80: Envisioning the Future Webinar Part 2

Foreign.

This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program, you'll learn about the world of commercial real estate and find out why it's one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson.

Welcome to episode number 80 of Real Estate Investing Live from New York. This is your host, James Nelson. I am principal and head of Tri State Investment Sales at APIs and Young, and as always, thank you so much for joining. Means so much to me and telling your friends, we're certainly growing our audience here and the goal of the show is to make you the best investor possible and you're learning from some legends in the business and really learning how to in a challenging environment post pandemic to really learn where the opportunities are and how to react. So if you didn't hear the show that we rebroadcast last week, where I had Michael Dowling, the president and CEO of Northwell Health, the largest hospital system in New York, and Jeff Levine, a builder who has decades of experience, who is founder and chairman of Douglaston Development and Levine Builders. Definitely give that one a listen for today's show. I'm going to first give you a quick state of the market for New York so you can hear what's going on here. And then you're going to hear from the second half of the panel from the Fordham Institute's program Envisioning the Future, Technology Innovation and Obsolescence. And I will be interviewing Christopher Mills, who is president and COO of Plaza Construction, Jennifer Stewart, who is global head of real estate for BNY Mellon. And and finally, Mark Zulaga, who is the CEO of Steven Winter Associates. He's an architect who has a lot of experience in design and green elements. Clearly, Jennifer will be speaking from the owner occupier's point of view and Chris talking about construction. So this is going to be a really fabulous discussion after you get that state of the market. So stick around. We're going to have a brief word from our sponsor and we'll get right into it. Thanks again.

You are listening to Real Estate Investing live from New York. To find out more about James Nelson or avison young, visit avisonyoung.com now back to our show.

Okay, welcome everybody. I think we'll, we'll get started as people roll in. I'm James Nelson, principal and head of Tri State Investment Sales for Avis and Young. Thank you so much for joining us for our first quarter State of the Market report for New York. We're trying to keep these very tight and going with the 30 minutes where I'll be going through the deck, but then also answering any questions. So got to go a little bit over. We can do that, but I think a lot of you out there are having some zoom fatigue. So we understand not keeping you on too long, especially on a beautiful day like today where it's finally we're getting some nice weather. So I am reporting from our New York headquarters here at 530 Fifth Avenue and excited to let you all know our office has been open pretty much throughout, but optional. And now we've moved to the AB schedule, start getting more people back in the office and that has been encouraging. Our landlord, rxr, they've got this great app that tracks how many people are actually in the building at one time. So right now we are at 37.1% occupancy. And I can tell you that's a heck of a lot better than January when in some of those dark days, the winter, we were as low as 9%. So we're headed in the right direction. I know that the, the weather is certainly helping, but more importantly is the vaccine rollout. So let's jump right into it, Matt, because I think that is what we're all watching closely. We used to say that jobs were the number one driver for the real estate industry. And today, right now, it's really about how we're doing with the vaccines. And speaking to the press when we first released this data last week, you're going to see some pretty depressing statistics from a sales standpoint in the first quarter. But the important thing to remember with these sales reports is that when transactions are reported, it can take a couple weeks to hit the transfers. But those deals were typically negotiated anywhere from three to six months before. So a January, February sale this year was likely negotiated in October, November, December. And I guess many of us forget how new this vaccine rollout is. I mean, the vaccine rollout didn't really even begin happening until the beginning of this year when still we were under 100,000 doses per day. This is US Stats Now. We're over 3 million doses per day. If you look at how the US is doing, where 22.3% of the total population is fully vaccinated, compared with 36% with at least one dose, you can tell within the next two or three weeks that that number is going to jump up double digits, is kind of lock step barrel with what we're doing in New York, and again, we're talking about for 18 and older. But you look at New York City vaccination, we're at 22% right now, fully vaccinated, 35% with at least one dose. So we can move forward here. Again, this really explains what happened in the first quarter, which is a big drop off in volume. And what we're doing for this first quarter is we're actually comparing the sales statistics to the second, third and fourth quarters of last year. We threw out the first quarter, which was before the pandemic, and really looking at establishing that second, third, fourth quarter as the new benchmark, which we was hoping was really the low point. But you'll see that this first quarter, the dollar volume dropped 41% in New York City. So we are back to what will look like annualized volume way back to 2009, right during that financial crisis, where again, even if you annualize this quarter, it's going to look a whole lot worse than last year, which albeit benefited a little bit from the first quarter before the pandemic. But again, the point is that I want you all to take away with you is again, I truly believe that we have bottomed out from a volume standpoint because again, the bulk of these transactions were negotiated before this vaccine rollout really took place.

