Nationwide COVID-19 Commercial Real Estate Impact Study by Editor

NATIONWIDE COVID-19 COMMERCIAL REAL ESTATE IMPACT STUDY Selected Insights Among Southeast Office Decision-Makers N=3,010 Respondents (Office Space Decision-Makers/Influencers) Nationally

January 2021

TENANT IMPACTS – ENVIRONMENTAL DYNAMICS

VIEWS ON IMPORTANCE OF IN-PERSON OFFICE SPACE • Respondents were asked if a series of statements/attitudes apply to them today, or could apply to them in the future. • Overall three quarters of tenants (74%), rising to 77% of C-Suite/Owners believe their “office space is vital to conducting a successful business/operation). • Views across the Southeast and Georgia tend to mirror the national sample, with views increasing significantly among Georgia commercial office tenant decision-makers. “We believe our in-person office space is vital to conducting a successful business/operation”

National / All Audiences

All Southeast

46%

48%

28%

27%

18%

74%

Office Tenants Nationwide Believe Office Space is or Will Be Vital to Conducting a Successful Business

19% 5%

State Breakdown

Georgia Only

49%

Could Apply to Us in Future

31%

Doesn’t / Won’t Apply

17% 3%

Applies/Could Apply

Florida

74%

Georgia

80%

Tennessee

75%

North Carolina

74%

Unsure 2

CRE INDUSTRY IMPACTS

COVID-19 AS AN INFLECTION POINT OR TRANSFORMATION • Views in the Southeast slip slightly below the national sample, driven in part by “less transformational” views among VPs/Directors, healthcare industry and

Agree / Strongly

Neutral

36%

Agree / Somewhat

“Coronavirus/COVID-19 is a tremendous inflection point or transformation in workplaces; and the way our company does business in its workplace will not be the same for some time to come.”

Nationwide Tenants Agree Coronavirus is a ”Transformation”

63%

Among Southeast Tenants

State Breakdown

BY SQUARE FOOTAGE

21%

28%

BY RENT PER SQUARE FOOT (PSF)

Disagree

65%

“Agree – Transformation”

Florida

67%

Georgia

59%

Tennessee

45%

North Carolina

64%

BY INDUSTRY

15%

BY LOCATION

Agree or Disagree – Is COVID-19 a Transformation?

Agree – Transformation BY JOB ROLE

• Almost two thirds of tenant decision-makers believe coronavirus is a transformation or inflection point for owners-operators, profiled below and at right.

Nationwide

Southeast

C-Suite, Owner VP, Director Facilities Manager Mid-Level Managers

63% 65% 66% 69%

66% 50% 88% 62%

Southwest California Texas South Northeast Midwest Northwest

65% 64% 63% 64% 67% 60% 60%

--------

1,000 – 5,000 SF 5,000 – 10,000 SF 10,000 – 25,000 SF 25,000 – 50,000 SF > 50,000 SF

58% 67% 68% 67% 73%

56% 65% 66% 71% 69%

< $30 PSF $30-$40 PSF $40-$50 PSF > $50 PSF

57% 68% 67% 69%

54% 62% 64% 73%

Technology Professional Services Healthcare Real Estate Construction Manufacturing Retail Other

74% 63% 66% 53% 67% 56% 66% 62%

71% 66% 52% 59% 54% 58% 66% 63% 3

TENANT IMPACTS – ENVIRONMENTAL DYNAMICS

OFFICE TENANT FINANCIAL BAROMETER • More than 6-in-10 tenants (63%) say clients have canceled projects/reduced business with them, or could in the future, with a similar share saying they’ve experienced at least a 25% dip in revenue relative to forecast. • As a result, just under half are–or could in the near-term–struggling to meet payroll, and pay their office rent on time, climbing in the Southeast and Georgia as tenants indicate they are under more intense financial pressures.

