The BOMA Magazine - January/February 2011 by lprats

Leading the Future

january/february 2011

2010 Year in Review

From Capitol Hill to City Hall

Plus: The Personal Touch in Tenant Relations Best Practices in Allocating CAM Charges Break the Germ Transmission Chain in Your Building

Advertorial

Reflectivity Updates Required for Traffic and Other Signage The time for assessment, making improvements is drawing near. Just over a year remains for building owners and property managers to assess the traffic signage at properties and devise a replacement plan in order to get in line with new traffic sign standards geared around reflectivity. For sites under construction, building owners and property mangers should plan to use these new rules now to avoid replacing traffic signage later.

Why the new regulations? The new regulations were created in early 2008 by the Federal Highway Administration (FHWA) to improve safety on the nationâ&#x20AC;&#x2122;s roadways. The push is largely due to an everchanging driving environment caused by an increase in aging drivers, altered headlamp performance and varied vehicle sizes. Who is affected by these new regulations? If your property has paved areas including roads open to the public, private roads and parking lots for shopping malls and restaurants, office complexes, apartment and residential developments, sports and recreational facilities and other businesses open to the public, you will be affected when the regulations go into place. What are the suggested reflectivity levels for traffic signage? â&#x20AC;˘ Parking signs should use engineer-grade or better. â&#x20AC;˘ Street signs and other traffic control signs should use high-intensity grade or greater. Why does reflectivity matter? Studies show that highly reflective signage significantly reduces the number of injury collisions. Conformance with the new standards provides a better position to defend against litigation should someone get hurt on your property. Information provided by Grimco.

SIGNARAMA is ready to help you evaluate your site to ensure it is aligned with the new regulations. Contact your local SIGNARAMA for more information. Find your nearest store at www.signarama.com/locations or call 1-866-360-7446.

In 2008, companies in the U.S. lost $55 BILLION due to absenteeism,1 the costs generated by employees being out sick.

But you can help them save that money with the Healthy Workplace Project from KIMBERLY-CLARK PROFESSIONAL*. An innovative approach to hand hygiene that goes beyond the restroom. That engages your tenants’ employees to stay healthier. Saving your tenants money. Call your KIMBERLY-CLARK PROFESSIONAL* Representative or visit www.healthyworkplaceproject.com to find out how you can implement it today.

Source: “The Total Financial Impact of Employee Absences Survey Highlights”. Kronos Consulting & Mercer LLC. October 2008. Article: Nationwide article

January/February 2011 Volume 7, No. 1

21 25 28 26 2010 Year in Review Lindsay Tiffany Helping property professionals navigate real estate’s “new normal”—with the industry’s best advocacy, networking, resources and education.

For advertising rates and information, contact Paul Hagen at Stamats Business Media 866-965-4205. Connect with BOMA Join BOMA on Facebook Join BOMA on LinkedInJoin the new EER Users Group See BOMA on YouTube: www.youtube.com/ bomainternational Follow BOMA on Twitter:

Thinking Outside the Lavatory Laura Horsley Where germs are actually hiding in your building—and how to break the transmission cycle.

POSTMASTER: Send address changes to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Undeliverable U.S. copies should be sent to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Return undeliverable Canadian addresses to: PO Box 875, STN A, Windsor, ON N9A 6P2.

Message from the Chair

Lindsay Tiffany Confused about CAM charges? A new BOMA publication offers case studies and best practices for managing mixed use properties.

30 Green Scene

Dan Rose Four steps to a better recycling program.

New Year’s Resolution.

Legislative Update Republicans make historic gains in mid-term elections; “lame duck” Congress passes tax extenders; BOMA comments on proposed lease accounting standard.

State & Local Update

Neil Carolan Healthcare reform, aging infrastructure and capital constraints pose challenges for medical office buildings.

Is it time to dust off the hard hats? Predictions for construction starts in 2011.

Around the Industry BOMA local association executives discuss strategy and governance; “A Vision for CRE in 2020”; trends from the ULI conference.

Trade Tools A technology park transforms a former hospital into a “green” showcase.

Leading the Way Jen C. Suddreth, RPA—young professionals’ advocate, Hollywood extra.

Eye on Education

36 TRENDS TRACKER

Codes & Standards Update ICC code hearings produce the next generation of energy codes; BOMA and NMHC appeal possible voting irregularities at ICC hearings.

Research Corner Do you submit your building data to the EER? Seven reasons why you should.

BOMA helps defeat onerous Amendment 4 in Florida; plus, what the new political landscape will mean for CRE.

BOMA Vice President Lisa Prats @ LisaPratsBOMA Volume 7, No. 1 The BOMA Magazine January/February 2011, (ISSN 1532-4346), Copyright 2011. The BOMA Magazine is published bimonthly in January/February; March/April; May/June; July/August; September/October; and November/December by the Building Owners and Managers Association (BOMA) International, 1101 15th St., NW, Suite 800, Washington, D.C. 20005; Telephone 202-3266300; Fax 202-326-6377; www.boma.org. Periodicals Postage paid at Washington, D.C. and additional mailing offices.

Stephanie J. Oppenheimer, APR The shortest path between average and exceptional tenant relations is personalized service.

DEPARTMENTS

BOMA Chair Ray Mackey @ rhmackey BOMA President Henry Chamberlain @ HenryBOMA

The Personal Touch

Lessons in Mixed Use Management

Conference Connection Five reasons why you can’t afford to miss BOMA 2011.

On the Cover: Richard W. Greninger, managing partner, Carr Services, represents BOMA International before Congress in testimony on building maintenance best practices.

January/February 2011 The BOMA Magazine

Message from the Chair

New Year’s Resolution Happy New Year! I’m not one for making New Year’s resolutions, but this year, I think I’ll make an exception. This is a collective resolution, and one that requires the resolve of every BOMA member reading these words. This New Year’s resolution is all about optimism. The past couple years have been a challenge for commercial real estate and BOMA members. Development has all but halted; the banks have put the choke hold on lending; and building managers have had to run buildings on big expectations and lean resources. So, why so optimistic? After all, few economists predict a full recovery before 2013 at the earliest and we certainly have our work cut out for us in the year ahead. I’m optimistic because when I look back at the enormous market challenges we faced, and more importantly how we faced them, I have every confidence that BOMA members are the best prepared to seize the market opportunities ahead of us. You have made excellent use of the BOMA business network, and that has made all the difference. This summer, that powerful network meets again in D.C. for what could be our most important annual conference in years. BOMA 2011 has all the tools, education and networking you need to gain advantage as the industry turns toward recovery. The programming is outstanding, with headliners David Gergen, Sam Zell and Dr. Peter Linneman,

not to mention the industry’s best education with more than 40 sessions. The Every Building Show® will offer the solutions you need for any operational challenge. And, the premier conference facilities at the Gaylord National® Resort & Convention Center are truly exceptional: It doesn’t hurt that it’s all located within the most exciting new mixed use complex on the East Coast—National Harbor on the shores of the Potomac River. Check out “Conference Connection” on page 38 for full details. Another reason for my optimism in 2011 is that we are building on a very active and successful 2010. “The Year in Review” on pages 21-24 lays it all out—from enhancing asset value through programs like BOMA 360 to releasing an entire suite of floor measurement standards to the vital work on Capitol Hill and in city halls across the country. BOMA’s advocacy victories continue to propel the industry. We helped defeat a carried interest bill in June that would have cost our industry billions and quashed entrepreneurial investment when we need it most. And, at the end of 2010, we helped pass critical tax extender legislation and tax cuts to drive the engine of recovery. Our accomplishments show us that optimism is a New Year’s resolution we can all get behind and stick to. So, get ready; it’s going to be an exciting year. Thank you for supporting this great industry!

Ray Mackey, Jr., RPA, CPM, CCIM Chair and Chief Elected Officer

The BOMA Magazine January/February 2011

Publisher: Lisa M. Prats, CAE Editor: Laura Horsley Associate Editor: Lindsay Tiffany Contributing Editors: Karen W. Penafiel, CAE, Ronald Burton, James Cox, Lorie Damon, Ph.D., Tracy Glink, Liz Hazleton Designer: Amy Belice Published by: Building Owners and Managers Association (BOMA) International

BOMA International Officers Chair and Chief Elected Officer Ray H. Mackey, Jr., RPA, CPM, CCIM Stream Realty Partners, LP Dallas, Texas Chair-Elect Boyd R. Zoccola Hokanson Companies, Inc. Indianapolis, Ind. Vice Chair Joseph W. Markling CB Richard Ellis, Inc. Los Angeles, Calif. Secretary/Treasurer Kent Gibson, CPM Property Reserve Inc. Salt Lake City, Utah President and Chief Operating Officer Henry H. Chamberlain, CAE, APR BOMA International Washington, D.C. Call for Nominations: Vice Chair, Secretary/Treasurer and Executive Committee Members BOMA International’s Nominating Committee is seeking candidates for the positions of vice chair, secretary/treasurer and for five members of the Executive Committee to the Board of Governors. For further information, contact Ann Coslett at acoslett@boma.org. The cost for The BOMA Magazine is $75 a year for subscribers and $50 a year for BOMA International members. Publication of advertising should not be deemed as endorsement by BOMA International. The publisher reserves the right in its sole and absolute discretion to reject any advertisement at any time submitted by any party. Material contained herein does not necessarily reflect the opinion of BOMA International, its members or its staff.

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legislative UPDATE

R’s Make Historic Gains in Mid-Term Elections ON NOVEMBER 2, 2010, voters went to the polls, with the economy on the forefront of their minds—and in a very anti-incumbent mood. The result, as you probably have heard several times by now, was that the Republicans made substantial gains in the Senate and historic gains in the House, taking control over that chamber. What does this mean for real estate? Some experts predict that the next session of Congress will bring “more of the same”—meaning more dysfunction and party-line bickering. Though many key Democrats and Republicans are pledging to work together and to give members of the other party a meaningful opportunity to participate in the drafting of legislation and the hearing process, the proof will be in the pudding. But, what we do know for sure is that nothing will get through Congress without the full cooperation of leaders of both parties. Cooperation did occur in the December “lame duck” session, when Congress passed tax extensions (see article: “Congress Passes Critical Tax Legislation”). When the new Congress gets to work, BOMA expects lawmakers to address broader tax reform issues. We also anticipate that House Republicans will hold hearings once the new session gets under way to address some of the regulatory issues on BOMA’s plate, including lead-based paint and storm water management issues currently in play at the U.S. Environmental Protection Agency (EPA). Congressional oversight on these issues would definitely be

a benefit to the commercial real estate industry, though a divided Congress may not reach resolution.

