By: Sara Warden
2 min read December 2020 — Philadelphia’s commercial real estate landscape is morphing toward designs that accommodate post-COVID-friendly environments. Jerry Sweeney, president and CEO of Brandywine Realty Trust, shares his expertise on these emerging trends.
How has Brandywine Realty Trust’s 2020 strategy played out?
Anyone who had a 2020 business plan laid out in 2019 has had to pivot hard. Real estate is a cyclical business anyway, so we are used to dealing with systemic shocks. COVID-19 has clearly been a sizable shock, but we have always approached these situations from both a danger and opportunity standpoint. The first piece of our attack plan in terms of dealing with the pandemic, and its impact on our business and communities, was identifying where the real danger points were. From a business perspective, we shut our office down in mid-March 2020, like everyone else, so our employees could work remotely. Our essential employees continued their daily on-site operations, so our buildings could remain “doors open, lights on” for tenants to use as they deemed fit. As it became clear that the situation proved more pervasive than anybody had thought, we spent significant amounts of time as a management team covering the danger side of our equation: ensuring we had good rent collection, that we were able to provide for our tenants’ need for financial relief, and understanding the impact on our parking and hotel business. We then analyzed our four capital commitments to see where we were and what we needed to adjust. When going through a situation such as the pandemic, you should over-communicate your strategy. We moved to weekly employee calls, reached out personally to many of our major tenants and held weekly board meetings. We also implemented a great outreach effort toward all of our team members and all of our tenants across the portfolio to make sure they understood we were there to help them, that our buildings were open and that whatever we could do to help facilitate their business plan, we were there to do that.
That consumed a fair amount of time early on but once we had the danger side covered, we could focus on the opportunity side. We dramatically accelerated the growth of our life sciences business and we have made significant inroads into getting all of our approvals perfected on all of our development projects. We have actually undertaken renovations on some buildings because with a lot of tenants working from home, it gave us a good opportunity to really accelerate lobby renovations, create better amenity floors, and do some larger capital projects in our buildings. All were done so when people do come back, the buildings present themselves incredibly well.
From a civic standpoint, we directed a big piece of our philanthropy budget to people, businesses and communities impacted by COVID. We set up a fund with the Enterprise Center in West Philadelphia, where we augmented $350,000 with the sole objective of making low interest and flexible-term loans to minority-owned real estate firms — general contractors, janitorial companies — to make sure they had the financial liquidity to survive the challenging environment. We made loans to 16 different companies, all minority-owned and mostly based in West Philadelphia.
How has the Philadelphia mixed-use and office real estate market evolved?
Every physical space has been impacted. As we look at it thematically, the rate of technological growth has changed the office anyway. We have been in this decade-long shift of mobility. If you recognize that reality, you start to think more creatively about what physical spaces can do for companies. Physical spaces help companies define their culture, which helps define their brand. If their brand is positioned well, they will attract and retain the right employees, showcasing higher levels of productivity. Our actual physical platform is just a vessel for them to accomplish their objectives. That predicates what we have been focused on since COVID-19, which is our high-quality portfolio product. We have never been shy about investing capital to improve it. We have upgraded several of our building systems for either UV or MERV-quality filtration systems that are clearly a step up from our competitive set. Every single project we had on the drawing board for development was revisited to inject a post-COVID capacity, whether through increasing ventilation, larger elevator cabs or touchless environments.
What is your outlook for Philadelphia’s recovery in 2021?
We believe the economic recovery is already under way. It will be slower than we would have hoped for. If you look beneath the surface, everybody wants to get back. Most people understand that there is a responsibility and accountability in getting back. Behavioral changes are important. Home sales are back; the financing markets are back; investment sales for certain product types are back. The pause we had is over. Now, it’s a matter of how we risk-adjust the recovery to make it the most acceptable and the most durable as we look forward. Philadelphia is on the precipice of creating a highly competitive ecosystem on the life sciences side. That is a major driver for us and the institutions we deal with are all focused on growing that. It will become a growth catalyst for us.
An area of possible concern revolves around public policy. Philadelphia has always been a slow growth city. Sixty percent of the jobs generated paid less than $35,000 per year. Philadelphia’s major opportunity is to use our existing infrastructure, the anchor institutions and the growth in the life sciences arena, among a few other things, to generate family-sustaining jobs that can address Philadelphia’s systemically high levels of poverty and generational structural unemployment.
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