Five Capital Projects to Prioritize in 2022

Retail real estate professionals needed unprecedented flexibility in early 2020. For those with capital budgets at the time, most of the funds were frozen or reallocated to cover operating expenses. The decreased availability of labor and materials canceled most preventative maintenance plans, causing a halt in capital projects. Luckily, in the U.S., capital budgets are regaining momentum. After four consecutive quarters of year-over-year decline, investment volume began rebounding strongly in Q2 2021 to $130.9 billion.¹ Retail real estate and facility managers now face the task of determining where best to allocate these funds following a period of lost time and money.

Five Ways to Allocate Capital Project Budgets in 2022:

1. Support COVID Guidelines & Preparedness

Although the world is in a much different place than it was two years ago, companies still need to look ahead to maintain their businesses. Some capital budgets are being used to continue to follow COVID-19 guidelines, keep employees and customers safe and manage their fleet of stores. We have seen a continued need from our clients for plexiglass partitions and increased janitorial cleaning.

2. Increase / Accelerate Proactive HVAC Unit Replacement

Proactive maintenance is vital to keeping businesses operational and unfortunately was one of the first expenses cut to support operating expenses in 2020. A key area where companies are focusing proactive maintenance efforts is HVAC replacements. According to the U.S. Department of Energy, “older, inefficient commercial rooftop unit (RTU) air conditioning systems are common and can waste from $900-$3,700 per year, per unit.”² Proactive replacements can benefit companies on many levels, from information tracking, on-site and system knowledge, and warranty protection. Allocating capital funds to a program of this type also allows for readily available repair parts, a reduction in reactive maintenance spend and energy costs, and improved EPA R-410A compliance. HVAC systems that run well mean less down time, higher employee morale and a better customer experience with improved store comfort. Facility managers are also focusing on replacing water heaters, generators, and LEDs, as they have similar efficiencies and cost-saving benefits. 

3. Restart Deferred Maintenance

In many facilities, work orders have piled up during the pandemic due to shifting budgets and priorities. Many integrated facilities management (IFM) programs do not have the capacity to address backlogged work orders in addition to the current workload. Facility managers have an opportunity to expand their current IFM program by including additional providers to help service the excess and utilizing capital project budgets to cover this backlog.

4. Prioritize ESG Efforts

More than 30% of global Fortune 500 companies say they have either achieved a climate goal or are publicly committed to doing so by 2030.³ Real estate professionals have an instrumental role to play in helping achieve those goals. ESG capital projects topping the list this year include innovating indoor-air quality by modifying existing HVAC forced-air systems or installing hydronic HVAC systems that heat and cool buildings with water. Safety and wellness efforts are also top of mind as we see more touchless technology in elevators, restrooms, and common areas.

5. Implement Dark Store Surveys

Before and throughout the pandemic, many retailers closed stores temporarily due to retail strategy adjustments or low profit margins. With dark stores no longer being maintained as they were when they were open for business, facility managers are beginning to implement dark store survey programs. Dark store survey benefits include:

• Ensuring lease obligations are maintained
• Protecting the value of the asset
• Reducing or eliminating any defacing issues that negatively impact brand standards
• Reporting and servicing needs in a timely fashion
• Keeping the property in a sellable or leasable condition.

This service gives facility managers monthly site-condition inspections, dedicated reports, repair recommendations and emergency response for critical repairs. 

¹ Source: CBRE Research, Capital Markets Q2 2021 report.
² Source: U.S. Department of Energy, November 10, 2015.
³ Source: CBRE, Real Estate’s Role in the Environmental, Social and Governance (ESG) Agenda, 2021.