The modellers didn’t precisely foresee a global pandemic upending the economy in the early months of 2020, but analysts and strategic planners have long assumed that an event like the COVID-19 outbreak could occur. Now in its grips, they’re looking to a range of tools and resources to both respond to the immediate crisis and help chart the way forward.
“For a forecaster, it’s a black swan,” acknowledges Adam White, chief executive officer of the energy management analytics and advisory firm, Powerconsumer Inc., evoking the term for sudden, unexpected upheaval with severe consequences. “I would never have guessed they would have ever evacuated and shut down so much of the economy.”
However, predictive modelling now provides insight into what might lie ahead. In White’s case, that’s calculating potential electricity cost repercussions for many larger commercial customers and small manufacturers in Ontario — information that can guide those sectors’ decision-making and perhaps be leveraged to lobby the Ontario government for intervention and aid.
Commercial real estate operators are seeking similar kinds of advice across a wide spectrum of expertise as they deploy their crisis management, business continuity and recovery plans. Discussing the issue during a REMI Network-sponsored webinar last week, Rob Wesley, lead, real estate and construction services, with the business consulting firm, MNP, noted that many questions are arising around lease obligations, rent deferrals, security and cleaning requirements that call for extra legal, insurance, financial, IT and building services acumen.
“I would lean on, rely on and make sure you are communicating with your advisor team,” he urged.
He tallied the many demands building owners/managers are now juggling as they: confront disruption to their own service delivery models and supply chains; deal with their tenants’ similar business concerns; accommodate essential personnel and contractors who still need to be on-site in buildings; and coordinate the efforts of scattered staff working from their homes. Management teams are facing often unfamiliar financial, technical and social challenges, discovering the strengths and weaknesses of their preparedness planning and learning lessons along the way.
“I don’t think we are all the way out of our crisis management plan even though we have already transitioned to contingency,” revealed Justin Taylor, chief operating officer with Greenrock Real Estate Advisors.
“Crisis management tends to be (thought of as) the short term, but we are certainly not seeing that in this situation,” concurred Cheryl Gray, head, special projects, operational excellence, with QuadReal Property Group and the moderator of the discussion.
More to cash flow management than downsizing
Cash flow ranks high among the most immediate and pressing concerns for landlords and their tenants. Panellists reiterated it’s important to stay on top of the steady announcements of federal and provincial/territorial programs and ensure tenants know about available supports. Offloading discretionary expenses can be a prudent way to find funds to redeploy to business continuity and recovery.
“The cash flow side is a big and ongoing component of your continuity plan,” Wesley submitted. “It may not all be downsizing. There may be places where you’re spending more.”
For example, he reminded webinar attendees that largely vacant buildings and fragmented online management involving dozens, or hundreds, of connections from staff homes are vulnerable to both physical and cyber breaches. “A lot of us are not as focused on this as we might need to be,” Wesley cautioned.
Extra cleaning and IT expenditures are likely showing up in many operating budgets. Looking to recovery, Wesley suggests new funds may also be directed to marketing. Meanwhile, the impact on leasing has been another frustration for cash flow.
“Any deals that we had closing, those people can’t move in, they can’t get their permits,” Taylor recounted. “A lot of deals are not falling off the table, but they are certainly being delayed.”
Eye-opening perspectives on remote work
Sketching out what’s been relatively easy, Taylor reported that Greenrock’s management staff was already equipped to work from home or other remote locations. The company has since rolled out a few extra supports, such as delivering office chairs to staff members’ homes and introducing some online social and personal reflection opportunities, including a weekly meditation session and a Friday afternoon virtual happy hour.
Even so, the scale of the remote workforce — some also sharing quarters with online-learners — is not something most flex-hour plans have contemplated. “We were fortunate, I think, that we had a lot of things already in place, but the dynamic of having partners, kids or roommates all in one place has confounded it,” Taylor reflected.
Ironically, one of his more positive discoveries from a staff manager’s perspective is not necessarily such good news for a real estate provider. Reporting a new appreciation for online meetings and one-on-one communication with staff, he speculates that many others have experienced the same “eye opener.”
“I think I have spent more time with people individually than when I’m in the office, and this is something I didn’t imagine,” Taylor recounted. “I also sense companies (now) realize they can work remotely to a much larger degree than they have.”
Wesley likewise agreed that COVID-19 has accelerated what was already robust adoption of remote work and flex space, perhaps by as much as five years. On the flipside, however, it may have placed a brake on open floorplans and the steady densification of office space that’s been occurring over the past decade or more. “It may return to more private (office) space,” he hypothesized.
As a second month of the work-from-home regimen unfolds, there’s also plenty of anecdotal evidence that many people are weary of social distancing.
“I think we will all have a heightened appetite for the social aspects (of office environments),” Wesley said. “For all of this, there is a sense that the longer this goes on, the more different the new normal is going to be.”
Barbara Carss is editor-in-chief of Canadian Property Management.