BOMA Submits Comments on Lease Accounting Standards Changes

Congress Passes Critical Tax Legislation

Last year, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued a standard that, if implemented, will completely revamp the way leases are accounted for by both lessees and lessors. Generally speaking, the proposed changes would move the cost of operating leases from a disclosure in the footnotes onto the balance sheet. Ramifications of the proposed changes could prove to be very far-reaching to the commercial real estate industry. BOMA International joined forces with a broad business coalition, which included the Real Estate Roundtable and the U.S. Chamber of Commerce, to submit comments to FASB. BOMA International also put together resources on the

On December 16, Congress passed an $859 billion tax bill that includes provisions that will strengthen commercial real estate and economic recovery. The legislation includes two tax extensions that will greatly affect real estate: the 15-percent tax rate on capital gains through 2012 and the 15-year timeline for depreciating leasehold improvements, retroactive to Jan. 1, 2010, and through December 2011. The bill’s passage comes at a critical time, providing needed tax relief for a still fragile commercial real estate industry. BOMA International’s advocacy team worked diligently to educate members of Congress about how the legislation would affect commercial real estate. In a December 9 letter to Congress, BOMA explained that, “with the commercial real estate sector still grappling with an unprecedented liquidity challenge, now is not the time to increase the cost of investment and operation of commercial properties.” Citing a special report issued by the Congressional Oversight Panel in early 2010, BOMA stated that approximately $1.4 trillion in commercial real estate loans will expire between 2010 and 2014; in nearly half of those cases, the borrower owes more than the underlying property is currently worth.

The BOMA Magazine January/February 2011

Continued on page 10

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legislative UPDATE issue and encouraged members to submit original comments to FASB before the Dec. 15, 2010, due date. The coalition offered critique of the exposure draft and also called for FASB and IASB to extend the deadline for implementation to ensure the final standard is sound and thoroughly vetted. The Washington Post also ran a commentary by BOMA about the issues (see page 19 for details). Visit www.boma.org for more information.

BOMA believes the solution is to impose new requirements upon the utility to provide aggregate whole-building energy consumption data upon request, and ideally, to have that data automatically imported directly into EPA ENERGY STAR®’s Portfolio Manager. The new coalition is comprised of real estate associations, building owners and managers, environmental groups, state regulators and state energy offices, among others.

BOMA Joins Real Estate Coalition to Submit Comments on Lead Paint

BOMA, USGBC Form Coalition to Address Data Collection Issues

On Dec. 6, 2010, BOMA International joined forces with several other national real estate associations to submit comments to the Scientific Advisory Board Lead Review Panel on the U.S. Environmental Protection Agency’s (EPA’s) approach for developing lead dust hazard standards for public and commercial buildings. The coalition stressed that, as EPA itself has noted through its Advanced Notice of Proposed Rulemaking issued in Summer 2010, the development of lead hazard standards for public and commercial buildings is fraught with uncertainty, due to the minimal data available regarding the prevalence of lead dust in these types of buildings and other factors critical to the development of a reasonable standard. The coalition also noted that Congress required EPA to conduct a study to determine which of the “various types of renovation and remodeling activities … disturb lead and create a lead-based paint hazard on a regular or occasional basis” before promulgating any regulations concerning renovation, repair and painting activities. The coalition is also concerned about what appears to be the EPA’s predominant focus on risks to young children. While young children may be the principal population of concern, any lead dust hazard standards for public and commercial buildings that are based on exposures in young children may be largely inapplicable to a wide range of public and commercial buildings, such as office buildings, which are visited only infrequently by children. The real estate coalition strongly encouraged the Scientific Advisory Board, and EPA, to more thoroughly research the issues at hand and fill in the gaps before beginning down the path of regulation.

Under the leadership of Transwestern’s Al Skodowski, chair of BOMA International’s Energy Committee and a board member at the U.S. Green Building Council (USGBC), BOMA and USGBC have joined forces to advance the joint goal of resolving the data collection issues often encountered in multitenant, separately metered buildings. Buildings with separately metered tenants often do not have access to tenant energy consumption data, and, without permission from the tenant, the utility or energy distribution company will not provide it due to ownership and privacy concerns. This leaves building owners unable to benchmark the property and without reliable data upon which to make educated retrofit decisions. And more and more, it is leaving building owners unable to comply with some new state and local benchmarking and disclosure laws that are making their way across the country.

The BOMA Magazine January/February 2011

GAO Federal Leased Space Study Identifies Challenges; Recommends Guidelines In April of last year, the Interagency Security Committee (ISC), comprised of 47 federal agencies and departments, issued new building security standards for federal facilities, also known as the Physical Security Criteria for Federal Facilities. Congress directed the Government Accountability Office (GAO) to review the standards for leased space and ultimately released a report (www. gao.gov) on Sept. 22, 2010, that identifies challenges that exist in protecting leased space and examines how the new standards address these challenges. The GAO study ultimately recommends that ISC establish a working group to determine guidance for working with lessors, and to incorporate this guidance into a future ISC standard. BOMA International will work to provide comments to the working group and keep you up-to-date on its findings.

state & local update

BOMA Helps Defeat Amendment 4 in Florida FLORIDA’S REAL ESTATE AND BUSINESS INTERESTS scored a huge victory in November with the defeat of Amendment 4. If passed, Amendment 4 would have required the state’s voters to approve all local comprehensive land-use planning changes, rather than having those changes approved or rejected by city or county commissions. The amendment needed 60 percent of the vote; however, 67 percent of voters rejected the measure. If voters had approved the measure, its implications were expected to set a national precedent for other states to adopt such legislation or consider such ballot initiatives. BOMA International and BOMA Florida leveraged Industry Defense Funds to join other real estate organizations in Citizens for Lower Taxes and a Stronger Economy, a coalition of more than 200 organizations that oppose the initiative, to protect commercial real estate’s interests. Other members of the

coalition include NAIOP (the Commercial Real Estate Development Association); the American Resort Development Association; NAIOP of Florida; the Florida Apartment Association; and other business groups. Spearheading the campaign to get Amendment 4 approved was a group of environmental lawyers who founded Florida Hometown Democracy, a special interest group. More than half of its funding comes from Floridians for a Sustainable Population, a population control group. Had the amendment passed, it is estimated that the average voter would be expected to decide about 200 to 300 intricate land-use planning amendments each year. Local governments would be forced to use taxpayer dollars to fund additional elections or would have to wait until the next election to list out all of the changes proposed to a comprehensive land use plan.

GOP to Reshape Political Landscape Republicans made historic wins in the November 2010 state elections, putting the GOP in control of redrawing congressional and state legislative districts. The party took control of 18 chambers in 12 states, including both houses in Alabama, Maine, Minnesota, New Hampshire, North Carolina and Wisconsin. They made significant gains in both the Midwest and the South. In total, Republicans gained over 675 legislative seats, the biggest gain by either party since 1966. The GOP also gained 16 governorships in November. Democratic governors were term-limited out of office in four

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The BOMA Magazine January/February 2011

Republican leaning states (Kansas, Oklahoma, Tennessee and Wyoming), and Republicans easily won those seats. They also took over open seats in Michigan, Pennsylvania and Wisconsin, while defeating incumbents in Iowa and Ohio. According to the National Conference of State Legislatures, these new lawmakers face a collective budget shortfall of approximately $72 billion for FY 2012. Some estimates place this figure higher at between $112 billion and $140 billion. These budget deficits may prevent lawmakers from keeping their campaign promises of not raising taxes. Commercial real estate advocates will need to be vigilant this year to prevent any onerous tax increases.

BOMA/Portland Launches New Sustainability Initiative In an effort to further challenge Portland’s commercial real estate industry to reduce costs and its environmental impacts, BOMA/Portland launched a new voluntary energy competition. Dubbed Carbon4Square, the competition encourages building management teams to benchmark their environmental performance using EPA ENERGY STAR®’s Portfolio Manager, analyze the data and implement strategies that lead to greater efficiencies and reduced operating expenses. In most existing buildings, carbon emissions can be attributed to waste generation, water usage, electricity usage and transportation. The program shorthands the list as the four W’s: watts, water, waste and wheels. Directly or indirectly, these four “squares” are the major components of a commercial office building’s carbon footprint. Focusing on these four categories gives participants a simple framework to assess, analyze and

TRANSFORM OPERATIONAL EFFICIENCY

prioritize strategies for overall environmental performance. The program focuses on carbon, as it can be viewed as a proxy for overall energy and environmental performance, linking various building operations— energy, water, waste and recycling and transportation—through a common framework. Carbon emissions and the impact on climate continue to be a major public policy and cultural focus in the Portland community. Commercial building owners and property managers in Portland have until the end of January to register for the program, which will provide participants with free advice and technical support to achieve sustainability goals. Participants will also receive their own “4Square Coach” to coordinate resources and assist in developing building sustainability initiatives (a scoping study to identify operational areas to save energy) and access to an array of resources through city and regional sustainability programs. Prizes will be awarded at the end of the program, which runs from February 2011 through March 2012.

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January/February 2011 The BOMA Magazine

Codes & Standards Update

International Code Council Hearings Produce Next-Generation Energy THE MOST SWEEPING CHANGES ever made to model building codes will be included in the 2012 edition of the International Energy Conservation Code as a result of proposals approved at International Code Council hearings last October. These changes will result in a whopping 25- to 30-percent increase in energy efficiency over earlier code editions, depending on building type. Proposals to modify the entire IECC commercial building section to achieve efficiency gains of approximately 25 percent over the 2006 code were submitted by a coalition of groups led by the U.S. Department of Energy, the New Buildings Institute and the American Institute of Architects. Primary support for these proposals was also provided by the Energy Efficient Codes Coalition, a group of product manufacturers and non-profit organizations primarily focused on building energy issues. While

these proposals were, in large measure, approved, BOMA’s code advocacy team was successful in securing concessions to eliminate major concerns for the commercial real estate industry, including: • Withdrawal of a proposal mandating installation of renewable energy systems on all existing commercial buildings. • Alternatives to mandatory renewable energy system requirements for all new buildings. • Defeat of a proposal to require permits and inspections for replacement of more than 10 percent of the lighting fixtures in existing buildings. • Reductions in several onerous additional building envelope insulation and window provisions. Changes to define the useful life of such products as insulation and

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May 16-18

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June 13-15

Facility Planning

July 11-13

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August 15-17

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September 12-14

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October 17-19

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November 14-16

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December 5-7

Design, Operations and Maintenance I

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The BOMA Magazine January/February 2011

windows as the “life of the structure,” currently calculated at 50-plus years, were also approved. This virtually eliminates any rational cost/benefit calculation for these measures, making project financing and long-term project viability decisions much more difficult or even impossible. BOMA will work to eliminate this language when code adoption is considered at the state and local level. The full economic impact of these historic changes to the national model baseline energy code will be substantial and will surely make the adoption of the 2012 IECC much more contentious. Add the concerns of municipal officials about potential negative impacts on the fragile construction industry recovery in their area, and acceptance of this code by far fewer state and local governments than would otherwise be anticipated seems likely.

BOMA and NMHC Appeal Possible Voting Irregularities at ICC Hearings BOMA and the National Multi

Housing Council filed a joint appeal to the ICC Board of Directors, challenging the validity of the voting process during International Energy Code hearings last fall. BOMA’s chief concern is the potential impact of direct financial contributions on the outcome of the hearings— specifically, financial assistance provided to ICC voting members to attend the hearings in support of the more stringent code provisions. These concerns had previously been brought to the attention of an ad hoc committee developing recommendations for improving the ICC code development process, as well as to the ICC Board. BOMA’s appeal urges immediate steps be taken by ICC to address these concerns. Regardless of the outcome of this appeal, BOMA’s efforts to greatly reduce the influence of those with a financial interest in the outcome of the code development process will continue. A hearing of the ICC Appeal Panel to consider the BOMA/ NMHC appeal will be scheduled early in 2011.

