Building & Facilities Operations

There is a scene in the movie Field of Dreams when the voice that originally convinces Ray Kinsella (Kevin Costner) to turn his cornfield into a baseball field now instructs him to “Go the Distance.”   Ray was feeling somewhat pleased with himself at this point in the movie having built the field and locating Terrance Mann (James Earl Jones,) but there was still work to be done in order to realize the ultimate vision, and he needed just a little more prodding to get there.

I thought that this was the same situation as I read through both the BOMA 360 certification program life safety components and the recommendations in the National Preparedness Month notice on how property professionals can maximize preparedness.

Both the programs and recommendations are excellent and go a long way toward helping guide property professionals with regard to what they need to have in place in terms of emergency and risk management guidelines, processes, manuals, training, etc. But, owners and manager need to understand that creating and documenting alone does not mean the objectives of risk management and preparedness have been fully met.

In order to “Go the Distance,” professional owners and managers must also:

• Effectively share and make the information available throughout their organization-  This means that it cannot exist in manuals on someone’s shelf, or in documents sitting buried on a network drive

• Make the information actionable

• Educate people (employees, tenants, vendors/service providers) on how to implement and ultimately execute on all of the procedures they have put into place.  You don’t want to be practicing this stuff during an actual event or emergency

This is extensive process that requires commitment, and often a partner, to help guide you and support your teams.  There is little question that effective and well thought-out risk management and preparedness plans are essential components of today’s property management reality, just make sure you Go the Distance so that your efforts deliver the Field of Dreams you’re hoping for.

Related resources you might be interested in:

On-Demand Webinar- Managing Risk & Life Safety With Effective Pre-Plans

As the summer winds down and we begin to brace ourselves for the uptick in activity come September, I came across this piece in R&D.com about scientists at MIT using a virus to assemble more efficient, more green batteries.  The problem with batteries is a vexing one: in order for our economy to move beyond petroleum (particularly for transport), which has incredibly high energy density, is inexpensive and easy to transport, we need to find a more efficient way to store electrons.  Electrons are weightless, but conventional batteries are not; hence the problem.

‘”Using M13 bacteriophage as a template is an example of green chemistry, an environmentally friendly method of producing the battery,” Allen said. “It enables the processing of all materials at room temperature and in water.” And these materials, he said, should be less dangerous than those used in current lithium-ion batteries because they produce less heat, which reduces flammability risks.’

Amazing.  Now I know that technology is not an unalloyed good and that progress should not be embraced without question, but I do find it remarkable that to read about things that researchers are working on today, that may only begin to affect society 10, 20, 30 years hence.  The Internet was conceived of in 1973, rolled out in 1983 and really only began to shake things up in the late ’90s.  The transistor was invented in the Bell Labs in 1947 but it was its minaturization in an integrated circuit in 1959 that really accelerated change. And then powered the personal computer (and the Internet).  The rest, as they say, is history.

The Green Movement in Real Estate is growing darker.  All new certification schemes, like all new growth, have that light green tinge when they begin that denotes suppleness. While it makes them amendable to change, it provides little armor when the going gets tough.  As a result, many rating systems mature to a darker shade.

The USGBC’s LEED rating system is by far the most recognized and most used green building rating system in the world and the UK’s Building Research Establishment Environmental Assessment Method (BREEAM) is frequently used in Europe.   As standards like LEED and BREEAM mature, that light hue darkens to a more serious and robust one – characteristic of maturity and staying power.  According to Pike Research, that day has come.

Pike projects that by 2020, 53 billion square feet of space worldwide will hold some type of green building certification, up from 6 billion this year, and 73 percent of green-certified building space is in a commercial building – a number expected to grow to 80 percent by 2020.   The majority of green certifications will be held by existing buildings instead of new construction, the report says.  One American Row in Hartford, CT recently obtained Leadership in Energy and Environmental Design for Existing Buildings Silver status, making it one of the few LEED-EB certified buildings also listed on the National Register of Historic Places.

The bigger question is how a building maintains LEED certification status once it has achieved it.   Without a comprehensive scheme for posting and managing LEED related tasks – the lifeblood required to sustain any certification level – that LEED or Green status will fade to brown and join the detritus of other failed programs.  Technology – operations management systems that post and sustain LEED related tasks throughout the year are integral to maintaining LEED status.  Keeping it Green and maintaining affordability requires energy and organization as well as robust data collection, communications and reporting.  Think of these systems as the arterial system for your LEED targeted building management practice.

Without one, your LEED status will die on the vine.

When it comes to technology, most people fall into one of two camps:  Either they hate it and shy away from change and advancement, or they love it, and they are always first in line for the upgrade or latest and greatest.  Personally, I try to walk the middle road and find a balance somewhere between the two.

