CREJ - Office Properties Quarterly

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Page 28 — Office Properties Quarterly — April 2015
Development
Project Management
A s more people move to
Denver for employment
opportunities, the region’s
aging office inventory pres-
ents both a challenge and
an opportunity for developers and
brokers, who often say the market
isn’t overdeveloped, just underde-
molished.
But demolishing old buildings
would tarnish the region’s reputa-
tion as a hub for sustainability, and
there are plenty of examples of
older buildings that have been suc-
cessfully redeveloped to meet the
needs of today’s workforce.
Take The Alliance Center in Lower
Downtown – the first historic build-
ing in the world to receive two LEED
certifications. The old warehouse
became a hub of sustainability that
moved the needle in terms of creat-
ing collaborative workspace aimed
at increasing the productivity of its
tenants.
Collaborative workspace is the
trend as millennials take over the
workforce, and The Alliance Center
isn’t the only example. In the River
North Art District, developers con-
verted a distressed warehouse into
Industry, a 120,000-square-foot cre-
ative office space that anchors the
revitalization of the Brighton Boule-
vard corridor.
The move to develop modern
office space comes with the expec-
tation that about 45,000 jobs will be
added to metro Denver this year.
The majority of those positions will
be filled by millennials – people
reaching young adulthood around
the year 2000.
But more than 76 percent of metro
Denver’s office
buildings were
built before 1985
and can’t meet
the demands of
increased efficien-
cies and amenities
that companies
say are crucial for
attracting talent.
With employment
growth expected
to continue, the
expectations that
companies have
for office space
will keep evolving.
Accommodating the rapid growth
of the region’s population with an
aging building inventory is critical.
The simple answer is to demolish
the old buildings and build new
ones. The alternative is to repur-
pose and substantially renovate the
aging inventory.
There is room for both options. A
shining example of new construc-
tion is DaVita’s headquarters in
LoDo. The state-of-the-art work
environment with collaborative
workspaces throughout the build-
ing, including the Town Hall on the
top floor, creates a progressive work
environment for the kidney dialysis
company’s employees.
DaVita’s headquarters is steps
from Denver Union Station, the epi-
center of the metro area’s FasTracks
system. The voter-approved transit
expansion program will build 122
miles of commuter and light rail, 18
miles of bus rapid-transit service
and add 21,000 new parking spaces.
With growing traffic congestion
and rising parking
rates, millenni-
als are demand-
ing a “live, work,
play” environ-
ment – whether
it’s in an urban or
suburban location
– that has easy
access to transit.
That’s sparked an
increase in the use
of Denver’s easily
accessible public
transit system.
Since 2012, the
average weekday boarding of the
Regional Transportation District’s
buses and trains has increased 5
percent from 328,109 to 344,381.
This growing demand is also caus-
ing a shift to higher-density use
in buildings near transit centers,
which typically are in older neigh-
borhoods. The concern is whether
the old structures can withstand
the surge in density growth. Metro
Denver’s aging buildings have been
forced to accommodate the highest
capacity they can, causing deterio-
ration in performance ability. Out-
dated building systems, deferred
maintenance, inadequate parking
and failure to meet the regulations
required under the Americans with
Disabilities Act are just a few of the
characteristics that contribute to
the functional obsolescence that
can cause a property’s value to
depreciate.
But companies demand these
things, so there’s been a flight to
quality that resulted in increased
rental rates across the metro area.
Over the last 12 months, Class A
rental rates in Denver’s central busi-
ness district increased 5.3 percent.
That trend is metrowide, with the
southeast market reporting a 4.8
percent increase in Class A rents.
Rents in Class B buildings also are
rising. Class B lease rates in the CBD
rose 8.3 percent and rates were up
6.1 percent in the southeast market.
Developers are trying to meet the
demand for office space. They’ve
recently delivered 442,954 sf of
office space to Denver’s CBD and
397,285 sf to the southeast market.
There also is nearly 1.5 million sf
of new office space proposed in the
CBD and 2.8 million sf in the south-
east market.
Still, the supply isn’t enough to
meet the demand for contemporary
office space. So tenants are adjust-
ing their real estate requirements
to fit the space that’s available, and
it’s affecting the reliability of metro
Denver’s office statistics.