37%

We have had clients cancel projects or reduce business with us

33%

We’ve experienced at least a 25% dip in revenue relative to forecast We have reduced overhead in reaction to the coronavirus emergency (e.g., layoffs, furloughs or reductions in compensation)

We have struggled to pay our office rent on time/meet our lease terms

27%

32%

We’ve applied for small business emergency loans (e.g., PPP funding, SBA EIDL, other loans or local government grants) We have struggled to meet payroll requirements

26%

28%

34% 22% 21%

Could Apply to Us in Future

24% 27%

32%

33%

34%

44%

26% Doesn’t / Won’t Apply

30%

45% Unsure

47% Nationwide Office Tenants Struggling to Pay Rent Applies Today or Could Apply

56%

In the Southeast Region

7% 8%

State Breakdown

“Struggling to Pay Rent”

Florida

60%

Georgia

59%

Tennessee

50%

North Carolina

47% 4

TENANT IMPACTS – ENVIRONMENTAL DYNAMICS

ATTITUDES TOWARDS THE PANDEMIC AND WORKPLACE IMPACTS • Nearly two thirds (65%) are personally comfortable returning to the office (vs. 59% saying their employees share the same feeling), with comfort scores declining in more suburban and suburban-urban areas (which is counterintuitive, but follows the Phase 2/3 shift of coronavirus to more suburban/rural areas).

Nationwide Tenant Comfort/Support for Safe Returns – Personal vs. Projection on Colleagues I am personally comfortable with or supportive of coming back to our physical office space

Our employees (my colleagues) are generally comfortable with or supportive of coming back to our physical office space

Agree / Strongly

69% vs. 63%

Agree / Somewhat

32%

25% Neutral

33%

34%

18%

21%

16%

19%

65% Personal vs.

59% Projection

Disagree

70% vs. 67% Among Southeast Region C-Suite/Owners Only

Personal Comfort

Projected Colleague Comfort

Florida

74%

68%

Georgia

69%

58%

Tennessee

70%

North Carolina

63%

59%

State Breakdown

TENANT IMPACTS – BUSINESS PERFORMANCE DRIVING SPACE DECISIONS

NATIONAL ENTERPRISE RISK PROFILES – FINANCIAL BAROMETER VS. SPACE VALUE Industry Risk Profiles

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

Technology

Real Estate Construction Manufacturing Retail Other

37%

59%

46%

21%

64%

53%

23%

60%

46%

27% 34%

4 or more years Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

55%

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

Urban

28%

Suburban/Within Commuting Distance to City

52% 42%

37%

20%

1,000 - 5,000 SF

58%

10,000 - 25,000 SF 25,000 - 50,000 SF

45%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

More Than 50,000 SF

28%

32%

60%

39% 45%

28%

54% 68%

Rent Per Square Foot (PSF)

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

34%

Less than $30 PSF

46%

44%

57% 66%

39%

$30 - $40 PSF

58%

23%

73% 58%

23%

$40 - $50 PSF

21%

76% 30%

66%

45%

33%

Midwest

65%

53%

35%

32%

41%

61%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response 38% 34%

56%

58%

22%

Northwest

Office Square Footage

5,000 - 10,000 SF

43%

71%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

72%

32%

Suburban-Urban/Within a Town Center Rural

53%

49%

24%

Northeast

47%

56%

43%

51%

36%

23%

Texas

43%

23%

South

67%

32%

3 to 4 years

Office Property Location

55%

58%

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

California 70%

32%

1 to 2 years

56%

58%

33%

6 to 12 months

Geographic Risk Profiles Southwest

56%

63%

34%

23%

46% 42%

Less than 6 months

78%

40% 35%

Healthcare

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

61%

24%

Professional Services

By Renewal Horizon

48%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

More than $50 PSF

20%

51% 64% 59% 72% 65%

66%

77%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

TENANT IMPACTS – BUSINESS PERFORMANCE DRIVING SPACE DECISIONS

SOUTHEAST REGION – SPECIFIC RISK PROFILES – FINANCIAL BAROMETER VS. SPACE VALUE By Renewal Horizon

Industry Risk Profiles

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

Technology Professional Services

Construction Manufacturing Retail Other

33% 14%

17%

6 to 12 months

50% 58%

3 to 4 years

4 or more years

51%

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

Suburban/Within Commuting Distance to City

23%

Rural 14%

52% 60%

33%

64%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

50%

Tennessee

23% 60%

76% 48% 55%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

1,000 - 5,000 SF

25,000 - 50,000 SF More Than 50,000 SF

25% 56%

Office Square Footage

10,000 - 25,000 SF

47%

North Carolina

28%

39%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

Rent Per Square Foot (PSF)

