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?

A number of recent news items have struck me as portents of the increasing pace of technological change that we are seeing.

This news item in the Wall Street Journal yesterday revealed that Amazon’s eBook sales outpaced hardback book sales over the last three months.  Specifically, over the last month, the online retailer sold 180 Kindle books for every 100 hardcovers that it sold.

Meanwhile Tech Crunch notes that Pandora, the online streaming music provider, has surpassed 60 MM users and is  ”…adding users faster than ever.”  Pandora assembles playlists based on a user’s taste and can be played over smart phones, making them like the old transistor radios.  The article points to Pandora capturing 100 MM users sometime next year.

Finally, in “Spending Soars on Internet Plumbing”, the Wall Street Journal notes that IBM’s server sales jumped 30% in Q2, after rising 36% in Q1 of this year and quotes the research firm IDC as saying that it expects capital spending on cloud computing – all the hardware that goes into supporting web based activities, to grow at 27% annually through 2014.

“Try again. Fail again. Fail better.’ ~Samuel Beckett

While I don’t think the Irish writer and poet ever owned or managed commercial property, you can certainly apply his quote to what we all do in the course of running our businesses or doing our jobs.

This may be especially true now, given what the industry and economy in general have been through over the past few years. There have been some spectacular failures (Bedford-Stuyvesant anyone?).  But, there are also those who have weathered the storm well, such as Normandy Real Estate, and many signs of life are rising from the ashes and companies are trying different approaches to partnerships, financing, filling space, manage operations, etc.   In other words, “trying again.”  Not all of these attempts will be successful, the “Fail Better” part, but what are the alternatives?  This is what we do.  We move on, we try again, we fail again, we get better.

We are all suffering from symptoms of information overload. The daily onslaught of more and more data means that some of it will inevitably fall through the cracks. You may file away 25 e-mails one day, and overlook ten other important ones. You may communicate important preventive maintenance data within one building and neglect the rest of the portfolio.  Let’s face it, there is only so much time in the day.  Every day we make hard decisions on which people, activities, and processes receive a piece of that “time” pie.

Because of this, the ways in which modern real estate processes interact are increasingly complex. Facilities and Operations Teams, business systems, and data must work seamlessly together in order to deliver on the promises of optimal productivity, improved occupant service and satisfaction, and quicker decision-making time frames.  A good workflow must allow for that information to seamlessly pass between people, systems and…brace yourself you’re not going to like this one…portfolios.

More importantly, a good workflow allows you to “automate the mundane.” A phrase we like to use a lot here at Building Engines – and not just because our operations and maintenance management system allows you to do it, but because we really believe it, is that people in the real estate operations business are always in overdrive and always putting out fires.  Once you get your workflow and processes in order, you’ll be amazed how much extra time is freed up for more valuable activities.

Building Engines will be hosting a Webinar in early August where we will tackle best practices for handling large teams, workflows that “automate the mundane,” and other valuable insights for increasing productivity and managing data across your organization.

Now, add that to your follow-up cue.

“Any sufficiently advanced technology is indistinguishable from magic.” – Arthur C. Clarke

The commercial real estate is not an industry that adopts new technology aggressively; in fact I think you could say we are late adopters.  As someone who works in the software space, lives in Silicon Valley and serves the real estate community, I am especially aware of this.  However, the industry is changing, even if slowly.

I was reminded of this when I had lunch recently with a friend with whom I had worked on large portfolio acquisitions at the end of the last real estate bust, almost 20 years ago.  Hard to believe but back then a big number was $250 BN (the total cost of the S&L crash to tax payers), which seems like chicken feed now.  Our largest deal was in the $750 MM range and we thought it was huge, absolutely huge – that now seems almost laughably small.

We sent teams of underwriters around the country looking at assets and assessing their value.  Each was given a map of his/her target city, with colored dots locating specific properties.  Local market knowledge was difficult to come by – you had to work the phones hard to find brokers who would talk to you about the market and divulge any of their hard-won information.  Values were calculated on paper work sheets using a pencil and simple cap rates (the underwriter could us a calculator if necessary but the “real men” did the calculations in their heads.)

We had big, clunky cell phones that were so expensive they could only be used when urgent.  Our SWAT team on analysts ran Project and Argus on clunky, green screen computers that seemed to be constantly choking on the data they had to crunch. Talk about illiquid data!

So, things have changed some in our industry.  One of the changes is the radically increased information liquidity.  It is just a lot easier to figure out who has leased what space at what rate or what price a property has traded at now than it was 15 – 20 years ago.  This may be part of the reason that the crash in the CMBS market we were all expecting, didn’t happen.  As this Fortune article details, the market is bumbling its way through the downturn without completely collapsing.

