Building & Facilities Operations

In today’s fast-paced world, people need information as soon as possible. If a problem arises, it needs to be alleviated immediately-or avoided completely. Buildings need to be able to respond to tenant needs as quickly as possible, as well as keep the building running smoothly so no issues pop up. The answer? The cloud.

Simply put, real estate in the cloud is moving your business online. By properly utilizing the Internet, building data can be accessed at any time from a variety of sources. When you know what’s going on with your building instantaneously, you can react to it and keep your tenants pleased and free of problems. Three key factors separate best-in-class buildings from the rest of the pack: focused productivity, improved building operations, and improved tenant experience.

Moving into the cloud means automating certain processes that employees used to waste valuable time on. With these processes taking care of themselves, employees can focus on more worthwhile activities, such as interacting with tenants and developing stronger relationships. Your employees will become more productive, and your building will thrive.

Furthermore, bringing business online allows for an electronic preventive maintenance program. Monitoring equipment and making adjustments in real-time is crucial these days, in order to best predict when a problem will come up and to handle it before it happens. When you can catch a discrepancy in energy usage, realize that it means a machine is about to fail, and handle it before anyone can notice, you’re working in the cloud.

Finally, working online allows owners to monitor tenant needs and fulfill their requests almost instantly. Most tenants are already in the cloud, and they appreciate when outside aspects of their life are on the same level. If you can appease tenants with speedy response to issues and a smooth-running building, they will stay around and building revenues will benefit.

Bringing business online cannot be avoided. It leads to better employees, easily-managed buildings, and happy tenants. Bring your building into the cloud today and move into the future of building management.

In today’s ever-changing business world, companies who can seamlessly and successfully move online are proving to be successful, while those less adaptive to change are getting left behind.  Join us as Tommy Russo, CTO of Akridge Properties, presents a webinar on moving your business online and into the cloud.

As Chief Technology Officer, Tommy oversees all of the technological and informational aspects of Akridge. His duties entail discovering and implementing new, innovative information systems in order to provide clients with cutting-edge technology and lead the industry.  His background in information systems and residential and commercial construction makes him an industry thought leader in online business.

Tommy will discuss many ways to move your business online and take advantage of all the technology now available, turning your building into an efficient, predictable machine. Topics will include:

• Best practices for predictable maintenance and monitoring building equipment
• Tenant expectations across a variety of technology-enabled management services
• How to use technology to stand out from the crowd and impact your bottom line

These and other areas of discussion will show you how to easily move your business to the Web and find yourself amongst business leaders already in the cloud.  Don’t miss this informative webinar!  Sign up today!

If tenants are the heart of a building, than the structure and equipment in that building is its lifeblood.  Without properly functioning systems, costs will rise, tenants will become dissatisfied and the property will degrade. Over time it will lose value and become less of a viable entity.

Much like your body needs proper care, nutrition, and regular check-ups, the equipment in a building needs the same.  That is the fundamental principal behind the need for a preventive maintenance program.

This certainly isn’t a new or revolutionary concept. However, truly successful PM programs are often perceived as hard to implement and manage in the commercial real estate space.

The reasons for that are fairly obvious:

1.       In a business driven by the issue of the moment, a PM program is a long-term investment with a difficult to identify return.

2.       There may be a short-term investment strategy that conflicts with the long-term nature of a PM program.

3.       The PM program requires knowledge and expertise owned by a few.

4.       Relevant and important information is difficult to access.

5.       There is no visibility into activity, problems and results.

6.       Electronic or online systems that promise to simplify the PM process are often overwhelming, complex and difficult to implement.

7.       Staff is overwhelmed and resists the input of sufficient data necessary to realize full system benefit.

So what is required to implement a PM program that delivers results?

Belief

Everything must begin with an underlying senior management belief that a successful PM program is a core strategic objective.

Management Will

There will often be pushback from teams and there is a change management component to the implementation.

• The most common complaint will be lack of time to input what maintenance teams will portray as a huge volume of information to input.
• This cannot and should not be a manual operation any longer. True efficiency requires automation of the PM process.
• While good systems will help, at the beginning, this is a project that must be managed.

Cooperative Teams

• PM is everybody’s concern and should not just be relegated to the maintenance staff or outsourced providers. The maintenance team needs commitment and help from management to do their job well and deserves input into the program.

A system that works for you

There are many available system choices to consider and evaluate. Ease of use and system reliability should be a given.  The critical evaluation factor should be to find a system that is designed to help you accomplish your specific PM objectives.

Guidance from knowledgeable partners.