So.

What'S interesting here is that the boroughs in this case have seen a steeper drop off in dollar decline. It seemed like last year that the boroughs were hanging in there a little bit better. Manhattan was getting hammered. Dollar volume only dropped 25% compared to those second, third and fourth quarters last year. Whereas the boroughs, you look at Brooklyn down 67%, Queens 51%, the Bronx 81%. I mean, very, very few sales when it comes to dollar volume in upper Manhattan at a 46% drop off. So let's look at what happened on number of sales. Starting to see a couple green arrows here. So although I would say 34 sales in Manhattan is not much to celebrate over now we track investment properties. So we're talking about multifamily retail development and office and above $5 million. So Manhattan number of sales went up 7% from the average. But Brooklyn down 19%, Queens 30%, the Bronx down 55%. And upper Manhattan again had an uptick, but not by much. I wouldn't say six sales is much to celebrate, but if you annualize, if you look at this across, across the whole city, we're talking about a 10% decline again from the second, third, fourth quarters. Of last year. We're on pace to only do 312 sales this year, which is slightly above 2009, but well below about a third of the 10 year average and certainly far from the peak. That being said, I think these numbers, when we come back to you next quarter, I think you're going to see these numbers. So certainly the projections the year are going to start ticking up. 10, 20%. We're seeing it now. I will tell you the current listings that we have out on the market right now. In some cases we're getting 10 tours per week. Be very selective about what we bring to market. We're valuing as many as 50 properties per month, but we're only taking on about five or six listings out of those. Typically we'd be retained on 25, 30% of what we present. And not because, you know, maybe necessarily one of our competitors is getting the listing over us, but. And of course that does happen on occasion. But you know, oftentimes the owner is saying, well, you know, that value doesn't work for me. I'm not going to sell, I'm going to wait, I'm going to try to reposition the property or I'm going to refinance. And you know, past couple of years the rates have been so incredible. We were working on a Brooklyn package where eight buildings prime North Williamsburg and we were getting great pricing. Of course, this was before COVID but the seller said, look, rather than sell, I can just get 2 1/2% interest only debt on this. So our biggest competition in the past has been not necessarily the owner selling off market or with another broker, but it's really been that they've been refinancing instead. And that might certainly still be a good choice if you don't want to sell right now, if you want to try to punt and refinance. But the challenge you're going to see now, and we're going to get to this a little later in the presentation about the challenges. The distress that's in the market is going to be the challenge to refinance some of these properties when you have 10, 20, 30, 50% vacancy. So Matt, we'll keep going here. This is what the Manhattan sales market looks like. Again, only a billion dollars of sales. Interestingly, it's usually office, which supplies the bulk of the dollar volume and it was really multifamily leading the way, but still a 25% decline by $ volume for Manhattan and the number of sales slightly up, but still a far cry of what we were seeing Pre Covid, if you look at Manhattan dollar sales volume back in 2009, there was only 3.7 billion 1 trades. So you know, we're, we're slightly higher looks like on a dollar side, but the number of trades are dropping here. We know it was kind of the inverse for the boroughs as we saw just before. But again, I don't want you all to read too much into these 2021 annualized numbers because I think we're going to look a whole lot better after next quarter.

You are listening to Real Estate Investing LIVE from New York. To find out more about James Nelson or Avis and young, visit avisonyoung.com now back to our show.

Perfect. Okay, so we're going to welcome up our second panel and thank you everyone again for our attendees for joining on and I am seeing your questions. And again we're going to try to get to as many of these as possible. But let me go ahead and jump right into the introductions. So in no particular order, we've got Chris Mills, who is President and CEO of Plaza Construction. He has more than 30 years of experience at the company managing notable projects and serving on the company's board. He's been involved in such projects as 99 Hudson street in New Jersey, the award winning Fulton center in New York City, as well as New York's newest super tall towers, 45 East 22nd and 111Murray. He's been involved in the development of over 10 million square feet of construction projects throughout New York City. Next we have Jennifer Stewart, who is the global head of real estate with BNY Mellon. Jennifer is responsible for a global portfolio of 11.5 million square feet and an annual operating budget of $580 million. Prior to BNY Mellon, Jennifer was the global head of client management for JP Morgan. She had over 10 years experience working as well in London in New York, overseeing the office development and delivering cost effective solutions. Last but not least, we have Mark Zulaga, who is CEO of Steven Winter Associates. He's been with the company since 2001. He leads an interdisciplinary team charged with growing the firm as a means to positively impact people and the environment through improved building performance. And he has served on several notable boards and task forces, including the New York City Green Coats Task Force, reporting to the New York City Mayor's Office and most recently has co chaired the New York City MOS Technical Working Group that developed a plan to reduce carbon emissions by 80% by 2050. Again, this is a panel that's all about the future and forward thinking. So we've got a lot of forward thinking individuals join us for the second panel as well. So welcome everybody. Good. So I've got to start with you because and I love having the occupiers perspective because these have no doubt been unprecedented times. So maybe walk us through a little bit about how your bank initially responded to the pandemic a year ago with the workforce and maybe you can bring us through today to talk about what your plan is for the future.

