By Michael G. McGuinness
A year ago, we were kicking off the new year on the heels of the longest economic recovery on record. Our workforce was nearly at full capacity with an unemployment rate of 3.4 percent. By contrast, this year we are starting the new year with an unemployment rate of about 10.2 percent in the wake of what may end up being one of the most economically disastrous years of all time, thanks to the COVID-19 virus. Unlike past recessions and massive disruptions, this one has had widely disparate impacts — negative and positive — on businesses, communities and households, given the virus’ transmission vectors. Sadly, the losers — restaurants, brick-and-mortar retail, office development, hotels, entertainment facilities and theaters, airlines, transit agencies, dry cleaners, Uber, Lyft and taxis — far outnumbered the winners, which included e-commerce, PC makers, Zoom and other videoconferencing technology firms.
As Charlie Chaplin said in the last century, “Nothing is forever in this world, not even our problems.” That is, unless you don’t learn from your mistakes and continue to do things the same way. The days are numbered for any business, organization or government agency (without a rainy day fund) that doesn’t adjust, right-size their operation and get prepared for the next disruption that’s just around the corner.
To prep for this article, I asked many of NAIOP’s commercial real estate leaders to share takeaways from 2020. The balance of this article will highlight a number of the more compelling ones.
Resilience, perseverance, flexibility and adaptability were indisputably the universal traits critically needed and practiced: “Be the willow, not the oak” was one adage that says it all. “It is so important to take that deep breath, assess the situation, be thankful, adapt and set goals that help you grow both personally and professionally when you are facing challenges and circumstances that are beyond your control. You need to bend, not snap!”
Another point raised was the critical importance of communications for engagement with your staff, tenants and customers. Investment in time and technology proved to be invaluable in helping to educate these groups on steps being taken in response to government and health mandates for enhancing the safety and wellness of buildings and their occupants. In other cases, it was essential to work with tenants to reduce their stress and provide relief toward rent payments. Most firms significantly increased their budgets and accelerated the purchase and rollout of VPN technology to enable their business models to function during the lockdown and continued social distance restrictions. Many employees are still working from home on multiple days, which is likely to persist post-pandemic. The importance of keeping people connected for collaboration, mentoring and social interaction cannot be overstated.
The pandemic also made it crystal clear that commercial real estate is a people-centric business, exposing the bad players while highlighting the good ones. I would expect to see a bifurcation of CRE property owners that will favor those who were most accommodating and flexible, while punishing those who treat their properties as mere commodities and profit centers.
I would be remiss if I did not extend kudos to Gov. Murphy’s administration for doing a fabulous job of engaging the state’s business leaders during the earliest days of the pandemic, keeping us informed on critical issues and developments as they were happening. Thrice-weekly conference calls ensured a steady stream of communication and a two-way conversation that allowed the business sector to help shape public policy decisions. These conversations yielded many great ideas, a number of which have since been embraced by our legislative leaders, Senate President Sweeney and Assembly Speaker Coughlin, and are now making their way through the Legislature. Examples include: third-party Uniform Construction Code (UCC) inspections by licensed and authorized inspection agencies — the LSRP model; virtual municipal planning and zoning board meetings where decisions are binding; next-generation incentives program to support economic recovery for small business and growth industries; and funding for capital improvements to buildings to enhance tenant and workforce safety.
New Jersey took a bruising hit from the COVID-19 virus, which is still silently raging out there, with close to 20,000 people succumbing to the disease over the past 10 months. Huge numbers of businesses have closed their doors forever and left hundreds of thousands of people without jobs, health insurance and meaning in their lives. It is essential for those of us who still enjoy those comforts to be grateful and as generous as possible. And while we ramp back up toward more significant economic recovery in 2022, let’s reassess our state’s assets — location, ports, diversity and labor pool — and leverage them as best we can, to welcome future growth industries. The governor and Legislature should also carefully reconsider the use of revenues from the recently enacted (and ill-advised) millionaires tax. These monies would be better invested in the state’s future — infrastructure, higher education and health care — than in bloated entitlements, such as uber-generous lifetime pensions and health insurance coverage, for state and local government workers and their families, many of whom no longer live in New Jersey.
For me personally, nothing could have better prepared me for this pandemic than my training in Boy Scouts and my Jesuit education at St. Peter’s Prep. Two mottos that have been ingrained in me during those growing up years were “be prepared” and “serve others.” This past year, I witnessed countless examples of these two mottos in action from leaders in every walk of life — state and local governments, health care and frontline workers, business owners, neighbors and the members of NAIOP, who had to pivot overnight to sustain what they could. In response to Gov. Murphy’s April plea to assist with relief efforts, NAIOP members stepped up generously overnight to identify 1.5 million square feet of space for potential conversion to makeshift intensive care facilities and other emergency operations for first responders. It was also heartening to see many municipalities close off streets to cars and issue special event permits allowing their landlords and restaurants to set up outdoor dining areas in the streets and parking lots, which also were used for classes, meetings and conferences. I would expect nothing less from us Jersey folks, who know a little bit about adversity (traffic, heat waves, snowstorms, flooding, congestion, high taxes and insults).
Looking ahead to better days when we no longer have to say, “You’re on mute.”
Michael McGuinness is CEO of NAIOP New Jersey and has led the commercial real estate development association since 1997. NAIOP represents developers, owners, asset managers and investors of commercial, industrial and mixed-use properties, with 830 members in New Jersey and over 19,000 members throughout North America.