For more information, contact Dave Tyree at dtyree@boma.org.

BOMA to Co-Host Seminar at ICSC’s ‘University of Shopping Centers’ in Philadelphia In early March, Bill Tracy, vice-chairman of BOMA’s Standard Method Floor Measurement Committee, and Dave Tyree, BOMA’s director of codes and standards, will present a program on the recently published 2010 BOMA Retail Standard at the ICSC University of Shopping Centers in Philadelphia. The BOMA Retail Standard is the first to document how to measure gross leasable area in accordance with consensus industry practices. This seminar will benefit those leasing and managing space in shopping centers and will cover how the BOMA standard was developed, when and how to apply the measurement concepts in the standard, key terminology and the 12-step method for measuring retail buildings.

BOMA Promotes Official Floor Measurement Standards Interpreters Visit the BOMA website, www.boma. org, for an introduction to the official BOMA Standards Interpreters—building measurement professionals, or metrologists, who assisted in the development of the BOMA standards and are recognized by BOMA as experts that can assist BOMA members with building measurement needs. The interpreters primarily serve the commercial real estate industry, have a proven track record, participated in the development of BOMA standards, met BOMA’s stringent requirements and make important contributions to the industry through their experience and knowledge.

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January/February 2011 The BOMA Magazine

leading the way

Jen C. Suddreth, RPA Young Professionals’ Advocate, Hollywood Extra

JEN SUDDRETH IS REGIONAL MANAGER with Grubb & Ellis Realty Investors, where she directly oversees operations for Tenants in Common (TIC) investors throughout Texas, Colorado and Southern California. Suddreth is an active leader for Texas BOMA and Houston BOMA, serving on the Texas BOMA Board of Directors, Nominating Committee and Advocacy Day Committee. She has also served as chair of the Houston BOMA Membership Committee and co-chair of the Education Committee. She is currently serving as the 2010 Houston BOMA President and as a member of BOMA International’s Executive Committee.

Your position as regional manager for Grubb & Ellis requires you to understand G&E properties from both the management and owner perspectives. How are these skills complementary? The daily focus of the property manager is operational. He or she needs to keep everything running, keep tenants happy and create budgets to get the most value at the least cost. It’s a bigger picture from the owner/asset management perspective. We trust the manager to take care of the operations side, which allows us to look at the income side, such as leasing and renewals. We also keep an eye on economic conditions to know the best time to sell or hold and to maintain property value in a difficult economy. Having worn both hats, I understand the importance of value from both perspectives, and how that affects investment potential. To hold property value, the maintenance must be kept up and tenants must be renewing. The property manager and asset manager must work in sync.

You are a role model for young professional members in the Houston real estate community. Recruiting and retaining young talent in property management is a challenge; how does the industry tackle this issue? I’m very passionate about young professionals being a part of BOMA and the industry. The last few years, Houston BOMA has done an incredible job of growing the young professionals program. It’s a matter of getting the word out at the college level so when students first get to college they are aware of this career choice. Like so many people, I was not aware of the commercial real estate industry but sort of fell into it. If I could have studied for this industry, I could have been that much stronger that much sooner. Where I see a big hole is in mentoring. We’re missing out by not mentoring a lot of good, young talent. Young professionals come in excited and full of energy, and then they are dropped into a property, given some small instruction and often left somewhat abandoned. They need mentors to take them through the ropes. BOMA could be a great link between bringing in the new generation and taking advantage of the experience and wisdom from the older generation.

At Houston BOMA, you recruited the most new members for three consecutive years (20052007). What was the secret to your success? Any recruitment tips?

The BOMA Magazine January/February 2011

Any time you’re part of an association you really believe in, recruitment becomes a lot easier. BOMA is the networking association for commercial real estate. When I talk to a property manager or service provider, I always ask if they are a member of BOMA. If they aren’t, I tell them what they’re missing out on— all the benefits of membership. For a property manager, BOMA is where you can talk about the problems you’re having in your building with another manager who may also be having a similar problem. For service providers, having that core relationship makes it so much easier. Plus, the advocacy benefits are incredible. BOMA is the leader on advocacy, from the city level to the national level. You don’t get that anywhere else. It’s a great opportunity to get the information you need on different issues and to draw on BOMA’s strength in numbers. The recent carried interest tax victory is a perfect example. It had a local and national impact. BOMA came forward as a leader with a voice that allowed us all to be heard. You can’t do that on your own.

What is something that most people don’t know about you? I grew up in California, and when I was home from college on summer break one year I decided to take my shot at acting. I landed a part as an extra in the Disney move “Newsies” with Christian Bale. Sometimes when you’re an extra, you don’t actually get to be on the screen, but you can really, very clearly see me [check out the last 10 minutes of the movie to see Jen’s close up!]. That was my Hollywood moment. It was a great job and it paid $80 a day—not bad for a teenager’s summer gig.

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Around the industry ULI Conference Highlights Modest Signs of Market Improvement for 2011

Katya Naman of Lowe Enterprises and Henry Chamberlain of BOMA International discuss the state of commercial real estate.

Experts Foresee a More Promising Future for Real Estate COMMERCIAL REAL ESTATE VISIONARIES from both academia and industry painted a fairly optimistic picture of what the industry will look like in the next years at a recent thought leader symposium, 2020: A Vision for Commercial Real Estate. The event, held November 9 in Washington, D.C., was presented by the BOMA Foundation and the Georgetown University School of Continuing Studies and its Masters of Professional Studies in Real Estate Program. Their predictions point to a future in which property management is increasingly important, buildings are carbon-neutral and shifting demographics create a greater demand for real estate. During “The State of Commercial Real Estate” address, BOMA International President Henry Chamberlain, APR, CAE, and Lowe Enterprises, Inc. Senior Vice President Katya Naman, CCIM, discussed current industry conditions and stated that, while the market has bottomed out, real recovery may not be felt until 2013. Both emphasized the importance of asset value enhancement, and, in turn, the demand for skilled property managers. A lively panel of real estate finance veterans discussed the future of commercial real estate finance in the session “Real Estate Finance in the Year 2020.”

Michael Grupe, executive vice president of research and investor outreach, National Association of Real Estate Investment Trusts, noted that re-equitizing assets is a top priority, adding that public financing will likely replace some lending activity previously handled by CMBS markets and commercial banks. Freddie Mac Vice President and Chief Economist Frank Nothaft said that 12 to 15 million new households will be created over the next decade, citing immigration and a rise in the birth rate as drivers. “The future of sustainability is now,” remarked Anik Jhaveri, AIA, LEED AP, principal, HDR Architecture, Inc., during the panel “Environmental and Energy Issues in the Year 2020.” He likened sustainability to the Americans with Disabilities Act (ADA), explaining that accessibility features quickly went from being optional to required. David Borchardt, chief sustainability officer, The Tower Companies, pointed out that the real challenge of the next decade will be retrofitting the existing building stock. He also underscored the need for lease changes that allow landlords to benefit from green retrofits. To view a free recording of the program, visit www.boma.org.

The BOMA Magazine January/February 2011

At its annual conference this past October, the Urban Land Institute (ULI) released Emerging Trends in Real Estate® 2011, a forecast that hints at hopeful signs of tempered commercial real estate market improvements. The report, produced in collaboration with PricewaterhouseCoopers (PwC), is the result of a survey among commercial real estate investors and professionals. The report’s theme, an “era of less,” emphasizes that current market conditions are creating a flight to quality. “As we enter an ‘era of less,’ an extreme bifurcation persists, as the capital flight to quality creates a greater separation between the trophy and trash assets,” commented Mitch Roschelle, partner, U.S. real estate advisory practice, PwC. “The best properties have cash flow and that’s what buyers and lenders want. As a result, prime apartments and office buildings in gateway cities are generating the most attention from the increasing pent-up sidelined capital.” Survey respondents indicated that they expect the debt markets to loosen somewhat in 2011, as banks strengthen their balance sheets and increase lending. Fully leased assets with strong net operating income will have improved chances to obtain financing, while assets with weaker qualifications will increasingly face the likelihood of foreclosure. Washington, D.C. topped the report’s markets where commercial and multifamily investment remains strong, followed by New York, San Francisco, Austin and Boston. Secondary and tertiary markets remain weak, as big corporate space users consolidate their operations in coastal gateway cities. Survey respondents indicated a lowering of performance expectations and anticipated high single-digit returns for core properties and mid-teen returns for higher-risk investments.

BOMA Local Association Executives Discuss Strategy and Governance By Liz Hazleton The economy was still the most pressing issue facing BOMA members at the 19th annual BOMA Association Executive (BAE) Leadership Conference, where BAEs gathered to discuss local initiatives and programs. The meeting, held Oct. 21-23, 2010, in Philadelphia, Pa., provided an opportunity for BAEs to network and share information. Strengthening governance was at the core of the discussion, as were strategic planning and briefings on new BOMA initiatives. BOMA Chair Ray Mackey and BOMA President and COO Henry Chamberlain opened the program on a positive note, discussing the year ahead in terms of leadership and

strategic initiatives, as well as the best in association governance tools. “There is hope that things might be getting better. We are beginning to see transactions happening and banks reconciling their balance sheets; 64,000 new jobs have been added and more than a million will be added by year-end,” said Mackey. “We are entering the era of the property manager. Fine-tuning your team, proactive asset management and staying close to clients are keys to success.” Brian Green, chief financial officer, BOMA International, presented an update on PCI compliance and the Sarbanes-Oxley Act. The Payment Card Industry (PCI) Data Security Standard details security requirements designed to ensure that all organizations maintain a secure environment for the processing, storage or transmittal of credit card information. The Sarbanes-Oxley Act, also known as the Corporate and Auditing Account and Responsibility Act, has its own set of requirements for associations. Ed Able, CAE, president and CEO of NonProfit Consulting Services, presented Governance: Key to Achieving Organizational Potential, a session designed to help BAEs ensure their boards are being as effective as possible. “Governance is becoming the Achilles heel of associations,” said Able, stressing that boards should not neglect governance. “Too many board meetings listen and listen and never talk about anything on the strategic level.” The program also included sessions on Able opened his presentation by asking “What local education programs, leadership and works, what doesn’t and where are the pitfalls in association success. Robert Skelton, CAE, your association?” chief administrative officer and in-house council for the American Society of Association Executives, presented Seven Measures of Success: What Remarkable Associations Do that Others Don’t, which reviewed the seven factors of success common among non-profits. BOMA International Senior Vice President Pat Areno, CAE, discussed associate member partnership programs, explaining how to construct benefits and deliver buyer satisfaction.