So James, thank you so much for having me today and thank you to Fordham and really appreciate also the perspective of Michael Dowling and Jeff Levine on the first panel. So thank you for that and obviously to our first responders and to our medical healthcare workers. So thank you to Northwell. As you mentioned, James, when I think about coming to today's panel through the lens of an owner and an occupier, I know that today's theme is around forward thinking and envisioning the near future and technology and innovation. However, we should just take a moment to think about from the lens of technology what we just endured for the past year. Some of the biggest technology was the biggest beta test ever, where we all had to leave our offices and go work from home. And what a tremendous effort. Because you know what everyone, we passed the test. And from saying that not only have we learned that we can all work remotely or in some manner, but it shows us kind of a way forward, if you will, with the beauty of technology and innovation and how we all have been able to adapt. And it's been a bit of a the paradigm shift, if you will, and if anything that we've learned from using this technology, it's made us all very much more forward thinking and innovative. You know, 12 months ago, were you on a zoom call? Probably not. Right. And here we are having a panel where we normally all would be sitting together on a dais. So we too have adapted quickly and become innovative. Anything from when you walk into a building today, Right. Our landlords have adapted anything from health screening to contact tracing to when we think of going forward, how will we return to the office? Not return to work because you've never left work. Right. We all work even maybe more hours than we did previously. Right. We've cut out the commute, we've cut out, you know, the different things that we used to do throughout the day. And so when we hear, you know, Michael earlier on the panel say that productivity, you know, is way up, of course it is, because we're all here working, you know, in a manner in which technology has afforded us that luxury. Will there be some balance that we strike in the forward thinking future? Maybe Q3, Q4 and beyond? What does 2022 look like? Without a doubt. We start to think about what does a hybrid workforce look like? What are the functions of jobs that people can do remotely or virtually, if you will. Maybe not five days a week, but maybe two days a week. Maybe there's a workforce that comes back in a manner that's. It's certain days that you need to come back to the office and be collaborative. Maybe there's a certain project that the team is working on together that brings them back into a space that you need to collaborate. I think that from an owner occupier perspective and even from a workforce perspective, I think that moving forward that we've just had a major paradigm shift, that we all have just passed a test, if you will, that technology is our friend and has given us the ability to be able to still be productive, communicate, be innovative and move forward.

Awesome. That was a great way to set the stage and the conversation. And I'd love to hear from Chris and Mark on this. And Chris, I know you're a big fan of leveraging technology as well, and we're going to definitely get to that. But you know, you're in a business that's an essential business, you know, so I don't know if your offices stayed throughout, but just maybe give our audience a little bit of sense of kind of what the workplace was has been for you over the last year. And how is that going to look different moving forward?

Yeah, sure, James, no problem. And I'll start off by saying, to pick up from the last conversation, I'll add two more children to the Northwell tally on this call. But yeah, so, you know, sometimes, sometimes you're. Sometimes you're good, sometimes you're lucky by dumb luck, because I'm not. I'll take credit for being lucky. Our business had been reacting to a shortfall in labor and professional labor. So we were striving. Prior to Covid, we were striving for ways to make the construction industry more attractive to people. So dumb luck. We had spun up a software application. Teams. Right now everybody knows what teams is. A year and a half ago, nobody knew what teams had been. So we like most, pivoted over a weekend to a remote work environment. It was a little bit of, I'll say, a little bit of a challenge for some. And the challenge was really related on, you know, there's an aspect of our Business that can work remotely. But we're in the construction business. Construction projects are out in the field. So it created a little bit of a stress even amongst our workforce. You know, who was lucky enough to have a job that they could work remotely, who had to perform their job role out in the field. So, you know, the construction industry is very nimble and it was very impressive to me. Not just the plaza construction folks, but the whole industry, how the whole industry reacted, project managers who maybe and you know, other office type roles that had historically been able to work remotely. You found those people volunteering to go out to the job sites to kind of spell the superintendents that were out there that primarily needed to do their job. So, you know, we reacted to it. If you came in our office right now we still have a fair amount of people working remotely out of the main office in New York and some of the offices we have around the country. But the job sites are fully staffed and they have been since, you know, since essentially since the pandemic started.

