Those keeping track of our ongoing Top Tech series will know that this regular blog is aimed at highlighting some of NAI’s key tech partners and the game-changing solutions they bring to the commercial real estate (CRE) space. These are not sponsored blogs, but rather a way for us to share tools, technology, and ideas that are changing CRE for the better and streamlining and improving the services we offer.
This month’s partner is Apollo Energies. Below we discuss their approach to creating carbon-free properties and helping clients hit ambitious Environmental, Social, and Governance (ESG) goals.
What does Apollo Energies do?
The starting point for Apollo’s commercial services is typically an energy audit that helps clients determine the best way to streamline their building’s operations and bump up energy efficiency. Apollo also advises clients on how to meet safety, health, and wellbeing requirements in line with today’s ESG standards.
In recent years, there’s been an increasing push for corporate entities to meet sustainability commitments and to be able to show their progress. ESG criteria, which detail the goals these companies must meet, are also being used by investors and the public to evaluate the impact that company has on society and the environment.
With a focus on the ‘E’ of ESG, Apollo aims to help its partners meet the right goals, and lower their own energy spend in a clearly documented and reportable way. Their approach includes evaluating carbon emissions from a company’s operations, reducing carbon tied to power use, and assessing the carbon impact of the enterprise’s supply chains.
They also work with clients to meet benchmarks for Energy Star® certification, identifying their buildings as top performers in energy efficiency and ESG accountability.
The results of this focus and dedication are certainly impressive, and one of the reasons Apollo are a top choice among NAI brokerages across the country. At time of writing, the company has improved some 52 million square feet of building space and saved nearly 7.5 million kilowatt-hours (kWh) of energy across their client base.
Over the past few years, the use of drone technology in the commercial sector has seen massive growth, with drones being used for everything from agriculture to law enforcement.
In the commercial real estate (CRE) context, the value of drone technology is also rapidly becoming apparent. Drones deployed for site inspections can save time and money, in addition to keeping personnel out of harm’s way. In the event of disasters and damage to premises, drone photography provides accurate images for insurance purposes and a detailed catalog of damage.
In this latest blog in our ongoing tech series, we explore these applications in more detail, along with other smart technologies that are changing how we approach real estate development and management.
One of the main areas where drones add value is by enabling fast and accurate building inspections. Processes that would normally take a long time for a human team, such as surveying rooftops, can be completed in a single programmed flyover. There is also potential for the technology to be deployed for façade inspections and other critical, but time-intensive, maintenance operations.
The advantage of using drones for these tasks is that they can access areas that are difficult, or even dangerous for human crews. And they do it in a fraction of the time.
When equipped with the appropriate hardware, like thermal imaging cameras, drones can also check on a building’s heat loss profile, potential gas leaks, and even expedite operations during construction, all while making the overall project more sustainable.
Easing insurance and investment
Drone surveys can also add value during dealmaking, with detailed drone imagery that lowers investment risk when properties are changing hands. With a flyover, it becomes a matter of a few minutes to figure out whether a property shows signs of external structural issues. The task of valuation also becomes easier, allowing property sales to proceed smoothly.
As a recent Wall Street Journal article points out, there’s also been wide-scale adoption of drone technology in the insurance industry. The use case here is rapid assessment of claims and the ability to respond to critical situations, such as assessing property damage after a natural disaster.
Quoted in the article, Travelers Insurance VP, Jim Wucherpfennig, puts it like this:
“The technology allows us to write damage estimates more quickly for our customers, pay them more quickly, so that they can begin the repairs to their property and get back on their feet.”
As with maintenance inspections, he adds that deploying drones to these sites ensures that claims professionals are kept out of harm’s way in potentially dangerous areas.
Smart glasses and CRE
A second technology that is gaining traction for site inspections is Augmented Reality (AR) “smart glasses”. In essence, smart glasses allow the user to combine what they are seeing in the real world with superimposed virtual tools, making it easier to measure and quantify key parameters during construction and development.
As an example, on a building site, an inspector equipped with smart glasses could take measurements just by looking at a doorframe or window and then compare their findings to virtual plans. They would also be able to photograph, record and stream what they’re seeing, ensuring no details are missed during an inspection.
Like drones, smart glasses also enhance on-site safety. In this case by ensuring personnel can focus on what’s in front of them, rather than the tablet or smartphone in their hand.
What’s important to bear in mind is that these technologies don’t negate the need for human intervention. Rather, they shift the human element to the controller’s seat.
The photographic surveys undertaken by drones, for example, still need to be interpreted by human experts. Similarly, the video feed from a pair of smart glasses still streams back to the team at the office, who are then enabled to support decision-making processes at the site. So instead of replacing human expertise, these technologies supplement it, providing the means to optimize routine operations.
For CRE professionals, these technologies offer another tool to add to the toolbox. And some extra options for making deal negotiations as smooth and seamless as possible.
Social: Are smart tech and drones already part of your CRE environment? And how do you see this space developing?
Since April 2020, the National Association of Industrial and Office Properties (NAIOP) has been keeping track of the pandemic’s impact on CRE with their regular COVID Impact surveys. NAIOP’s June 2021 survey collected data from 239 US-based members, including brokers, building managers and owners, and real estate developers. A recurring theme in this latest survey was the increasing challenges commercial real estate (CRE) is navigating associated with supply chain disruptions and materials costs.
Supply and delay With more than 86% of developers reporting delays or materials shortages, it seems the impact of COVID on supply chains is set to become one of the longest-lasting effects of the pandemic. Adding to difficulties, 66% of those surveyed reported delays in permitting and entitlements, a figure that hasn’t changed since June 2020.