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

Less than $30 PSF

47%

27%

69%

22%

$30 - $40 PSF

69% 65%

16%

78%

23%

31% 43%

19%

63%

16%

5,000 - 10,000 SF

46%

59% 73%

67%

79%

27%

Suburban-Urban/ Within a Town Center

65%

Georgia

61%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

56%

24% 65%

78%

30%

18%

60%

65%

63% 68%

Summary of “Applies Today” or “Could Apply” for “Struggling” and “Less Value” Response

Florida

65%

33%

1 to 2 years

62% 68%

Office Property Location Urban

31%

47%

65%

37% 29% 26%

71%

57%

33%

21%

Less than 6 months

81%

58%

29%

Healthcare Real Estate

67%

16%

Geographic Risk Profiles

31%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

72%

28%

$40 - $50 PSF 20%

86% 69% 74%

More than $50 PSF 15% 15%

39% 42% 54% 66% 68% 73% 74%

Struggling to Pay Rent / Meet Lease Terms Seeing Less Value in Physical Space Reassessing Space

86%

CRE INDUSTRY IMPACTS

PANDEMIC TIMELINE: THROUGH THE LENS OF NATIONAL OFFICE TENANTS • Well over half of tenant respondents (58%) believe their companies will return to pre-pandemic profitability in advance of Q2 2021, with an even greater share (65%) predicting an earlier (and in some cases, prerequisite) resumption of normal, in-person office operations. • 43% say a downsizing of their current office footprint is possible by Q1 2021, another 21% in Q2 or later, and 36% say it’s not a factor. Q2 2021 Or Later

19%

Return of my company to pre-pandemic profitability

13%

17%

13%

19%

10%

Q2 2021 Or Later

15%

Considering raises / salary increases (unfreezing compensation)

13%

17%

11%

18%

19%

Q2 2021 Or Later

13%

22%

14%

13%

Q2 2021 Or Later

22%

Hiring and onboarding new employees

12%

15%

12%

14%

17%

Q2 2021 Or Later

Downsizing our current office footprint

13%

10%

13%

36%

LONGER DURATION

22%

Resumption of normal in-person office operations

Q2 2021 Or Later

Potential shutdown of my organization if things don’t improve

10% 6%

12%

47%

Q2 2021 Or Later

16%

August – September 2020 Later than Q2 2021

11%

October – December 2020 Never / Not Applicable

39% Q1 2021 (Jan. – Mar.) 8

TENANT IMPACTS – ATTITUDES TOWARDS PHSYICAL OFFICE SPACE

RESULTING ORIENTATION TOWARDS REASSESSING/REDUCING SPACE • Even though many tenants will continue to renew their leases, a large share will be reassessing their space needs, or are unsure as to their plans. • Among those who are likely to reassess their space needs or who are unsure, 33% would expand their square footage while 54% would reduce, which normalized to the full tenant population in the sample, reflects 43% of all tenants reducing square footage. Tenant Likelihood to Reassess Space Needs 20% Unlikely

61%

Likely to reassess space needs

26% Likely / Strongly

& 19%

19% Unsure

33%

35%

Likely / Somewhat

Likely to maintain or expand square footage Of Those Likely or Unsure

54%

Likely to reduce square footage

Unsure

Southeast Region – October 2020

65% & 15%

Likely to reassess space needs

12%

Likely to expand square footage

Unsure

Views on Reassessing Space

State Breakdown

Likely to Reassess

Unsure

Florida

65%

14%

Georgia

73%

Tennessee North Carolina

57%

Likely to reduce square footage

Square Footage Impact

43%

Of all tenants reducing square footage

46%

Of Southeast tenants reducing square footage Compared to Overall Population

Likely to Reduce SF

Absolute Impact

11%

59%

47%

15%

16%

58%

51%

60%

18%

10%

58%

45%

56%

18%

10%

52%

38%

Likely to Expand SF

SPACE DYNAMICS IN A COVID-19 ENVIRONMENT / FUTURE SPACE PLANS

WHAT DOES REASSESSING SPACE NEEDS LOOK LIKE? • Likelihood to reassess space increases significantly in the 6 month to 3-to-4-year renewal period dropping for those with leases expiring more than 4 years out, indicating those tenants are predicting management of/less impact from the pandemic in the far future. • Still, of those reassessing or unsure, 54% are planning to reduce square footage on their next renewal, reflecting 43% of all tenants.