Both of the philosophies mentioned above can be dangerous.  Resisting change and failure to embrace new technology is closed minded.  It is important to be open to new ideas and ways of doing things – generally these advancements improve the quality of our lives and ease with which we accomplish things.  If not for changes in technology we would still be sending letters by way of the pony express rather than email and sitting on the phone for hours to purchase airline tickets rather than doing it online in minutes.  Think about how you would have gotten money and directions to a restaurant 15 years ago.  I hope you got the money before the bank closed…

Racing towards technology and embracing change too quickly can have its downfalls too.  Unless you are a self-proclaimed early adopter and enjoying helping companies work out the kinks, sometimes it’s better to not be in the first round of people to try a new product.  Bugs and pieces not all working together properly can lead to time consuming trouble shooting and frustration.

Recently, a lot of people have been moving off local email clients like Outlook to web-based email like Hotmail and Gmail.  I tried this briefly myself, but found that I personally didn’t like some things about gmail.  I don’t like the way they index emails together.  I also think that it does not look professional when you send a work related email and it comes from kylemaikath@gmail on  behalf of Kyle Maikath. I’ve also experienced issues when accepting invites via Gmail – they don’t always show up on your calendar and that can be a real problem.

As a result, I’ve opted to stay with Outlook.  It works well for me and I am happy with its performance – less 1 item.  I really don’t like the archiving in Outlook.  .PST files can be gigantic and clunky and it’s tough to retrieve information from them.  I had problems about a year ago in which a giant .PST file crashed my computer and I lost everything.  Not fun…

I started to think that there has to be a happy medium between the two.  I started looking at Gmail again and noticed that there was unlimited storage.  And then the light went off.  I decided to continue to use Outlook for my day to day operations, but to use Gmail as my means for backing up.  This revelation led me to my current configuration:  Emails are received and managed using Outlook.  Emails are automatically deleted from Outlook once they are 3 months old.  Emails are automatically forwarded to Gmail where they are stored indefinitely.

The configuration has worked out great.  I am still using the interface and app. I prefer for email, but I am also taking advantage of the unlimited storage of an online email client.  In the end, a combination of new and older technology worked best for me and allowed me to do everything I wanted.  Best of both worlds!

Best Practice Definition

Methods and techniques that have consistently shown results superior than those achieved with other means, and which are used as benchmarks to strive for. There is, however, no practice that is best for everyone or in every situation, and no best practice remains best for very long as people keep on finding better ways of doing things.

~ Source: BusinessDictionary.com ~

Where do we go to find best practices? It’s a question most managers have asked themselves at one time or another.  At some point, we recognize that we don’t always have the answers we need for improving operating performance.  And with that recognition comes additional questions about where to look to get those answers.

Finding the best, and most relevant, sources for our particular problem can be challenging.  While there is no shortage of access to information these days thanks to the Internet, the volume we have to wade through can be daunting.   In addition to the Internet, there are industry associations, various publications and people we know whose opinions we trust and value.  I think one of the most overlooked sources of information on best practices is often right under our very noses, and that is the service partners that we work with every day.

We recently hosted a Webinar for our clients: “Field Service 2.0: Bringing Best Practices To & From the Front Line…Everyday.”  The webinar featured a company, UGL-Unicco, that provides facilities and maintenance services to the real estate and facilities management space.   While it would be easy to classify UGL-Unicco as a “cleaning company” at its core, that would be simplistic. They are an international powerhouse, a market leader in their space and are as sophisticated in their operations and business practices as any of the companies they serve.  They have achieved their place in the market through a relentless commitment to continuous improvement and managed the change required to support it.  They have successfully created a system for scouting  pockets of excellence and best practices from across their organization, as well as a means for sharing them with any of their clients to apply to many areas of their own businesses.

And the effort has certainly payed off.  In an industry where companies change vendors more than clothes, UGL boasts a 95% client retention rate.

The real beauty of looking to your suppliers for guidance on best practices is that it is in their best interests to help you- and doesn’t that help define what a true partnership with your service providers should look like?

The next time you have an internal discussion about process or business improvement and you are making your list of information and other resources, don’t forget to look internally and consider involving your service providers in the discussion.  Sometimes the answers are right under your nose.

We recently held a webinar on Field Service 2.0: Bringing Best Practices To & From the Front Lines…Everyday. Guest speaker, Heidi Anderson-Rhodes, illustrated how UGL Unicco incrementally transformed their Field Service and Maintenance Management programs by establishing a customer-centric Continuous Improvement Program. Despite being a large and diverse company, UGL Unicco dedicated themselves to making an honest assessment of areas they needed to improve, scouted out pockets of excellence from across their geographically disbursed workforce, and established a standardized library of best practices and front line solutions. A mountain of a project, certainly, but one that ultimately enabled them to better service their clients.

