The pandemic, and the urgent social and environmental issues we face call for a new approach to the way all sectors do business. IMT has been watching for commercial real estate leaders to emerge and one company that deserves attention is Brixmor Property Group, which owns and operates nearly 400 retail centers nationwide. Many of their properties are located within residential neighborhoods and the company has a record of prioritizing the people and communities essential to their success. Their Environmental Social and Governance (ESG) activities are fully integrated in their operations, which positioned them for an agile and effective response when crisis hit. Audi Banny, IMT Private Sector Associate Director of Engagement, recently interviewed two Brixmor team members, Haig Buchakjian, EVP of Operations, and Daren Moss, SVP of Operations and Sustainability, about the company’s innovations in supporting their retail clients over the past year.
How has the pandemic reshaped your daily operations and those of your retail tenants?
We focused on small businesses most affected by shutdown orders which eventually included every state where Brixmor operates. Since many did not qualify as essential businesses, they suffered mandatory closure and lost business. Based upon the circumstances, these businesses needed to find innovative ways to operate which was often outside the four walls of their leased space due to indoor capacity limitations. So, we needed to help all of these businesses coexist safely and respectfully outdoors. There was no universal solution. It had to be customized for every shopping center.
We worked with a consulting firm to create recommendations and best practices for operating in an outdoor environment, including furniture, protection, accessibility, maintenance and experiential. We worked with each tenant on a licensing agreement that allowed them to extend their business operations into the common area at no additional cost. We wanted to give them the best opportunity to succeed. In some cases, the agreements are still in place and will remain post-pandemic.
For 2021, we’re enhancing use of outdoor gathering spaces, particularly for use during the evenings. Plus, a big focus is safely enabling BOPIS (buy online, pickup in store) which entails more cars stopping and more people walking in the drive lanes across tenant storefronts. This service provides a convenience to our consumers and a critical sales tool for our tenants, so we want to safely accommodate for the optimal experience.
It’s worth noting that we made a conscious decision not to monetize these outdoor offerings during COVID. We didn’t want to add costs to businesses that were already struggling with reduced sales hours and higher operating costs to retrofit their venues for new safety needs.
Can you describe your community response to the pandemic?
Most of our properties are centrally located within the communities they serve and are often occupied by locally owned and operated businesses. Our vision to be relevant to those communities became even more important in 2020.
During the pandemic, our shopping centers remained open every day because we provided essential retail and services, such as grocery, pharmacy and medical, that were needed by everyone. If even one business was open, we had to ensure the property remained clean, safe and inviting to the public. Plus, we found new ways to serve such as working with a national vendor to set up COVID testing pods in our parking area or partnering with local organizations to meet local needs such as a fundraising concert for veterans in the Milwaukee area, pet food/school supply/toy donation drives and our national campaign to address food insecurity where we collected over 13,000 pounds of non-perishables for local food banks around the country.
How has the pandemic changed, or not changed, the way you evaluate building performance?
We generally operate under a triple-net lease structure, which means that tenants already have the operational control over how they use energy and other utilities in their space. We have been very proactive in upgrading properties with energy-efficient LED parking lot lighting, smarter irrigation systems, and landscaping that uses less water. Our approach hasn’t changed because of the pandemic, but it is more important than ever to operate efficiently and keep operating expenses low. We have always been focused on a property’s relevance to the local community and will continue to seek opportunities to use “placemaking” to further enhance that connection.
Lastly, we use green lease clauses to help generate scale and clarify responsibilities related to sustainability-related initiatives and have been named a Gold-level Green Lease Leader for the past four years. As a side note, we have a new case study available about our work installing solar under a triple-net lease environment, which is furthering our goal of supporting 20 MW of onsite renewable energy capacity by 2025. To achieve this, we focus on tenant engagement and provide a meaningful incentive for them to participate, namely in the form of reduced expenses and availability of locally generated renewable energy. Engagement is critical to innovation in commercial real estate and advancing sustainability initiatives overall.
Do you anticipate any changes to leasing as a result of the pandemic?
We are seeing strong demand for our space due to our centers’ proximity to where people live and have worked for the past year. Following any period of disruption, retailers and businesses will continue to innovate and find new ways to serve consumers, including technology, consumer services and new concepts. The pandemic not only created lessons learned, but accelerated the blending of online and in-store retailing.
Have you taken any immediate actions that have potential to reshape your longer-term business model?
We continually learn and make adjustments; however, we found that our core business strategy is still the right strategy. We strive to be the center of the communities we serve. This means providing vibrant retail environments filled with thriving merchants, which in turn serve the needs of the surrounding community. Our ability to quickly pivot, early in the pandemic, to tenant and community support demonstrates that we are operationally sustainable and resilient.
We are fully integrated across the organization with respect to Environmental Social and Governance ESG strategy. While there is always room for improvement, we’ve worked hard to accomplish that the last few years and laid the groundwork for our success in 2020. The model of sustainability or community engagement off to the side doesn’t work. Our constant focus on community engagement is core to our business given our vision of being the center of the communities we serve. Additionally, our cultural tenet that “Great real estate matters, but great people matter even more,”ensures that employee engagement and their health and well-being are always a priority, not just during the difficult operating environment of 2020. We have received favorable feedback from investors and stakeholders because we have responded to these challenges effectively and transparently.