There was about 9 million sf of
office vacancy reported at the end
of 2014, but it’s difficult to deter-
mine how much of the vacancy is
in buildings that are not competi-
tive in today’s market. The question
now is whether there is a future
for aging buildings. In most cases,
as evidenced by the repurposing of
older buildings in Denver’s core, the
answer is yes.
If owners are willing to spend
the money to bring a well-located
property up to current market
standards, even the most outdated
buildings have a shot at competing
with newly built next-generation
office space.s
T he definition of a project
manager is ever-changing,
and a new definition exists
that requires the role to be
nimble and flexible in its
project approach to office construc-
tion. Often, a project manager is
also referred to as a PM, owner’s
representative, construction man-
ager or process manager. While
varying definitions and unique
identifiers come into play, one thing
remains the same: A project man-
ager, when scoped correctly, is the
grounding point and conduit for an
office project, and progressive adap-
tation of the project management
role is underway.
While there are changing and
varying titles to the role itself, the
differentiating factor in a project
manager’s profile is the scope of
services that a project manager is
asked to orchestrate in any given
project’s lifecycle. The resultant
changing workload affords the
opportunity for clients to custom
tailor their needs and ensure not
only no duplication of efforts within
their project team, but also to stra-
tegically source what they need
from a project manager.
Determining the scope is critical
to a project’s realization and ulti-
mate success, as is fully acknowl-
edging and understanding that
construction and nonconstruction
workstreams play an equal role in
the project. From
architecture and
engineering to
general contracting
and strategic part-
ners encompass-
ing sustainability,
audiovisual, low-
voltage cabling,
security, furniture,
soundmasking,
artwork and move
management –
each workstream
plays a mission-
critical role in the
success of the
project. In addition, the specific
workstreams can have project man-
agers within their teams leading the
efforts. While the industry has many
definitions of “project manager” and
strategic partners within any given
project have project manager titles,
the definition of the term can be
defined depending on the role with-
in the project team.
When onboarding a project man-
ager, step back and assess the dis-
tribution of workload internally and
externally within your organization.
Ask yourself the following ques-
tions: Are there deliverables that
can be managed in-house or does
a current job description not sup-
port the time and dedication needed
to focus on a one-time real estate
effort? Does trying to allocate inter-
nal resources to a project distract
the internal team from their day-
to-day role or efforts in a way that
would adversely impact your opera-
tions or business? Can an external
project manager augment or sup-
port in a hybrid role in partnership
with an internal team member or
team? Or does an internal team not
exist for this one-time project effort
and full outsourcing is required?
The ability to strategically structure
your specific need is key.
The value of a project manager
can be realized at varying stages of
a project. While typically hired early,
project managers can join a team at
varying intervals depending on the
scope of services needed. Changes
to the current project management
profile are underway. While often
clients onboard a project manager
for full project support, variations
can occur. There are times when a
client may only need move-man-
agement support to help orchestrate
the client’s relocation from point A
to point B. Likewise, there may be
instances where a client only needs
construction-management support
and can internally handle the logis-
tics of a move on his own.
In addition, a ground-up or build-
to-suit project requires a differ-
ent project management scope of
services and has differing scope
complexities than a tenant improve-
ment project. You should know the
nuances of a turnkey versus tenant
improvement project when scoping
a project manager’s role. It is also
important to understand the vari-
ance of a landlord-managed tenant
improvement project as a tenant-
based project manager – while the
landlord may be managing the con-
struction aspects of the project, a
tenant-based project manager can
be the link between landlord and
tenant, while maintaining oversight
of the nonconstruction workstreams
on behalf of the client. In addition,
when a client is taking a subleased
space, there are varying degrees
of project management that are
needed from oversight of furniture
reconfigurations to low-voltage
cabling and security adaptations for
the space, with move coordination
to follow.
Regardless of the project man-
ager’s scope and whether he is
contracted for full service or a la
carte, menu-based selections, proj-
ect managers are being asked to
take on a more consultative-based
approach versus a task-based
approach. Checking the boxes is
easy for any manager, but fully
engaging in a project as the project
manager requires creativity, strat-
egy, problem-solving and people
skills. The art is in the ability to
understand the clients’ needs and
expertly be exactly what they need,
when they need it.s
Katy Sheehy
Vice president,
Colliers
International,
Denver
Megan Walsh,
LEED AP BD+C
Principal, Catalyst
Planning Group,
Denver
Abby Vollmer
Broker associate,
Colliers
International,
Denver