Information is often still stuck in silos, but it is a lot less stuck less often than it used to be.  We may curse email and the fact that our Blackberries have eliminated whatever downtime we used to have but they have radically improved communication.  The use of fax machines is  declining precipitously and, although we still manage a lot of paper, we are learning that scans of documents are much easier to manage.

It is time in this blog post for me to hold forth on what the future will bring, with respect to real estate and technology.  I think the biggest driver of change over the near term will be peoples’ expectations: folks now expect to be able access real time data from multiple properties easily, summarize it and analyze it and be able to view it anywhere. Web-based operations and maintenance management systems are now offering one solution. Interestingly, this expectation is being driven by their experience as consumers – real time data about flights, purchases, shipping and financial transactions is now almost ubiquitous in the consumer world.

The second big driver of change will be a generational shift: the next generation of workers, folks that will take our jobs, is growing up in a data-rich, highly connected environment.  They will be comfortable with and will expect access to highly liquid property data; silos will not be an option.

This is all going to take time- longer than folks like me expect, but faster than you might imagine. And its effects will be profound.

It can be very frustrating when you don’t see eye to eye with someone.  Whether it’s a difference of opinion between friends, an argument between rivals, or a dispute between a vendor and client, when people are not in agreement, tempers can flare and emotions can get the best of almost anyone.  Before blowing off the handle, it’s important to think carefully about the big picture and not jump to rash decisions.  In moments of adversity and frustration, try to think of these 5 simple rules:

1)      Consider all the Facts

 Don’t jump to conclusions before having done all the necessary homework to see the big picture and understand all the variables.  Don’t rush…make sure that you’ve considered every angle and have all pieces of the puzzle before you try to put it together. 

 2)      Picture the Problem from the Other Person’s Point of View

 Really try hard to put yourself in the other person’s shoes and imagine what you would say if you were being dealt the information or pitch that you are about to deliver.  Is it believable?  Would you be amendable to what is being proposed?  Don’t forget to really listen to what the other person has to say.

3)      Make Sure You’ve Explained Yourself Well

Your argument or point of view may be so obvious to you and so well thought out in your head that you might not take the time to calmly and slowly explain your opinion.  Most people assume that everyone is following point #2 above – they probably aren’t.  If you find yourself hitting a wall…stop.  Take a deep breath and declare that you are guilty of not explaining yourself well.  This admission of guilt will help to bring the other person’s guard down and help you to work cooperatively rather than antagonistically 

 4)      Sell Your Opinion

 Remember that you want your opinion or point of view to be adopted by your adversary.  A little salesmanship goes along way when trying to get your point across.

 5)      Compromise

In many situations a perfect solution for both parties may not be possible.  Compromise is an important element in order to arrive at a resolution.  Remember, it’s better to get 80% there than to walk away mad.

In the end, you aren’t always going to see eye to eye with everyone, but with a little hard work and a lot of patience, you can almost always get close.

Much of the value we promise to deliver with our products and services revolves around the concept of helping our clients become “more efficient.” It’s a phrase we use liberally, but what does it mean and where is the real benefit to any organization?

Property or facility managers and their staffs need to manage and complete a large set of common, repeatable tasks on a recurring basis.  These include such things as lease related notifications, generating tenant statements, responding to and managing requests for service, scheduled maintenance, risk management processes such as tracking certificate of insurance compliance, and a host of others. These tasks are fundamental to the operation of any property, representing the blood supply for  successful operations.

The challenge for property operations professionals and their teams is finding a way to keep up with this large volume of required, repeatable tasks while reacting to the host of unforeseen occurrences that invariably pop up on a daily basis.

I recently returned from the BOMA annual conference in Long Beach and had the opportunity again to observe and listen to the things our clients deal with. Although they were away from their properties, they were constantly tied to their Blackberries and dealing with a never ending stream of unforeseen and unplanned-for events:  cut telephone lines, power outages, bad weather, crime, accidents, etc…the list goes on.  The image of the property manager as a fire fighter is one that truly fits.   But like a fireman, these are the issues that require training, experience, knowledge and skill.  They are the daily occurrences that require people, not systems and is where the effective manager and team shine.

The problems that arise out of these realities of operating and managing a building and those inevitable unforeseen events are that they constrict the time and energy available for the mundane, repeatable tasks.  These things that are necessary for a healthy property are often pushed aside, delayed for another day, and handled incompletely or inaccurately.  In addition to the fact that these tasks generally represent less than fulfilling work for any employee, the inconsistent completion and management of them is unhealthy for any organization.

The way to approach this reality is to ruthlessly automate the mundane.  Cut a 12 step process to 6.  Look at every set of rote activities you can that don’t require real thinking and use a technology solution to streamline them where possible.