BOMA Voices Concern over FAS 13 in The Washington Post Commentary The Washington Post’s Capital Business section recently ran a commentary by BOMA President Henry Chamberlain expressing concern over the proposed change to Financial Accounting Standard No. 13, or FAS 13, which capitalizes all leases and will require lessees and lessors to make projections on lease extensions and apply these projections in a complex calculation to determine the assets and liabilities to be recorded. Currently, lessees do not have to account for possible extensions. BOMA explained that the proposed change would adversely affect both tenants and landlords in a sickly economic climate where lending is already difficult to obtain. “The new standard will fundamentally change the way commercial real estate operates,” noted Chamberlain in the article. “Both landlords and tenants holding leases longer than 12 months will be required to apply the standard to their leases whether new or existing—no grandfathering. It is expected that tenants will no longer want a typical 10-year lease with a five-year extension option, due to the debt that will need to be recorded on their balance sheets.” For more on FAS 13, see “Legislative Update” on pages 8-10.

January/February 2011 The BOMA Magazine

Weâ&#x20AC;&#x2122;re Leading the Future. Make pLans to join us. Looking for the strategies and solutions that matter most in the changing commercial real estate environment? Attend the 2011 BOMA International Conference and The Every Building ShowÂŽ, the one event of the year that brings together the foremost experts and resources in the industry. Come together with building owners and managers the world over to grapple with current trends and learn firsthand what industry leaders are doing to stay ahead. BOMA 2011 is conveniently located at the Gaylord NationalÂŽ Resort & Convention Center, just outside of Washington, DC. Learn more at bomaconvention.org.

By Lindsay Tiffany

2010 Year in Review

Communicating Value

Navigating Real Estate’s ‘New Normal’

In addition to communicating the latest news and information to members via mediums like e-News, The BOMA Magazine and www.boma.org, BOMA also used social media tools like YouTube, Facebook, LinkedIn and Twitter to connect with the industry. Anyone can subscribe to the magazine or e-News by visiting www.boma.org/news.

Commercial real estate continued to feel the burden of the recession in 2010. Unemployment hovered near 10 percent, creating double-digit vacancies in many markets. With some assets valued as low as 40 percent below peak values, financing remained difficult to obtain and “extend and pretend” became the motto for many banks hoping to avoid defaults. All of BOMA’s offerings in 2010 focused on helping property professionals survive the downturn and prepare for success once the economy recovers. Throughout the year, BOMA rolled out a series of webinars and articles offering information and best practices for tenant relations, leasing, escalations, bidding service contracts, tax assessments, managing assets in receivership and more. BOMA also continued to help property professionals enhance their career development through the BOMA/SelectLeaders Career Center Richard Greninger, managing part- and Rx—Resource Exchange, a portal on the BOMA website linkner, Carr Services, represents BOMA before Congress in testimony on building to books, on-demand programming and interactive tools for professional development and networking. ing maintenance best practices.

Join BOMA on Facebook Join BOMA on LinkedIn See BOMA on YouTube: www.youtube. com/bomainternational Follow BOMA on Twitter: BOMA Chair Ray Mackey @ rhmackey BOMA President Henry Chamberlain @ HenryBOMA BOMA Vice President Lisa Prats @ LisaPratsBOMA

From Capitol Hill to City Hall In a distressed economy, it was more important than ever to make sure legislators and policymakers heard the voice of commercial real estate. One important tool BOMA developed in 2010 to ensure decision-makers understood the value of the industry was The Contribution of Office Buildings Operating Outlays in the U.S. and States’ Economies in 2009, a new report detailing the impact of commercial office buildings on the national and local economies. In 2009, the five billion square feet quantified in the report generated $40 billion in annual expenditures, which contributed a total of $118.4 billion to the U.S. economy. It generated a total of $37.6 billion in new earnings and supported a total of 994,728 jobs while housing 21 million workers within the 91 office market areas presented in the report and their respective state economies. This is in addition to the more than one million jobs supported directly as a result of these outlays for office building operations. The research, funded through BOMA International’s Industry Defense Fund, was used to augment BOMA’s advocacy efforts at all levels of government. BOMA members throughout the United States came to Washington in early February to take commercial real estate´s message straight to legislators on Capitol Hill during the 2010 Winter Business Meeting and National Issues Conference. BOMA members collectively met with about 250 Senate and House offices—a BOMA record—to discuss how issues like energy, carried interest and leasehold depreciation have a tremendous impact on commercial real estate and the broader Continued on page 22

January/February 2011 The BOMA Magazine

2010 BOMA Year in Review

BOMA 360: Enhancing Asset Value and Recognizing Excellence BOMA continued to build on the success of the BOMA 360 Performance Program in 2010, a unique designation that recognizes all-around excellence in building management and operations. The designation distinguishes properties with excellence in six key areas: building operations and management; life safety/ security/risk management; training and education; energy; environment/sustainability; and tenant relations/community involvement. Since the program’s launch in May 2009, more than 180 buildings have earned the designation, making it a critical tool for property professionals trying to differentiate their assets in a tough market.

BOMA 360 designees were honored at the BOMA Conference.

A recent survey of BOMA 360 designees indicates that designees are able to document operational savings and efficiencies, tenant acquisition and retention, community recognition and other benefits from their BOMA 360 designation. Here is what one designee has said about the program:

“We strive to be the best at all times, but certainly during a down economy, you can’t afford to be less than your best. Having the BOMA 360 designation is proof that we excel at all aspects of property management and operations.” —Edward Fallon, RPA, Vice President of Operations for the New York Region, Brookfield Properties

Capitol Hill to City Hall, Continued from page 21

economy. Attendees also heard from Senate Real Estate Caucus Co-Chairs Johnny Iskason (R-Ga.) and Ben Cardin (D-Md.), Rep. Danny Davis (D-Ill.) and political pundit Charlie Cook. In March, BOMA was called to testify before Congress on building mainte- BOMA President Henry Chamberlain, Senate Real nance best practices in the private sec- Estate Caucus Co-Chair Ben Cardin and BOMA Chair James Peck at the National Issues Conference. tor, as the Congressional committee that oversees the U.S. General Services Administration (GSA) considered how to allocate funds for the maintenance of federal buildings. Richard W. Greninger, managing partner, Carr Services, represented BOMA International, describing the type of maintenance plans commercial buildings in the private sector have to maximize equipment life and optimize building operations. He also noted that, according to BOMA data, federal buildings are often more expensive to maintain than private-sector buildings and urged Congress to grant GSA sufficient funding for federal building maintenance. In early summer, BOMA and its industry partners launched a successful effort to inform lawmakers of the negative implications of a proposed tax increase on carried interest. In addition to Capitol Hill and grassroots lobbying efforts, BOMA engaged in a targeted coalition media campaign that underscored the industry’s contribution to the economy. Commercial real estate faced another fight in 2010 as proposed changes to the Financial Accounting Standard No. 13, or FAS 13, threatened to negatively impact the industry. In October, The Washington Post ran a commentary by BOMA President Henry Chamberlain expressing concern over the proposed change, which capitalizes all leases and would require lessees and lessors to make projections on lease extensions and apply these projections in a complex calculation to determine the assets and liabilities to be recorded. BOMA urged members to voice their opposition to FAS 13 in a letter writing campaign to defeat the proposed changes. In December, Congress passed two important tax extensions for the industry: the 15-percent tax rate on capital gains, extended through 2012, and the 15-year timeline for depreciating leasehold improvements, retroactive to Jan. 1, 2010, and extended through December 2011. It is estimated that the leasehold depreciation extension will save members of the industry $3.6 billion dollars over 10 years. The capital gains tax extension helped stimulate prudent investment and promote an expansion of construction activity. BOMA played an active role in representing commercial building owners and managers in the codes arena. During the International Code Council final action hearings for the 2012 code development cycle, BOMA supported proposals by DOE and others to modify the entire International Energy Conservation Code commercial section to achieve approximately 26-percent efficiency gains over the 2006 code after securing modifications to these proposals to eliminate major concerns. BOMA also persuaded DOE to withdraw a proposal mandating renewable energy systems on all new and existing commercial buildings. BOMA International’s political action committee, BOMAPAC, is critical to BOMA’s legislative success in Washington. Funds raised through BOMAPAC help support political candidates who understand the issues facing real estate. In 2010, BOMA members raised nearly $40,000 and supported 19 members of Congress.

The BOMA Magazine

2010 BOMA Year in Review

Solutions and Standards 2010 was a milestone year for BOMA standards, as three new ANSI-approved standards hit the market to help real estate professionals measure every type of property in their portfolios. The entire BOMA suite of standards now includes: • Office Buildings: Standard Methods of Measurement (ANSI/BOMA Z65.1 2010); • Industrial Buildings: Standard Methods of Measurement (ANSI/BOMA Z65.2 2009); • Gross Areas of a Building: Standard Methods of Measurement (ANSI/BOMA Z65.3 2009); • Multi-Unit Residential Buildings: Standard Methods of Measurement(ANSI/BOMA Z65.4-2010); and • Retail Buildings: Standard Methods of Measurement (ANSI/BOMA Z65.52010).

Allocating Common Area Maintenance (CAM) Charges in Mixed Use Properties And Other Strategies for Managing Live-Work-Play Developments Robert Shovan, CPM®, RPA, LEED® AP

In addition to the new suite of standards, BOMA introduced the Guide to Developing a Standard Operating Procedure Manual, a step-by-step primer on how to develop a standard operating procedure manual for commercial buildings. BOMA also developed Allocating Common Area Maintenance (CAM) Charges in Mixed Use Properties to guide real estate professionals in determining how to allocate common area maintenance charges in mixed use developments. The manual provides case studies and best practices to help property professionals allocate expenses associated with utilities, life safety, security and access control, parking garages, loading docks and more.

At year’s end, BOMA re-released two best-selling publications. First published in 2008, The Guide to Writing a Commercial Real Estate Lease, more widely known as the “BOMA Green Lease Guide,” was updated to include the newest best practices for writing a commercial real estate green lease. BOMA also released a third edition of its popular Preventive Maintenance publication—Preventive Maintenance Guidebook: Best Practices to Maintain Efficient and Sustainable Buildings—which contains greater emphasis on predictive maintenance, sustainability, commissioning, use of electronic tools and resources, and renewable and recovered energy.

Building Smart, Sustainable Strategies BOMA continued to build on its reputation as the industry’s green leader in 2010. In March, BOMA received the U.S. Environmental Protection Agency’s (EPA’s) 2010 ENERGY STAR® Award for Sustained Excellence, BOMA’s fourth consecutive year being honored for energy-efficiency initiatives by ENERGY STAR. BOMA remains the only commercial real estate association to receive the award. The primary initiative BOMA was honored for was the 7-Point Challenge, a unique program which calls on BOMA members to reduce energy consumption by 30 percent by 2012 across real estate portfolios, as measured against an average building measuring a 50 on the ENERGY STAR benchmarking tool. Since its launch in 2007, the 7-Point Challenge has been widely embraced throughout the marketplace, with more than 120 member companies and local associations representing more than three billion square feet of office space endorsing the challenge. In 2010, BOMA announced an addendum to the 7-Point Challenge that calls on BOMA´s associate members—providers of products and services to the commercial real estate industry—to institute sustainable practices in their business operations. BOMA also introduced a new three-part webinar series, Strategies for Supporting Sustainable Building Operations, which helps property professionals implement green practices to enhance asset value and net operating income, improve tenant satisfaction and benefit the environment.

