Filtered by category: Industry Clear Filter

The Impact of the Federal Reserve Rate Cuts on Commercial Real Estate Markets

Originally published on September 26, 2024, by Morris Davis, Ph.D. for NAIOP.

Citing progress on inflation and the balance of risks, last week the Federal Reserve announced rate cuts of 0.5%, to 4.75% to 5%. Can we expect additional cuts from the Federal Reserve and when, and how would these cuts impact commercial real estate markets?

How deep are the cuts? 

According to data from the Fed, on Sept. 20, Treasuries were trading as follows: 

  • 1-month Treasury           4.87%
  • 3-month Treasury           4.75%
  • 6-month Treasury           4.43%
  • 1-year Treasury                3.92%

After some math, we can use these yields to compute market participants’ beliefs on future Fed actions as follows:  25bp rate cut on Nov. 7, 50bp rate cut on Dec 18. and 75bp rate cut on March 19. In sum, markets are expecting the Fed to cut rates by 1.5% over the next 6 months, and if that occurs, the Fed funds rate will fall from 4.75% to 3.25%.

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Competitive Advantage through Property Tax Mitigation

Originally published on October 24, 2024 by Ginger Meurer for NAIOP.

As developers reduce every possible expense in a tight market, what are overlooked ways to improve their competitive position? Tax attorney Ben Blair, a partner at Faegre Drinker Biddle & Reath LLP, said that while you may not be able to move the building to a better location or put an intensive capital investment into improvements, you can work to lower your tax bill.

During a CRE.Converge conference presentation on property tax mitigation, Blair shared tips for making your case for property tax mitigation.

Any assessment that is based on pre-pandemic data is ripe for challenge. Assessment data is inherently backward-looking while values for income-producing properties are (and should be) forward-looking. Many municipalities are assigning higher values for properties today than pre-pandemic, which Blair said is not reflective of the economic reality.

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IRS announces tax relief for victims of Hurricane Helene in North Carolina; various deadlines postponed to May 1, 2025

Originally published on October 1, 2024, by the IRS.

The Internal Revenue Service announced today tax relief for individuals and businesses in the entire state of North Carolina that were affected by Hurricane Helene which began on Sept. 25, 2024. These taxpayers now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments.

Following the disaster declaration issued by the Federal Emergency Management Agency (FEMA), individuals and households that reside or have a business in the entire state qualify for tax relief.

Affected taxpayers with returns and payments with due dates postponed until Feb. 3, 2025, due to Tropical Storm Debby in North Carolina (NC-2024-07) will also now have until May 1, 2025, to file and/or pay.

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Plan to Widen the South Section of I-77 Encounters Some Drama

What’s happening here? Make sure you read to the end:

In an earlier edition of Two For Tuesday, we reported that the Charlotte Regional Transportation Planning Organization (CRTPO) Board had requested that the North Carolina Department of Transportation (NCDOT) prepare a comparative analysis to compare a traditional toll alongside and a Public Private Partnership (P3) delivery for additional lanes for the eleven-mile segment of I-77 running through the City of Charlotte and south to the border of South Carolina. Those results were presented by representatives of NCDOT at the August 21, 2024, Board Meeting (Agenda, Minutes - item 14, pages 5-8).   

During a recent Charlotte City Council business meeting, an update was provided by NCDOT containing highlights of its NCDOT: I-77 South Express Lanes Supplemental Report and the next steps were discussed.

Some of the details of the project along with recommendations include:

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Bonds on the Ballot

This fall, several communities within the region have referred bond measures to the voters for their consideration. Today we are highlighting two of those efforts.

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The City of Charlotte is asking residents to approve three measures related to housing, neighborhoods, and transportation.

Housing - The housing bond will invest $100 million into new affordable housing for low and moderate-income residents. The breakdown looks like this:

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Charlotte Storm Water Services Making Changes to Design Manual

Charlotte Storm Water Services has updated the draft Stormwater Control Measure (SCM) Design Manual based on feedback provided over the past year. This draft update is available and may be found at:

Stormwater Control Measure (SCM) Design Manual​ - City of Charlotte

This draft contains feedback from the previous year’s use along with an increased allowance of compliance options for individual residential lot projects.

As has been the case over the previous year, designers may ‘opt-in’ to use the draft SCM manual before its official adoption.

For additional questions please contact Andrew Poindexter, Senior Project Manager at Charlotte-Mecklenburg Storm Water Services at [email protected].