A few tips to establishing your own Continuous Improvement Program:

1. “Standardize” your Standard Operating Procedures- SOP’s should have a consistent format across the board

2. Tap into your organization’s subject matter experts- they’re your best resource for creating SOP’s, KPI’s, and all the other fun “process” documents that are necessary for any Continuous Improvement Program

3. Get your hands dirty! Go in the field to uncover challenges and great practices (these are happening every day and many times go unnoticed)

4. Checklists, checklists, checklists:  UGL consolidated forms from across their operations into a series of 4 easy to follow checklists – i.e. one for Operations, one for Financial & Reporting, one for Employees, and one for Health & Safety.

5. Create a knowledge repository to store best practices and Process Improvement Forms on an ongoing basis. And then encourage people to share solutions they’ve developed through a reward and recognition program.

I was intrigued to read an article in the New York Times the other day about how law firms are beginning to offshore some of their clerical processes to India in order to drive down costs.  They are doing this largely because their large corporate clients are insisting on cost reductions, not because they are particularly forward thinking.  Why pay for a New York based associate to copy edit a document at $250 per hour when it can be done for 1/5th of that rate by a double graduate in India?

Now, large corporate law firms are pretty darn conservative and not organizations that adapt to change easily, so the fact that this is happening is an indication about how much sectors of our economy are likely to change over the next 5 – 10 years.  We have all gotten used to hearing about manufacturing jobs being shipped overseas; those of us in the technology space know that the same is happening with jobs in our space, but this is an indication that other sectors, previously thought to be immune from the trend, will be affected.

This got me to thinking about property operations.  On the one hand, folks in this sector all provide services that are site dependent, like a hair stylist or plumber – until we figure out teleportation, you are going to have to pay a real live plumber to come and fix your dripping faucet: no way to offshore that service – so it should be largely unaffected by off shoring.  On the other hand, some of the property and asset management teams that I work with spend a lot of time on fairly low level clerical activities: copying, faxing, moving information from one silo to another.  These activities can (and will be) off shored.  Given the relentless downward pressure that owners put on asset and property management fees, this change may be forced on the property operations sector by its customers, as it is in the law profession.

There is a bright spot in all this: property operators that figure out how to streamline clerical processes and focus on providing their clients with higher value services will prosper.  Some of this value-add comes through using technology, like Building Engines‘ web based operations platform, to improve customer service, increase data liquidity and reduce operating costs.  I have run into a few that have made this a differentiator and who tell me that their clients are beginning to see it as a significant benefit.

The best defense is a great defense – Or so it seems to The National Football League (NFL), the nation’s premier sports league, which announced last Tuesday that it is relocating its headquarters to 345 Park Avenue in Manhattan and 175,000-square-foot,  down from its current 205,000-square-foot headquarters at 280 Park Ave.  This maneuver is no feint.  Faced with a down economy, an ongoing labor struggle, and declining attendance and viewership in all other major sports, the NFL has decided to protect its lead and play a little preventive defense.

This single commercial office transaction may be the clearest bellwether for the future of commercial real estate.   According to Eric Grubman, executive vice president of NFL ventures and business operations, the new space “will enable us to be more efficient.”  Apparently, NFL executives are as talented at the post-game empty quotation as their renowned players.   Reading between the lines, the NFL is in the midst of some serious game planning – a plan that still goes for the win, just with fewer players.   Let’s look at the stats.

A $7.8 billion dollar industry, the NFL boasts an average team value of $1 billion among its thirty-two teams; an average attendance of 67,000 and a consistent season-to-season winning record.  According to Plunkett Research, the NFL earns eight times as much each year for TV and cable broadcast rights as MLB, despite the fact that MLB teams play roughly ten times the number of games annually than do NFL teams.  Yahoo Finance says that “the pro football business is booming, and the expectation is that the NFL will set new records for fan viewership during the 2010 season.”  In fact, the NFL enjoyed a 9% viewership increase in 2009, and is expecting a 15% gain during the upcoming 2010 season.   To the TV viewer, the NFL is appointment television.  To the rooting fan, every game matters.   To America, the Super Bowl is iconic – the closest thing we have to commercialized war.   It is a growth sport, and is considering adding two additional games to an already profitable schedule.  In short, the NFL is giving the Heisman (read “stiff arm”) to every other major sports league.

So what’s with the contracting office presence?