Likelihood to Reassess Space Needs by Renewal Horizon (All National Tenant Audiences)

26%

Office Square Footage Adjustment Post-Coronavirus

(Asked Among 80% Likely to Reassess Space Needs or Unsure for All Tenants, 80% for Southeast Region)

Would expand space in next lease

15%

Unlikely 16%

24% 23%

Wouldn't change square footage

16% 27%

Would reduce by < 10%

17%

10% 10% 20% 16%

Would reduce by 10-25%

14%

Unsure / Need More Info 18%

15% 16%

Would reduce by 25-50%

13% 26% 58%

Would reduce by 50-100%

10%

Unsure / Need More Info

12% 8%

70%

Likely

15%

33%

Would Expand or Not Change

54%

Of Those Asked Would Reduce Square Footage *Equates to

! 43%

Of All Tenants*

67% All Audiences

71% 47%

9% 12%

Less than 6 Months

6 - 12 Months

3 - 4 Years

4+ Years

1 - 2 Years

Southeast Region

Based on your experience with staff reductions, teleworking and/or other business impacts during the coronavirus public health emergency–whether or not you stay in your current property–to what extent would you plan to change the total square footage of your space?

SPACE DYNAMICS IN A COVID-19 ENVIRONMENT / FUTURE SPACE PLANS

WHAT DOES REASSESSING SPACE NEEDS LOOK LIKE? • The table to the right details the extent of possible space reductions by renewal time horizon. • Notably, the ”Percentage of Tenants Reducing SF at Each Renewal Period” factors in the overall percentage of tenants with renewals at each time point. • This shows the largest risk of tenants reducing square footage in the 6 month to 2-year time table from October 2020, equating to 25% of all tenants potentially making space reduction decisions in that time period. • The Southeast region, despite representing a higher overall space reduction risk, still shows 25% of all tenants potentially reducing their footprint in the 6-month to 2-year timeline, with a higher space reduction number in the 4+ year window. With anticipated vaccines/management of the pandemic, this segment of space reductions may not necessarily materialize.

Space Reductions by Renewal Horizon

(Relative and Absolute Space Reductions – All Data Among National Audiences w/ Exception of Renewal Period Highlight) <6 6 – 12 Months Months

1–2 Years

3–4 Years

4+ Years

85%

84%

73%

43%

60%

63%

60%

41%

43%

32%

51%

53%

50%

29%

Percentage of National Tenants Reducing Square Footage at Each Renewal Period (Total 43%)

43%

14%

Percentage of Southeast Region Tenants Reducing Square Footage at Each Renewal Period (Total 46%)

46%

14%

12%

By Renewal Time Horizon

All

Reassessing Space Needs or Unsure

80%

74%

Reduction Among Those Reassessing or Unsure

54%

Reduction as a Percentage of All Tenants

*BELOW DATA REFLECTS SPACE REDUCTION AS A PERCENTAGE OF ALL TENANTS IN EACH RENEWAL SEGMENT*

Reducing <10%

10%

11%

Reducing 10-25%

16%

10%

20%

22%

16%

Reducing 25-50%

12%

13%

14%

Reducing 50-100%

12%

7% 11

SPACE DYNAMICS IN A COVID-19 ENVIRONMENT / FUTURE SPACE PLANS

WHAT DOES REASSESSING SPACE NEEDS LOOK LIKE?

National Audience – What This Means by Square Footage Segment (Relative and Absolute Space Reductions)

10,000 – 25,000 SF

25,000 – 50,000 SF

> 50,000 SF

By SF Segment

All

70%

80%

88%

90%

84%

Reassessing Space Needs or Unsure

80%

54%

43%

60%

63%

62%

51%

Reduction Among Those Reassessing or Unsure

43%

30%

48%

56%

43%

Reduction as a Percentage of All Tenants

All

Reassessing Space Needs or Unsure

80%

Reduction Among Those Reassessing or Unsure Reduction as a Percentage of All Tenants

*BELOW DATA REFLECTS SPACE REDUCTION AS A PERCENTAGE OF ALL TENANTS IN EACH RENEWAL SEGMENT*

(Relative and Absolute Space Reductions)

