Managing construction in an occupied building

A lobby renovation, finished at the end of 2019, was completed by Urban Renaissance Group while the building remained occupied.

David Myers
Regional manager, Urban
Renaissance Group LLC

You’ve heard it before: Location, location, location. Such is said to be the most important element in the world of real estate investment. And yet, when it comes to tackling construction projects, it’s planning, communication and execution that really take center stage.

As a manager of commercial real estate, there inevitably will come a time when your responsibilities include overseeing, if not running, tenant improvement, or large capital projects. How you handle that start-to-finish process can make or break the success of not only the project, but also the reputation of the building and the future leasing decisions of existing tenants.

While asset managers work to drive value for ownership by making decisions that ultimately will increase the net operating income of the property, the execution of such projects often falls to the property management team. If this is not handled properly, it can wipe out whatever well-intentioned value creation was to occur. In this sense, your job as a property manager is to effectively execute the desired capital, repositioning or tenant improvements with as little impact to the existing tenants as possible.

When preparing to undertake a significant capital project or tenant improvement, the initial planning sequence is critical to the success of the project. The first part of that planning process is assembling your team: your architect, engineer, general contractor, building engineer, operations vendors, security team and emergency response team all need to be approached. Depending on the size of the project, you may have a construction manager, too. And even if you do, you’re responsible for your building and what occurs in it, or to it. Aside from the tenant impacts, a determination of who will be integral in the performance of the project, its completion and continued operation of the building is imperative.

After ensuring the appropriate members of your team understand the project, as well as its objectives, impact and time frame, the next step is to start what ultimately will be a continuous chain of communications with your tenants. Some tenants inevitably will be more impacted than others and, in those instances, a more personal approach will be necessary. Of course, a dialogue and open communication with all tenants will help get the buy-in of the building. The process can start with a building email broadcast followed by an in-person visit from the management team to answer questions, face-to-face, with each tenant. Renderings and other visual images on large remodels help show tenants that the end result will be worth the temporary inconvenience they are experiencing. It also is important to continually provide updates on the project, along with pictures of any progress being made. And, depending on the size of the project, biweekly or monthly project updates should be provided; if necessary, daily check-ins of the most impacted tenants could, too, be necessary. In the end, having strong personal relationships with your tenants will help you in this process as they will provide valuable, critical feedback on the project that you otherwise might not hear from your contractors.

Of course, dealing with unforeseen issues and delays is another challenge that will present itself when performing major renovations on an occupied building. Having a plan in place and allowing for delays in the overall project schedule will help alleviate some of these concerns. However, even greater impactful issues can occur including, for example, the building’s main entrance being temporarily shut down, a restroom being taken offline or the elevator no longer working. These events propose significant impacts on your tenants, so a personal interaction and relationship with them will help to, at least in the interim, smooth an issue. And despite being slightly more time consuming, taking that time to speak individually with each tenant helps to demonstrate to your tenants that you care and have concern on their behalf.

Build these relationships with the rest of your management team. Have an assistant property manager? She should join you when talking to tenants. It is never a bad idea for your tenants to have multiple avenues of reaching the management team, and at least one secondary point of contact if you are unavailable. Moreover, be sure to celebrate the wins – big or small – and milestones of the project with your tenants. Doing so ensures tenants feel vested in the building’s overall success and, once completed, hopefully will aid in their decision to stay in the building. Easy ideas? Keep it simple. Take-and-go breakfast, like doughnuts and coffee, for example. Ideally, having your general contractor attend these events will help your team answer questions your tenants may have, and provide the tenants with a way to ask questions they may not know they had. This also allows your team the opportunity to update tenants and solicit direct feedback, both critical parts of the communication process that you might not otherwise have.

Lastly, once the project is complete, share, share, share that information. Provide before and after photos, if possible, and allow your tenants to see the changes. Tenants who have gone through major renovation projects, though inconvenienced, often feel a stronger connection to the building if the management team has helped and cared about them during the project. In a nutshell, major renovations should drive leasing. If tenants are eager to renew and/or the leasing velocity of the property has increased, you’re well within your right to feel a sense of pride in your accomplishment. These types of capital investment, along with their successful implementation, drive value to the building and demonstrate your value as a capable manager.

All in all, running extensive renovation, tenant improvement or capital projects is never easy, and the unforeseen more often than not ends up rearing its head. Just remember: Assemble the right team. Focus on your tenants. And over prepare. Success starts and ends with careful planning, thoughtful communication and considerate execution.

Featured in CREJ’s April 2020 Property Management Quarterly

Edited by the Colorado Real Estate Journal staff.