the office portion of World Trade Center Tower 3 in New York City, with a value of $1.3 billion. The $369 million U.S. Coast Guard Headquarters in Washington, D.C., supported by federal funding, ranked as the second largest office start in 2010. The $180 million Facebook data center in Prineville, Ore., was also high on the list.
Retail construction starts, which also saw three consecu-tive years of steep declines, are expected to increase by 19 percent this year. Starts for the sector fell 34 percent in 2008, 53 percent in 2009 and 17 percent in 2010. Industrial warehouse constructions starts are pre-dicted to increase 30 percent in 2011, due to retail recovery and increased trade.
Healthcare facilities starts will increase by six percent, having avoided the dramatic decreases that other sectors saw over the past few years. Debate over healthcare reform created short-term uncertainty, but many are betting on greater demand in the long-term. Multi-family housing starts are expected to grow by 23 percent. Murray cited job growth and the creation of new households as factors, explaining that many young adults who lived with their parents during the reces-sion will move out as the econ-omy gains strength.
Time to Dust Off the Hard Hats?New Report Predicts Modest Pick Up in Construction Activity in 2011
Women in ConstruCtionMining and agriculture are the only industries with less female representation at the executive level than construction, according to a statistic cited at How-rey LLP’s Women in Construction conference, held in early November in Washington, D.C. During the panel, “Forge Ahead! Accelerating the Advancement of Women in the Construction Industry,” six industry veterans discussed how to close the gender gap.
“On-the-ground operational experience was critical to my credibility. Also, my involvement in an industry trade organization gave me the opportunity to hone my leadership skills in a supportive environment.” –Deb Wathen Finn, President, Wathen Group
“Today, more than half of college graduates are women. It’s a huge waste if construction companies aren’t tak-ing advantage of that investment.” –Mildred Callear, Executive Vice President and Chief Operating Officer, Small Enterprise Assistance Funds
“Diversify what you do within the industry—whether it’s operations, marketing, finance, whatever. If you don’t take advantage of those opportunities, you will be dispensable.” –Barbara Wagner, Senior Vice President, Clark Construction
January/February 2011 The BOMA Magazine 37
trade tools [networks]
VANCOUVER ISLAND TECHNOLOGY PARK (VITP), in Victoria, British Columbia, opened in late 2002 after its operators reno-vated an old hospital to become an economic engine and an environmental leader. VITP has focused on installing advanced technology—as well as green technology—to attract tenants, boost VITP’s revenue opportunities and reduce the park’s envi-ronmental footprint. Early in the project’s development, offi-cials decided to create a green building to appeal to leading high-tech companies and to showcase green technologies to the community.
The VITP complex needed a new network infrastructure to be able to offer advanced services like voice over IP and video to tenants. “From the beginning, we wanted to make our build-ing’s network a key component of our business and our clients’ businesses,” says Dale Gann, president of technology parks for the University of Victoria. Cisco’s broad product portfolio allowed for deployment of services based on equipment from as few vendors as possible.
The new network core consists of Cisco® Catalyst® switches, which feature intelligent, scalable performance, allowing cus-tomers to grow their network easily as their traffic increases. This network supports:
• Cisco Network Building Mediator, which can help control the park’s environmental footprint.
• Cisco WebExTM, Cisco WebEx Connect and Cisco TelePres-enceTM, which allow clients to hold meetings online, reducing cost and environmental impact.
• Cisco wireless access points and controllers, which keep cli-ents connected to the network anywhere they roam on the VITP campus.
• Cisco Physical Security equipment, which helps VITP’s secu-rity staff secure the premises.
• Cisco Unified Communications Server and IP phones, which let clients take advantage of voice over IP (VoIP) and unified communications.
• Presence, which allows employees to see instantly someone they want to communicate with.
This investment in green IT infrastructure, as well as a dedica-tion to environmental sustainability, has attracted a variety of technically savvy and environmentally conscious clients to VITP. With the network core, VITP plans to expand to 250,000 square feet and add new tenants. “The Cisco equipment is very scalable, so we’ll be able to add network traffic and clients without any problems,” Gann says. “We won’t have to rip out existing gear and replace it with something more expensive.”
For more information, and to read the entire case study, visit cisco.com/go/realestate.
