COMMERCIAL REAL ESTATE & CONSTRUCTION CONSTRUCTION OVERVIEW OVERVIEW
Frank Baird CEO Capital Associates Management
considerations for a safe return back to the office, constant communication between tenants, property managers and landlords has been key in navigating the pandemic challenges. “On the commercial side, we saw a higher rate of delinquency with commercial tenants, and particularly with retail, but not as much on the office front,” Real Estate Associates President Seth Jernigan told Invest:. “We had to work with many of our tenants on providing some rent relief to keep them in the space. The majority of those have bounced back and are living up to whatever rent deferral agreement was put into place. We, of course, wanted to avoid having to take action against the tenants and do whatever we could reasonably do to help them weather the storm. If they were strong as COVID came in, we wanted to work it out and keep all the tenants in place, hold hands and keep things together,” he said.
How have deferrals and concessions impacted the commercial real estate business? We took an interesting approach early in the pandemic. I think we learned from the experience back in the early 2000s when the dotcom bust happened and we had several software companies that came in and asked for concessions in the middle of their lease term because they were over-extended and in trouble. In our world of office tenants, we have not had a lot of problems. I think we have lost one or two tenants out of about 400-500. Our company has not had to give any rent concessions to anybody. We went through a lengthy process of requesting a tenant to provide us information related to receiving PPP funds, if they implemented a pay cut in executive salaries and other financial information that illustrated financial hardship. By the time you go through all those requirements, it’s probably not worth the hassle of getting two months of free rent or any other rent concession that you would have to pay back anyway. Most of the big companies pushed it a little bit and decided it was not worth the effort. We tried to help those that were struggling but they worked through it as we did. The effect on our business has been very limited. Where are the emerging areas for commercial real estate in Raleigh-Durham? During COVID, we have had a lot more biomedical, pharma, clinical research, lab space and life science companies coming to the market than we ever had since I’ve been in the Triangle. It’s mainly occurring west of the airport but other buildings in Wake County are being repurposed for lab space. There’s also the Research Triangle Park, which is re-emerging as a tech leader when I thought it was maybe heading the wrong way five years ago because of lack of amenities and because employees wanted to be in bigger urban buildings Downtown, with restaurants and housing close by. But COVID has changed that dynamic. The suburban office building is alive and well. www.capitalanalyticsassociates.com
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