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From Our Members: Observations & Opportunities

April 2, 2020

Join us each week as ULI San Francisco leaders and members share their experiences and perspectives in this ever-changing world. Their views represent various real estate industry segments and delve into both professional and personal thoughts and ideas in this snapshot in time, and what positive opportunities can be found today, and in the future.

Meet this week’s contributors:

Dave Blackwell
Partner, Allen Matkins Leck Gamble Mallory & Natsis LLP

Observations
I submit these short observations with the recognition that we are still early in this crisis, and that the situation will get worse before it gets better, thus anything below may seem quaint or naive a few weeks from now.

Yesterday, one of my daughters asked if I would rather always work from home or always work in our downtown office. I replied, “Neither.” Even though commuting in the Bay Area is unproductive, environmentally harmful, and the essence of drudgery, the ability to interact in person with colleagues and clients in a shared space still has great value. That said, the ability to communicate remotely has improved so markedly in even the last ten years that the last couple of weeks have not been as disruptive as expected. (Our ULI Executive Board meeting last week was conducted via Zoom and it worked remarkably well.) A fairly obvious silver lining is that as we are all forced to integrate telecommuting into our work schedules this spring, it will become more widely used and accepted when our working lives eventually return to normal, and we can perhaps then strike a better balance between working from the office and from home.
More broadly, despite some bizarre hoarding and other aberrant behavior, it appears that most people have been civic-minded and are adhering to the shelter in place orders. Despite numerous essays about how our polarized and fragmented society is eroding at the core, perhaps the stress test of this pandemic will reveal the resilience of our society and institutions. At least one can hope so.
Opportunities
Based on the flood of emails and posts from law firms (including mine) regarding COVID-related issues and strategies, it is clear that the legal profession is constantly evolving and able to quickly respond to unprecedented events. What none of us know right now is what the legal or real estate markets will resemble in six months. There is very little that I personally can do about it, so I’m not going to devalue my time at home worrying obsessively about the short- and long-term future of our industries. It won’t accomplish anything.

For the last decade, many of us have been running back and forth to meetings and rushing to meet deadlines, while lamenting that we have so little time to do anything else. This crisis provides a very rare opportunity to now do some of those things, the most fundamental of which relate to family, community, physical health, and mental health. All of my kids will be out of the house in a few years, and I cannot rewind any missed time. Slowing down a bit and sharing time with family (and friends, remotely) is an opportunity that should not be squandered.

Alexandra Stoelzle
Director, Kilroy Realty Corporation

Observations
Two weeks down, and now officially at least four more to go, of the Great Bay Area Quarantine (or so I like to call it). Life now consists of videoconferences, virtual happy hours with colleagues and friends near and far, calculated grocery store runs, socially distanced outdoor workouts, family check-ins, and a constant evolution of global news regarding COVID-19. San Francisco has been at this longer than the rest of the country, and for us, this already feels like the new normal.
As an office developer, the thought of this being the new normal is particularly unsettling. Workers are beginning to become accustomed to a new way of working that does not include a traditional office environment. We begin to ask ourselves: Would this meeting be worth the commute to the office? Is face time really as important as we make it out to be? Am I actually more efficient without the unavoidable chatter that comes with today’s open office setup? In short, maybe, but I think we will begin to see that telecommuting is not the solution to creating the most productive workday. However, I do think this will be a time of innovation in work practices that determine how office spaces are designed and built into the future.
The city-by-city shelter-in-place ordinances have also created several uncertainties within the Bay Area construction industry. In San Francisco, the construction deemed non-essential now includes not only all commercial buiding (including tenant improvement projects), but also all residential building except those projects which include at least 10% affordable housing. Developers are still sifting through the nuances to better understand the implications on our development pipelines and our businesses in general.
Opportunities
In the midst of all the turmoil and uncertainty that COVID-19 has brought upon the world in the last several months and will continue to cause for the foreseeable future, a light shines not even so much in the distance, but in the foreground. That light is the life science sector.
Places like the Bay Area and Boston, and in recent years Seattle, have ramped up the construction of robust life science campuses to house some of the best in scientific research. Biotech firms, like Genentech and Nektar Therapeutics in the Bay Area, need specialized high tech campuses to carry out their research and development as they race to create life saving cures to terminal diseases, vaccines, antibiotics, medical devices, essential treatments – the list goes on and on. These activities are not only essential in sustaining the human race (people can see this more now than ever as companies press to find a vaccine for COVID-19), but are also generally not activities that can be conducted from the comforts of one’s own home. So, not to belabor the topic any further, there you have it – life science will save us!

