A brighter future … at least starting in the second half of 2021. That’s what the industry experts speaking at the 19th Annual Commercial Real Estate Forecast Conference promised during the big event held virtually Jan. 7.
That optimism, a belief that this will be a better year for the commercial real estate industry and the country, was on display throughout the event hosted by Illinois Real Estate Journal and the Chicago chapter of SIOR.
It was there, too, during the From the Top panel discussion featuring some of the biggest names in the Chicago-area commercial real estate business. This panel, moderated by Kathryn Kovitz Arnold, practice group chair and partner at law firm Taft Stettinius & Hollister, featured Molly McShane, chief executive officer of The McShane Companies; David Reifman, president of the Chicago Business Unit at Clayco/CRG; and Drew Nieman, executive vice president with Riverside Investment & Development.
These panelists started their discussion focusing on – what else? – COVID-19 and its impact on the Chicago CRE market and on how they do business.
Nieman said that the pandemic, of course, was and has been a challenge. Riverside Investment & Development is a traditional development firm, meaning it puts the capital together for projects, finds sites and hires designers, consultants, lawyers and other professionals to close its deals. That couldn’t stop during the pandemic.
Nieman said real estate pros must focus on three key areas during the pandemic: If they’ve built buildings, they must find a way to keep them full. If they are building buildings, they need to finish the leasing of them. And if those two jobs are going well? It’s time for CRE pros to focus on the strategic growth of their companies.
“The type-A personalities, like all of us in commercial real estate, don’t sit back and wait until business shows up at their doors,” Nieman said. “We start scrambling. What can we do during the downtime that would be effective and helpful? What can we do now so that we are positioned well to take advantage when we are past the pandemic?”
For Nieman, this meant calling on tenants and brokers to find out what challenges they were facing during the worst days of the pandemic. It also meant adding a host of health and wellness features to Riverside’s buildings, he said.
For five months, Nieman said, Riverside focused on adding air-purification systems, touchless entry technology, new cleaning protocols and other features to their buildings. The goal is to make their tenants feel safe and comfortable when they are ready to return to these properties.
“We put together a budget and got it approved,” Nieman said. “We spent money in buildings that we hadn’t planned on spending before the pandemic hit. We went back to our tenants and told them what we were up to. We showed that we were trying to be collaborative with our tenants, that we wanted to be partners in solving the issues of the pandemic. We didn’t sit back and wait to see what would happen.”
Reifman agreed that the key to working through these challenging times is to be proactive. CRG, an essential business, has been open throughout the pandemic. And during the last 10 months, the company worked hard to rebuild its multifamily practice. It also acquired several key parcels of land for future development.
“We’ve all had to adapt to the day-to-day realities of working through this pandemic,” Reifman said. “We’ve been looking at what the world might look like when we come back from this.”
The last 10 months have been particularly eventful for McShane. She took over her leadership role at The McShane Companies during the pandemic, not exactly the easiest time to shift into a new position. McShane, though, said that making this move during the time of COVID-19 has actually come with some benefits.
“This is a moment where we are accepting of new ideas and change,” McShane said. “We are looking at the world with perhaps a different lens. We are in an environment where people are more open-minded about change.”
As far as working during the pandemic? McShane said that she is proud of the work done by the employees at her company.
“We have been open the whole time,” she said. “People are working at job sites. They are working from our offices. Some are working from their bedrooms. Some people have come into the office more often than others. Some have stayed home the whole time. What hasn’t changed, though, is our adaptability. People in our company run toward the problem. We are problem-solvers. We adapted quickly to keep our business running. Whether people were at their desks in Rosemont or at home in their Chicago apartments, they were able to keep this going.”
No one would argue that the pandemic hasn’t been challenging for CRE professionals. But Reifman said that many companies – CRG included – were prepared for the tough times. That’s partly because the commercial real estate industry went through such a challenging time during the Great Recession in 2008.
Because of this, the top CRE companies have always had plans in place to work through whatever the next economic slowdown would be. Companies didn’t think a slowdown would be the result of a pandemic, but that doesn’t mean they didn’t have guidelines in place to help them survive tough times.
“There is always going to be something challenging,” Reifman said. “We were prepared for something like this. We had all been wondering how long the expansion cycle could realistically continue. So from a cash position and a staffing position, we were really prepared. We adapted quickly once the pandemic hit. It’s a different group of challenges today, but we were ready for it.”
Nieman gave a good example of how Riverside has pivoted. The company opened a new building during the pandemic, Bank of America Tower at 110 N. Wacker Drive in Chicago. In pre-pandemic times, Riverside would have hosted a big party at the building. That, of course, couldn’t happen during the pandemic.
Instead, for three days Riverside took groups of no less than two and no more than 10 on tours throughout the building. Gibsons Bar & Steakhouse provided breakfast, lunch and dinner on one of the building’s top floors. Riverside passed out custom-made face masks for the occasion. A DJ with equipment on wheels moved through the floors providing music throughout the day.
And the end result? It was a positive. Nieman said that Riverside pros were able to spend far more time with their clients than they otherwise would have.
“Everyone at the firm worked their butts off. We were so tired. But it gave us the opportunity to meet one-on-one with people,” Nieman said. “We took them through the building and showed them the amenities. We turned a tough thing into something we had never done before. During a big party, think of how little you actually talk to people. During this event, we were able to hit everyone.”
As far as the future goes? Reifman said that it’s important to recognize that while industrial is thriving today, many other commercial real estate sectors are struggling mightily. Reifman pointed to hospitality and restaurants are just two examples.
“These industries are devastated,” he said. “We need to find ways to support them until we are over the hump. The office market will be tight for a while, too.”
Reifman also said that major downtowns – including Chicago’s – are struggling today, too.
“We have to bring downtown back,” he said. “There are very few people around. You can’t support the hotels and restaurants if no one is there. But I do think we will be back. You have to do everything you can to hang in there. We will be back as a community, city, state and an economy.”
McShane agreed that better times are ahead. As she said, people are social beings. They want to be together. There are reasons why people were flocking to cities before the pandemic hit: They were fun places full of entertainment, dining options and night life.
People will return to the center of cities, McShane said. She also said that the CRE professionals who work in the city and help build the skyline have a duty to promote the benefits of urban life.
“The amount of complaining we all do about the city of Chicago and what is wrong with it can be frustrating to me,” McShane said. “It is a fantastic city. We all love it. We are all working here and making money here. It is incumbent upon us to lock arms and work to support the city. There will be some pain we all have to suffer through. There is no magic pill. But we need to be part of the solution. We can’t just complain about what we don’t like.”