Changing Amenities and Legal Requirements

What’s topping the checklists of property management concerns? A New York Build 2020 Expo panel agreed that in the upcoming decade, multifamily property owners will need to focus on two areas: amenities and legal requirements.

Renovations Needed to Stay Competitive

Owners will need to invest in upgrading their properties to stay current with tenants’ changing lifestyles. “With almost every lobby renovation, one of the key challenges is where do all the packages go and how do you distribute them,” said William T. Payne, principal at O&S Engineers & Architects. “What if the mailroom is way too small for Amazon?”

More residents are ordering deliveries of not just meals but now groceries. Payne stated this raises additional security issues with more people knocking on the door. He also noted the rising demand for bicycle parking and charging stations for electric vehicles. With these types of property upgrades, owners need to be honest in their requests for proposals (RFPs), said Carmen Rainieri, regional director at Skanska. This includes providing accurate information about pricing and logistics.

In working with contractors and consultants, “collaboration is the most important thing for any project to become a success,” Rainieri advised. “Truly understand the scope of the project.”

Avoid Violations While Upgrading Property

In her line of work, Lina Gottesman, the president and owner of Altus Metal, Marble and Wood, refurbishes property. She emphasized the need for contractors and subcontractors to comply with applicable laws. When restoring metals in elevators and wood in panels, her projects can involve using products that release volatile organic compounds (VOCs).

Gottesman noted Altus uses low-VOC products and high-efficiency particulate air (HEPA) machines to minimize exposure to tenants. When contracting with a vendor, she advised owners to know the company they are hiring.

“Know their safety precautions and safety backgrounds. Know what safety training they have done. Know what kind of safety devices they are bringing into your building,” Gottesman advised. “Be vigilant because if you start having some toxic chemicals in your building and one OSHA compliance officer walks through there, trust me…” She added under those conditions—substantial chaos can break loose.

Upgrading Property to Avoid Violations

Other times owners renovate buildings specifically to protect the environment. Jason Kliwinski, founder and CEO of Green Building Center, reminded the audience of New York City’s Local Law 97. This law requires all buildings 25,000 square feet and larger to cut carbon emissions 40% by 2030 and 80% by 2050. Penalties start to kick in as early as 2024.

Kliwinski stated Local Laws 84, 87 and 88 have energy efficiency requirements. However, they exclude tenant space and impose minimal penalties. There still are owners who pay fines instead of taking measures to follow the laws.

“But Local Law 97 is a little different because it sets greenhouse gas emission limits by buildings,” said Kliwinski, “You’re not going to be able to exclude your tenant spaces. The fines for Local Law 97 are five and six figures. They’re substantial. It’s not going to be cost-effective for you to ignore this local law for more than a couple of years.”

Owners will need to take a holistic approach. They’ll need to look at the infrastructure across the entire structure, including the building envelope, HVAC system and lighting. Kliwinski described an example where insulating a small roof on a tall building would not be enough of an improvement.

He suggested owners benchmark their progress. This starts with measuring each building’s current carbon emissions. “You can’t manage what you don’t measure,” he explained.

Efficiency in Legal Compliance

Kliwinski added with property portfolios, building-by-building upgrades would be more expensive. By grouping projects together across a building portfolio, owners can decrease costs with economies of scale.

The speakers noted property owners are planning for the next 10 to 20 years. They are hiring outside consultants to prioritize all projects across portfolios. Operators are determining which projects are interrelated to create funding plans. Roadmaps can evaluate energy codes as part of the RFP process to anticipate expenses. Rainieri pointed out that owners could save money by forgoing the general contractor and hiring specific trades based on the project.

Payne opined that fines for Local Law 97 will rise. “Whatever fines you think there are for greenhouse gases, that’s for the first cycle. The second cycle is where they [the New York City’s Department of Buildings] hire more inspectors,” he said. “These fines are going to very quickly increase exponentially. Across the board, brace yourself because this is going to be a cottage industry.”

However, owners who pay attention to amenities and legal requirements can avoid expensive fines. Strong building management will also help maintain tenant satisfaction and retention.

Arbor Realty Trust provides several options in multifamily loans that can assist in renovations. Contact Arbor today to find out more about our solutions, including green financing.