NCDOT Presents Options to Charlotte City Council on Widening I-77


Earlier this year, the Charlotte Regional Transportation Planning Organization (CRTPO) Board requested the North Carolina Department of Transportation (NCDOT) prepare a comparative analysis between a traditional toll and a Public Private Partnership (P3) delivery for additional lanes for the eleven-mile segment of I-77 running through the City of Charlotte and to the border of South Carolina. Results were presented by representatives of NCDOT at the August 21, 2024, Board Meeting (Agenda, Minutes - item 14, pages 5-8).   

During last night’s Charlotte City Council business meeting, an update was provided by NCDOT containing highlights of its NCDOT: I-77 South Express Lanes Supplemental Report and the next steps were discussed.

Some of the details of the project along with recommendations include:

  • New managed lanes/express lanes to be constructed next to existing lanes
  • 11 miles of I-77 widening
  • The project scope is I-277 to the South Carolina State Line
  • Total Project Cost: $3.2 - 3.7 billion
  • NCDOT suggests a P3 engagement is currently the only financially feasible delivery method for the construction of the project.
  • Also, crash rates for this segment of I-77 are two and a half times higher than the statewide average for urban interstates.
Last night’s meeting was informational. The City Council will likely deliberate at next week’s meeting and determine if it can make a formal recommendation to the CRTPO on moving forward with a P3 engagement for the future expansion of I-77 South. 

State Legislative Elections Affect Policy Outcomes

Originally published on October 16, 2024 by Toby Burke for NAIOP.

U.S. citizens will go to the polls on Nov. 5 to cast their votes in the 2024 election at each level of government. The outcome of this election may have an impact on the policies affecting commercial real estate, the economy, communities and families. At the state level, 44 states will hold elections for representatives within their state legislature. The significance of the outcomes of these state elections cannot be overlooked in setting policy for the commercial real estate industry.

There are 5,808 state legislative seats up for election in November, according to the National Conference of State Legislatures (NCSL). This equates to 78% of all legislative seats. Therefore, these elections should not be overlooked in setting state policies that Impact the commercial real estate industry.

According to the NCSL, Republicans currently hold 4,023 out 7,386 legislative seats and control 58 of 98 legislative chambers. Republicans control both legislative chambers in 29 states compared to 19 states by the Democrats with a divided legislature. There are also states where one political party holds both legislative chambers and governorship, also known as the trifecta of government. The pre-election trifecta is 23 Republicans and 16 Democrats with 10 divided state governments.

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REBIC Public Policy Event - CLT Water November 12th

Meet Angela Charles, Director of Charlotte Water

As the director, Angela is responsible for the county-wide water treatment and distribution, wastewater treatment and collection, utility planning, and most recently the city's stormwater system along with management activities. She leads a staff of approximately $2.46 billion. Charlotte Water maintains more than 11,000 miles of water, sewer, and stormwater pipelines, with nearly 300,000 active water connections county-wide. 

She will be updating attendees on Charlotte Water's current operations as well as sewer capacity and other relevant matters.

RSVP Now

Powering the Real Estate Investment Process with GPT

Originally published on October 11, 2024, by Ginger Meurer for NAIOP.

Generative AI is not just a tool of the future. Practical applications are already at work today in investment, acquisition, financing, asset management, debt management and more. At this week’s NAIOP CRE.Converge conference, Laura Krashakova, CEO at Smart Capital, shared insights into ways companies can use generative AI to cut costs and automate their way to peak efficiency.

While most hadn’t tried the technology a year ago, especially not in a workplace setting or to automate workflow,  she said that today adoption of generative AI is growing faster than adoption of many other significant technologies like the adoption of internet or mobile technologies.

“Already 40% of people in the U.S. use generative AI,” Krashakova said. “Of this 40%, 10% already use it every day. And this is just U.S. statistics. That’s a huge number.”

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Innovating Urban Spaces: The Future of Mixed-use Real Estate Development

Originally published on October 10, 2024 by Chanelle Hayes for NAIOP.

When it comes to mixed-use real estate development, it isn’t just a trend but a transformative force that’s reshaping our cities in today’s rapidly evolving urban landscape.

At CRE.Converge 2024 this week in Las Vegas, a panel of distinguished speakers gathered to discuss the latest trends, challenges and opportunities in mixed-use developments. The panel, moderated by Steve Smith, principal of Cooper Carry, Inc., featured Jay Curran, president of multifamily for Crescent Communities, LLC; Matt Friedman, managing director for Rockwood Capital, LLC; and Tom van Betten, vice president for Matter Real Estate Group.