5,000 – 10,000 SF

By SF Segment

1,000 – 5,000 SF

Southeast Region – What This Means by Square Footage Segment 1,000 – 5,000 SF

5,000 – 10,000 SF

10,000 – 25,000 SF

25,000 – 50,000 SF

> 50,000 SF

68%

80%

91%

96%

82%

58%

46%

61%

63%

69%

54%

46%

32%

49%

57%

67%

44%

*BELOW DATA REFLECTS SPACE REDUCTION AS A PERCENTAGE OF ALL TENANTS IN EACH SIZE SEGMENT*

Reducing <10%

11%

Reducing <10%

14%

10%

Reducing 10-25%

16%

10%

18%

22%

20%

15%

Reducing 10-25%

13%

17%

14%

Reducing 25-50%

12%

16%

13%

19%

11%

Reducing 25-50%

12%

13%

12%

27%

Reducing 50-100%

10%

Reducing 50-100%

12%

13%

15%

16%

24%

SPACE DYNAMICS IN A COVID-19 ENVIRONMENT / FUTURE SPACE PLANS

HOW WILL TENANTS ACHIEVE SPACE EFFICIENCY & SAFETY? • Tenant views on how they will achieve space efficiency are diffuse, though reducing the size of common areas, the number of private offices and conference rooms resonate most with those suffering from revenue declines. • At right, smaller tenants tend to focus more on common area reductions, with larger firms considering open floor-plan layouts, hoteling desks and other novel concepts.

Changes to Create Space Efficiency by Audience 36% 36%

Reduce size of common areas Reduce private office size Reduce number of private offices Reduce number of conference rooms Add in hoteling or flexible desks for teleworkers Go to a full open floorplan layout Reduce size of conference rooms Reduce number of employees (reductions in force) All Audiences

Southeast Region

28% 32% 36% 27% 24% 26% 27% 28% 32% 25% 24% 24% 24% 28% 28% 24%

23% 22% 24%

41%

29% 32%

Southeast C-Suite / Owners

In order to change your office space needs, which of the below would you do and/or which factors would apply to achieve that square footage reduction? (Please select all that apply)

National Audience – Space Reduction Approach / Efficiencies by SF Segment (Asked Among 43% Likely to Reduce Space) 5,000 – 10,000 SF

10,000 – 25,000 SF

25,000 – 50,000 SF

> 50,000 SF

37%

38%

34%

37%

35%

28%

24%

25%

31%

25%

Reduce number of private offices

27%

26%

28%

27%

34%

18%

Reduce number of conference rooms

27%

26%

25%

35%

33%

Add in hoteling or flexible desks for teleworkers

25%

22%

23%

27%

30%

29%

Go to a full open floorplan layout

24%

21%

26%

33%

22%

Reduce size of conference rooms

24%

19%

28%

25%

22%

29%

Reduce number of employees (reductions in force)

23%

18%

19%

27%

24%

29%

By SF Segment

All

Reduce size of common areas

36%

Reduce private office size

1,000 – 5,000 SF

SPACE DYNAMICS IN A COVID-19 ENVIRONMENT / FUTURE SPACE PLANS

CHANGES TO CREATE SPACE EFFICIENCY – BY STATE How Will Southeast Office Users Change Their Spaces? 34%

Reduce size of common areas

Reduce size of conference rooms

35%

26%

Reduce number of conference rooms

41%

29%

24%

31%

22% 18%

Reduce number of private offices

50%

35%

30% 29%

Reduce private office size

37%

44%

22% 50%

30%

Go to a full open floorplan layout

22% 18%

Add in hoteling or flexible desks for teleworkers

Georgia

21%

32%

23% 22%

Reduce number of employees (reductions in force)

29% 29%

44% 28%

22% Tennessee

North Carolina 14

FUTURE-STATE / CRE INDUSTRY NEXT STEPS TO CONFRONT THE PANDEMIC

TENANT “VALUE EQUATION” POST-COVID • Though the previous slide showed a decline in “service” as a driving factor for location decisions, for current tenants in their spaces, personal relationships with their landlords/PM staff are more important than ever.