Finding solutions to help you do this is the easy part. Finding the right provider to help you understand where you can make improvements is bit harder. The hardest part of all is understanding where your value and your team’s value truly lies, and making the decisions and commitment that will allow you to spend more of your time doing that. That is what efficiency is all about.

Developing energy-efficient buildings can lead to dramatic cost savings, but building owners must plan their forays into energy data management by taking careful, measured and iterative steps.

Our new white paper outlines the key elements required for a successful energy data management (EDM) strategy. It also discusses the tremendous benefits of succeeding in EDM. At the same time, it provides insights into the potential causes of EDM program failure and ways to avoid making such mistakes.

Download Now

The Internet is changing the way we interact with one another and the way that companies communicate with their customers. In the software world, this brave new frontier is known as Social CRM whose power is described in this white paper by the Altimeter Group.  The idea is new enough that Wikipedia doesn’t have an entry on it.

Simply put, companies selling products and services (e.g. the owner/manager of a property leasing it to tenants) used to manage communication with their customers in a fairly linear, systematic, top down manner.  Back in the day, the building manager would create a form letter about a specific issue and mail it out to tenants.  Then, thinking that regular contact might be a good thing, the manager created a newsletter and mailed it out too.  Along came email: the building manager generated the same documents in electronic format and sent them out to the building tenants.

This is changing: the social and collaborative nature of the web means that companies no longer drive communication and are losing control of conversations with their customers: if I have an problem with a piece of electronic equipment, I no longer call customer service, I Google the issue.  I may end up on a forum with all sorts of candid (and not all positive) comments about the equipment in question; its supplier controls none of this.  Sounds a little anarchic, a little chaotic.  Like the web.

One of our clients owns and manages a major, class A office property in a secondary market.  A while ago when you Googled the property, the first item that popped up in the search was a very negative review of its parking by a consumer on Yelp, the crowdsourced review web site.  Not a good way for someone to find your property.

Owner/managers will have to learn to manage social media and leverage the technology to communicate with their customers (tenants).  Or be overwhelmed by it.

When the going gets rough, team cohesiveness can break down and productivity plummets. Declining conditions breed controversy and contempt among subordinates.  Good teams respond well.  Great teams excel. Exceptional teams turn the challenge into an opportunity and achieve greatness.  The latter case requires exceptional leadership. Your actions under fire set the tone for your company, your products and services and your life. Ten simple rules will help you bolster and harden your team in these tough times.  Heed them and perhaps you can follow in the footsteps of George Patton.  Ignore them and you may follow the footfalls of George Custer.

1. Slow down: Crisis will force you to act decisively, but that does not mean you should rush your decision-making.  In the heat of battle, with bullets and dirt flying, the best leaders, like the best athletes, slow the game down.

2. Think: Thought is the one of the most under-valued attributes of leadership.   When events take hold, the ability to stop and consider all circumstances and all options before acting is crucial to success.  Thinking will help you to master the detail; organize and orchestrate the details required to affect a positive outcome.

3. Be mindful of your Actions: Remember that your demeanor and your actions are the real indicator or you state of mind.  Never show doubt, discouragement or fatigue.   Act like a leader. You are the source of direction, as well as an example to others. A leader knows.  Leader ship is not a nine to five job – you have to live it.

4. Communicate: No news is bad news in a crisis.  The more your team knows about the situation and your approach to it, the more thoughtful consideration it will get.    Seek counsel of all reliable participants.   Demand a difference of opinion. If everyone is thinking alike, no one is thinking.  Effective leadership is consultative.  In the end, your message must be clear, unmistakable and delivered with conviction.

5. Go to the Source: Get your information from the front lines.  Do not rely on conjecture.  Find the source of the problem and move towards it with a mind to understand it better so that you can address it properly.

6. Keep it Simple: All statements, conclusions and tactics should be simple. Use the most direct language possible.   To do this, a leader must completely and comprehensively understand the mission, purpose, objectives and goals.  It is a precedent that you do your homework.

7. Remain on the Offensive: Do not relax with your success.  When you relax, your team relaxes.   Never dig in.  “a good Calvary charge i The best defense is a good offense.

8. Be One of the Troops: In cold weather, do not to dress more warmly than your team members. Use what they use, work with their tools.  Suffer with the team members and you will know them and the limits of their capabilities.

9. Maintain Balance: Do not sacrifice too much for too little gain.   Give equally and expect to get equally.  Know the content and quality of your adversary and measure it against your own.   Keep your confidence in balance.

“There are not enough Indians in the world to defeat the Seventh Cavalry.”  George Armstrong Custer

10. Be Decisive: Once you have made a decision, stick to it and see it through to conclusion.   If you have applied the previous rules, your decisions have a high likelihood of success – but only if given the chance to succeed.

“Listen to your heart and proceed with confidence.” George Patton.