Time to call in the boss. For this episode of “Conversations with Cohen,” I’ve brought Jim Pirot, the head of Cresa’s Project Management in New York. As a colleague of Jim’s, I’ve seen firsthand the wealth of knowledge that he brings to the table as a real estate advisor. In this episode, Jim and I chat about heading back into the office post Covid-19, the longer lasting impacts of the pandemic on the office, and some tips and tricks Jim has for folks to know of on their next lease negotiation. Let’s get to it.
Jim’s been tearing up the real estate market from 18 years old. At that age, he was working as an engineer in the Empire State Building and worked his way up in the Helmsley Organization. Eventually, he was overseeing all their properties from hotels to office buildings. His career went on a long and winding road into the advisory space before he settled with Cresa seven years ago. His experience as both an engineer as well as real estate advisor makes him a true fountain of knowledge that I’ve seen firsthand in our work together at Cresa.
Re-occupancy and Testing
There are a lot of moving variables to the re-occupancy process. Many have started to be set in motion with the planned phases of reopening while others are still up in the air. An interesting factor that Jim brought up is indoor air quality. Cresa has been working with a company called Environmental Building Services (EBS) for a while now to ensure clients get top indoor air quality. Jim thinks this responsibility is going to begin to fall on the landlords to ensure all those hygienic standards are up to scratch, particularly in the transitional phase back to the office.
Making sure hygienic measures are in place is only step one though. After putting that all together, actually testing the air quality is critical for peace of mind and safety. One method, also done through EBS, is a swab test, where you swab high touch points in the office and send it out to a lab to test if Covid-19 is in the space. Additional critical measures are one’s I’ve spoken about a lot on this show, such as cleaning and sanitizing the buildings’ spaces.
Other than the office itself, measures need to be taken for more communal buildings’ spaces like lobbies and entrances. Of course, some of those measures will be similar such as sanitizing surfaces and improving air quality, but others will be different like that of directing traffic. Buildings will likely be required to, in some way, test people walking in or at least have proof that they’ve been tested elsewhere. Some of this is a bit early to define, but there is definitely a consensus that there needs to be some level of testing for individuals as well as spaces.
Cleaning and Class A vs B Buildings
While testing is critical, it would be remiss not to discuss the cleaning and sanitation requirements offices will need to have. Of course, maintaining social distancing will be required as well as encouraging those feeling ill not to come into the office. Janitorial staffs will likely be expected to do more cleaning and sanitizing around the office than normal. So, can these requirements look different depending on what type of building you’re in? Whether you have midtown office space or downtown office space, the truth is that Class A buildings will likely have different systems than lower class ones.
Landlords of Class A buildings typically already have a top cleaning vendor (janitorial staff) that services the building. Jim feels those vendors are more than capable of taking on the extra requirements a Covid-19 world has. In the short-term that will be as discussed above – more frequent and intensive cleanings and sanitations. As to long-term changes, it could very well be that janitorial staff will be required to do a broader cleaning sweep of an office, such as wiping down all surfaces, than they do pre-Covid-19.
Class B buildings are a different story. A key difference between Class A buildings as opposed to Class B buildings is that the latter generally does not include garbage removal and cleaning. In New York, that usually comes out to about an extra $3 per square foot, so while they may be cheaper, keep in mind you’re paying for more in other areas. Jim pointed out that the cleaning specifications in a contract with a Class B building can be far less than those of a Class A building. The landlord really may just say, “it’s all on your Mr. Tenant.” Going forward Jim plans on advising his clients to negotiate better cleaning deals, particularly for those in Class B buildings.
Building Technology Solution (BTS)
Jim developed a service at Cresa called Building Technology Solution (BTS) which is really an incredible product that I wanted to hear more from him about. Basically, BTS is an artificial intelligence product that focuses on sensory equipment technology. Installed in spaces, BTS can gather loads of information to improve workplace utilization, such as air quality or CO2 levels. In fact, it’s in this space that Jim thinks BTS can be tremendously beneficial to clients in the near-term, as employees will want peace of mind on things like air quality.
Not only does BTS assist clients with the product installed in their space, but it can help for future clients as well. By having the product installed in a variety of places, Cresa can utilize that information for future clients in a variety of ways.
Jim’s Tips and Tricks
When you’ve got a guy as knowledgeable as Jim is, you just have to hear some of his insight on the office leasing process. I asked Jim what his top tier things are that folks should make sure they get in their next lease agreement when you have decided on your next commercial property for rent.
Aside from the business piece (which of course is the most important), Jim highlighted the security of the building, infrastructure of the building, HVAC, and how the building is staffed. Understanding how your business entwines with these factors is critical to a successful leasing term. We focused on a few to do a deeper dive into. The infrastructure of a building includes its operating hours and there are a lot of moving pieces there. If your hours don’t correlate directly to the buildings’ operating hours, your landlord may start charging you sundry charges, that is, charging overtime for air conditioning. Cleaning is another factor too. Beyond the building providing cleaning services when you actually need them, something to look out for going forward is what the landlord or cleaning vendors’ standards of cleaning are, particularly post Covid-19. It’s important to note that it’s always within your rights as a tenant to ask for those cleaning specifications and sit back down with your landlord to talk them through when we come out on the other side of Covid-19.
It’s worth diving a bit deeper into sundry charges, because they really are critical to understand. Essentially, sundry charges are a revenue center for a landlord to compensate for costs that aren’t necessarily covered in your lease agreement. That air conditioning, as mentioned before and we’ll mention again, is a great example of this. If you plan on sticking around in your space till 8pm, the landlord may turn to you and say, “well the building only operates till 6pm,” and you run into a problem of getting that sundry charge on AC. If you landlord really values you (which he should considering you contribute to his income), you can try to negotiate that extra charge and find some middle ground. Freight charges are another suspect for sundry charges. If you’re moving bulky items into your space, the landlord may have some rules up that charge you a premium for some of that moving. Those are definitely some areas to keep an eye out for sundry charges.
HVAC is another big factor to keep an eye out for. Jim pointed out that a lot of tenants often want the option for supplementary HVAC without being reliant on the landlord for it. Therefore, it’s important to know what power in the building is available to you as a tenant. This point also touches on part of the reason why tenants need to pay such a premium for having an entire floor to themselves. By having their own bathrooms and HVAC, you as the tenant are really in control of your own space. That privilege can come at a cost. But for any tenant looking to sign a new lease, Jim wanted to stress the importance of having a conversation with your landlord about how HVAC is set up.
A Little Something Extra…
As many of you know by now, no episode of “Conversations with Gregg” would be complete without some talk of food. I asked Jim what sort of goodies he and his wife have been cooking up at home. Jim’s been really into the grill recently (partially because his new kitchen still isn’t finished), but they’ve been grilling up some mean steaks recently. Hard to argue with that.