Amenities / Features – Value for Tenants Post-COVID All Audiences

Flexible, shorter term leases (2-4 years) Personal relationship with landlord / property management staff

18%

Front desk concierge/doorman/security

18%

Availability of longer term leases with clauses/ covenants for health Employee collaboration, networking and coaching conducted in person, in our office

On-site café/deli

15% 13%

41%

28%

41%

24% 22%

22%

40% 38%

About the Same

15% 17%

39%

46%

National Office Tenants Tenants Seeing More Value in Personal Relationships w/ PM Staff

15%

43%

25%

More Value / Somewhat

11%

41%

27%

20%

12%

43%

26%

16% 15%

More Value / Strongly

31%

15%

Social spaces in building (lounges, rooftop decks)

Gym and fitness center on-site/in-building

18%

State Breakdown

% More Value in Personal Relationships

All Southeast

48%

Florida

54%

Georgia

50%

Tennessee

40%

North Carolina

36%

22% 29%

Office Tenants Seeing Less Value in Traditional, Built-In Amenities

Less Value

FUTURE-STATE / CRE INDUSTRY NEXT STEPS TO CONFRONT THE PANDEMIC

PERCEIVED VALUE IN OWNER/OPERATOR MEASURES AND PROGRAMS • Maximization of fresh air leads the way as a “most important” measure for owners-operators to adopt, though more than 4-in-10 respondents each are willing to “pay a premium” or additional fees for large disinfecting stations and twice-daily full office disinfecting.

New Measures and Programs

“Positives” for Additional Services

Overall Preference (Most Important Change) by Audience

Overall Preference by Audience 37%

Increasing fresh air intake in HVAC system

34%

(reducing recycled/re-circulated air) which adds energy expenditures

35% 21%

Large, prominent disinfecting stations with

24%

extra sanitizer, ultraviolet wands, gloves and other essentials

29%

methods

13%

guests, ensure compliance with mask and other

13%

facilities and ways to adapt your workplace

16%

Additional staffing at front desk to check in

information about coronavirus, testing

Southeast Region

Building out dedicated teleworking board rooms with reliable, high-end AV and IT for connectivity to remote workers

16%

approved chemicals and CDC-recommended

On-site health/wellness advisor with

Complimentary access to vacant office space/flex space for social distancing measures

60% 62% 51% 59% 56%

17%

Frequent full office disinfecting with EPA-

safety policies

Georgia Resonance

57%

9% 11% 14%

50% 56%

Parking accommodations

53% Supplemental facilities services (e.g., coordination of temporary relocation and moving employees out of the property to workfrom-home environments)

46% 52% 54%

12%

Southeast C-Suite / Owners

All Audiences

Southeast Region

Southeast C-Suite / Owners 16

FUTURE-STATE / CRE INDUSTRY NEXT STEPS TO CONFRONT THE PANDEMIC

PERCEIVED VALUE – NEW MEASURES AND PROGRAMS BY STATE New Measures and Programs

“Positives” for Additional Services

Overall Preference (Most Important Change) by Audience

Overall Preference by Audience

28% 31% 34% 21%

Large, prominent disinfecting stations with extra sanitizer, ultraviolet wands, gloves and other essentials

23% 23% 15% 15%

Frequent full office disinfecting with EPAapproved chemicals and CDC-recommended methods

16%

Florida

Georgia

30%

18% 16%

15% 14%

8% 12%

Tennessee

Georgia Resonance

65%

Complimentary access to vacant office space/flex space for social distancing measures

48% 55% 63%

Building out dedicated teleworking board rooms with reliable, high-end AV and IT for connectivity to remote workers

62% 50% 50%

21%

12% 13%

Additional staffing at front desk to check in guests, ensure compliance with mask and other safety policies

On-site health/wellness advisor with information about coronavirus, testing facilities and ways to adapt your workplace

62%

36%

Increasing fresh air intake in HVAC system (reducing recycled/re-circulated air) which adds energy expenditures

North Carolina

61% 58%

Parking accommodations

45% 45%

Supplemental facilities services (e.g.,coordination of temporary relocation and moving employees out of the property to work-fromhome environments)

Florida

Georgia

57% 60% 35% 35% 40%

Tennessee

North Carolina 17

FUTURE-STATE / CRE INDUSTRY NEXT STEPS TO CONFRONT THE PANDEMIC

WHAT WE SAY: CENTERING THE NARRATIVE ON SAFE RETURNS TO WORK Message Effectiveness Based on “Value Delivery” – Summary of “More Value” Scores 65%

Office property owners and managers are making significant investments in physical features and infrastructure to keep tenants and their employees safe (e.g., new/improved HVAC and sanitization features)

