CEO Series: Sharon Harper
President and CEO, Plaza Companies
Assess the current state of commercial real estate development in the Valley.
The commercial office sector is being impacted significantly. Vacancies are on the rise, rental rates are going down. In addition to all those statistics there is also kind of a shadow vacancy factor in place, in that companies are downsizing and subleasing their space or not occupying that space. And so all of that does have impact. There’s been negative absorption for some seven quarters in our region and probably more to come. So it has forced the industry to do a number of things. First and foremost, there’s no new construction really underway, so that’s going to have some impact. Secondly, building and business owners have had to adjust the way that they do business, and certainly in the case of Plaza Companies we have so that we can maintain a competitive edge for our buildings, for our tenants, for our investors. An example of this is that we are very focused on maintaining our buildings; we want them to be in excellent condition. We want to make sure that we are doing everything we can to make our buildings competitive. We’re working with our tenants, making sure that the buildings are clean and safe and accessible and beautiful and wayfinding is well-organized, and doing what we can to enhance their businesses. We are an owner and a property manager who is so hands-on, really thinking about the tenant, how their business is doing, how they are faring, as well as how we are performing for our investors and our owners and the facility itself. That makes a difference. There’s a concerted focus and effort and it’s my thought with our company we go above and beyond in every way we can, and it’s made a difference. Our buildings are doing quite well because of it.
What do you foresee for commercial real estate in 2010?
I think 2010 is going to be another year of flat rates, if not a reduction in rental rates. I think there will be increased vacancies. I think that a number of building owners are having difficulties with their financing and with their loans. As these shorter-term loans come due, it’s going to have an impact on the marketplace. And finally and most important in this marketplace is the owner’s ability to provide tenant improvement dollars to attract a tenant. Many owners cannot do that. And so tenants are, I think for the first time in my history in this industry, tenants are looking to the credibility and the substance of the building owner. Can they keep the buildings up? Can they provide the tenant improvements? Can they keep the promises? Can they keep the lights on? Tenants care about that. And that’s very important right now, more so than ever … and the second part of it is that some substantial companies have had problems performing on their loans and on their buildings and that’s been very unnerving for tenants. They want to know that there are building owners and managers that have credibility, integrity and are going to see the project through, and that gives a competitive advantage and we’ve certainly seen that here at Plaza.
Plaza Companies specializes in health care construction.
What difference did that make during the recession when compared to other commercial real estate developers?
Plaza Companies actually is focused on three specific areas of business. One is medical office/health care, the other is seniors housing and the third is bioscience and biotechnology. And it was in 2005, in a company retreat with the top leaders here at Plaza, that we made a concerted effort to broaden the base of where we are involved in business. We wanted to have certain unique sectors that are related to one another, yet provide it a bit of diversification for us. In addition to that, on our service lines we have grown our facilities’ property-asset management divisions, our leasing department, and our construction division. So we have diversification at that line, as well. And I can tell you that diversification has made a significant difference, and I am most appreciative that several years ago, when no one would have projected what is going on now, our company set the stage for sustainability during these difficult times. And that has made a difference. Secondly, the sectors that we are involved in have ridden the storm a little bit better than others. They’re very dependent upon demographics, and not just the growth of demographics but aging, as well, and also the whole notion of innovation, research and science. All of that ties together and these are growth, with a small ‘g,’ industries right now.
What strategies did Plaza Companies implement to ride out the recession and how is it repositioning itself for the recovery?
Once again, we readjusted and repositioned our company in 2005, and started to grow foundationally a diversification program and that has paid off significantly for the company. I think that our strategy has stayed the same, our focus is the same; we’ve never deviated from the core principles of our business. But we’ve all worked harder in this company, as well. People are stepping up in all of the divisions here at Plaza Companies, doing what they can because it is more difficult and it is harder to achieve the same goal than it was just a couple of years ago. And so we’re focused, we’re diligent, we’re careful, we’re all working harder, and we are in sync here jointly with the management and all of the employees of the company.
What skills do C-level executives in commercial real estate development need to acquire or cultivate in order to succeed in these difficult times?
I think the traits that a CEO needs to have in difficult times are the very same traits in all times. I think that it’s important to have a vision and to be able to articulate that vision and to inspire and excite people that are going to help carry that vision out, and that’s really what I’ve tried to do here at Plaza. And it’s not just me, but it’s other senior managers here at Plaza.We understand what we’re trying to accomplish. We are so committed to carry through and being accountable for what we commit to do, and we need to be inspired and we need to inspire others to do that.And we also need to be very realistic about the realities of the world, and we have to have high expectations for performance and for people. And more so than ever, the core values of the company need to be part and parcel to everything that we do.
- Co-founded the company in 1982 with Dr. Harold Gries
- Recipient of the 2007 Sandra Day and John O’Connor Award for outstanding community service
- Is a member of the board of trustees of the Virginia G. Piper Charitable Trust, the board of directors of the Arizona Community Foundation and the Banner Health Foundation, and past chairman of the Greater Phoenix Economic Council (GPEC)
- Served on the finance committee of Arizona Sen. John McCain’s 2008 presidential campaign
- Received a Bachelor’s of Arts in Journalism from Creighton University in Omaha