Performance Matters BOMA’s income and expense benchmarking report, the Experience Exchange Report® (EER), proved to be a key tool for industry professionals looking to enhance asset values. The 2010 report encompassed more than 4,200 buildings and 768.8 million square feet of office space across 110 cities, making it the leading source for office building income and expense data. Thanks to a collaboration with leading industry research firm Kingsley Associates that brought the report online in 2009, generating reports and analyzing the data is easier than ever before.

Thank You BOMA 2010 Partners Cornerstone Partners AlliedBarton Security Services Cisco Ingersoll Rand Kimberly-Clark Professional* Naylor ThyssenKrupp Elevator Trane Waste Management

Leadership Circle Partners IB Roof Systems Orkin Commercial Services ValleyCrest Landscape Maintenance

Supporting Partners Acuity Brands Lighting Chemsearch ISS Facility Services UGL Unicco

The BOMA Magazine

2010 BOMA Year in Review

Leading the Future Leaders in the commercial real estate industry assembled in Long Beach, Calif. in June for the 2010 BOMA International Conference and The Every Building Show®. Attendees tapped into the power of the BOMA network over the course of the conference by connecting with colleagues, exchanging ideas and information, meeting with solutions providers and hearing industry leaders share strategies for success. During the 2010 State of the Industry address, Kurt Padavano, chief operating officer of Advance Realty Group, and Henry Chamberlain, president of BOMA International, stated that, despite a host of challenges, there are opportunities for high-performance assets. Renowned economist and humorist Ben Stein offered wit and insight into the state of the economy and commercial real estate, noting that building owners and managers, in particular, have persevered through the worst of the downturn. Attendees took in the industry’s best education by participating in more than 40 education sessions offered across five strategic tracks designed to help property professionals optimize building performance and take advantage of existing opportunities. More than 50 college and graduate students also took part in a special student program. They met with mentors, explored career opportunities, attended education sessions and visited the tradeshow.

BOMA International 2010-2011 Chair Ray H. Mackey, Jr.

The industry toasted the best of the best during The Outstanding Building of the Year (TOBY®) Awards, sponsored by Securitas Security Services USA, by honoring 14 properties for excellence in building operations and management in categories based on asset type or size. Ray H. Mackey, Jr., RPA, CPM, CCIM, was formally sworn in as the 2010-2011 chair of BOMA International during the ceremony. Other 2010-2011 BOMA International officers elected were Boyd R. Zoccola as chair-elect; Joseph W. Markling as vice chair; and Kent C. Gibson, CPM, as secretary/treasurer.

The industry’s best products and services were on display at The Every Building Show®, which was filled with industry professionals looking for innovative ways to deal with today’s toughest operational challenges. The green carpet was rolled out for attendees who visited the Green Pavilion and ENERGY STAR® Showcase, as they saw firsthand the solutions to increase efficiency and save money. BOMA’s 2010 Medical Office Buildings and Healthcare Facilities (MOB) Conference had record attendance, as nearly 600 medical office building owners and managers, developers, brokers, lenders, investors and healthcare executives took part in the conference held in May in Chicago. Healthcare reform topped the agenda, with experts predicting an increase in demand for medical office and other ambulatory healthcare facilities in both the short- and long-term.

A panel at the BOMA Foundation’s inaugural thought leader symposium discussed how sustainability issues will shape the next decade.

A Vision for Commercial Real Estate BOMA strives to provide forward-looking programming to help its members successfully prepare for the challenges and opportunities ahead. In November, the BOMA Foundation collaborated with Georgetown University’s School of Continuing Studies and its Masters of Professional Studies in Real Estate Program to present 2020: A Vision for Commercial Real Estate, a thought leader symposium held in Washington, D.C. During the symposium, commercial real estate visionaries from both academia and industry painted a fairly optimistic picture of what the industry will look like in the next 10 years. Their predictions point to a future in which property management is increasingly important, buildings are carbon-neutral and shifting demographics create a greater demand for real estate. Throughout the year, BOMA also supported the Real Estate Associate Program (REAP), an industry-backed, market-driven program that finds and trains career-changing minority professionals for positions in commercial real estate. BOMA donated meeting space, contributed education materials and instructors, including the textbook for BOMA’s popular “Foundations of Real Estate Management” course, and offered free registration to program participants interested in attending BOMA’s annual conference.

Strength in Membership Membership remained solid in 2010, despite the challenges posed by a distressed economy. Several new associations were added to BOMA’s robust network in 2010: local association BOMA/Greater Huntsville, state associations BOMA Washington and BOMA New York and international affiliate the Chinese Building Owners and Managers Association. BOMA also strengthened its international presence through its active International Region Committee.

Building Owners and Managers Association International, 1101 15th Street, NW, Suite 800, Washington, DC 20005, (202) 408-2662, www.boma.org The BOMA Magazine January/February 2011

Thinking Outside the Lavatory Where Germs are Actually Lurking in your Building By Laura Horsely

When cold and flu season kicks in, employers’ concerns about absenteeism and the resulting loss in employer productivity also kicks in ... and with good reason. According to a 2005 study by Free Health Inc., employers lose $1,320 per person annually to absenteeism; multiply that number by 10, 25, 100 or several thousand, depending on the size of an organization, and absenteeism can quickly make a real dent in a company’s bottom line. A recent program launched by Kimberly-Clark Professional*, called the “Healthy Workplace Project,” takes a comprehensive approach to ending germ transmission in buildings by expanding the knowledge of where and how germs are transmitted and providing tools, resources and products to help improve tenant wellness and productivity. According to Peter Leahy, LEED GA, customer marketing manager with Kimberly-Clark Professional*, property professionals need to think outside the lavatory when offering guidance to tenants. “Most people’s idea of germ control starts and ends in the restroom,” explains Leahy, “but the average office desk and common areas, such as conference rooms and kitchenettes, have a much greater germ load.” Elevator buttons, stair railings, door handles, keyboards, phone handsets— chances are these hot spots harbor more germs then a stadium full of crowded restrooms, and the typical office kitchen is an absolute nirvana for germs. Leahy tells us that the average ATP [adenosine triphosphate] result for a germ test is under 200, whereas Kimberly-Clark Professional* tested one refrigerator handle at over 2,700. The key to breaking the germ transmission cycle is to know the hot spots and to take action by washing or sanitizing hands and wiping down surfaces. “You could touch one to 100 people or places with the flu virus on any given day, but if you go to a hand-sanitizing

station or wipe down an infected surface, you’ve broken the chain of transmission,” says Leahy. The comprehensive information provided by the Healthy Workplace Project makes it easier for tenants to break the chain of transmission in the workplace, while benefiting employers trying to break the trend of costly absenteeism. Another trend related to absenteeism affecting worker productivity is what some in the industry have coined “presenteeism,” which Leahy defines as “lost productivity that results from going to work sick,” not to mention that individuals who go to work sick are continuing to spread germs. The Healthy Workplace Project has been put into practice in office buildings across the country and is even

Germ Hot Spots in Office Buildings

percolating into other building sectors, including a manufacturing plant in Little Rock, Ark., that has 25-percent fewer employees than two years ago due to recent automation changes and layoffs. “The idea of losing even one employee for any period of time is devastating for this company,” explains Leahy. “They were interested in tools, techniques and products to help reduce absenteeism and were onboard immediately.” Ultimately, Leahy hopes the Healthy Workplace Project will live beyond the cold and flu season and have a lasting impact on the way tenants think about germs and transmission in the workplace. “We continue to refine, update and measure so we that we can challenge people to change their behavior; that’s our goal.”

Doors Copy stations

Stair railings

Elevator buttons

Conference tables

Lobby areas

Water cooler/ kitchen space

ATM in lobby Reception

Break the Germ Transmission Chain in Your Building BOMA International is using the Healthy Workplace Project to reduce the spread of germs. Check out what BOMA President Henry Chamberlain has to say about the project and learn how you can help your tenants reduce absenteeism and improve productivity at www. healthyworkplaceproject.com. Healthy Workplace education is available from Kimberly-Clark Professional* in several BOMA local markets. Check with your BOMA local association to learn more.

January/February 2011 The BOMA Magazine

The Personal Touch The Shortest Path Between Average and Exceptional By Stephanie J. Oppenheimer, APR

When a disgruntled client created a serious security situation at an affiliate office of Williams Financial Group (WFG) in Dallas, Texas, staff members at WFG’s headquarters on the other side of town were unnerved; but with no obvious threat to their personal safety, there was not much cause for alarm when it came to the security of their own building. So when property managers immediately dispatched the head of security to meet with staff, placed an officer outside their suite door and provided additional security screening for WFG’s visitors that day, headquarters staff was duly impressed. The response resonated with Maggie Moore, executive administrator for WFG, as a shining example of excellent tenant relations. “Their responsiveness stands out,” Moore recalls, “as the right way to handle a shocking event. As we were trying to get a handle on what happened, knowing they were on top of it—to the point of having someone standing guard outside our door—was phenomenal. They provided more than security that day … they provided peace of mind.”

Don’t Wait for the Tough Times This may be an extreme example, but it speaks a simple truth: When you think about good customer service, what comes to mind? A list of automated voice-mail options, or a live person answering the phone? An annual survey, or a quarterly lunch to talk face-to-face? Almost without fail, it’s the personal touch that turns average into outstanding. And with a still-struggling economy and national vacancy rates hovering around 18 percent, standing out from the competition through exceptional service is a must, but it can’t be rolled out only when times are tough. Mike Kent, president of U.S. Real Estate Management Services for Colliers International, agrees, explaining, “It scares me when people say, ‘We’re focusing on customer service now.’ It

The BOMA Magazine January/February 2011

must be the most basic service you provide, and you can’t be the only one involved. If there’s only one person focused on a client, he or she will either have a rapport or they won’t—there is no in-between. So, have multiple contacts; if you can’t put your engineer out in front of tenants, or if you can’t ask your accountant to walk through financials with them, it’s going to be next to impossible to address their needs.” Another way to prioritize tenant relations is to always think of tenants as king, regardless of market conditions. Jim Arce, executive managing director of client solutions for Cushman & Wakefield of California, Inc., views tenant retention and recruitment as being about service first and bricks and mortar second. “It’s all about service and how you relate to tenants,” he says. “Your building may not be the newest or the best in town, but I’d rather be in an older building that is better managed. Since real estate is so competitive, service is what differentiates you.” In order to quantify your service over the competition’s, Kent recommends touring the five most competitive properties quarterly in order to “know what your tenants are seeing firsthand. The knowledge you’ll gain will give you the ability to be nimble … and will remind you why the expense of moving is almost never a deterrent.” David Williams, COO of WFG and someone who recently moved offices after outgrowing the former space, agrees, saying, “We place a premium on a responsive management team, and we’ll move to get it. We want to work with people who care about us as tenants. Even if the answer to a request is ultimately ‘No,’ we want someone who is willing to work with us to find a solution rather than someone who looks to the lease for an answer.” Nancy Pinson, an administrative office manager in Korn Ferry’s Dallas office and a primary contact for her building’s property manager, points to the “above and beyond” moments

that help differentiate great property managers from average ones. “My company was celebrating its 40th anniversary and, being a global firm, we were asked to send photos of our office location. We wanted to get a photo of the Dallas skyline from the roof, but we couldn’t do that because of safety reasons. Rather than just say, ‘No,’ however, our property manager checked with other tenants who had balconies on upper-level floors and arranged for a photo shoot. Maybe it’s not a huge thing … but it’s a good example of their willingness to go the extra mile for us.”