Great to hear. And I know we're going to get back to some of the technology that you're now leveraging and expanding on further. So, Mark, how about you? As an engineer, I've got to imagine a lot of your work is on the job as well. So how did this impact you all? How much of your work can now be done virtually and how do you see your work practices changing in the future?

Sure. Again, thanks for having me on this panel. It's been an interesting discussion so far. Honestly, our view of things. My view of things is we have a much easier job than everyone else. I'm listening to here. You guys are building and operating the buildings kind of day in and day out, and we're engineering services, consulting services to provide support. So I think we have a very partial view of a lot of different projects. But we've been able to operate, same old story as everybody else, seamlessly, in a very surprising way. We're obviously going to job sites, our offices. We've been able to sort of all work remotely, but I think it's been a far easier position to be in, in our line of work than, you know, in actual kind of developing and operating. Operating building. So a lot of. A lot of respect for everybody on the phone doing, doing what you're doing.

Thank you. And I want to certainly get to the changes in your industry and how you're leveraging technology as well for the improvements of some of these buildings. Jennifer, it's a question on a lot of people's minds, especially real estate brokers, our leasing brokers, which is, you know, how are you going to deal with your footprint moving forward? You have 11.5 million square feet. If you have some people who are now virtual or hybrid, I know your former shop was released that they are already downsizing some of their projects. I think they're building a project out on the west coast. If I'm not mistaken, that's going to be 30% smaller. So how do you think about your future space needs in the near term or the long term?

Sure. And thank you for the question, James. And I think that 12 months ago immediate reaction. Oh my goodness, how will we adapt? How will we change? Will people ever go back? And I think that human nature, we look at ourselves and there's such pent up demand and energy. The vaccine's a game changer. And people like that, like, when can I get back in? When can I collaborate, when can I work? Being able to work in a hybrid way or virtually is an added bonus. And it gives people the flexibility and it adds to wellness and can make the experience that much better. But at the same time, we're social beings and so this idea of get out and just work from home forever, I don't think that the industry in any way, shape or form or any workforce believes that. So I think that it's a bit of a wait and see as well. I don't think that people are quick to go and spend money to retrofit something or do something, to react. I think it's along the lines of let's make sure that our workforce is healthy and that people are safe and that people are productive and so that they're able to embark and come back into the workforce in a meaningful way and in a healthy way and make sure that children can be back in school and that folks can be able to work together. You might get invited to a coffee now and it's a virtual coffee. People are so eager to say, have you had a shot yet? When do you have your second shot? When can we meet for that coffee? When can we come back together? I don't think that knee jerk reaction that perhaps maybe was top of mind or front of mind, you know, a year ago. I think that we all have been living this for, you know, well over a year, if you will. And I think that you need to make sound decisions and you need to be able to, you know, honor the business and the needs to be productive and you know, revenue, revenue generating as well. So I don't think that It's a quick fix, if you will. I think it's an opportunity for innovation, creativity and what we've learned from this, how can we go ahead and move forward? So I wouldn't say that it's a real knee jerk reaction.

That's great to hear and that makes a ton of sense because when I hear companies making bold changes in their plans, when I really feel like we're not going to understand how the new office environment plays out, at least until the fall when we see who comes back to the office, what it is so to, to be thinking about. And one of our, one of our competitor firms came out with a statement or plan very early on. We're designing offices now where everyone has to be six feet apart. And I said, wow, that seems, you know, pretty drastic. And I mean, we're talking about, you know, a lot of expense in a very challenging financial time to just, you know, all of a sudden build out, you know, offices a certain way. Whereas, you know, my office here, we're on an AB shift, so we're not sitting next to each other in cubes. We'll address it until we see how things are in a couple months. But we're not, you know, locking in. And Chris, I wonder if, you know, and you don't have to give specifics, but talking about, you know, knee jerk reactions, did you have clients saying, oh, Chris, we gotta come in here, we gotta change the whole office or, you know, how are some of your clients asking you to think about building new space when, you know, kind of the future workplace might still be.

