RENO, Nev. — Tomi Jo Lynch and her team have been zeroing in on a specific mantra as the coronavirus pandemic has shaken the U.S. economy.
“We’ve been focusing on one of our core covenants in our office that says, ‘Focus on the positive and the possible,’” said Lynch, managing director with SVN Gold Dust Commercial Associates in Reno. “And I think the more that people can focus on the positive and the possible, the quicker our economy will come back and we can climb out of this.”
Pausing, she added: “Obviously, there’s a whole bunch of medical stuff that I can’t speak to. I’m not a doctor, and I don’t know when this going to end.”
With the COVID crisis having a widespread impact on the commercial real estate industry worldwide, the NNBW spoke with Lynch to zoom in on the pandemic’s immediate affect on CRE in Northern Nevada and what the future might hold.
Q: What have been the biggest challenges the coronavirus pandemic has had on commercial real estate in this region?
Lynch: Obviously, with the shutdown, a lot of tenants were unable to pay their rent, so just managing that has probably been the biggest challenge. When a tenant can’t pay their rent, there’s a trickle down effect to the landlord and potentially to the lender on the property. That’s been the biggest challenge — making sure that all of those parties are talking and working together. It’s something we didn’t have to do before. Everything was smoothing sailing and tenants were paying their rents and landlords paid their loans and investors were happy. I just think there’s a lot of misconception that all landlords have these really deep pockets, and that’s not always the case. There’s a lot of risk there on the landlord and developer side that I think gets overlooked a lot.
I think retail properties — with bars, restaurants, salons, retail stores — have been obviously hit the hardest. And then, obviously hotels are suffering. If you look at any of the publicly traded REITs (real estate investment trusts) to see where the values are going; industrial office REITs are down a little bit. But then you look at retail and hospitality and it’s not a good picture. It’s pretty easy to see what’s been the hit the hardest.
Q: What far-reaching impacts might this crisis have on the future of office real estate?
Lynch: With office properties, I think it’s going to depend on the type of building. I think your multi-story buildings that have common-area lobbies and elevators and shared restrooms have more challenges to overcome. I know a lot of them have increased janitorial and put COVID-related guidelines in place so that people feel safe to come back to their office building.
The big question is are office tenants going to want less space or more space? It’s this big debate right now about which way that’s going to go. I think it will probably depend from business to business and what they do and how they are set up. From office landlords I’ve talked to, they’ve seen just as many tenants reaching out to them going, ‘I need to increase my footprint so that I can socially-distance my staff,’ as tenants that are saying, ‘we’ve realized a huge portion of our staff can work remotely and it’s efficient to have them work at home.’ And those tenants are going to need less space. It’s too soon to tell. Until people feel safe to go back to work, it will be hard to know what people will do.
Q: How about industrial real estate — what long-term impacts might this crisis have?
Lynch: Most industrial businesses were considered essential and never actually shut down. Obviously, they’ve been continuing to operate and bring in revenue and a lot more of them have been able to pay their rent. I think the biggest impact was being in the manufacturing sector, and a lot of that had to do with supply chain issues. Basically, if a manufacturer can’t get the components that they need to make whatever they’re producing, they can’t make their product.
So, when everything was shut down and no shipments were coming from China or India, they had to shut down. I know there was some distress in some of the manufacturing sectors. Looking forward, a lot of people are predicting — and I agree with this — is that we may see some more onshoring of manufacturing and bringing those jobs back to the United States, which obviously could be very positive for Northern Nevada.
Q: What are the keys for the CRE industry to respond, recover and thrive as this crisis plays out?
Lynch: Personally, I think it’s about putting one foot in front of the other, and that goes across the board for our entire industry. Regardless if you’re a tenant that’s struggling with your business and figuring out what the next step is to keeping your business open. I think it’s trying not to look too far outside of that and get caught up in what might happen six months to a year from now.
I’ve been out in the market a lot touring with a lot of tenants. Tour activity is really strong, and deal velocity is really strong. There seems to be a huge sector of business owners and investors that are getting back out there. As a broker, if I don’t work, if I don’t show properties, that means we don’t close deals and make any money. That’s true for a lot of business owners — if we don’t get back out there and make these hard decisions and take the next steps, it could be detrimental for our business.
If you look at most of the major development projects around town, they’re all moving full-steam ahead. You’ve seen very few projects put on hold — everything from Park Lane to all of the apartments in the Damonte area to Rancharrah is moving forward. There are big industrial projects being built. It’s quite remarkable that all these developers still have enough faith in our market that they are charging full-steam ahead. I think that’s a good indicator of where the market’s going to go. And I think we have enough demand to absorb all of that product, regardless of what’s going on with COVID.
Q: Over the past few years, how has the industry adapted to advances in technology? And what role has tech played in CRE companies operating amid the pandemic?
Lynch: If anything, the pandemic has served as a catalyst for CRE tech. It was already happening, but there was a very slow adoption of it. And now the pandemic really didn’t give us a choice. During the shutdown, all of our tours came to a halt a good four to six weeks. During that time, we just pivoted to doing virtual tours and you can go to any brokerage in town now and go to their website and go online and start clicking on their brochures and on their listings — you’re going to see a lot of virtual tours. And that’s not something we were really doing before. That was maybe something you would do on a really large listing or a development project so you could show what the renderings would look like. It’s really turned into something people are doing on every single listing.
