Study assesses impact of terrorist activities

Jones Lang LaSalle, the world’s leading real estate services and investment management firm, in a new study has identified the implications of the Sept. 11 terrorist attacks on the management of commercial real estate in the United States, Asia Pacific and Europe. Increased attention to security has emerged as a common dynamic in all three regions amplifying already weakened economic conditions and delaying non-security related business decisions.

The study, "The Events of September 11: Impact and Implications for Corporate Real Estate Occupiers," focuses on the heightened demands for corporate occupiers, and provides perspective on the economic outlook, security assessments, and technological challenges, as well as energy-related and capital issues. The report is available online at www.joneslanglasalle.com.

"The perception of safety has become a key factor touching all aspects of real estate portfolio management," said Peter Barge, chairman of Corporate Solutions for Jones Lang LaSalle. "It will affect the ability of businesses to attract and retain employees as well as to reassure investors that they will be able to resume operations quickly following a disaster."

Global perspectives

In the US, increased scrutiny is being given to disaster recovery plans, as well as to decisions related to tenancy in landmark buildings, decentralization of operations and occupancy in suburban versus central business district locations. With Europe’s economy already slowing before Sept. 11, leasing volumes are foreseen to be 40 percent lower in 2001 than 2000 with no improvement expected for 2002.

In Asia Pacific, the economic slowdown appears to have had a greater influence on corporate real estate. However, growing concern with security measures and disaster recovery procedures is emerging, and relocation decisions are being delayed. In Australia, the emerging decentralization trend will gather momentum as companies consider locating core functions in central business districts and moving non-core facilities to suburban locations. The popularity of high-rise buildings in Asia may be affected as occupiers no longer compete to occupy the highest profile space and as the accompanying stagnant demand for space prompts a short-term rise in vacancies.

"The unprecedented nature of the attacks has prompted a revision of disaster plans to prepare for a whole new set of potential circumstances," said Joe Stolarski, senior vice president of technical services for Jones Lang LaSalle. "Disaster recovery plans that were designed to anticipate the possibility of fire, severe weather or bomb threats now are being amended to include appropriate responses to potential terrorist acts such as exposure to hazardous materials."

Risk threat matrix

Jones Lang LaSalle also developed a matrix to quantify the relative risk for each building and enable building management to determine if security measures need to be augmented. Criteria include location of the building in relationship to the prominence of its market and its site, proximity to focal points and transportation hubs, tenant exposure and infrastructure importance.

The risk threat evaluation enables building owners and tenants to make informed decisions about relevant security needs. The improvements identified and implemented as a result of the analyses can be used in negotiations with insurers, which may be critical in the anticipated environment of higher premiums, and in prioritizing security needs across portfolios.