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At Fratzke Commercial Real Estate and Fratzke Property Management, we have a team of 15 employees and independent contractors. Rather than share how we (like every other business) have been impacted by the virus, we offer readers a few key strategies that we have implemented in order to keep operations as fluid as possible while supporting our clients.
We also offer a few predictions for future trends in the Commercial Real Estate Market in Central Oregon.
Because we are designated as an essential business, and because we can distance ourselves more than 30 feet apart in our offices, we have three team members in our building during working hours. In addition, we have implemented the following:
- Engaging in weekly team conference calls to check in on how everyone is doing both personally and professionally.
- We spend more time on the personal items but since we have very little interaction in person, weekly contact is critical to mental health.
- Finding at a minimum one event or experience we can laugh about during our day.
- Humor is key to good health and we are living in extremely stressful times.
- Creative working hours:
- Two of our team members come into the office after hours and on weekends to process invoices, rent payments, write up deposits and manage our books. Other team members only come in for a few hours in the morning.
- Proactively reaching out to our clients instead of waiting for them to call us.
- We manage 343 tenants who lease more than 1.5 million square feet of commercial real estate in Central Oregon. We have already engaged in some form of lease modification for over 80 tenants.
- We have also reached out to a majority of the more than 50 building owners we work with, most of whom have been asked to modify rent terms.
- We have spoken with most of the commercial lenders utilized by our landlords in order to help our landlords support realistic requests from tenants for rent deferral.
- We still receive requests to list, lease or purchase commercial real estate. Respond to every email, every call, quickly.
- When communications “go dark” we become concerned.
- Our clients want to stay informed. We often say during our calls, “everything is changing hour by hour but here is what we know right now.” Make the call. Your clients want to hear from you!
- Financial awareness and lockdown
- Like every business, we are managing our cash closely. Pay attention to every dime spent.
- Predictions:
- Central Oregon is going to experience an increase in vacancies in the commercial real estate market. We could see some sectors with double digit increases in vacancies by January of 2021.
- Industrial will be the least impacted.
- Retail/restaurant and tourism will be the most heavily impacted.
- Office will be impacted with those high human interaction firms such as daycare providers, medical firms and salons experiencing the greatest hit to their revenues. Businesses that have more back office operations like law firms and accounting firms will not be as greatly impacted.
- It is uncertain for us to measure how lease rates will be impacted at this time.
- We know that as vacancies increase, lease rates will decline.
- The greatest variable in vacancies will be the landlord’s ability to negotiate with their tenants.
- In the case of a building being owned outright, the landlord can reduce lease rates, keeping their property 100 percent occupied.
- Buildings that have debt service must meet minimum covenants of the loan such as debt service coverage and loan to value ratios, disallowing the owner from lowering lease rates without a possible capital call from the lender.
- Social Distancing will continue well beyond COVID-19. The way we operate our businesses, educate ourselves, travel, recreate and how we distance ourselves from large population centers will create greater demand for Central Oregon real estate over the next two years.
- Central Oregon is going to experience an increase in vacancies in the commercial real estate market. We could see some sectors with double digit increases in vacancies by January of 2021.
Brian Fratzke is a commercial real estate broker and the president of Fratzke Commercial Real Estate Advisors, Inc., and Fratzke Property Management located in Bend. Having started his commercial real estate brokerage in September of 2007, Brian weathered the storm of 2008-2010. Fratzke Commercial is one of the few firms focused 100 percent on leasing, selling, managing and advising clients on commercial real estate in the Central Oregon market.