Yeah, I mean, good question. We, you know, initially we had a lot of reaction to clients and you know, another interesting fact is plaza construction ourselves, we're going through, we're moving our offices right as part of our program prior to Covid. So we were kind of going through those same decisions. So we had a fair amount of clients asking a lot of questions early on about modifications that has since quieted down. You know, frankly, to be brutally honest, I'm kind of. There's a piece of me that's hoping we start to hear some of the clients start to talk about some modifications because I think it will be good to kind of spur the interior renovation construction business in New York City. But I think most clients are waiting and seeing, just like Jennifer said, that we all. Speak for myself, we all kind of feel like we are going to get back to business as usual. We're New Yorkers, we're not going anywhere. I'll let go the same sentiments from the earlier group. And we're going to wait and see. And we'd all like, like it to get back to the way it was. You know, maybe not entirely right, a little bit different, but fundamentally the same.

Couldn't agree more. And I was going to mention before that I'm definitely open for coffee. I had my first breakfast. Well, no, that's not true. This is my second breakfast in the last couple months, but my first breakfast in Midtown, because unfortunately, there's only one place to have breakfast in Midtown right now. I'll give them a plug. The Red Flame Diner on 44th Street. So if you're looking for a place that's still open. But I know we are all looking forward to the day when our poor restaurants are able to open back up and welcome us back, because you know what we do, this is really a people business. And I think that all these virtual platforms, we can kind of keep things going, but we're not expanding and we're not growing audiences. And I even know with my work with Fordham, and I wish I was up there on the dais with you all, because we'd have 300 people in the audience. And then all the magic that happens is afterwards, and when some of those Fordham students can come up to you afterwards and say, hey, can you give me some advice on this or that? So I hope those who are listening will still take it upon themselves to reach out to you, and we'll certainly get to some of their questions, but we're getting close. We're certainly getting there. So, Mark, maybe the same kind of question about your approach and how things are changing. I know sustainability is something that's really high on your list, and I'm sure we all agree on the need to be more sustainable, but also thinking about how we accomplish this in a way that makes sense. So I don't know where it's better to kind of start macro and then zoom in, because one of the hot topics in New York right now is that Local Law 97. And I don't want to get overly technical for this audience, but there is a pretty serious mandate right now, not only at the state level, but in the city, with some really hefty fines if certain things are not accomplished by a certain date. But maybe for the layperson who's listening in right now, maybe kind of talk to us a little bit about, it might seem obvious, what are the goals for sustainability, but when you talk about reducing the carbon footprint by 80% by 2050, what does that all mean? And it really feels to me, in a City where 3/4 of our buildings are over 75 years old, we, we got a lot of work to do here. So wherever you would like to start.

On the sustainability discussion, sure, that's certainly a big, big topic. But I'd say I just want to stress how different in my experience this moment is. Go back to like say a decade ago, like how the last decade opened up. 2010, the industry conversation was in the Bloomberg doing a lot of incremental, important, good stuff. Can we make real estate publicly report their energy data on an annual basis? And it was an open question like no one knew. And a lot of people said no, that's an invasion of privacy, that'll never happen. And then you know, it happened. You can't manage what you don't measure. But that's how the last decade opened up. Just to like for context, where we are right now, it seems that Everybody's number is 2 trillion. So 2 trillion is what you read about in the Times with the federal stimulus. Two trillion is what the mayor's office just put out this morning in a report. 80% carbon reductions is old fashioned by the way. Now new goal is 100%. My bio is already out of date. So they published a report that It'll require a $1.5 to $2 trillion investment in New York City alone that by 2050 to meet these kind of carbon neutrality goals. So that's at the highest level. But I think the other thing that has changed is it's not just sustainability anymore. They've taken basically that problem, climate, carbon, whatever you want to call it, and wrapped it up with jobs and economic development, and wrapped it up with health and wrapped it up with equity. So it's really interlinked. And I think we've all sort of seen that out there. But it's not just policy that's changed. I think you can draw a straight line between the policy changes and private sector changes. I mean, to quote Larry Fink, climate risk is investment risk. But the climate transition presents a historic investment opportunity. I mean, every day it seems I read about a new VC that's starting a $100 million plus climate tech fund. Climate tech is outperforming NASDAQ. So I just want to call out how frothy the private sector is and bullish in addition to these policy changes. And the technology stuff is going to follow the money, of course. I mean, a fundamental change that will need to happen in a town like New York is we can't burn things on site, right? We can't burn fuel on site. And there's the amount of infrastructure that's going to need to get reimagined to make that happen is a monumental thing. But I think it's also related to health. So to pick up on the previous panel, I mean we've all heard of sick buildings and what if buildings can improving the built environment can deliver measurable and meaningful kind of healthcare savings. All the kids with asthma are living in certain places and did you know that the biggest pollutant in buildings is actually cooking gas and cooking gas stoves and so HPD is actually pushing electric cooking as a health measure. Impact. We do a lot of stuff in ventilation, but you know, extracting a little bit of stale air from an apartment is nowhere near as important as not burning gas, you know, and noxious fumes within the apartment. So I think there's some very interesting by making the problem bigger, like connections that can be drawn and can the investments in building infrastructure be rationalized by healthcare savings? Right. Like someone needs to close those loops. But I think those connections are possible. And obviously we had a pandemic 100 years ago and a lot of our building systems, our old steam heated systems, were all designed based on the 1918 pandemic to be able to provide enough heat with open windows. I agree with the previous comments that I don't see anyone making drastic changes to building infrastructure as a result of COVID Mostly because it just takes too long to make drastic changes at scale. But I think there'll be some subtle things that sort of stick with us that'll be hard to sort of that we'll need to look back on 10 years from now to see what those changes are. Just like there were some pretty subtle things that happened 100 years ago. So I could talk a lot more on that.

