THE CCIM INSTITUTE FOUNDATION
Building Resilience
Does The CCIM Institute Foundation ' s Tenant Resiliency Index Have Legs Beyond the Pandemic ?
The first Tenant Resiliency Index ( TRI ) in 2021 , funded by the Robert L . Ward Fund of The CCIM Institute Foundation , was prompted by the pandemic and its potential long-term impacts on commercial real estate . The impetus was to provide an accurate risk tenant analysis that went beyond credit scores and financial records due to the disruptions fueled by COVID-19 and numerous tenants shutting down .
The TRI survey highlighted the different effects of the pandemic across industries ( primarily office and retail ), and tenant types , and particularly around remote work viability .
Now part two of the TRI survey is complete , and the results are in . The survey was again directed by The CCIM Institute Foundation and under the guidance of researcher Brent Smith , Ph . D ., Endowed Chair at Virginia Commonwealth University . Following minor adjustments to the weighting process , TRI 2 was distributed to The CCIM Institute ' s members for input and testing . The beta test included 35 members .
The primary goal was to assess whether the index has value as a dynamic measurement tool for gauging tenant risk beyond major crises like the pandemic .
Smith explains , " The purpose of the second phase was to determine whether this can explain tenant resiliency beyond extreme events like a pandemic , major recession , or financial crisis ." “ What can it tell us ? The idea was to create something that would have a dynamic story to it , and we could see trends over time .”
Smith didn ’ t alter any questions from the first TRI to gauge how responses changed from the “ pandemic world ” to a “ recovery world .” Results indicated that the TRI survey has potential to provide valuable insights if ongoing data is available .
For example , the new survey assessed variations in tenant resiliency as interest rates rose . Industries with stronger debt needs , for instance , may see more challenges in staying power and location .
Major Finding Around Remote Work In the first survey , remote work was perceived as a threat to the stability of leases . “ However , the story about working remotely completely turned on its head in the new survey ,” explains Smith .
There was concern about tenant resiliency during COVID-19 for firms that were nimbler in allowing employees to work remotely and their ability to continue to service their leases .
“ That seems to have gone away , because the correlation between a threat for vacancy and remote work wasn ' t present in this survey ,” says Smith . “ Entities have started to dial in who ' s going to work where , so those threats are reduced .”
More Changes in Survey Results In the original survey , there was consternation around tenants in food service and retail consumer goods . The new TRI score by tenant type shows virtually no concern in those categories . However , there ’ s unease in consumer services , and interestingly , computer and engineering , says Smith .
“ That wasn ' t the case in 2021 . That ’ s an example of dynamic frictions in these different industries and their ability to service their leases ,” notes Smith .
Meanwhile , some responses around resiliency remained consistent from 2021 , Smith says , including the importance of a tenant ’ s financial condition and tenure , economics of the area , and whether it ’ s the tenant ’ s primary location .
Mean TRI by Ability of Employees to Work Remotely |
Mean TRI by Years in Business |
100 |
|
Mean TRI Score by Economic Condition of Location |
81.49 75.66 |
83.98 67.94 |
80
60
40
|
83.36 |
76.39 |
81.48 |
71.08 |
|
73.88 |
20 |
|
|
|
|
Yes |
No |
<= 5 6-10 > 11 |
0 |
Highly Stable |
Growing |
Stable
Less Diversified
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