Fixtures and equipment for stores are also in short supply, with order backlogs stretching into months for some retail sectors. While this isn’t necessarily surprising, given setbacks in manufacturing in key suppliers such as China, the CRE market shows promising signs of being on-track for continued recovery nonetheless.
Development despite setbacks Despite the issues highlighted in the report, the survey still showed an increase in retail prospects. New acquisition of existing retail buildings was indicated by 39.1% of respondents, while 31.3% mentioned new development going ahead. Both of these figures represent a strong improvement from a previous survey in January. Deal activity was also noted to be on the up, with figures doubling for office and retail properties over the course of a year, and industrial deal activity increasing over 20% since June 2020.
“Bricks and clicks” International industry players have also noted that, though larger spaces are still facing delayed rental uptake, 20,000-30,000 square-foot sites are garnering increasing interest. The potential for these spaces is as part of a multichannel retail/warehouse approach – the “bricks and clicks” strategy. As the demand for online retail increases, logistic assets, and storage spaces become more valuable, contributing to an overall uptick in both virtual and brick-and-mortar marketplaces.
A promising prognosis Even with the supply chain challenges facing the industry, the Federal Reserve agrees with the trend data gathered from NAIOP participants. In their June 2021 Beige Book, the Fed noted upward movement in industrial output and consumer demand. Though economic gains were noted to be slow, the outlook remains steady and positive.
President and CEO of NAIOP, Thomas J. Bisacquino, puts it like this: “The materials and supply chain issues are lagging effects of the pandemic, and they are affecting every industry. While the pandemic’s impact was deep, there’s a sense of optimism among NAIOP members, with deal activity rising and an increase in people returning to offices, restaurants and retailers.”
A standout memory of my youth was going to the movie theater to see “Caddyshack.” While I’m sure some of you are rolling your eyes right now, others are smirking as you picture Judge Smails and the gang. The movie was one of the hits of 1980, grossing $40 million. Seeking to capitalize on this success, “Caddyshack II” was released a few years later. My memory of that was much different. To read the fully article, click here http://digital.propertiesmag.com/publication/?m=15890&i=714009&p=46&ver=html5
In a recent announcement, LightBox principal analyst Dianne Crocker predicted that as many as 25% (a quarter) of America’s malls can be expected to close down within the next three to five years.
This is, obviously, a trend that commercial real estate (CRE) professionals – like us within NAI Global – have been aware of and tracking for many years, but the LightBox prediction goes on to offer some idea of what we can expect to see filling these spaces in future and what investors see as the opportunities created by this trend – both projections worth exploring.
The “death of retail” has been hanging over the industry’s head for the better part of a decade, but what is more likely – Crocker and NAI agree – is a move away from brick and mortar towards e-commerce, with a hybrid model in future. This trend was merely heightened by the Covid-19 pandemic.
The Amazon effect
This is in line with what trend analysts and futurists like Doug Stevens are forecasting. Stevens told RetailDive last year that by “2033 the majority of our daily consumption will be transacted online”.
“In the future, all but the most convenience-based retailers will begin to use their stores as media to acquire customers and their media platforms as stores to transact sales…” – Doug Stevens, author of “The Retail Revival: Re-Imagining Business for the New Age of Consumerism”.
This tracks: Our most recent Real Estate Outlook study, Q42020, found that over half of the survey respondents (57%) said the “Amazon effect” was expected to have an even larger impact on their CRE markets than the pandemic itself.
A buyer’s market
Crocker argues that the slowdown in deal volumes initiated by the pandemic has left a supply gap, and described the demand from investors as “pent up”.
“Institutional capital right now is focusing its repurposing investments on the safest benefits, the suburban metro areas that have seen meaningful growth in the past year…” – Dianne Crocker, LightBox principal analyst.
Multifunctional malls with a lifestyle component are not only the darling of consumers, but of investors too including private equity firms looking to score a bargain on a distressed CRE asset.
We are seeing this interest spiking too, and not just for straight sales. There is much interest in reusing these generously sized spaces in novel ways.
There are many such developments on the cards around the country. In Benton Harbor, Michigan, plans have been suggested to reconfigure the Orchards Mall with some 116 luxury two-bed apartments, with six-month leases to attract business travelers. Chapel Hill Mall in Akron, Ohio – which was foreclosed – expects to see new life as a business park.
There are also some less-traditional buyers in the market for malls these days. Gaming giant Epic Games recently bought up an almost 90-acre defunct mall in Charlotte, NC, that will be refitted into their new international headquarters.
Repurposing and extended life
The malls that outpace the trend will be those with a strong anchor tenant and those that offer the live-work-play balance. Crocker argues that malls that are grocery-anchored, or those “featuring medical services, pharmacies, gyms, and lifestyle amenities are more likely to survive in their current forms.” This is the kind of mall that will become a hub of urban life, she says.
An anchor tenant with a multichannel presence and a pandemic-proof loyalty is a gamechanger for mall and retail leasing.
Malls also have, we believe, a long life ahead of them as places to showcase goods and establish brand experiences. Raydiant makes digital experience tools for real life spaces. Writing for Forbes in 2020, Raydiant CEO Bobby Marhamat wrote that “in-store experience defines retail for people”.
“Touching products is part of that experience, but helpful staff, well-organized showrooms, unexpected activities, smart technologies and other components all combine to create exceptional experiences…” – Bobby Marhamat, Raydiant.
These factors combined are why smart money is betting on not ‘a death’, but ‘an evolution’ for our malls.