Forget Spec Office Development For A While, But Focus On Cleanliness And Touchless Entry
When the coronavirus crisis ends, building owners with newer assets armed with germ-fighting technologies are most equipped to succeed in the new normal, DFW developers Bill Cawley and Bill Brokaw say.
"I think people after this are going to flock to new product like they have been, but almost to a greater degree," Cawley Partners CEO Bill Cawley said while speaking at Bisnow's The Office Market After Coronavirus webinar.
"They are going to want everything that comes with a new building. The safety of touchless entries, and all of the technology that we can put into them to make people feel comfortable. I think a new building is going to win the day again."
And the list of what tenants want will only increase, with a newfound focus on healthy buildings that feature top-quality air circulation systems to proactively fight germs, Hillwood Urban Senior Vice President Bill Brokaw said.
Hillwood Urban and USAA Real Estate's 365K SF Victory Commons office project near American Airlines Center in Dallas is still on schedule to finish later this year, Brokaw noted. But, in the past month, Hillwood Urban has enhanced its focus on end-user technology and cleanliness.
"We’ve looked at the common areas, automated doors and elevators," Brokaw said. "There’s going to be voice-activated technology. We are working with Mitsubishi right now on our elevators at Victory that can be controlled through an app, so people can have touchless entries throughout the building."
Both Cawley and Brokaw have a list of air quality tools that will be standard amenities in future new builds. Hillwood Urban is in the process of installing UV air purifiers throughout its Victory Commons project to reduce contaminates in the air.
"We are looking at touchless front doors, improved air circulation and ways to sanitize rooms," Cawley said of his projects. "We’ve even looked at ultraviolet lights that sanitize restrooms."
While office projects have been paused across the development space and the future is unknown right now, the developers said speculative office deals are the riskiest bets today.
"What we are seeing from a spec standpoint on development is that those are going to be hard to come by," Brokaw said. "Lenders are looking for a higher percentage leased. It's harder to find lenders out there that want to do spec, so we feel like spec development is going to slow."
Cawley advised it's prudent to lay off speculative projects until at least 90 to 120 days after the economy gets back to normal.
Until then, neither developer has a crystal ball clear enough to predict the exact future of DFW office, but they see the metroplex possibly gaining off momentum lost in other hard-hit urban cities.
"Everybody is sitting in a position where they really don’t have a clue what’s going to happen," Cawley said. "So everybody is kind of looking at the future and is a little bit uneasy. I think personally it's going to be better than what we think it's going to be."
New Yorkers and other urban dwellers impacted the most by coronavirus may start to see DFW and its suburbs as a quality area to escape to, the developers said.
"Fortunately for Dallas, we haven’t overbuilt," Brokaw said. "Vacancy rates are still low, and we still have a great opportunity for folks from the the West Coast and East Coast to move this way. These super urban areas will look at Dallas and see some advantage to being here."