The other biggest thing is Zoom. Prior to the pandemic, I maybe had one to two Zoom calls a month. And now I’m having anywhere from 10 to 15 a week. It’s a total shift. It’s become the new normal, and it’s something clients have accepted. It’s something that would’ve normally been a phone conversation with a client, is now oftentimes a Zoom meeting. And I love it. It’s great to be able to see someone face-to-face and also the capability to screen share in real time. Particularly, if you’re doing something like working on the financials of a property or the underwriting … something where you can make real-time edits to a document and the client can see it and you can work on that stuff together. It’s just much more interactive than a phone call, which then would result in a bunch of emails back and forth.
Q: Where do you see things going from here in the CRE industry?
Lynch: I think things will cool down a bit. Pre-COVID, I would say our market was red hot — it was a little crazy actually. But that will be OK, because it’s going to create some room for more opportunities. In our industry, sometimes problems breed opportunities. I think the creative thinkers and hard workers will thrive by creating new opportunities. And I think a cooling down will be good because it will maybe free up some inventory, so you won’t have so many people competing over one building or one space, and it might make it a little easier to conduct business. Instead of every deal being kind of a fight to get it done.
There’s a lot of cash waiting on the sidelines for these opportunities to arise. There are investors out there just waiting for any sort of trouble or discount where they can come in and buy it at the right price and fix whatever the problems there are with the asset and bring it back to stabilized. There’s a whole lot of investors where that’s what they do, and that’s what they thrive on doing.
Q: Lastly, what makes Northern Nevada a great place to do business?
Lynch: The same fundamentals still hold true. We have a very business-friendly climate — from a tax perspective, and from a permitting perspective. I think our government agencies have done a great job with that. EDAWN and GOED have done a great job attracting the right kind of businesses here in Northern Nevada, as well, and making it easy for them to do business here. Particularly, when you compare it to some of the neighboring states.
Our location has always been a driving factor, particularly in the industrial sector. We have proximity to the 11 western states, and you can get to all 11 of them within a two-day drive time. From a logistics and ecommerce perspective, we’re just located in the right spot. And we have land to build more industrial product on. I think those two factors combined position us really well for even more expansion in that area.
I think the most important factor is the quality of life here. And I think that’s going to be true now more than ever.
Editor's note: This interview was edited and condensed for clarity.
-->RENO, Nev. — Tomi Jo Lynch and her team have been zeroing in on a specific mantra as the coronavirus pandemic has shaken the U.S. economy.
“We’ve been focusing on one of our core covenants in our office that says, ‘Focus on the positive and the possible,’” said Lynch, managing director with SVN Gold Dust Commercial Associates in Reno. “And I think the more that people can focus on the positive and the possible, the quicker our economy will come back and we can climb out of this.”
Pausing, she added: “Obviously, there’s a whole bunch of medical stuff that I can’t speak to. I’m not a doctor, and I don’t know when this going to end.”
With the COVID crisis having a widespread impact on the commercial real estate industry worldwide, the NNBW spoke with Lynch to zoom in on the pandemic’s immediate affect on CRE in Northern Nevada and what the future might hold.
Q: What have been the biggest challenges the coronavirus pandemic has had on commercial real estate in this region?
Lynch: Obviously, with the shutdown, a lot of tenants were unable to pay their rent, so just managing that has probably been the biggest challenge. When a tenant can’t pay their rent, there’s a trickle down effect to the landlord and potentially to the lender on the property. That’s been the biggest challenge — making sure that all of those parties are talking and working together. It’s something we didn’t have to do before. Everything was smoothing sailing and tenants were paying their rents and landlords paid their loans and investors were happy. I just think there’s a lot of misconception that all landlords have these really deep pockets, and that’s not always the case. There’s a lot of risk there on the landlord and developer side that I think gets overlooked a lot.
I think retail properties — with bars, restaurants, salons, retail stores — have been obviously hit the hardest. And then, obviously hotels are suffering. If you look at any of the publicly traded REITs (real estate investment trusts) to see where the values are going; industrial office REITs are down a little bit. But then you look at retail and hospitality and it’s not a good picture. It’s pretty easy to see what’s been the hit the hardest.
Q: What far-reaching impacts might this crisis have on the future of office real estate?
Lynch: With office properties, I think it’s going to depend on the type of building. I think your multi-story buildings that have common-area lobbies and elevators and shared restrooms have more challenges to overcome. I know a lot of them have increased janitorial and put COVID-related guidelines in place so that people feel safe to come back to their office building.
The big question is are office tenants going to want less space or more space? It’s this big debate right now about which way that’s going to go. I think it will probably depend from business to business and what they do and how they are set up. From office landlords I’ve talked to, they’ve seen just as many tenants reaching out to them going, ‘I need to increase my footprint so that I can socially-distance my staff,’ as tenants that are saying, ‘we’ve realized a huge portion of our staff can work remotely and it’s efficient to have them work at home.’ And those tenants are going to need less space. It’s too soon to tell. Until people feel safe to go back to work, it will be hard to know what people will do.