Retail is a huge component of mixed-use developments, but it can be tricky, Curran said. “We aren’t retail experts, so we partner with retail experts.” Curran explained that Crescent Communities has done a fair number of mixed-use projects where the ground floor is either co-developed or owned by someone with extensive experience.

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Navigating Trends in Industrial Real Estate Development

Originally published on October 10, 2024, by Ginger Meurer for NAIOP.

The ideal industrial real estate site criteria have evolved with the economy.

“It’s power, power, power instead of location, location, location,” said Damon Austin, managing director, global head of customer-led development, Prologis. “Power from a logistics perspective, it really is more critical than ever.”

Experts who joined Austin on a panel discussing industrial real estate development trends at NAIOP’s CRE.Converge conference this week agreed. Denice Tokunaga, partner, Seyfarth Shaw LLP, moderated the conversation joined by Adam Mullen, CEO, KBC Advisors; Greg Pearson, managing director, Fortress Investment Group; and Reon Roski, CEO, Majestic Realty Co.

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NAIOP's Crowned Developer of the Year at CRE.Converge

 

NAIOP, the Commercial Real Estate Development Association, has selected Crescent Communities as its 2024 Developer of the Year – the association’s highest honor. The award was presented during NAIOP’s CRE.Converge conference in Las Vegas this month.  

“It is NAIOP’s honor to recognize the tremendous work of Crescent Communities as the 2024 Developer of the Year. Their ongoing commitment to advancing the commercial real estate industry through cutting-edge innovation and exemplary real estate development across many property sectors is impressive,” said Marc Selvitelli, NAIOP president and CEO. “Crescent Communities has demonstrated significant market resilience and adaptability, overcoming economic headwinds to deliver value consistently.”

Since 1979, the NAIOP Developer of the Year award has been presented to a development company that best exemplifies leadership and innovation in the commercial real estate industry. Crescent Communities was selected from an impressive slate of nominees and was evaluated by a team of seasoned developers on the following criteria: outstanding quality of projects and services; active support of the industry through NAIOP; financial consistency and stability; ability to adapt to market conditions; and support of the local community.

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Targeted Incentives and Key Challenges in Data Center Development

Originally published on October 9, 2024, by Marie Ruff for NAIOP.

“We’re in a really unique point in history in the sense that we have this huge demand curve for data centers at a time when we also have some constraints in power,” said Elissa Wilson, attorney, Vorys, Sater, Seymour & Pease, LLP, to begin a panel discussion on data center development at NAIOP’s CRE.Converge. “But the reason data centers are so important is they are fundamental to our modern economy. They’re fundamental to our way of life. They’re fundamental to every single transaction that happens online.”

“Every single person in this room accesses a data center in some way, shape, or form every single day, and probably every single time you use your phone,” said Tony Burkart, head of market development and economic development, at Google. Even a simple task like navigating directions to a local restaurant uses a data center.

Contrary to the perceptions of some state and local governments that data centers take up large amounts of land and power without being offset by large gains in jobs, Burkart said data center development is a catalyst for growth in economies. The primary impacts are data center construction and operations, he said, but also in the wider economy through all the different business services that are enabled using our phones and other digitized tools like AI and the cloud.

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Automation, Solar and Tools Driving Cold Storage Design

Originally published on October 8, 2024 by Kathryn Hamilton, CAE for NAIOP.

Cold storage warehouses differ from traditional buildings in more ways than just temperature, and new technologies and trends are reshaping the sector as it grows.

Vince Free, president and CEO, FREEZ Construction, moderated a panel this week at NAIOP’s I.CON Cold Storage that featured experts Jeremy Bentley, NCARB, director of architecture, United Insulated Structures; Michael Jones, AIA, president, Primus Design; and Gary O’Donnell, vice president of construction, Karis Cold.

Their conversation ran the gamut, from design and construction to automation trends to best practices in refrigeration, electrical, structural, fire protection and thermal systems and beyond.

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Defining Cold Storage: Asset Classes, Opportunities, Challenges and Forecasts

Originally published on October 7, 2024, by Kathryn Hamilton, CAE for NAIOP.

Cold storage is a collective term that encompasses multiple types of facilities, agreed on the first panel at NAIOP’s I.CON Cold Storage this week in Las Vegas. A record-setting crowd of almost 700 professionals in the sector gathered for NAIOP’s second conference on the topic.

