T.J. Brookover, regional manager for AmTrust Realty Corp. in Chicago, has a busy year ahead of him. In November, he was elected president of the Building Owners and Managers Association of Chicago, better known as BOMA/Chicago.
Midwest Real Estate News recently spoke with Brookover about his goals for the association, the challenges facing building owners in 2015 and the state of the Chicago commercial real estate market.
Midwest Real Estate News: Now that you’ve assumed the presidency of BOMA/Chicago, what are your goals for the organization in the coming year? T.J. Brookover: My job is to provide leadership to a 22-member board. That board, frankly, is composed of very seasoned professionals. Our board members, on average, have about 20 years of experience in this field. The staff is seasoned, too. My job is to look for things that will impact our member buildings and look for ways in which we can provide help either by way of advocacy or education. Those are our two focuses as it relates to member buildings.
MREN: This position requires a lot of time. Why volunteer for it? Brookover: There is definitely a time commitment. But it’s one that I see as being important, not just to our member buildings but also to our affiliate members, those people who provide services to our buildings. I’ve seen the good work that BOMA does. I thought it was important to take more of an active role. The time spent helps me, too. It provides me with access to people with differences of opinion and different expertise.
MREN: What challenges do BOMA members face in the coming year? Brookover: The one thing that we continue to focus on is the pressure that managers and owners have as it relates to the cost of maintaining and operating a commercial building. We are seeing trends that will push up real estate taxes. There may be utility rate hikes that will increase the cost of our utilities in the future. Labor rates are on the way up, too. We have janitorial staff, security staff and engineering staff in these buildings. There is pressure to increase health and welfare contributions, pension contributions and wages. All those things – labor, real estate taxes, utilities – are major expenses of operating a building, and all of them have the potential to rise over the next year and thereafter. We are paying particular attention to those expense-line items and what we can do by way of advocacy to help building managers and owners control those costs.
MREN: These are certainly big issues. Brookover: Look at the daily papers. There’s debate over real estate taxes as a way to fund pension shortfalls. With utility rates there are always tariffs being filed. There are always justifications being made by the generators of our power that they need additional money to operate. Of course, there is plenty of discussion these days over wage rates, too. These are large issues.
MREN: When you look at your market in Chicago, are you seeing an increase in commercial real estate activity? Brookover: We are seeing an increase in property sales and an increase in occupancy rates. Businesses are starting to come out of hiring freezes, so they might need more space. Some of the larger firms are adding people. Even some of the smaller and mid-size firms are hiring again. Many of these companies were hesitant to hire after the recession. Now they feel more comfortable in hiring for those positions that have been open and have been covered by their current employees. That may attribute to some of the trends of occupancy rates being pushed up a bit.
MREN: Are you seeing any interesting trends in the Chicago market? Brookover: We are seeing some start-up firms that are in need of space. Some are moving from the suburbs to Chicago to take advantage of our educated and available workforce. We are also seeing some large firms that are opening downtown offices to be able to capture and take advantage of that well-educated and available workforce. Some members of the workforce prefer to be downtown where they have access to an environment that provides a good balance of live/work/play opportunities. People want to move near to where they work. They want to lessen their commute times. That seems to be the trend today.
MREN: We’ve written a lot lately about the changing layout of office space, with more companies moving to open, collaborative office space. Are you seeing this trend, too? Brookover: There is a noticeable change in how users view their space. There is a trend toward more open, collaborative workspaces. People are moving out of private offices and into more open areas, even at the CEO level at some companies. They will have huddle rooms for impromptu meetings. They will have more collaborative open areas where people can meet and have discussions rather than being separated into private offices.
MREN: What other trends are you seeing? Brookover: Larger firms, law firms and accounting firms, have shrunk the amount of space per person in an effort to become more efficient. It all comes down to how companies use their office space most efficiently. The cost to occupy space in Chicago can be rather high. Our owner members do their best to lower their operating expenses. But they sometimes do have to pass an increase in operating expenses to their tenants. Occupancy costs as they increase, then, will put pressure on these tenants. Will companies spend their money on adding additional jobs or will they spend it on higher rent or occupancy costs? As Chicago becomes more expensive with rising utility rates, taxes and labor costs, that is going to put pressure on companies on how to allocate their money. Is it spent toward occupancy costs rather than adding to their labor forces? If so, that could have a negative long-term impact on jobs in Chicago. I don’t know if that will occur, but it is something to pay attention to.
MREN: What are some of the benefits for companies that choose to open locations in Chicago? Brookover: Firms can reach out and tap into a very educated workforce. That educated workforce is now eager to be in a downtown area that offers a good stock of affordable housing, good educational system – especially higher-ed – and fun venues. That workforce is here.