I was just going to say, Mark, we could spend hours on this topic because there is so much to unpack on what you just said. So Jennifer, I'm going to try to get you to maybe touch on the sustainability piece. But we got to stay also broad on the topic of how are buildings built in the future. Sustainability is one piece, but as you think about your future office space, retail locations, how are you going to build differently? How much does sustainability play into that?

I think it's important that it's this collective group. It's collective thinking. I appreciate what Mark just described because that's what we hear, right? People want to enter into a building that is safe originally, you know, MERV 13 filters. What are you doing with the H vac? What about the essential, you know, office, you know, the essential workers coming back into the office. So I think that something like this that happens, you take pause and for sure you have to react at what's right in front of you. But then what happens then is that you think forward and you think, okay, well, we just did that. We did it relatively quickly to make it a healthier building because it was important. And so when we continue to move forward and when we think about what will we build, what will we occupy, I think you take the intel that the world of marque and engineers and sustainability, and then you think about partnering with Chris and construction and architects and engineers, and what does that look like going forward for an occupier, for someone that's in the built environment? And perhaps maybe there's a bit of a pause right now, but when we think about the fact that we are able to work in a remote or virtual fashion, it will impact the built environment going forward. Right. We don't need a one to one desking going forward. Right. There will be areas in which we come back and what type of a function will we perform together? And we'll want to sit together. It'll be collaborative. Right. You want to ensure that culture resonates and that we don't lose culture of your workforce by some people being remote or virtual and that they feel left out. It should always be going forward. That is the line open? Not are you in the conference room? It needs to be inclusive. And what does inclusivity look like? I think it's not just what are we seeing from how the workforce will react and what they want, but it's also function based and purposeful. Right. And so I think that, you know, obviously every industry is knee deep in this conversation and what does that look like for your workforce? And so we, you know, we will see, but I don't think that we will go back, you know, to a way in which we were right. You think about five days a week, you think of a commute, you think of what you did while you were there, how you sat in that one seat, how you moved to a conference room, how you did coffee, lunch, et cetera. There's a blending, if you will, there's a coming together. And I think that that is very exciting and it's innovative and I think that everybody's eager to jump in and do it and let's see how it works out. But it can't just be, let's go and do it. It has to be well, thought out as well. So I think more to come, but certainly with our partners and even those that are on this panel today.

Hey, James, I just want to pick up on something that Jennifer just said and maybe pivot slightly towards the technology piece again. But there's a theme that we've heard throughout this panel, both parts of the panel, and it's about collaboration and integration amongst various stakeholders in the process. And one of the unique things I think that we've seen, and I may be talking a little bit more narrowly about the architecture, engineering, construction portion of the industry, but with the shift towards remote work.

Right.

