7 minute read
Leadership review – Office leasing
Office leasing
with Terry Doran
Terry Doran has worked for Crombie REIT and its predecessors for 30 years . As the Vice President of Office Properties, Terry is responsible for the company’s office portfolio across the Atlantic region . In addition to his commitment to building strong relationships with clients, Terry’s passion for sustainability has led to director positions with BOMA Nova Scotia, BOMA Atlantic (Past President), and BOMA Canada . I sat down with Terry this past September to get his insights on the changes and challenges in office leasing, what’s coming next in a highly competitive market place, and how Crombie REIT has become one of Canada’s leading national real estate investment trusts .
How did you get started in the real estate industry? What has your career journey been like at Crombie?
I applied for a job at the local shopping centre in my neighbourhood just prior to my first year in university . It was a large company from Toronto with shopping centres throughout the country . I got a job working maintenance and security for the summer . After that first summer they hired me back and I stayed all through university . I was looking for work after I graduated and they had a marketing director position in Ontario, so I moved into management from there and travelled across Canada . I joined Crombie REIT (formerly Atlantic Shopping Centres Limited) in 1988 . This is my 30th year .
What are the biggest changes in office leasing over the last 30 years?
The biggest changes in the office market are the types of office spaces and the requirements for the offices and the amenities . Sustainability is something that has become really important over the last number of years . Technology and innovation are also playing a large role in our industry . Halifax tenants, like other cities, migrate to and from the suburbs and the Central Business District . Another trend in Halifax and in other Canadian urban markets is mixeduse and multi-residential developments .
Millennials and younger generations want to live downtown . They want sustainability, they want you to be environmentally friendly, they want walkable cities, they want bicyclefriendly cities, and they want urban rooftop amenities and gardens, anything that’s going to reduce your carbon footprint and make the world a better place to live . Climate change is no longer an argument – it’s a reality . In order to appeal to tenants today you must keep sustainability, customer service, technology, and amenities top-of-mind .
There have been a lot of changes over the years in office density, going from the typical one-person office with a door, to open concepts, with more meeting and collaboration space . The other big change in the industry is analytics . Everybody wants data and they want to be able to use it to track people’s habits and to more accurately provide what customers are looking for .
Halifax has experienced a significant amount of growth over the last ten years. Vacancy rates in residential properties, especially affordable spaces, have remained low. Have commercial and office properties experienced the same growth and low vacancy rates?
Terry Doran, BA
It goes up and down . If you look at Alberta, it is heavily influenced by the oil patch and it tends to go up and down with the industry . So right now, Calgary is experiencing very high vacancy rates . Halifax is as well . Although there was a big shift of office properties in the suburbs, we are seeing multi-residential mixed-use development coming back into the city, and younger people wanting to live in the city . That will make offices migrate back downtown close to the talent they seek . Right now there is a 20% vacancy rate in Halifax and it will take a long time to normalize that, but it will happen over time .
Is that a high rate?
That is very high . In a good market the average vacancy rate for offices is in the 2% to 4% range . You need flexibility in the office market so people can upsize or downsize if need be . So in the end you don’t want to be 100% occupied, but a low percentage vacancy rate would be great .
There is a surge in shared office spaces recently. Do you see this changing in your properties?
Yes, it’s happening in large markets and it’s happening here on a smaller scale . Those types of spaces are becoming more popular and I think that will continue to increase . Instead of getting in their car and driving to an office, people will work from home or they will work from home parttime and go to the office when it’s necessary . It’s rapidly changing the way people work, and technology has allowed us to do that . It’s a different way of working . The old standard ways of sitting in an office and going
to a meeting in a boardroom are changing . With technology there is video conferencing, which is quite common for us at Crombie as we have offices across the country, so if we need to have a meeting it’s very easy to do .
What happens in a high vacancy rate is that you tend to see a decline in rental rates . We are not seeing a lot of that in Halifax and also what happens is a ‘flight to quality’ . If people can get a good deal in a brand new building and they are currently in a B building, then they are going to move to the new building . But if you have a B building, you have to put capital back into that building to make sure it is renovated and you can turn it into a B+ building . Make it sustainable, upgrade the amenities with high-end finishes, and make sure that the lobbies and all of the spaces that people use are top quality or else you will not maintain your retention rate . People will go to where they get the quality they desire .
Have residential developments been a more recent market for Crombie?
Yes . We’re not the only REIT to be moving into residential . Most developers are moving into the mixed-use residential in urban markets, where you have retail, amenities, and fitness facilities so that people can live, work, and play .
What trends are you seeing in major centres to adapt to new technologies, and the way people live and work when it comes to commercial real estate development?
Sustainability, customer service, and amenities – all absolutely necessary things . But from a technology standpoint, it’s increased data collection around business operations and personal preferences . E-commerce is a huge growing sector and we’re not exactly sure how that’s going to impact bricks and mortar .
What do property owners need to do to continue to draw good tenants and supporting clientele beyond sustainability, amenities, and the convenience factor?
Food courts, fitness, and facilities that promote healthy living; bringing in tenants that provide necessary services like medical clinics, pharmacies, dentists, and education . All of those things are fairly critical components .
For the next generation of people entering a new career who might be thinking of choosing a path in commercial real estate, what advice would you give them?
In the real estate industry, relationships are everything . Some people would say you should study finance and technology and you need to be innovative and nimble . You need all of that . But you also need very good people skills . You can’t just rely on technology, tablets, and smartphones . This always has and will continue to be an important part of the industry . People still want to talk, people still want to build relationships, and you need to be able to develop them over time . Getting involved in industry organizations like BOMA or the International Council of Shopping Centres (which are worldwide organizations) allows you to build relationships . The first time you attend a conference with one of these organizations, you might only meet a few people . By the tenth, you will likely know most people and develop and business relationships .
It’s also about staying well ahead of the curve . It’s about analytics, technology, innovation, and finding out what’s coming next and trying to get in front of it . Who would have guessed 20 years ago that there would be no Sears? Many of the big Canadian and American retailers are now facing new challenges .
About the author
Amanda White, PQS, owns and operates Foresight Atlantic Inc ., a boutique quantity surveying firm just outside of Halifax, in her hometown of Sackville, Nova Scotia . When Amanda is not building relationships with her clients and colleagues or being an entrepreneur, she volunteers as a board member of the CIQS Maritimes Chapter and as a member of the Canadian Progress Club Halifax Citadel .
QS Online Cost Consultants Inc. Halifax, Nova Scotia p. 902 405-1504 halifax@qsonlinecostconsultants.com www.qsonlinecostconsultants.com