67% 69% 62%

Most successful businesses are based on human connections (e.g. in-person meetings, collaboration, coaching, etc.) and environments which facilitate such interactions are essential to keeping organizations productive

65%

57% 63% 62% 56%

The young, skilled talent you've worked hard to recruit needs the in-person office environment for networking, mentoring and making the face-to-face connections they need to rise in their contributions to your organization

62% More Positive on Culture and Power of In-Person, Human Connection

61% 59% 56%

Office property owners and operators are developing and investing in new solutions for lessees, including 'resilient building' certifications and programs that guarantee disaster funding and continuity of operations

63% 65% 50%

McKinsey, among other research firms, has suggested that work-from-home time will only increase from 20% pre-COVID-19 to 27% once the crisis is over

All Audiences

More Positive on “Investments to Keep Tenants Safe”

67%

As 'experts in space,' landlords and brokers are working with tenant organizations to redesign spaces, create hybrid working environments (facilitating remote and on-site work) and evolve their properties

65%

55% 53% Southeast Region

Southeast C-Suite / Owners

18 20

FUTURE-STATE / CRE INDUSTRY NEXT STEPS TO CONFRONT THE PANDEMIC

WHAT WE SAY: STATE-SPECIFIC BREAKDOWNS Office property owners and managers are making significant investments in physical features and infrastructure to keep tenants and their employees safe (e.g., new/improved HVAC and sanitization features)

70%

45%

Tennessee

62% 65% 50%

67%

Tennessee Outlier for â&#x20AC;&#x153;Experts in Spaceâ&#x20AC;?

57% 64%

40%

68%

60% 65%

66%

38%

McKinsey, among other research firms, has suggested that work-from-home time will only increase from 20% pre-COVID-19 to 27% once the crisis is over

Georgia

67%

45%

Florida

65% 68%

69%

52%

43%

59%

62%

45%

North Carolina 19 20

CRE INDUSTRY IMPACTS

CURRENT STATE: CORONAVIRUS IMPACT ON TENANT LOYALTY

34%

Unsure

All Southeast

40%

21%

28%

11%

Florida

48%

20%

21%

11%

Georgia

42%

25%

21%

12%

Tennessee

33%

25%

18%

North Carolina

32%

20%

42%

No 5% Unsure

23%

Yes / Somewhat

39%

}

Yes / Strongly

39%

78% Yes on Renewal

30%

55% Yes on Renewal

}

Yes / Strongly

Yes / Somewhat

BY SQUARE FOOTAGE

Unsure

Yes / Strongly

BY RENT PER SQUARE FOOT (PSF)

10%

25%

Brightline Index 2014-2020

Lease Renewal by Region/State

Yes / Somewhat

BY LOCATION

Market Comparison

BY INDUSTRY

Are you currently planning to renew your lease?

BY JOB ROLE

• Without any prompting on coronavirus, tenants were asked at the very beginning of the survey if they would plan on renew; the 55% “Yes” score is well below the Brightline 6-year national index of 78%.

Yes – Will Renew – National Audience

Yes – Will Renew – Southeast Region

C-Suite, Owner VP, Director Facilities Manager Mid-Level Managers

61% 57% 47% 47%

65% 62% 64% 49%

Southwest California Texas South Northeast Midwest Northwest

51% 65% 64% 57% 53% 56% 63%

--------

1,000 – 5,000 SF 5,000 – 10,000 SF 10,000 – 25,000 SF 25,000 – 50,000 SF > 50,000 SF

50% 57% 67% 70% 67%

51% 70% 71% 71% 77%

< $30 PSF $30-$40 PSF $40-$50 PSF > $50 PSF

51% 54% 69% 71%

52% 59% 67% 81%

Technology Professional Services Healthcare Real Estate Construction Manufacturing Retail Other

67% 49% 54% 53% 69% 68% 57% 48%

80% 59% 56% 62% 76% 75% 53% 49% 20

FUTURE-STATE / CRE INDUSTRY NEXT STEPS TO CONFRONT THE PANDEMIC

FUTURE STATE: IMPACT ON TENANT LOYALTY / OWNER-OPERATOR ROI • Almost 8-in-10 tenants approve of their owners-operators’ coronavirus response, driven by superior communications, a renewed focus on safety and security and the earlier mentioned fact that tenants are depending on personal relationships with PM staff more than ever. • The result of this strong performance is that 47% of tenants would be more likely to renew based on the coronavirus response exclusively, demonstrating strong owner-operator ROI for proactive, transparent communications on day-to-day activities, future-state programs/features and ”experts in space” positioning.