Money Makes the World Go ’Round? Understanding financials is also a key component to differentiating a management team’s ability to service clients. Just as meeting personally with tenants and getting to know their needs is important, so are face-to-face meetings to talk financials. “Sit down with decision-makers at least quarterly,” advises Kent, “and find out how they’re performing. Tenants are very receptive; people want to talk about what they do, and it’s surprising what they’ll share. You’ll gain good intelligence, which will allow you to play a bigger role within your own company. We’re here to add value and add net operating income (NOI)

“We place a premium on a responsive management team, and we’ll move to get it. We want to work with people who care about us as tenants. Even if the answer to a request is ultimately ‘No,’ we want someone who is willing to work with us to find a solution rather than someone who looks to the lease for an answer.” -David Williams, COO, Williams Financial Group

to the bottom line, and this is one way to demonstrate that you’ve explored options and can say, ‘This is what I recommend, and here’s why.’ ” Having insider information will also give managers more negotiating power when it comes to renewals and financial concessions, a more common occurrence in today’s economy. “Tenants are looking for someone who can relate to the challenges they’re facing,” adds Arce. “They need someone who will listen, consider alternatives and be flexible. We’re seeing blend and extend deals [dropping rent in the short-term but extending the length of the lease], straight rent reductions and the provision of amenities in exchange for retaining a tenant. But in order to do any of it, you have to know their financials. Be rational and do your due diligence.”

How Important is Green? One of the final pieces of the puzzle is a firm understanding of tenants’ expectations when it comes to sustainability. Is interest waning? Do tenants really just care about lowering operating costs, which reduces their rent? Or is it merely a way to leverage social responsibility in marketing materials? Obviously, the answer depends on the tenant … but sustainability is still relevant. “Green is a hot button for tenants,” Kent notes, “and owners cannot afford to put it on the back burner because they feel priorities have changed in these economic conditions.” Arce points out that tomorrow’s workforce will continue to drive green: “Just as we’re trying to attract and retain tenants, employers are trying to attract employees … and the new generation has grown up in a far more socially conscious environment. Sustainable consciousness has to be in the top three of any CEO’s list. Our clients are seeking ENERGY STAR® and LEED® certifications; and, although they can’t charge a premium for it, they have to provide it as part of the standard package.” Bob Best, a LEED-accredited professional with Jones Lang LaSalle in Chicago and director-sustainability markets, is striving to make the company one of the world’s most sustainable. “Sustainability is good business,” he says, “and it’s important to tenants. A 2009 survey of our tenant representative brokers showed that, five years ago, people might not have considered it in a space decision, but a year ago, it was a factor one-third of the time. Today, it’s more like half the time.” “One of the most enduring aspects of sustainability is that it’s the one area in which everyone is in agreement,” Best adds. “In lease negotiations, you typically have people sitting on opposite sides: One wants maximum rates for services; another wants maximum services for minimum rates. There’s conflict everywhere … except with sustainability. We all want to use less energy and less water and be more environmentally responsible. It’s the one point where everyone wants to cooperate.” About the Author: Stephanie J. Oppenheimer, APR, formerly the assistant vice president of communications for BOMA International, is principal of Skylite Communications, a freelance writing and editing company based in Falls Church, Va.

January/February 2011 The BOMA Magazine

Lessons in Mixed Use Management New BOMA Publication Clarifies Confusion about CAM Charges By Lindsay Tiffany Mixed use development has been on the rise over the last decade and real estate experts predict that the trend will continue. Contributing to an increase in mixed use buildings are such factors as the rising cost of land and the need for localities to reduce traffic congestion, which have resulted in incentives for mixed use projects from some local and state governments. While a boon to end-users who are able to live, work and play under one roof, the projects create a bevy of challenges for real estate professionals charged with managing them. Mixed use property managers deal with multiple ownership entities, a diverse group of tenants (each with their own requirements and needs) and complicated accounting procedures. Allocating common area maintenance (CAM) expenses is, perhaps, the most challenging task for managers of these properties. CAM expenses are the expenses required to maintain building common areas and common building systems, such as lobbies, parking lots and loading docks. With several different entities, tenants and owners using common areas and building systems, it can be a time-consuming and often confusing process for property professionals. BOMA hopes to alleviate much of the confusion with the recently released Allocating Common Area Maintenance (CAM) Charges in Mixed Use Properties and Other Strategies for Managing LiveWork-Play Developments, a new publication that highlights the complexities of managing mixed use projects and offers guidelines for allocating CAM expenses. Authored by Robert Shovan, CPM®, RPA, LEED® AP, senior portfolio manager, Management Services,

Transwestern, and vetted by a team of industry experts, the book features best practices and seven in-depth case studies on everything from restaurant fit outs to parking garages. It also includes chapters on utilities, life safety/security and access control, insurance and general day-to-day management of mixed use properties. “Talking to the other collaborators about their experiences in managing mixed use projects, I found we had one thing in common: We all had a situation when our client needed us to sort out an issue and we didn’t have all of the information to provide a recommendation,” says Shovan. “This publication is a summary of those experiences, with examples of how these problems were solved. It also offers ideas on what type of information to look for and how to access it, which is especially helpful when managing a mixed use property for the first time.” Although every mixed use project is unique in design and operation, good management practices are universal. The guide emphasizes that communication with tenants is essential. Tenants may not understand the benefits or purpose of common areas, and it falls on the real estate manager to educate them on how common area expenses are allocated. In cases where it is unclear how tenants should be charged for CAM expenses, it is the property manager’s responsibility to offer advice to the owner about how best to allocate those expenses.

From Planning to Operations During the planning and develop-

The BOMA Magazine January/February 2011

ment stage of a mixed use project, it is ideal to have a real estate manager involved to help forecast operating expenses and how they will be allocated. Doing so accurately will help in the leasing and marketing efforts of the project and will ultimately affect net operating income and the profitability of the project for investors. Changes during the construction process can also occur, ultimately affecting easement and costsharing agreements. Understanding any changes that occur after the original planning will help the property manager properly allocate CAM charges once the building is operational. For example, a case study in the publication summarizes a situation where a high-rise apartment shares a courtyard with an office tower. Both entities have the right to use the courtyard, though a cost-sharing agreement between the office and apartment entities left it up to the office tower’s owner to determine how expenses for the space would be shared. The office tower owner and apartment owner agreed to an allocation based on a ratio of square footage between the apartment tower and the office tower. It was later discovered that the electric power for the courtyard was provided through the apartment owner’s main electric service, without the apartment owner’s knowledge and with no reimbursement from the office tower. Upon further investigation, it appeared that a construction change may not have been communicated back to the team that developed the cost-sharing agreement. The property manager tasked with sorting out the issue recommended installing a submeter to determine the precise

energy costs for the courtyard, which would then be split between the entities based on the existing allocation percentages. Based on the submeter readings, the owners of the office and apartment towers agreed on a reimbursement amount for past expenses and amended the cost-sharing agreement to reflect the new arrangement.

Utilities and Energy Conservation One of the most challenging jobs facing managers of mixed use buildings is allocating utility expenses. Each property is unique and energy consumption will vary greatly depending on the tenants and end-users, making allocations based on simple square-footage calculations insufficient in most cases. Submetering, a best practice in both single use and mixed use buildings, is an important tool for accurately allocating utility expenses. In addition to water and electric submeters, BTU meters are also used when condenser water or hot water is provided by district energy providers or a central plant. The book contains an entire chapter on how to manage the submeter infrastructure to ensure all entities are being charged fairly and correctly. Energy conservation is another best practice for managing commercial buildings, but can be complex due to the different users in mixed use projects. BOMA’s new CAM publication recommends establishing an energy conservation committee comprised of various volunteer members for each of the different entities in the building, with the goal of reducing energy consumption and promoting sustainability initiatives within the project.

Leveraging Economies of Scale One major advantage in mixed use properties is that property managers are able to leverage economies of scale. By offering a larger overall scope of work for a bid, managers can save money, create efficiencies and often receive a higher level of service. Building security is one example. It is common in mixed

use properties for a single life safety/ security team to service the entire project. Equipment can be standardized to reduce costs and minimize training. When equipment is standardized, vendors commonly prepare service agreements for the entire project. In such cases, the pieces of equipment can be totaled per entity in the project and costs can be allocated on a percentage basis. In BOMA’s CAM publication, a case study on loading docks offers insight into how to allocate costs associated with economies of scale in more complicated instances. Loading docks require a variety of different expenses, including security, lighting maintenance and janitorial services. This is another case where a simple allocation based on square footage may be insufficient, as different entities use the loading dock to different degrees. The case study tells of one such instance at a major urban mixed use project with eight different owners, where the loading dock was handling 5,000 truck deliveries per month. In order to develop an allocation method that all parties could agree on, the real estate manager proposed a two-pronged solution. First, the manager determined each entity’s share of expense based on the amount of deliveries made to the entity. Trash expenses were treated separately. The manager hired a trash consultant, who determined the overall quantity of trash disposed by each entity. From there, they established a base line allocation percentage for each entity, with adjustments made monthly based on any change in the project’s occupancy. While managing a mixed use property can be complex, foundational experience in many different property types and an in-depth knowledge of how the project is used by tenants are critical to success. It is important that the management team be creative, flexible and fair in order to serve tenants and help the project owners reach their goals.

Look For It: More Mixed Use Solutions

BOMA International is in the process of developing a floor measurement standard for mixed use buildings. The publication, available in June 2011, will enable users to identify and measure gross floor areas that constitute office, industrial, retail and multi-unit residential components using measurement standards published by BOMA for those use components.

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Finally, a Strategy for Managing Live-WorkPlay Developments

Allocating Common Area Maintenance (CAM) Charges in Mixed Use Properties and Other Strategies for Managing Live-WorkPlay Developments is now available (visit http://shop.boma. org). This comprehensive guide includes: • The Real Estate Manager’s Role in Mixed Use Developments; • Mixed Use Common Areas and Expense Allocations; • Managing Utility Expenses; • Life Safety and Security Access Control; • Allocation of Property Owner Insurance; • Day-to-Day Management of Mixed Use Properties; plus • Seven Mixed Use Case Studies.

Green Scene

Four Steps to a Successful Recycling Program By Dan Rose AN OFFICE RECYCLING PROGRAM is a central element to a building owner or manager’s sustainability strategy. An effective recycling program engages tenants, visibly demonstrates the property owner or manager’s commitment to sustainability and improves building operations. Here’s how to make your recycling program a success.

1. Waste Audit The first task is to conduct a waste audit in order to identify the materials in your building’s waste stream and estimate the amount of recyclable materials being generated. Identifying the types and amounts of materials generated in the office establishes baselines for measuring success of the campaign. The primary recyclable materials in any office building are paper, cardboard, plastic, aluminum, fluorescent bulbs, batteries, ballasts, electronic equipment and food waste. Understanding the mix and quantity of recyclable materials in your building will enable you to develop the most effective recycling program.