Q: How about industrial real estate — what long-term impacts might this crisis have?
Lynch: Most industrial businesses were considered essential and never actually shut down. Obviously, they’ve been continuing to operate and bring in revenue and a lot more of them have been able to pay their rent. I think the biggest impact was being in the manufacturing sector, and a lot of that had to do with supply chain issues. Basically, if a manufacturer can’t get the components that they need to make whatever they’re producing, they can’t make their product.
So, when everything was shut down and no shipments were coming from China or India, they had to shut down. I know there was some distress in some of the manufacturing sectors. Looking forward, a lot of people are predicting — and I agree with this — is that we may see some more onshoring of manufacturing and bringing those jobs back to the United States, which obviously could be very positive for Northern Nevada.
Q: What are the keys for the CRE industry to respond, recover and thrive as this crisis plays out?
Lynch: Personally, I think it’s about putting one foot in front of the other, and that goes across the board for our entire industry. Regardless if you’re a tenant that’s struggling with your business and figuring out what the next step is to keeping your business open. I think it’s trying not to look too far outside of that and get caught up in what might happen six months to a year from now.
I’ve been out in the market a lot touring with a lot of tenants. Tour activity is really strong, and deal velocity is really strong. There seems to be a huge sector of business owners and investors that are getting back out there. As a broker, if I don’t work, if I don’t show properties, that means we don’t close deals and make any money. That’s true for a lot of business owners — if we don’t get back out there and make these hard decisions and take the next steps, it could be detrimental for our business.
If you look at most of the major development projects around town, they’re all moving full-steam ahead. You’ve seen very few projects put on hold — everything from Park Lane to all of the apartments in the Damonte area to Rancharrah is moving forward. There are big industrial projects being built. It’s quite remarkable that all these developers still have enough faith in our market that they are charging full-steam ahead. I think that’s a good indicator of where the market’s going to go. And I think we have enough demand to absorb all of that product, regardless of what’s going on with COVID.
Q: Over the past few years, how has the industry adapted to advances in technology? And what role has tech played in CRE companies operating amid the pandemic?
Lynch: If anything, the pandemic has served as a catalyst for CRE tech. It was already happening, but there was a very slow adoption of it. And now the pandemic really didn’t give us a choice. During the shutdown, all of our tours came to a halt a good four to six weeks. During that time, we just pivoted to doing virtual tours and you can go to any brokerage in town now and go to their website and go online and start clicking on their brochures and on their listings — you’re going to see a lot of virtual tours. And that’s not something we were really doing before. That was maybe something you would do on a really large listing or a development project so you could show what the renderings would look like. It’s really turned into something people are doing on every single listing.
The other biggest thing is Zoom. Prior to the pandemic, I maybe had one to two Zoom calls a month. And now I’m having anywhere from 10 to 15 a week. It’s a total shift. It’s become the new normal, and it’s something clients have accepted. It’s something that would’ve normally been a phone conversation with a client, is now oftentimes a Zoom meeting. And I love it. It’s great to be able to see someone face-to-face and also the capability to screen share in real time. Particularly, if you’re doing something like working on the financials of a property or the underwriting … something where you can make real-time edits to a document and the client can see it and you can work on that stuff together. It’s just much more interactive than a phone call, which then would result in a bunch of emails back and forth.
Q: Where do you see things going from here in the CRE industry?
Lynch: I think things will cool down a bit. Pre-COVID, I would say our market was red hot — it was a little crazy actually. But that will be OK, because it’s going to create some room for more opportunities. In our industry, sometimes problems breed opportunities. I think the creative thinkers and hard workers will thrive by creating new opportunities. And I think a cooling down will be good because it will maybe free up some inventory, so you won’t have so many people competing over one building or one space, and it might make it a little easier to conduct business. Instead of every deal being kind of a fight to get it done.
There’s a lot of cash waiting on the sidelines for these opportunities to arise. There are investors out there just waiting for any sort of trouble or discount where they can come in and buy it at the right price and fix whatever the problems there are with the asset and bring it back to stabilized. There’s a whole lot of investors where that’s what they do, and that’s what they thrive on doing.
Q: Lastly, what makes Northern Nevada a great place to do business?
Lynch: The same fundamentals still hold true. We have a very business-friendly climate — from a tax perspective, and from a permitting perspective. I think our government agencies have done a great job with that. EDAWN and GOED have done a great job attracting the right kind of businesses here in Northern Nevada, as well, and making it easy for them to do business here. Particularly, when you compare it to some of the neighboring states.
Our location has always been a driving factor, particularly in the industrial sector. We have proximity to the 11 western states, and you can get to all 11 of them within a two-day drive time. From a logistics and ecommerce perspective, we’re just located in the right spot. And we have land to build more industrial product on. I think those two factors combined position us really well for even more expansion in that area.
I think the most important factor is the quality of life here. And I think that’s going to be true now more than ever.
Editor's note: This interview was edited and condensed for clarity.
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