Nell Selander
Deputy Director, Economic & Community Development Department, City of South San Francisco

Observations
The complete and total chaos of juggling a full-time job, my partner’s equally complex and unyielding schedule, and my toddler’s incessant, feckless demands seems somehow more difficult than what our lives were like just a few weeks ago. And yet, it’s not.

I am privileged to work for a City committed to supporting its employees. I have the tools and resources to get work done at home. I can stay safe and sheltered, ordering most groceries and necessities online and happily tipping delivery drivers to drop them on my porch. But amidst this abundance and privilege I feel inextricably linked to those more deeply affected by COVID-19 and government’s response to the pandemic.

I manage the Economic Development & Housing Division for the City of South San Francisco. We certainly are not the frontline of this disaster response, but we may well be the second or third line of defense. My team fields dozens of calls daily from businesses unsure of whether or not they will ever be able to reopen and tenants quite certain that even if they can scrape together April’s rent, they will not be able to make May’s. In addition to referring these individuals to federal, state, and local resources, we’re also working on policies to provide additional resources and protections.

Opportunities
This crisis has pushed to the forefront of political discourse the need for a broader and deeper social safety net. Whether it be more generous unemployment insurance, more extensive paid sick and family leaves, or just getting cash to households who have no savings to speak of and therefore no way to stave off homelessness or bail out a failing family business. Local jurisdictions are funding emergency rental assistance programs. States, counties, and local jurisdictions are enacting eviction moratoria. And governments at all levels are postponing collection of taxes.

All of these policy efforts indicate the need for an even larger conversation. One that will have a more long-lasting impact, as assets are repositioned and decisions about new investments and development projects are made. How will our cities operate in the future? Will social distancing (think restaurants at half capacity) be something we default to periodically as new viruses ravage communities worldwide? Do buildings need more means of egress (I hear buildings in New York are allowing only one family in elevators at a time)? Will this push even more retailers to online formats, away from brick and mortar? Are big-box retailers, like Costco and Target, more essential than ever? If we could afford to house the homeless during this crisis, why can’t we during good times?

Needless to say, work is more interesting than ever. It’s just incredibly sad that it took a crisis of such proportions to force us all to talk more candidly and with more immediacy about serving and protecting those amongst in greatest need.

 

Tomás Schoenberg
Executive Vice President, The Swig Company

Observations
At The Swig Company, the health and safety of our employees, their families, and our tenants has been our top priority during this Great Hunkering Down. Initially, we are erring on the side of over communicating with our employees, board Members, and family owners, to be adjusted as time goes on, as this situation evolves, and as new guidelines and ordinances emerge. At the risk of stating the obvious, these unprecedented times have caused a significant disruption in day-to-day business across our workforce and portfolio. Our employees have been instructed to shelter-in-place until further notice, with only a few temporary exceptions in order to maintain essential services in our buildings. No layoffs, furloughs, or reductions in benefits are being considered.

We are using this time to focus on building operations and triage. For example, we have sent well-protected industrial clean-up crews to disinfect a few tenant suites that have reported an employee testing positive for COVID-19 (this is less likely going forward as few tenants are going to work). As office closures continue, our building offices are operating on a reduced schedule and are thinly staffed when open.  As with most real estate firms right now, capital market transactions and new leasing activity is in a state of semi-paralysis, having effectively come to a screeching halt.

We know there are more challenges on the horizon and that by focusing on our own workforce, we will have strong and resilient teams in place to enable us to adapt to what will continue to be changing conditions.

Opportunities
In terms of opportunities, there is no doubt that we will all learn new ways to work and remain productive through this experience. These uncertain times have also shown us the value of using new technology to stay connected (e.g., Highfive and Zoom conferencing, Slack messaging). We are staying in frequent contact with our employee community (and also with clients, tenants, partners, etc.) and are encouraging increased business and social interactions to boost morale.

In the short term, we at The Swig Company (and I’m sure in the industry as a whole), are learning new ways of communicating efficiently and collaborating remotely. In the long term, I think these challenging times of isolation will really cause us to reassess the need to have folks come into the office every day and rethink the way people and companies utilize office space. We will continue taking the lessons learned from our own workforce strategies and how companies can utilize space to our understanding of tenant needs going forward.

I miss my real estate community.  Stay healthy and safe everyone!

 

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