2. Tenant Engagement The success of any office recycling program depends on tenant participation. A key first step for property owners and managers is to work with tenant companies to identify internal champions for the recycling program. Tenant champions provide a strong internal push when starting a recycling program by encouraging the required behavioral changes. Property owners and managers can work with tenant champions to conduct recycling education and training programs, promote participation and monitor the program’s success. Champions can drive participation by hosting a kick-off event, sending regular newsletters, holding a contest among employees

to reward participation and publicizing successes when goals are met. Employee education results in high participation rates and less contamination of recycled materials—critical components for a successful program.

3. Program Development All successful office recycling programs have one common element: Tenants have easy access to clearly marked recycling containers throughout the workplace. Single-stream recycling, because of its simplicity, is the easiest program to implement. Singlestream recycling is a program in which the primary tenant-produced waste streams (paper, cardboard, aluminum and plastic) can be comingled in a single recycling container. The best recycling programs have several centrally located recycling containers on every floor with clear signage that identifies items that are (and are not) recyclable. Common areas for containers are kitchens and break rooms, cafeterias, training rooms, conference rooms, copy rooms, mail rooms and near exits. It is also a best practice to place traditional waste containers nearby to reduce contamination in the recycling containers. Effective placement of waste and recycling containers can also lower janitorial costs by reducing cleaning service needs in individual offices.

The BOMA Magazine January/February 2011

4. Vendor Selection The final element of developing a successful office recycling program is choosing a company to partner with to execute the program. The critical selection criteria centers on the recycler’s ability to accommodate your building’s recycling needs. Your recycling partner should be able to collect and process the primary recyclable materials coming from your buildings. A site visit and survey of a recycler’s material reprocessing facility is a terrific means of evaluating a potential partner. In addition, a recycling partner should be able to support building owners and managers in developing an effective program and provide recycling education, recycling containers and training materials.

Final Thoughts When beginning a comprehensive office recycling program, plan to start small and let it grow. Allow time for recycling to become a habit with tenants. Invest the time and effort to educate and train your staff and tenants up front. Office recycling programs that are launched effectively will build momentum and become sustainable programs. About the Author: Dan Rose is the Midwest commercial property sales director for Waste Management. Dan has been with Waste Management for 15 years, and for three years of his tenure, Dan served as the Midwest recycling director for Waste Management Recycle America. Contact Dan at Drose4@wm.com.

research corner

Seven Reasons Why You Should Complete the EER Survey THE CURRENT COMMERCIAL REAL ESTATE CLIMATE could be the industry’s toughest since the 1990s, and it’s not expected to improve any time soon. In this market, measuring building performance is key—not just to surviving but thriving. For nearly a century, BOMA’s Experience Exchange Report® (EER) has helped property professionals evaluate the income and expense performance of their buildings compared to their market peers. From small suburban office parks to lively urban towers, building managers have turned to the EER to benchmark their properties and identify key industry trends. What makes the EER the industry’s leading benchmarking resource? The thousands of income and expense submissions by property professionals from the United States and Canada. The 2010 EER contains income and expense data from more than 4,500 buildings in more than 110 markets, totaling more than 821.9 million square feet of commercial office space. What prompts so many building owners and managers to submit their building’s income and expense information? Here are the seven most important reasons:

1. To assure that market data is rep-

building performance and for gauging the potential impact of proposed legislation or code changes.

3. To demonstrate optimal asset performance. Widely used by owners

and investors to evaluate asset performance, the EER can help demonstrate that an asset’s operations are optimized and that its management team is working to control costs, enhance NOI and maintain the asset—even in the face of challenging market conditions. For developers, investors and owners who are moving into new markets, the EER can provide valuable market intelligence, helping to reinforce due diligence and corroborate information from local brokers.

4. Submitting data is easy and green. The EER survey is entirely online at www.bomaeer.com. Respondents have complete flexibility to begin the survey form and save their work as they go. The survey is open from January through March 31, giving respondents plenty of time to complete the form. Plus, the survey is “smart”; it will automatically total all income and expense categories and check your work as you go.

By Lorie Damon, Ph.D., and Tracy Glink

5. Any office building, medical office building, financial building, corporate facility or government building can contribute data—BOMA membership is not required. That’s right: Any office building can share its performance data, regardless of whether it’s owned or managed by a BOMA member. The EER is the industry’s largest source, not only for commercial office data but also for medical office and financial office data.

6. Submitters get discounts and free stuff. Each submitter receives a complimentary Expense Performance Comparison, which assesses the submitted building’s performance to three or four of its market peers. And, submitters can purchase EER subscriptions for individual markets or for all markets at nearly 50 percent off the list price.

7. It’s simply the best.

First developed in 1920, the EER has long been the industry’s go-to source for office building performance data. It has remained true to its original purpose: providing valuable market data to those who have to use it to manage, buy or sell assets. Be part of a powerful tradition and submit today.

resentative and accurate. Many owners and managers share their income and expense information because they rely on the EER to help them gauge their own performance and want to be sure that the data included is an accurate reflection of the market conditions in which they operate. Throughout the industry, building investors, owners and managers recognize that the EER provides independent, third-party assessments of a market’s performance.

2. To create a powerful legislative

calling card. Those who contribute data to the EER recognize that aggregating income and expense information gives BOMA a powerful calling card in addressing legislative and regulatory bodies. Representing more than twice as much office square footage as other industry expense studies, the EER serves as a powerful tool for documenting office

Play Your Part

Go to www.bomaeer.com to start your EER survey today. Login if you have an EER subscription or have shared your data in the past. If not, create a login and password and get started. Need help? Contact Tracy Glink, BOMA’s manager of research, at (202) 326-6346 or tglink@boma.org.

January/February 2011 The BOMA Magazine

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The BOMA Magazine January/February 2011

SUPPLIER Showcase Special Advertising Section

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January/February 2011 The BOMA Magazine

12:12 PM

EYE ON EDUCATION

The Mother of All Headaches:

Challenges Facing Healthcare Systems and Their Real Estate Strategies By Neil Carolan WITH THE ADVENT OF HEALTHCARE REFORM, healthcare systems in the United States are faced with many changes and uncertainty. As the end-users—and, in many cases, owners—of medical office buildings (MOB) and other ambulatory facilities, healthcare systems are dealing with a number of challenges that will impact their real estate decisions and their capacity to develop, own, lease and manage their medical office facilities. The challenges they face include ongoing capital constraints; aging hospital system infrastructure; changes in lease accounting standards, commonly referred to as FAS 13; continued scrutiny of the STARK law, anti-kickback and other regulatory requirements; and the changes resulting from the recently passed healthcare reform legislation, the Affordable Care Act. And, there are no easy cure-alls. Much of the existing hospital building infrastructure and its associated physical plants are quite old. Addressing the needs of aging, existing infrastructure and planning to build new replacements consume considerable capital, leaving little money for new medical office development or for renovating existing MOB space to accommodate changing physician practice needs and evolving diagnostic technologies. In the face of these and other capital constraints, some hospitals have monetized their medical office assets, selling them to third-party owners, often healthcare REITs. Many monetizations were structured as sale-leasebacks and were typically “off balance sheet” transactions, allowing hospitals to protect their bond ratings. Bond ratings are significant for most health systems, because they allow them to raise capital at low rates;

The BOMA Magazine January/February 2011

however, the changes in lease accounting standards proposed by the Financial Accounting Standards Board and the International Accounting Standards Board will certainly create complications and may curtail monetization activity. The proposed changes require that all leases be recorded on the balance sheet. Hospitals who monetize their MOBs through sale-leasebacks have expressed concern that their bond ratings may be adversely affected, as these leases will now appear on their balance sheets. Further complicating the matter is the growing trend of hospitals directly employing physicians. Many physicians no longer wish to maintain their private practices due to declining insurance reimbursement rates, uncertainty about the impact of the Affordable Care Act and changing dynamics among new physician graduates. Health systems must be prepared to address this growing need. What does that have to do with real estate? Instead of having medical office buildings filled with multiple physician practices, those physicians will be hospital employees and the hospital becomes the primary lessee in medical office space. This trend intersects with the proposed lease accounting changes and what results are new complexities that directly affect health systems’ real estate strategies. If health systems will increasingly employ physicians and need to be the lessor of record for their practices, does it make more sense for them to own their real estate? This is a 180-degree change from what has happened over the past few years. How will healthcare systems allocate already scarce capital for that purpose? How will their bond ratings be affected? And, what additional compliance requirements, from regulations like the STARK law and Medicare/Medicaid Anti-Kickback statutes, will hospitals need to comply with if they elect to own their real estate? The Affordable Care Act adds still another layer of uncertainty. Although much of the legislation does not go into effect until 2014, most health systems have already begun to prepare. Moreover, despite Congressional posturing, most health systems believe that a repeal is unlikely; instead, they are trying to determine how best to prepare for this legislation in the face of new uncertainties about which provisions will stand and which will falter, either through lack of funding or other maneuvers. Either way, health systems, especially not-for-profit systems whose charters require them to treat the un- and under-insured, expect to continue facing increasing numbers of patients, increasing costs of delivery and declining reimbursements from Medicare, Medicaid and private insurers. Add to this dilemma a potential addition of 35 to 50 million people entering the system with the Affordable Care Act and, collectively, these circumstances create one of the most challenging environments for healthcare systems. They also demonstrate how essential a well-designed real estate strategy is for health systems—both to take advantage of opportunities and to mitigate risks.

About the Author: Neil Carolan is vice president and chief physician development officer, Network Real Estate, Carondelet Health Network, and 2010-2011 vice chair of BOMA’s Medical Office Buildings and Healthcare Facilities Committee. Learn more about the trends and challenges confronting healthcare systems at the 2011 Medical Office Buildings and Healthcare Facilities Conference, May 4-6, 2011, at the Hyatt Regency in Dallas. For more information, contact education@boma.org.

BOMA’S 2011 ALL-STAR LINEUP Looking for market advantage in 2011? BOMA has you covered. Check out our three new publications to help you do your job even better in the New Year.

YOUR WELL BUILDING EXAM CHECKLIST Preventive Maintenance Guidebook: Best Practices to Maintain Efficient and Sustainable Buildings The latest edition of BOMA’s top-selling publication provides maintenance practices and tools for creating, managing, monitoring and improving a preventive maintenance program. Look for additional information on predictive maintenance with more emphasis on sustainability, commissioning, use of electronic tools and resources, and renewable and recovered energy.

HIGH PERFORMANCE LEASE FOR HIGH PERFORMANCE BUILDINGS BOMA International Commercial Lease: Guide to Sustainable and Energy Efficient Leasing for High-Performance Buildings This update to BOMA’s best-selling Green Lease Guide includes more “green” clauses reflecting the evolution of the market over the past several years as well as updates to the “non-green” clauses. This definitive guide helps property professionals execute a lease that addresses building operations and performance to maintain an energy efficient and high performance property.

