The good news for landlords and tenants is that security costs appear to be under control. After an initial jump from 46 cents to 56 cents per sq. ft. between 2000 and 2002, research from the National Association of Building Owners and Managers (BOMA) shows they have now leveled off. Still, those overall numbers do not capture the trend for the high-end systems found in landmark and Class-A buildings. "Comprehensive electronic security and surveillance systems now cost between $2 and $5 per square foot. In the 1990s, they were under $1," says Varco of Convergint Technologies.
What are you paying for? Installing and maintaining a CCTV system ranges from $1,500 to $2,000 per camera. Varco estimates a card access system with a proximity reader may cost about the same per door. Metal detectors are expensive to install, requiring electrical expertise. As for security personnel, unions dictate wage levels in different cities. Chicago is the priciest at $11.50 per hour, followed by Boston and Washington at $11.25, and New York at $10.75, according to Coleman.
In the end, security expenses represent a drop in the bucket for both larger owners and tenants. "When occupancy rates are high, the landlord can be reimbursed for most of the costs, which are spread among the tenants," says John Kim, a research analyst at Bank of America.
From the tenant side, rents are a marginal expense for large companies and professional firms. Small increases in rental expenses, including security, barely dent the bottom line. "Total expenses, including property management, utilities, security, insurance and taxes, comprise 30% to 40% of rental revenue," Kim reports. "Security expenses constitute just 6% of all that," adds Amita Juneja, BOMA's director of research.
Security responses to threats vary based on the location and type of buildings. Populated coastal markets, such as New York, Boston, Washington, D.C. and San Francisco, viewed as prime targets, have ramped up accordingly. BOMA reports that from 2002 to 2004, security costs in New York rose from 79 cents to 95 cents per sq. ft., and in San Francisco from 51 cents to 89 cents. In Chicago and Boston security costs held steady, while in Washington, D.C. they fell from 96 cents to 69 cents.
Dennis Friedrich, president and chief operating officer for U.S. commercial operations at Brookfield Properties Corp., sees "dramatic differences" among tenant demands. For example, security measures at Brookfield's holdings at 1 Liberty Plaza and the World Financial Center in Manhattan are more rigorous than buildings in Denver and Minneapolis.
Brookfield "hardened" 300 Madison Avenue in New York City shortly after 9-11. The company reinforced structural steel columns on the outer shell to better resist car or truck bombs. Steel plates were welded over the open flanges of the H-shaped columns, producing stronger box columns. All windows on the wide lower section, or "podium," were fitted with tempered, double-paned, blast-resistant glass.
Landmark buildings viewed as targets, such as the Sears Tower and the Empire State building, now include optical turnstiles that only permit one person to pass at a time and prevent tailgating. Many new buildings are constructed with elevator lockouts, which only allow elevator riders to exit at a specified floor. Class-A tenants expect the most. "We haven't seen such big changes in B and C buildings, where smaller tenants may occupy less than 5,000 sq. ft.," says Friedrich.