Contributing Factors to Strong Approval / Increased Loyalty

“State of the Union” –

Approve vs. Disapprove on Office Landlord Coronavirus Response Disapprove

79%

10%

Unsure

12%

All Southeast

81%

Florida

83%

Georgia

82%

Tennessee

78%

North Carolina

76%

Approve / Strongly

41%

}

“How would you rate your landlord/ property management company’s response to the coronavirus/COVID-19 public health emergency? Do you approve of their response so far, disapprove or are you unsure?”

ROI on Coronavirus Response Measures

Less Likely

No Difference

12%

14%

Landlord is communicating “just the right amount” about Coronavirus (vs. 11% “too little”)

35%

41%

Ranking of “Safety and Security” as a reason to pick one property over another (25% “Most or 2nd Most Important Factor”)

More Likely / Somewhat

46%

Tenant decision-makers seeing more value in personal relationships with landlord/ property management staff

27%

More Likely / Strongly

19%

}

More Likely / Somewhat

23%

More Likely / Strongly

27%

}

50% More Likely

78% Approve

37%

% Approving of Coronavirus Response

ROI on Coronavirus Response Measures

47% More Likely

Approve / Somewhat

Region / State Breakdown

Impact on Renewal – Nationwide Impact on Renewal – Southeast Region

“Thinking about the communications, policies and processes your landlord/property manager has implemented over the past several weeks in response to the coronavirus/COVID-19 public health emergency – Has their response made you more likely to renew your lease when it’s up, less likely, or has it made no difference?”

FUTURE-STATE / CRE INDUSTRY NEXT STEPS TO CONFRONT THE PANDEMIC

FUTURE STATE: GROWING RENEWAL SHARE AND ACHIEVING OWNER-OPERATOR ROI • Following exposure to new services, features and physical spaces landlords/property management companies could invest in and deliver, tenants’ likelihood to renew their leases jumps from 55% to 66%. Though intensity wanes (“Yes / Strongly”) this is likely due to apprehension over additional costs/fees. • There is significant internal shifting, however, as 27% of respondents ”move up the ladder” towards a stronger renewal likelihood, and fully 18% switch to “Yes” from a “No” or “Unsure.” Driving this switching are those who demonstrated weaker numbers/larger COVID impacts earlier on, including small businesses (1,000 – 5,000 SF, and industries including retail, healthcare and professional services. • This reflects a strong opportunity for renewal growth, despite the pandemic, provided owners-operators continue communicating well, growing relationships and investing in advanced processes and technologies highlighted by tenants in the survey.

National Audience – Likelihood to Renew Based on Landlord/Operator Response

Nationally

If Your Property Implemented Features Discussed

30%

25%

61% Yes

Switch to “Yes” on Renewal from ”Unsure” or “No” Following Awareness/Prompting on Coronavirus Response

Southeast Region / State Breakdown

25% Yes / Strongly

10% Internal Shuffling of Renewal Likelihood

66% Yes Post-Exposure to Coronavirus Features

34%

If Your Property Implemented Features Discussed

18%

55% Yes Pre-Exposure to Coronavirus Response

Southeast Region – Likelihood to Renew Based on Landlord/Operator Response

41% Yes / Somewhat

26%

Unsure

“If your office property management company implemented the physical features and service programs you found most compelling earlier, would you now consider renewing your lease when it expires?”

Region / State Breakdown

% % Switching to More Likely to Renew

All Southeast

16%

Florida

13%

Georgia

21%

Tennessee

18%

North Carolina

16%

Pre-Exposure to Coronavirus Response

40%

21%

28%

11%

69% Yes Post-Exposure to Coronavirus Features

34%

35%

Yes / Strongly

"$#

'(#

Yes / Somewhat

24% Unsure

7% No

27 22

CONTACT US If you have any questions or would like to participate in the upcoming COVID-19 Impact Study set to field Mid-February, please reach out to us via email: James Moore â&#x20AC;&#x201C; jmoore@brightlinestrategies.com Kevin Hudak â&#x20AC;&#x201C; khudak@brightlinestrategies.com

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