Why Property Maintenance is Important in a Suffering Commercial Real Estate Market
COVID-19 and its effect on the already shifting commercial real estate space have left many property owners, managers, and investors reimagining the future of the retail, office, and industrial spaces.
Looking at the commercial real estate market and the interference of COVID-19, a shift in dollars allocated to property maintenance has led to a narrow view of what is a priority. If aesthetics and asset longevity was the theme before, sustainability in uncertain times has propelled us into the era, however short, of austerity. The investment must be purposeful in the short-term, and due to the risk of vacancy or lack of pedestrian traffic in many property types, it is more and more difficult to tie to a return.
2020 may not even recognize the worst of this trend. As some budget dollars were applied to projects this year, the real restriction may become evident in 2021. Postponed projects may not materialize at all, and deferred maintenance and repair could become abandoned maintenance and repair. What does this mean for commercial office and industrial, retail, and hospitality (experiential) spaces? Many of these locations might see repurposing at a rate much accelerated from what was already forecasted pre-virus. Repurposing will require these properties to be minimally maintained during the transition or redeveloped afterward.
This realignment, although inconvenient and jarring, may not be the worst thing that could happen. As online retailers capitalize on the pandemic, brick and mortar locations have shifted focus to eCommerce or risked closing their doors. Ghost kitchens, modified big box retail, and association driven residential properties will be at the center of what is really a lifestyle shift. Abandoned malls and shopping centers may hurt some major retailers' profits, but the gap left for the reemergence of the local economy should not be overlooked. Positioning local businesses to re-enter newly thriving downtowns might answer suburban sprawl that fed the previous shift of local business to the American shopping mall years ago. Although 2020 has affected local businesses and risked many small business owners' livelihood, eventually, we will exit the COVID crisis, and a gap will need to be filled in the economy. Amazon and other major online retailers already fill that gap for large corporations, but as communities look to get back their experience-based lifestyle, downtowns will track back to the trajectory they were on before 2020.
Between now and then, property owners are left with a significant challenge to maintain cashflow, protect property value, renew leases, and attract new tenants. Property managers will be tasked with doing a lot more with less capital. Tenants will have to decide whether or not to stay and weather the storm. Although the ecosystem struggles to interact to promote a healthy market, liabilities, asset deterioration, and compliance must still be addressed. To capitalize on a resurgence of foot traffic or investment to repurpose these properties, assets like parking lots, concrete sidewalks and curbing, drainage systems, and building exteriors should receive maintenance and repair budgets.
Crack Sealing an asphalt parking lot can be the most cost-effective maintenance item with the greatest investment return. Cracks are directly connected to all subsequent asphalt defects. Allegation, potholes, and asphalt failure are directly a result of neglected maintenance on emerging cracks in the surface. Crack Sealing prevents water from entering the base material. Keeping water from the subbase is the most important maintenance item that can be done to preserve any asphalt surface.
Removing trip hazards connected with concrete curbing and sidewalks can save a property owner significant costs associated with a lawsuit or claim resulting from unaddressed liabilities on a property. Concrete usually exists close to building entrances and exits. Being a heavy traffic area on the property, replacing concrete where a trip hazard exists is a smart investment.
Poor drainage on a property can result in standing water. Standing water is a health risk, can freeze in cold weather, and deteriorates asphalt (especially where cracking or potholes exist). Cleaning drains, adding additional capacity, repairing degraded catch basins, and addressing sinkholes can help reduce the major issues that can arise from drainage problems on a property. The money saved over time by tackling these issues will result in bigger savings in the future.
Painting building exteriors can reduce the deterioration of brick, stucco, and other exterior finishes. Cost-effective with aesthetic value, painting can prevent much of what vacancy and abandonment of large structures lead to over time, which is structural issues. Power washing can also help keep building exteriors healthy while properties are experiencing limited or no use.
For owners and managers looking to make a property pop before a lease or sale, line striping a parking lot can be just what is needed to add aesthetic value to the property quickly. This low budget fix can make a dulled asphalt parking lot look new again.
In this current reality, it is often hard to justify spend on non-necessities. However, to get the feeders of the economy working again, some investment and faith are essential. Freezing budgets is a short-term answer. Standing still too long may have an unintended consequence. Placing value on the future will help sustain a commercial real estate market that, if positioned correctly, can come back stronger than before.