By Kurt Yeghian, CEO, and Jared Curtis, president, Existing Conditions Surveys
Commercial and institutional real estate developers in the Northeast have one priority mantra for 2021: no more costly surprises.
Kurt Yeghian, Existing Conditions Surveys
With property deals and development projects resuming in an industry badly scarred by the coronavirus pandemic, the CRE community wants certainty above all — certainty in determining the value of their assets, in acquiring struggling portfolios and in repurposing vacant spaces and structures.
As-built conditions form the basic DNA of any development. Nowhere are those specifics more suspect than in the Northeast, where the only record of square footage, dimensions, walls, floors and other structural features are blueprints created decades ago by architectural interns with tape measurers or surveyors relying on low-tech equipment. Property owners encounter inaccurate blueprints more often in the Northeast than in other parts of the country, but it’s a common problem in any region with older development.
Smart players in the development community are avoiding expensive surprises — and sometimes uncovering hidden value — by turning to 21st century building documentation techniques. These practices rely on the same digital reality capture technology that has fueled advancements in robotics, self-driving vehicles and drones.
Jared Curtis, Existing Conditions Surveys
Our experience in this field has identified three key trends facing owners and developers as commercial and institutional deal-making resumes in the Northeast in 2021:
- Clients are worried about the risk of property damage, insurance claims and future litigation that could be caused by large construction projects in the region’s heavily built environment. With real estate at a premium, more developers plan to demolish the region’s signature low- and mid-rise properties to clear the way for high-rise buildings that maximize the original footprint, both under and above ground. Property owners abutting these developments are starting to rely on 3D laser-scanning technology to document the existing conditions of their structures, providing the situational awareness they need to quickly identify deviations caused by construction and recoup the cost of mitigation.
- No region in the United States has a higher proportion of older buildings or of older documents that purportedly present as-built conditions, including blueprints drafted in the early 20th century and stashed in the rafters of boiler rooms ever since. Not only are the structures of the Northeast older, but they also have been repurposed numerous times over the decades without ever generating accurately updated documentation. More and more clients, especially large institutional players like colleges and universities, are finding they can unlock and maximize the value of their holdings by taking advantage of the situational awareness delivered by precise digital scans. One major university in Boston used 3D scans to create intelligent floor plans to track everything from equipment maintenance schedules to accurate wall material take-offs.
- In the post-COVID environment, more failing CRE portfolios will make ripe acquisition. As a result of the economic problems the CRE industry has sustained in 2020, it’s likely that more CRE portfolios will change hands in the new year as owners unload struggling properties or capitalize on under-valued assets. Blackstone’s multi-billion-dollar December acquisition of a 2.3- million-square-foot lab and office portfolio in Cambridge, Mass., is just one example.
- Blackstone’s multi-billion-dollar December acquisition of a 2.3 million-square-foot lab and office portfolio in Cambridge, Mass., is just the beginning. Even classic office space will have the potential for R&D conversion, especially in the Northeast where white-collar vacancies are high. R&D uses require pinpoint accuracy for sophisticated devices and processes to function as designed. Thanks to cutting-edge laser-scanning technology, one pharmaceutical manufacturer in the Northeast was able to spot and avoid a structural deformity in a slab that would have prevented key equipment from working properly.
Even though CRE represents the world’s largest asset class, real estate and construction lag behind virtually every other industry in terms of embracing digital transformation. Even our most respected institutions, from world-class universities and hospitals to financial hubs and government centers, often do not have accurate digital documentation of their physical assets.
After documenting more than 50 million square feet annually for many years, our experience shows that large-scale 3D laser scanning creates superior-quality building documentation and empowers 21st century building information modeling (BIM). You would not buy a used car without proper documentation; why would you invest in a building without accurate documentation? Starting accurate allows you to stay accurate.
Risk avoidance is just one measure of ROI. In some cases, previously unmeasured square footage has been “discovered,” leading to pleasant surprises, like improved lease revenues. More often, however, 3D laser scans save money for real estate owners and developers by providing them with a comprehensive, highly accurate visual framework for evaluating and designing renovations, retrofits and other important property investments.
We are already seeing the revival of projects that had been delayed or deferred due the pandemic. We believe 2021 will be the year when more leading architects, builders and institutional owners wean themselves away from an overreliance on blueprints and tape measurers in favor of the certainty and value added by digital building documentation technology.