HELP FOR MIXED USE CAM ALLOCATIONS Allocating Common Area Maintenance (CAM) Charges in Mixed Use Properties and Other Strategies for Managing Live-Work-Play Developments This resource guide helps demystify the complexities and confusion of CAM charges by outlining methods and guidelines that can be applied to existing or new mixed use projects. It is a best-practice resource including a number of real-world case studies for managing live-work-play developments. This unique publication is a must-have resource for anyone involved in mixed use properties.

Order Online Today at http://Shop.BOMA.org

trends tracker

Time to Dust Off the Hard Hats? New Report Predicts Modest Pick Up in Construction Activity in 2011 By Lindsay Tiffany in 2011, following dramatic declines over the past three years. COMMERCIAL BUILDING CONSTRUCTION in the United Starts for office buildings plunged 27 percent in 2008, 55 percent States is expected to increase 16 percent in the next year, accordin 2009 and another 28 percent in 2010. With a lack of activity ing to 2011 Construction Outlook, a report recently released from developers, Murray predicted that growth will happen with by McGraw-Hill Construction. While the news is positive, the corporate headquarters, data centers and government-funded gains are modest compared to the significant decline the secprojects, as was the case in 2010. tor experienced over the last three years. Construction starts Construction was started on several large-scale commercial for commercial buildings fell 17 percent in 2010, 43 percent in office projects in 2010, which bodes well for 2011. Most sig2009 and 19 percent in 2008, adding up to a contraction of 62 nificant was the office portion of World Trade Center Tower 3 percent in dollar terms. in New York City, with a value of $1.3 billion. The $369 million During a presentation of the report’s findings at the Outlook U.S. Coast Guard Headquarters in Washington, D.C., supported 2011 Executive Conference, held in late October in Washington, by federal funding, ranked as the second largest office start in D.C., McGraw-Hill Construction’s Vice President of Economic 2010. The $180 million Facebook data center in Prineville, Ore., Affairs Robert Murray explained that tight credit conditions, was also high on the list. high unemployment rates and a dearth of developer-driven Retail construction starts, which also saw three consecuprojects mean that a recovery to pre-recession conditions is tive years of steep declines, still a ways off. “Recovery is still are expected to increase by 19 struggling to gain footing,” said percent this year. Starts for the Murray. “In 2011, we’re seeing sector fell 34 percent in 2008, 53 below-trend growth, though Mining and agriculture are the only industries with percent in 2009 and 17 percent things will pick up slightly in less female representation at the executive level than in 2010. Industrial warehouse the second half of the year.” construction, according to a statistic cited at Howconstructions starts are preConcern about the Eurorey LLP’s Women in Construction conference, held dicted to increase 30 percent in pean debt crisis and the fact in early November in Washington, D.C. During the 2011, due to retail recovery and that many consumers and busipanel, “Forge Ahead! Accelerating the Advancement increased trade. nesses are deleveraging is furof Women in the Construction Industry,” six industry Healthcare facilities starts ther stalling recovery. The stimveterans discussed how to close the gender gap. will increase by six percent, ulus bill, the American Recovery having avoided the dramatic and Reinvestment Act of 2009, “On-the-ground operational experience was critical decreases that other sectors did bolster construction in the to my credibility. Also, my involvement in an industry saw over the past few years. infrastructure and public works trade organization gave me the opportunity to hone Debate over healthcare reform sector as expected, but has not my leadership skills in a supportive environment.” –Deb created short-term uncertainty, helped other sectors much. The Wathen Finn, President, Wathen Group but many are betting on greater devaluation of assets, combined “Today, more than half of college graduates are women. demand in the long-term. with a lack of financing, has It’s a huge waste if construction companies aren’t takMulti-family housing starts are made turning the corner espeing advantage of that investment.” –Mildred Callear, expected to grow by 23 percent. cially difficult for commercial Executive Vice President and Chief Operating Officer, Murray cited job growth and the real estate; however, Murray Small Enterprise Assistance Funds creation of new households as noted that recently there have factors, explaining that many been early steps toward recov“Diversify what you do within the industry—whether young adults who lived with ery in the CMBS market. it’s operations, marketing, finance, whatever. If you their parents during the recesThe report predicts that don’t take advantage of those opportunities, you will sion will move out as the econoffice building construction be dispensable.” –Barbara Wagner, Senior Vice President, omy gains strength. starts will increase by 13 percent Clark Construction

Women in Construction

The BOMA Magazine January/February 2011

trade tools [networks]

Technology Park Transforms Former Hospital into a ‘Green’ Showcase VANCOUVER ISLAND TECHNOLOGY PARK (VITP), in Victoria, British Columbia, opened in late 2002 after its operators renovated an old hospital to become an economic engine and an environmental leader. VITP has focused on installing advanced technology—as well as green technology—to attract tenants, boost VITP’s revenue opportunities and reduce the park’s environmental footprint. Early in the project’s development, officials decided to create a green building to appeal to leading high-tech companies and to showcase green technologies to the community. The VITP complex needed a new network infrastructure to be able to offer advanced services like voice over IP and video to tenants. “From the beginning, we wanted to make our building’s network a key component of our business and our clients’ businesses,” says Dale Gann, president of technology parks for the University of Victoria. Cisco’s broad product portfolio allowed for deployment of services based on equipment from as few vendors as possible. The new network core consists of Cisco® Catalyst® switches, which feature intelligent, scalable performance, allowing customers to grow their network easily as their traffic increases. This network supports: • Cisco Network Building Mediator, which can help control the park’s environmental footprint. • Cisco WebExTM, Cisco WebEx Connect and Cisco TelePresenceTM, which allow clients to hold meetings online, reducing cost and environmental impact. • Cisco wireless access points and controllers, which keep clients connected to the network anywhere they roam on the VITP campus. • Cisco Physical Security equipment, which helps VITP’s security staff secure the premises. • Cisco Unified Communications Server and IP phones, which let clients take advantage of voice over IP (VoIP) and unified communications.

RPA/FMA/SMA/SMT ACCELERATED COURSES Jan 26, 2011

Asset Management

• Presence, which allows employees to see instantly someone they want to communicate with.

Mar 2, 2011

Design, Operation & Maintenance Part I

Mar 16, 2011

Budgeting & Accounting

This investment in green IT infrastructure, as well as a dedication to environmental sustainability, has attracted a variety of technically savvy and environmentally conscious clients to VITP. With the network core, VITP plans to expand to 250,000 square feet and add new tenants. “The Cisco equipment is very scalable, so we’ll be able to add network traffic and clients without any problems,” Gann says. “We won’t have to rip out existing gear and replace it with something more expensive.” For more information, and to read the entire case study, visit cisco.com/go/realestate.

May 4, 2011

Design, Operation & Maintenance II

Jul 20, 2011

Law & Risk Management

Aug 24, 2011

Real Estate Investment & Finance

Sep 14, 2011

Technologies for Facilities Management

Oct 5, 2011

Leasing and Marketing

Oct 26, 2011

Facilities Planning & Proj Mgmt

Nov 2, 2011

Environmental Health & Safety Issues

January/February 2011 The BOMA Magazine

conference connection

5 Reasons Why You Can’t Afford to Miss BOMA 2011 THIS JUNE, the BOMA International Conference and The Every Building Show® touch down in the nation’s center of power— Washington, D.C. Commercial real estate professionals from across the country and abroad will gather to discuss current trends, best practices and learn firsthand what industry leaders are doing to stay ahead. Want to be a market leader in 2011 and beyond? Then, you can’t afford to miss BOMA 2011. Here’s why …

Reason 4. Premier Conference Facility The Gaylord National® Resort & Convention Center along the banks of the Potomac River is a stunning new hotel and convention center taking the nation’s capital by storm. State-of-the-art conference facilities, beautifully appointed rooms and exceptional on-site restaurants will make your stay memorable, not to mention the indoor pool, spa and fitness center and D.C.’s hippest new nightclub, the two-story rooftop Pose Ultra Lounge.

Reason 1. The Industry’s Best Programming—Bar None Who says business and politics don’t mix? The BOMA 2011 lineup is the hottest ticket around. Where else will you find political guru David Gergen, finance and investment king Sam Zell and real estate strategist extraordinaire Dr. Peter Linneman under one roof? Nowhere else. Add to that the industry’s best education, and you’ll have a full plate of great ideas and strategies to position you and your organization for success. Tenant relations, asset management, engineering, energy efficiency, leadership—whatever issues you’re dealing with, we have a session (or two or three or 10) to help you tackle them. Plus, if you’re pursuing or maintaining a real estate designation or license, BOMA’s course selection has you covered.

David Gergen

Sam Zell

Dr. Peter Linneman

Reason 2. Your Networking Path to Success

Reason 5. World-Class Destination

The best way to come out on top after a recession is to be in the company of the best and the brightest. That’s the company you’ll find yourself in at BOMA 2011, where you can network and share ideas with a few thousand of the best minds in the business. Choose the registration option to fit your needs, including full registration, one-day registration or the free tradeshow-only option. New this year: For just $50, you can attend The Every Building Show®, have lunch on the tradeshow floor and attend an education session of your choice. Enjoy even greater discounts with team registration options.

Located just 15 minutes from downtown D.C., National Harbor is a world-class mixed use destination, home to the Gaylord National® Resort & Convention Center, as well as some of the hottest boutiques, restaurants and entertainment in the D.C. area. The waterfront pier at National Harbor offers river cruises along the Potomac with stunning views of national monuments, or you can hop a water taxi to popular destinations like Alexandria’s historic waterfront, Georgetown and National’s Baseball Park. National Harbor is just 15 minutes by car or taxi from Reagan National Airport and 30 minutes from Dulles International Airport.

Reason 3. The Every Building Show® ‘Learning Laboratory’ With 450 exhibits, The Every Building Show® is a true “learning laboratory” of innovative solutions that benefit all types of buildings. Meet with leading suppliers and learn how to increase operational efficiencies, enhance property values and reduce costs. Experience cutting-edge products, services and technologies with in-depth information targeted to your needs. And, don’t forget to check out the Green Pavilion and ENERGY STAR® Showcase to find solutions to increase efficiency and save money.

The BOMA International Conference and The Every Building Show® will be held June 26-28, 2011, in Washington, D.C. at the Gaylord National® Resort & Convention Center. Learn more at www.bomaconvention.org. Take a video tour of the Gaylord National® Resort & Convention Center at National Harbor with BOMA President Henry Chamberlain and BOMA Vice President of Communications, Marketing and Meetings Lisa Prats at www.youtube.com/

bomainternational.

The BOMA Magazine January/February 2011

Performance MATTERS

Play Your Part The best-performing buildings in the industry participate in and depend on BOMA’s Experience Exchange Report®.

2011 EER Survey Now Open at www.bomaeer.com Share Your Data by March 31 The EER—your most comprehensive resource for measuring and managing asset performance—is like an orchestra. Every participating building benefits the entire commercial real estate industry.

■ Submit your data—it’s easy and free. ■ Receive a FREE expense performance comparison for your building. ■ Get priority access and discounts.

Share Data. Improve Performance. Achieve Excellence. All data is kept in strictest confidence; only market level information is published.

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