The NFL is in the midst of a solid game plan; one they may share with the rest of corporate America – do more with less.   It embodies this new mantra.  Case in point:  In 2008, preparing for what it knew would be a tough 2009 and 2010, the NFL told 150 people that they did not make the corporate team.  To most industries, this would be sign of the apocalypse, but the NFL is expanding where other sports, such as baseball and golf, etc, are contracting.  Always good at cutting the wheat from the chaff, always a step ahead of its competition, the NFL is thinking ahead to a new sports economy – one underscored by efficient planning and cost controls.    Enable people to do more from the road.    Allow people to work from home.  Ask your employees to extend their hours and their signing bonus will be big – they’ll still have a job.

So look for fewer people in the seats – commercial office seats ? - a trend that may carry over to the balance of commercial America.  Growth through simultaneous expansion and contraction – expanding opportunity while contracting costs.   It’s a game winning plan.

There are a lot of definitions for a double-dip recession – some of them disgusting and all of them dire.  Generally, the following is the technical definition:

The economy fails to generate positive Gross Domestic Product (GDP) for two consecutive fiscal quarters, recovers with at least one positive quarter, and then drops into the negative again for two additional consecutive fiscal quarters.

Imagine showing a cup of water to a friend dying of thirst, then pulling it back at the last minute — or dropping into a deep slump, then hitting a game tying home run, and slumping again?  Double dipping is akin to adolescent teasing – more harmful than showing no relief at all because it cuts the heart out of hope.  It means nothing if you are in lower, unenviable recession-proof businesses like tombstone sales, sewage disposal or tax collection – all recession proof.  For the rest of us, however, an economic double dip is a harbinger of long and sustained stress on our lives.

For commercial real estate owners, double dipping can be devastating.  A “trailing indicator”, commercial real estate follows on an economic trend.  Protected by existing long-term leases, commercial real estate owners are not subject to the short-term ups and downs of the economy.  When a recession begins, commercial landlords are insulated from immediate harm because their lessees continue to pay the same structured rent no matter the current economic state.  Unlike hotel owners who, with single night commitments, feel the pain immediately, commercial owners have long-term commitment security.

On the other end of a recession, that lag can be painful but promising.  When the economy begins to recover, lessees begin to grow as employment and occupancy rates rise.  A well positioned commercial landlord can essentially “bridge” the recession with long term leases.  Growth may be slowed as tenants refill shadow space – unoccupied leased office space that has not been factored into the market’s vacancy rate.  Yet while that space gets reabsorbed, the asset will continue to throw off cash and then grow in value as the recovery matures.

However, an economic double dip will expand that recovery timetable and can collapse that bridge into bankruptcy or worse.  Faced with long term occupancy erosion and strong downward pressure on lease rates, Landlords may be forced to terminate capital improvement plans, settle for portfolio-wide lease rate reduction – all of which will seriously devalue their properties and result in higher cap rates.   Over leveraged properties are at a higher risk.  Cash flow erosion may lead to delayed or unpaid debt service.  Without the bank willingness to restructure debt, the properties may revert to the lender who has no business running them in the first place.  This condition may continue to spiral downward until the overall market devalues; pricing readjusts and the market begins to recover.  In the midst of a recession, a landlord who believes that a sustained recovery is around the corner will hold the bridge longer until his asset makes it over to the other side.   A double dip recession may cause a commercial office owner to reposition for growth too early, or give up on the market and let the building go fallow.   Double dipping is a feint from the marketplace from which commercial real estate owners may not recover.

Ten ways to protect your assets from the ravages of a double dip:

1. Never over-leverage your portfolio – Match fixed income to fixed costs to sustain a healthy projected NOI.
2. Stagger your lease terms to ensure that you will have adequate cash flow coverage to sustain your debt service no matter when a recession may occur, or how long it may last.
3. Diversify your portfolio (commercial, residential, retail, hospitality, etc) to ensure that you have a mix of long-term and short term leases and lease types that help you take advantage of a bull market and protect yourself when the bear arrives.
4. Perform necessary capital improvements when the cotton is high, with a strong emphasis on the word “necessary”.
5. Put proven systems in place that help you to expand services to your tenants when the economy is strong and easily contract costs (particularly FTEs) when cash flows contract.
6. Do not ignore normal preventive measures (maintenance, risk reduction, etc) in a down market – unexpected expenses will hobble your ability to survive.
7. Wait for a recovery to mature before acting like you are in one – don’t build your bridge too short or pop the champagne too early.
8. Know your tenants’ businesses; track their markets like you track your own.
9. Hedge your occupancy rate with a diversified set of tenant industries – “every retail mall needs a good pawn broker.”
10. Know your banker like you know your mother-in-law.  Hmmm?