Technology Park Transforms Former Hospital into a ‘Green’ Showcase
RPA/FMA/SMA/SMT ACCELERATED COURSES
Jan 26, 2011 Asset Management
Mar 2, 2011 Design, Operation & Maintenance Part I
Mar 16, 2011 Budgeting & Accounting
May 4, 2011 Design, Operation & Maintenance II
Jul 20, 2011 Law & Risk Management
Aug 24, 2011 Real Estate Investment & Finance
Sep 14, 2011 Technologies for Facilities Management
Oct 5, 2011 Leasing and Marketing
Oct 26, 2011 Facilities Planning & Proj Mgmt
Nov 2, 2011 Environmental Health & Safety Issues
38 The BOMA Magazine January/February 2011
THIS JUNE, the BOMA International Conference and The Every Building Show® touch down in the nation’s center of power—Washington, D.C. Commercial real estate professionals from across the country and abroad will gather to discuss current trends, best practices and learn firsthand what industry leaders are doing to stay ahead.
Want to be a market leader in 2011 and beyond? Then, you can’t afford to miss BOMA 2011. Here’s why …
Reason 1. The Industry’s Best Programming—Bar None
Who says business and politics don’t mix? The BOMA 2011 lineup is the hottest ticket around. Where else will you find politi-cal guru David Gergen, finance and investment king Sam Zell and real estate strategist extraordinaire Dr. Peter Linneman under one roof? Nowhere else.
Add to that the industry’s best education, and you’ll have a full plate of great ideas and strategies to position you and your organization for success. Tenant relations, asset management, engineering, energy efficiency, leadership—whatever issues you’re dealing with, we have a session (or two or three or 10) to help you tackle them. Plus, if you’re pursuing or maintaining a real estate designation or license, BOMA’s course selection has you covered.
Reason 2. Your Networking Path to Success
The best way to come out on top after a recession is to be in the company of the best and the brightest. That’s the company you’ll find yourself in at BOMA 2011, where you can network and share ideas with a few thousand of the best minds in the busi-ness. Choose the registration option to fit your needs, including full registration, one-day registration or the free tradeshow-only option. New this year: For just $50, you can attend The Every Building Show®, have lunch on the tradeshow floor and attend an education session of your choice. Enjoy even greater discounts with team registration options.
Reason 3. The Every Building Show®
‘Learning Laboratory’With 450 exhibits, The Every Building Show® is a true “learn-
ing laboratory” of innovative solutions that benefit all types of buildings. Meet with leading suppliers and learn how to increase operational efficiencies, enhance property values and reduce costs. Experience cutting-edge products, services and technolo-gies with in-depth information targeted to your needs. And, don’t forget to check out the Green Pavilion and ENERGY STAR® Show-case to find solutions to increase efficiency and save money.
conference connection
5 Reasons Why You Can’t Afford to Miss BOMA 2011
Reason 4. Premier Conference FacilityThe Gaylord National® Resort & Convention Center along the
banks of the Potomac River is a stunning new hotel and conven-tion center taking the nation’s capital by storm. State-of-the-art conference facilities, beautifully appointed rooms and excep-tional on-site restaurants will make your stay memorable, not to mention the indoor pool, spa and fitness center and D.C.’s hippest new nightclub, the two-story rooftop Pose Ultra Lounge.
The BOMA International Conference and The Every Building
Show® will be held June 26-28, 2011, in Washington, D.C. at
the Gaylord National® Resort & Convention Center. Learn more
at www.bomaconvention.org.
Take a video tour of the Gaylord National® Resort & Conven-
tion Center at National Harbor with BOMA President Henry
Chamberlain and BOMA Vice President of Communications,
Marketing and Meetings Lisa Prats at www.youtube.com/bomainternational.
Reason 5. World-Class DestinationLocated just 15 minutes from downtown D.C., National Har-
bor is a world-class mixed use destination, home to the Gaylord National® Resort & Convention Center, as well as some of the hottest boutiques, restaurants and entertainment in the D.C. area. The waterfront pier at National Harbor offers river cruises along the Potomac with stunning views of national monuments, or you can hop a water taxi to popular destinations like Alexan-dria’s historic waterfront, Georgetown and National’s Baseball Park. National Harbor is just 15 minutes by car or taxi from Reagan National Airport and 30 minutes from Dulles Interna-tional Airport.
David Gergen Sam Zell Dr. Peter Linneman
Share Your Data by March 31The EER—your most comprehensiveresource for measuring and managingasset performance—is like anorchestra. Every participating buildingbenefits the entire commercial realestate industry.
� Submit your data—it’s easy and free.� Receive a FREE expense performance
comparison for your building.� Get priority access and discounts.
Performance MATTERS
All data is kept in strictest confidence; only market level information is published.
Share Data. Improve Performance. Achieve Excellence.
Play Your PartThe best-performing buildings in the industry participate in and depend on BOMA’s Experience Exchange Report®.
2011 EER Survey Now Open at www.bomaeer.com
EERAd_2011Full:Layout 1 12/13/10 10:23 AM Page 1
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askedHighEff_BOMA.indd 1 12/8/10 11:49 AM