And I, you know, I know we're construction, we're trying to shift that back. Right. But with that shift, what we ended up doing inadvertently is we convinced ourselves that we can go from a project based business to a more centralized product based business. Right. And it's no secret that all the big AEC technology firms are pushing our industry towards manufacturing. And, you know, you let that sink in for a second. And there may be certain stakeholders that are uncomfortable with that thought. I'm not one of them. I recognize the fact that change is inevitable and you need to stay ahead of that change. And it's encouraging to me to think that we can push this industry to a much more collaborative world where risk and responsibility for performance is really placed with those people that are best suited to manage that, as opposed to the ones who are willing to do it for the least price. And I think what Covid has done at a very high level is opened our eyes as an industry.

Right.

As stakeholders in the delivery of a product, a construction product or a building opened our eyes to the value equation again. And I think that's important. I think we can't lose sight of that. I think we got to carry that momentum forward as we come out of.

COVID.

Well, I've got to use this saying at least once during this webinar. Never waste a good crisis. But I mean, you're absolutely right. We have to learn from this. This is also going to accelerate a lot of the trends that were already in the works. So sustainability is not new. Also, wellness is not new. And Mark, I don't know if you're familiar with Delos Living and their wellness score. I had a chance to tour their office and talking about the fresh air scores and keeping people moving throughout the property. I've got to imagine that that only accelerates now. So have you spent some time looking at these wellness scores and creating a healthy work?

Yeah, we've gotten a lot of Demand from clients kind of opening up this past year and kind of the well, well rating systems and basically which I think will evolve to ultimately just being more transparent with kind of, you know, tenants with everything going on and kind of, you know. So I think it's definitely a durable trend.

Great to hear. So I want to just see. I know we're bumping against two o', clock, so I want to make sure that we, we tackle some of these questions as well. And we had a couple very technical questions come in from the first panel that I'm sure you all can answer. But we had some questions on air filtration systems and are these a driving force and are we seeing some of these old obsolete buildings? Can they even be retrofitted at this point? Are there going to be buildings that just become obsolete? And then we also had a question from a biotech student who wanted to know about can we control within these buildings for infections? And again, that might just be for really medical space. I mean, I don't know how far we go. But Chris, do you want to tackle that one? In thinking about obsolescence, is there a hope? Can we deal with some of these existing buildings or is the only way you can really do it right is by building new?

You'll give me the easy questions I see. James. No, I mean, listen, you're speaking to somebody who's in the construction business, right? So anything can be done. You know, it's a question, can you do it economically and is it sustainable? Not sustainable in the end product, but. And I recognize I'm kind of crossing out of my knowledge base here, but is it sustainable from a real estate perspective long term? You know, does that, does that asset stay viable with the amount of capital that needs to be put in? But I mean, a lot of the conversation about filtration and other means to deal with contaminants. Covid, I don't think it's a challenge. I think some landlords have chosen to do certain things, take certain measures. I don't see it being a major challenge to convert some of the building stock. I think the same drivers about the existing building stock, are they obsolete in the future? I don't think, you know, what we've gone through in Covid is really changing that dynamic at all, in my opinion. Mark may have a different opinion, maybe.

Well, I'll add on to the question. So you think that I'm not giving Jennifer Mark the softball. So mark this. Now I will kind of pick on local 97 and you know, this requirement or Landlords are getting fined. I mean without, I'm clearly not an expert on this, but when I hear that Durst bank of America building, which was LEED platinum and it has all the, you know, every, or you might tell us three other things that it could have had from a sustainability point. But they built this. If you have environmentalists trying to build the most forward thinking sustainable building and yet they would get hit with a massive carbon tax. And why, I'm being told because the density of people that are working in that space 24, 7 is going to, is jacking up their carbon. So to me, and again, I'm a layperson, but if the answer is, okay, well you got to take half of the people out of the building and have them work at the next building over. That doesn't seem efficient to me. So how do we, you know, clearly they designed a building with the best technology to address this and they're still being penalized. So to me there's gotta be something wrong here with the way the requirements or the penalty systems being laid out.

Sure. Yeah. No, it's an issue that's been talked about for four years. Right. And there's not, I think great answers, but my two responses are one, all the changes are not going to happen within the buildings. And I think the work the state is doing to clean up the electric grid is like we can't get there without that. So most actually office towers use primarily electricity and that's going to be fully cleaned up by 20, 2040. Right. So that's a big deal. I think there's opportunities to clean up the district steam grid as well. That's. So I think a lot of the power going into these buildings can be cleaned up over time in a way that actually reduces the burden on changes with changing changes within the buildings. That's number one, not to interject, but.

