Using Capital Improvements to Create Competitive Advantage in the COVID-19 Era

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July 28, 2020

WASHINGTON, D.C. – A new research brief released today by the NAIOP Research Foundation details capital improvements that owners of office and industrial real estate spaces could consider to combat public health crisis like the COVID-19 pandemic, as well as their potential to create long-lasting competitive advantages.

The brief features observations from commercial real estate owners, developers, investors and property managers from across the U.S. on tenant demands and their approaches to capital improvements during the pandemic. Among the brief’s key points:

  • Building owners are actively researching capital improvements that may reduce the transmission of COVID-19, including HVAC system upgrades, UV lighting technologies, antimicrobial building materials and touchless technologies. Uncertainty about these improvements’ costs and benefits has limited their adoption, and it can be challenging to evaluate how effectively individual improvements limit disease transmission or whether they’ll be valuable to tenants after the pandemic ceases to be a major public health concern. This has led some owners to defer large capital investments related to COVID-19 and instead focus on proven operational measures such as enhanced cleaning and social distancing protocols.
  • Owners should view the pandemic as an opportunity to review the properties in their portfolios for any potential weaknesses, not just those exposed by the health crisis. In many cases, weaknesses unrelated to COVID-19 may pose a greater threat to a property’s long-term financial performance.
  • Property owners should prioritize improvements that reduce the risk of viral transmission while also improving operational efficiency or addressing perennial tenant concerns about sustainability and corporate social responsibility. For example, installing new HVAC systems may improve indoor air quality, reduce operating expenses and demonstrate a commitment to resource conservation all at the same time. This type of improvement can generate a considerable return on investment and is less likely to diminish in value if and when COVID-19 ceases to be a threat.
  • Many commercial property owners are turning to their property management teams to help them evaluate alternative responses to COVID-19. This frequently involves determining if new technologies are cost-effective, compatible with existing building systems, and capable of delivering promised health benefits. It also involves communicating with tenants to gain a better understanding of their concerns and how they can potentially be addressed via capital improvements.
  • There are no simple solutions. Most capital improvements designed to make buildings more resilient to COVID-19 have both advantages and disadvantages that should not be overlooked. Commercial property owners must therefore carefully weigh their options, seek out technologies that simultaneously advance multiple objectives, and invest in improvements that enhance the tenant experience.

“Commercial real estate owners are taking practical, responsible steps to prepare their properties and contribute to healthy work environments,” said NAIOP President and CEO Thomas J. Bisacquino. “Sophisticated HVAC and lighting systems, antimicrobial building materials and touchless technologies are all here to stay, and this brief helps provide guidance that property owners can use to determine when and how to invest."

The brief was written by Dustin C. Read, Ph.D./J.D., an associate professor at Virginia Tech and a NAIOP Distinguished Fellow, and Sam Kuprianov, an undergraduate student at Virginia Tech majoring in real estate.

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This is the second in a series of research briefs published by the NAIOP Research Foundation in response to the impact of COVID-19 on commercial real estate. The first brief, “Navigating a Safe Return to Work: Best Practices for U.S. Office Building Owners and Tenants,” is available at

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About NAIOP: NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate. NAIOP comprises 20,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit

Kathryn Hamilton