Led by moderator Cory Singer, senior vice president, of Griffco Design/Build Inc., panelists included
Andrew Armstrong, chief operating officer, Scout Cold Logistics; Jake Finley, founder and CEO, Karis Cold; Josh Lewis, chief operating officer, RL Cold; Scott McGarity, executive vice president, Industrial, Barber Partners; and Anthony Rinaldi, founder and managing principal, Saxum Real Estate.

The four asset classes that coalesce under the common term of cold storage are:

  1. Public refrigerated warehouse (PRW), in which third-party logistics (3PL) companies operate facilities for food manufacturers and processors.
  2. Food manufacturing and food processing, where the product is leased and operated by the tenant (think companies like Kraft-Heinz and Ocean Spray).
  3. Grocery and e-commerce, where traditional grocery and food service providers distribute products.
  4. Pharma and life science, are used for medical services.
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Two Important Advisory Committees Are Seeking Members

The City of Charlotte and Mecklenburg County are seeking members to fill vacancies on two important advisory committees.

ONE

City Council action established the City’s Alternative Compliance Review Board (ACRB) as a quasi-judicial board on June 17, 2024. This board will become effective no sooner than October 1, 2024 (more likely to be confirmed in November). The ACRB provides alternative compliance for certain design regulations based on the criteria found in Articles 35.5 and 37.1 of the Unified Development Ordinance. The ACRB will approve, approve with modifications, or deny requests for alternative compliance to select standards identified in the UDO for the applicable zoning districts. If interested, please get in touch with one of the following:

[email protected], [email protected], or [email protected]

Committee Member Details

5 regular members (1 must live outside of Charlotte city limits, but within the Charlotte ETJ (extraterritorial jurisdiction)

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Weigh in on the Charlotte Area Planning Process While There’s Still Time

YOU ARE INVITED TO SHARE YOUR INPUT! Charlotte Future 2040 Community Area Planning Workshops continue this fall, and information shared at the workshops is available online through the "Supporting the Vision" Webtool.

Navigate through 5 virtual stations to learn about planned projects and available programs that will support future development. Then share your input about other needed projects and programs in your community via the surveys at the end of each page. Station topics include:

The web tool will be active and receiving input through November 15, 2024. Input received through the “Supporting The Vision” web tool will be used to develop the Charlotte Future 2040 Community Area Plans.

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Federal Reserve Dials Back Basel III Endgame Regulation

Originally published on September 18, 2024, by Aquiles Suarez for NAIOP.

On Sept. 10, in a speech given at the Brookings Institution of Washington, D.C., the Federal Reserve’s Vice Chair for Supervision Michael Barr announced that the central bank would be revising and re-proposing its bank-capital rules proposal commonly referred to as their Basel III Endgame Regulation. The regulation, first proposed in 2023, would have mandated a dramatic hike in the capital requirements on major banks and garnered intense criticism from the private sector, including from NAIOP and its real estate allies, who raised concerns about the negative impact the new regulations would have on the availability of credit for commercial real estate. In a clear victory for NAIOP and real estate, Barr made clear in his speech that the Federal Reserve (Fed) would be scaling back the regulation.

Basel III is a reference to the Basel Accords, an international standardized approach to banking regulation focused on levels of bank capital and other requirements designed to enhance the safety and soundness of global financial institutions. The Basel Committee on Bank Supervision administers the accords, and Basel III, which originated in response to the great financial crisis of 2007-2008, is the third phase of Basel. The “Basel III Endgame Regulation” is the term used to refer to the final regulation of that phase. In July 2023, the Fed, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, jointly proposed the Basel III Endgame regulations for public comment, with the intent of issuing these in final form by mid-year 2024.

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Apartment Construction Hits Historic High in 2024

Originally published on September 6, 2024, by Veronica Grecu for NAIOP.

In 2024, the U.S. is set to achieve a new milestone in apartment construction: For the first time in history, the number of apartments completed in one year is anticipated to surpass the 500,000-unit mark. Developers are on track to complete over 518,000 rental units, which marks a significant 9% increase compared to 2023 and a 30% rise from 2022.

The New York metro area leads the nation in new apartment construction in 2024, followed by Dallas and Austin. Together, these three metros are expected to account for about 10% of all new apartments nationwide by the end of the year.

Looking ahead, developers plan to bring 2 million new apartments online by 2028, despite facing uncertainties in many markets. Approximately 47% of the 369 metro areas analyzed are projected to build more apartments in the next five years than they did between 2019 and 2023.

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