Revelations

ComReal®’s John Lonardo, CCIM on what to expect of commercial construction during and post-pandemic

By Ron Treister

During this past year, a huge percentage of American workers have moved either temporarily or permanently out of their company’s offices to conduct business from home. We all know why. Until a majority of Americans are vaccinated, the plight to normalcy will continue. The question remains on whether or not the at-home workforce can make a comeback to their old way of office life. Have the newfound benefits of working at home, combined with the potential savings corporations are experiencing make tomorrow’s office spaces different? To get a look at today’s commercial real estate brokerage market, we sat down with John Lonardo, CCIM, owner and Managing Broker of Miami-based ComReal® Commercial Real Estate.

CCR: What will happen to the office spaces that have been partially utilized during these pandemic-lined times?

Lonardo: The pre-COVID trend relative to office space was basically to maximize the office footprint. For example, the standard of allocating 200 rentable square feet (RSF) per worker was reduced to 180, 160, 120 and, in some cases, sub-100 RSF. With people working from home, companies have the option of allocating smaller numbers of users to their existing space, thereby offering social distancing. The other side of that equation leaves lessees with surplus space. Users can reduce their footprint and operating costs and, in many cases, have been/will be subleasing all or sections of their respective spaces.

CCR: Will office spaces be repurposed into, for example, multi-family units?

Lonardo: The multi-family market has shown resilience during the COVID era. However, where corporations have decided not to renew large blocks of space in gateway cities, a great many of these building owners are looking at re-purposing these vacated blocks of space into multi-family or specialty uses. Clearly, there is a marketplace for savvy architectural designers to retrofit these spaces. We are hearing of many buildings undergoing adaptive re-use offerings in many of the major metro markets.

Photo to the left courtesy of: Trimstone ® ; Photo to the right courtesy of: ComReal ® Commercial Real Estate

CCR: Is there an indicator that office leases will continue once workers return within the next year?

Lonardo: We don’t know the answer to that question right now. Will office building tenants renew leases? While many large companies, for the most part, have mandated their workers work from home, at this moment, they’re holding back from calling them in until the course of the pandemic becomes clearer. Therefore, they renew leases

John Lonardo

One area that currently is a demand of tenants, especially due to these times, is air quality and ventilation.

The Amtrust Building for shorter terms and hold back on moving forward to commit to new space. Additionally, many larger firms are looking to the suburbs for relocation, noting shorter commutes, more economical lease rates, and quality of life issues. Nationally, there was net negative absorption in the office market during the third and fourth quarter of 2020.

CCR: Because you specialize in commercial real estate, how has your business fared?

Lonardo: In particular, I have toiled 30-plus years in the South Florida commercial real estate market. Real Estate asset values preCovid had been increasing to peak levels. Our firm has watched historic commercial real estate investment cap rates in desired asset classes compress because of low interest rates, demand and flight to quality. As a result, we were able to sell these performing assets for owners with whom I personally had serviced at a noticeable premium. The capital gains were then reinvested via 1031 exchanges into corporately guaranteed net lease real estate. In plain English, we’ve been very lucky these past 12 months.

CCR: Give us an example of a recent successful transaction during these “different” times?

Lonardo: Two of our long-term clients sold net leased industrial cold storage buildings totaling 240,000 square feet. The buildings were net leased to food distributors, a sector that became in high demand during the pandemic. The cost of land and construction for these specialized facilities have made this a desired investment asset class due to delivery trends in the food chain. We experienced multiple offers, and thus sold to institutional buyers with logistics portfolios. We believe this was a win-win transaction for all involved.

Ron Treister is Founder/President of Communicators International Inc., a marketing communications firm in Jupiter, Florida. For three decades, his firm has worked with major accounts in the commercial construction sector. He can be reached at rlt@ communicatorsintl.com.

The La Palma Building

CCR: Is this kind of success something that people in your field are currently enjoying? Or, is it just for the real estate, established diehards?

Lonardo: Success in commercial real estate is highly dependent upon long-term relationships. Professional, personalized service generally results in long-term, repeat business. And, of course, if a company has the ability to adapt, it can succeed moving through the cyclical nature of this business. In other words, just like any other business, if one works hard, stays positive and does a lot of listening before responding, success usually can be expected. Even as we continue to go through this COVID debacle.

CCR: What are some of the trends overall you’re seeing within the commercial construction marketplace?

Lonardo: One area that currently is a demand of tenants, especially due to these times, is air quality and ventilation. Ultra-violet, light air purification is highly effective for schools, office buildings, nursing homes and healthcare. Industrial-rated, portable HEPA air filters also are in high demand. We think including all of the above in specific ways will become a major mandate moving forward, not just something for now. Even after the country is vaccinated at the highest levels, that doesn’t mean that airborne contaminants won’t still be transmitted via air ducts in multi-story buildings. That exposure to these has to be reduced everywhere. Additionally, signage implemented to mandate customers/guests wearing masks and keeping social distance has become part of the commercial building sector.

CCR: The commercial construction arena depends on new and efficient building products. Are there any that stand out?

Lonardo: There’s one that is a highly developed and tested commercial construction product for today’s building cladding projects. I have a long-time client who has been in the stone fabrication and manufacturing business for over 30 years. His company has developed a product called “Trimstone®,” a state-of-the art, lightweight stone paneling system composed of natural stone veneer securely bonded to high-strength, aviation-grade, aluminum honeycomb panels. The product allows clients to enjoy the beauty of natural stone without the weight, thickness, fragility and installation challenges that so often arise when stone materials are used as architectural elements. It offers a wide variety of applications, both commercial and residential. Because of the lightness, it can be used outdoors as a cladding system for the highest of structures. Yet due to its space-age, scientifically approved application process, even with Miami hurricane winds, it remains structurally sound resisting breakage.

CCR: Have you worked at home during the last year?

Lonardo: Because of the advances in communications technology that are very helpful to the commercial real estate industry, we were able to work from home through August. Any required face-to-face meetings were carried out with the strictest mask and distancing protocols among our colleagues and vendors. I personally experienced no adverse effects. For exercise, I am a dedicated road cyclist and was able to keep up my regimen by adhering to the same expected protocols. CCR

EST 2010