Much like the internal requirement of a cooperative team, your system provider must be committed to a long-term partnership far beyond the initial sale. You will require expertise and knowledge from them about what it takes for a successful implementation.

As we wrap up 2010 and prepare for the New Year, this is time of budgets, planning and resolutions.

Make a resolution to commit time to evaluate and plan for the long-term health of your building by taking a long, hard look at the condition of your preventive maintenance program.

How can you manage energy more efficiently?

By now, we all know the importance of practicing Preventive Maintenance.  The more important question today  is, do you have a comprehensive program in place that addresses not only time-based maintenance tasks, but also predictive maintenance? A good predictive maintenance component can save you 15% is energy costs- a number not to be scoffed at when energy costs are responsible for 40% of the average building’s overall costs.

Here is one example of the different methods that can be combined to save energy costs for an HVAC:

• Program temperature set point according to occupancy
• Adapt heating or cooling production power according to real building needs
• Raise temperature to comfort level when occupant presence is detected
• Adapt ventilation flow according to occupancy or internal air pollution level
• Recover heating or cooling energy from extracted air

I just read that the U.S. office market recovery has begun:

“…that the third quarter the U.S. office market posted positive net absorption for the second consecutive quarter — 5 million square feet absorbed in the second quarter and 7 million square feet in third quarter.” [U.S. Office Market Enters Early Recovery as Absorption, Demand Point Up, Vacancy Turns Corner].

While these are small numbers, they are welcome moisture to a desiccated market.

In the same digital breath, however, Co-Star’s Group’s 2010 Third Quarter Office Review said that “the national office market won’t begin seeing rental rate increases for another three or four quarters or net operating income increases for another four to six quarters.  That means rents won’t start increasing until well into 2011 and net operating income increases will have to wait until 2012.

In the lexicon of Bill Belichick – “that is bulletin board material”.

I think that the experts have it backwards.  Surely, office rental rates will remain flat for a while, but it will be far longer than a few quarters.   Office buildings in 79 metropolitan areas lost 1.9 million square feet of occupied space in the third quarter or 2010, pushing the national office vacancy rate to 17.5%, the highest level since 1993, or so says Anton Troianovski, of the Wall Street Journal in his October 5^th, 2010 article – Signs of Recovery for the Office Market. While economists agree that office vacancies will not reach their record 1992 high of nearly 19%, the recovery will certainly be long and rental rates will remain depressed.  I contend that those rental rates will remain well below their high for another two to three years as corporate recovery fills existing shadow space; 2009 and 2010 leases run their fully renegotiated course; employment begins, or struggles, to recover, and the market absorbs what is a massive inventory of newly constructed space.  Other factors will contribute to the length of recovery, such as changes in workplace design and the growth in popularity of outsourcing and virtual officing.    So, even with the recovery, things look bad for near-term rental rate recovery.

The same is not true for Net Operating Incomes.

The financial downdraft created by the current economy is beginning to change office management attitudes and practices.  The advent of long-term negative growth has shifted management focus back to asset quality and condition as well as towards renewed and better capital planning.  The commercial property management market has become far more comfortable with the “Cloud” and new technologies it provides have allowed progressive real estate managers to see more, to measure more; to manage more successfully, and marshal assets and resources more economically – more intelligently than ever before.   The Cloud makes managers look smarter – be smarter.   Improved visibility into property condition and asset-related activities provides management with enhanced decision-making power and greater revenue producing opportunities than ever before – yielding ever-increasing NOI.

The “Moore’s Law” of real estate management is that a real estate manager’s awareness and use of technology is growing exponentially – and from my limited perch, I’ve seen it double year-to-year.   The more technology a manager uses, the more visibility that manager achieves.  Visibility translates into efficiency which begets dollars per square foot.  Better managed buildings with professional systems and automated services keep tenants happier (retention) and attract new tenants to available space.   While property management dollars are not necessarily in the same order of magnitude as transactional dollars, they are dollars nonetheless.  A dollar saved is another dollar competing for sunlight on the bottom line.

So, I am encouraged by the new focus on management through technology.  It is a healthy change for what had become an old and staid market space. Simply said – quarter-to-quarter, clicks are driving bricks and mortar.

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?

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.

British Petroleum is dead – deader than a petroleum jellyfish.

Old Ben Franklin had it right when he said “an ounce of prevention is worth a pound of cure” – in fact 95,000 barrels a day of cure.   The BP Oil spill is a perfect example of the idiom at work.  Plainly stated, to have relied on a single blow-out preventer when the well head is a mile below the surface in an environment where no man can go, in water that can freeze gas – well that is a planck weight, a veritable “nano-gram” of prevention, given the risk.   What would the cost of a second or even a third blow-out preventer have added to the cost of this deep ocean well?  In the wake, or should I say plume, of this disaster the cost would have been negligible.