Is the wind powered? Because I just read something last week that New York State approved massive wind turbines. I mean, is this going to be.

Sure, yeah, it's, it's offshore. Yeah. Offshore wind, solar and kind of upstate hydro. And basically the governor is committed to 100% clean by 2040. And the other thing is, honestly, I mean, I'm not speaking for the law itself, but there's 3 billion square feet of New York City real estate impacted by this law. Class A office is a particularly complex sector that represents about 250 million square feet. And I think there's a specific approach that could be taken for that sector that is probably different than the majority of New York Is honestly six story buildings in Queens. Right. And so I think there's a tension in having a law that's applicable to 3 billion square feet. And then you run into a lot of issues with the towers that we're all familiar with that are legitimate issues that need to be thought through. But just kind of calling out the sort of what that law is, the impossible job that that law is trying to do, basically it would just be a thing to throw out there.

Thank you for addressing that. Okay, so we only have a couple minutes left here, so maybe it's a speed round. And Jennifer, we do have a question from the audience which is are you ready to commit to new space today? If so, are we talking 5 year, 10 year term? What kind of rent deal are you doing? Concessions. So I guess are you in the market right now?

So I think everyone's in the market also. That's the softball. So thank you for that.

They want your cell phone number too.

Yes. And so I think as an owner and occupier, you're always looking to optimize your real estate portfolio and your footprint. And so are you in the market? Yes. Are you, do you have critical dates that come due? Yes. Are you evaluating what's coming to term? Yes. The optionality and what are we doing going forward? Nobody's sitting still, nobody is sitting on their hands and so sure, we're in the market. And I think that we're even more excited about return to office, keeping our employees safe and being able to come back in a meaningful way. And what does that look like going forward? So optimistic, bullish and looking forward to having coffee and breakfast.

Wow.

Love it, Love it. Okay, so Chris, we're going to let you take us out here. So really want to hear because I know technology and leveraging that has been such a big story. How do we continue to grow? What are thinking forward couple years? What are the new practices? How can we do things better? How is this net net going to be a positive for the construction business? What has just occurred?

I think a lot of the decisions and the trends that we see are driven by owners and especially owners of, you know, like Northwell would be a great example. Jennifer will be a similar good example. Owners that are open minded to changing the way we do business, right? The contract structure, you know, the way we hire, you know, an owner hires architects, the way architects and contractors interact. Contractors and subcontractors, interactive interact. We have to be open minded to different ways of doing things and recognize.

That.

These contracts have become a bit barriers to the adoption of technology, the people developing technology, they're years ahead of us. From a practical perspective, we can't deal with as an industry some of the things that the technology could actually afford us to do. But that's a good thing. But we need to be open minded to just having more trust together with the stakeholders. And with that trust, we're going to open ourselves up to a lot more options with technology that I think are going to enable us to bring back a lot more people in the industry. I think we're going to really focus on the challenges of the industry, which are with delays and cost overruns. I think we focus so much on the cost of labor because it's an easy problem to, to wrap our heads around. We don't try to focus on the cost of rework or the cost of delays when we're not as collaborative as it could be. So I think we need to be open minded, have a little bit more trust with one another and we'll really leverage the technology that exists in the marketplace right now.

Chris, that was awesome and an incredible way to end. And we all are keeping an open mind here and I know that's what Fordham's about as well. And all of you who joined us today, thank you so much. I mean, this has been incredibly powerful forward thinking and so Chris, Mark, Jennifer, thank you so much for joining us today. Andy, I don't know if anyone from Fordham wants to help close this out, but if not, I'm going to give a huge plug sign up for their courses. Whether you're just getting started on your real estate journey or you're a veteran, I've had the pleasure of sitting in guest lecturing at some of these courses taught by some of the top professionals in the city. I know. Also, big shout out to Hugh Kelly who is on the board. And great thing that really puts Fordham above and beyond is their mentorship and so their students really benefit from making connections here within the real estate community. This is what it's all about. So Andy, if you all want to pop on or Kelsey, now would be the time to do it. And if not, hopefully that was a great way to close things out.

Thank you for tuning in this week to Real Estate Investing live from New York. Please join your host James Nelson for another program next Tuesday at 7pm in New York, 4pm Pacific Time on the Voice America Business Channel. All shows are rebroadcast on Wednesday, Wednesday mornings at 7am Eastern Time and 4am Pacific Time as well. As always on demand. We'll talk again next week.