As a result of the uncontrolled spill, BP’s stock plummeted yesterday losing nearly 15 percent of its value on the first trading day since the failure of the “top kill“.  Then it sucked the market down with it as the federal government announced criminal and civil investigations into the spill.  “We will closely examine the actions of those involved in the spill. If we find evidence of illegal behavior, we will be extremely forceful in our response,” said Attorney General Eric Holder in New Orleans.   BP, with an enterprise value of $137 billion, is losing market value with every barrel that emerges from the floor of the Gulf. That loss of market value puts the clean-up and recovery at risk as well as the companies struggle to survive.

So what is the lesson here?   There are certainly many to be learned – chief among them being that one cannot be too careful or take too many precautions when risking something of such enormous value.   Think of your own business and its assets.  Gauge their value to you and your future.  Large or small, it may be hard to imagine losing everything, but then British Petroleum seemed impossible to sink – too big to go bankrupt, fail or be acquired – yet it’s on its way there.

Prevention is not just prevention against disaster – it is prevention against a plume of related consequential costs to your organization and to those that rely on it.  BP is only part owner of the blown well.  Rig operator Transocean and oil services company Halliburton are also involved and, therefore, also at risk.  Cameron Inc., which made the blowout preventer that failed, is also in deep, deep trouble.   Moreover, we are in trouble.  We who rely on the strength of our economy; the health of the environment; the survival of the fishery, and the fitness of mother earth are all at risk.   So when assessing the cost of prevention to your organization in the future and imagining that, perhaps, you can risk taking a chance or two with an important asset – think of British Petroleum.   A desire to cut corners cut the business off at its knees and put our collective future at risk.

A planck weight of prevention is no prevention at all – how about putting a pound of it to work for you? If your cringing at the thought of your own preventive maintenance program, or lack of it, it might be time to get a little more proactive!

With everything we have going on these days it can be easy to allow things to slip through the cracks. If you have 50 things to do, chances are that you will forget at least 1 of them unless you’ve documented your to-dos or have some sort of list to work off to help you to keep track.

Atul Gawande just wrote a book called The Checklist Manifesto. The book’s main point is simple: no matter how expert you may be, well designed checklists can improve outcomes.  He gives many examples of how checklists have improved the performance of surgeons, airplane pilots, rock stars, etc.  One of the main points the book makes is that there are differences between errors of ignorance (mistakes we make because we don’t know enough), and errors of ineptitude (mistakes we make because we don’t make proper use of what we know).  He suggests that the majority of failures in the modern world are due to this latter type.

The bottom line is that no matter how smart, organized or prepared we think we are, we can all benefit from making a simple checklist and verifying our work against it.  This applies to almost everything we do – from performing preventive maintenance work on an air handler to operating in the emergency room to doing the weekly shopping to getting dressed.  Yes, getting dressed.  As I stood at my gym locker this morning – sopping wet, I realized I had no pants.  My options were limited…wear smelly gym shorts to work or drive home and get a pair of pants.  If only I had made a list of the things I needed the night before.

The goal of any preventive maintenance program is to prevent equipment failure before it occurs. This is typically accomplished by way of a schedule of planned maintenance activities such as equipment checks and inspections, system overhauls at designated times, oil changes, filter changes, and so on. The benefits of performing preventive maintenance are numerous and not typically debated:

• Improved system reliability
• Increased longevity of equipment
• Decrease in replacement costs
• Decrease in downtime

That said, another way to look at the benefits of a preventive maintenance program is to think about the cost associated with NOT having a PM program. Most people recognize the benefits, but many do not recognize the costs associated with doing nothing. By neglecting to perform PM, not only will you miss out on the benefits, but you will become burdened with additional costs:

• Increased replacement/ repair costs due to more frequent failure
• Increased man hours to maintain equipment as problems arise
• Increased downtown and dissatisfaction by equipment users
• Safety risks for equipment users
• Getting fired

Wait….getting fired?!?!?! Yup, not doing PM could be a one way ticket to the unemployment office:

The city of Boston has just terminated 8 MBTA employees for falsifying Preventive Maintenance records associated with public transportation. Not only has this delinquency costs these folks their jobs, but it has also put the general public at risk, not to mention cost tax payers more money by ensuring that these systems will break down sooner than later and more frequently.

There are many tools available today that will help you to get started and build a PM program: It could be the difference between a promotion…and a pink slip!