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NAIOP June Coronavirus Impacts Survey: Operating Conditions Improve but Developers Grapple with Supply Shortages

Originally published on July 9, 2021 by Shawn Moura Ph.D. for NAIOP E-Newsletter.

In June, NAIOP conducted its eighth survey of its U.S. members on the impacts of COVID-19. Since April 2020, the association has examined the pandemic’s effects on commercial real estate and how firms have responded. Most American adults are vaccinated, and daily coronavirus case counts have plummeted in the five months since the previous survey. This has allowed a widespread return of customers to restaurants and retailers, and most observers now expect that office occupancy rates will rebound in the fall when schools re-open for in-person instruction. 

Respondents to the survey report a strong recovery in retail property rent collections, as well as retail property acquisitions and development activity, alongside continued favorable trends for industrial, office and multifamily properties. Less than one-quarter of respondents now expect the pandemic to significantly affect their business operations for more than a year, and respondents are much more optimistic about employment within their own firms than in previous surveys. 

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COVID-19 Creates a Downshift in Parking Demand

Originally published in the Spring 2021 Issue by Jennifer LeFurgy, Ph.D. for Development Magazine.

Large revenue shortfalls will accelerate technological advances, conversions and design innovations. 

Quarantines and business shutdowns fueled by the COVID-19 pandemic have led to a dramatic decrease in parking demand. Subsequently, many sectors of the economy that depend on parking revenue are facing budget shortfalls this year.

Spothero.com reported in 2020 that the parking industry saw parking volumes in many areas fall by up to 97%, resulting in job losses and furloughs for 50% of the industry’s workforce. Commuter lots had a 50% to 70% reduction in use, while visitor lots saw up to a 95% drop from the same time the previous year, according to a survey by Smarking, a parking software company. 

Municipalities are scrambling to recover not only lost parking income but also a dramatic reduction in revenue from fees and fines. A 2019 CarRentals.com survey of parking data for 16 major U.S. cities found that they collected a total of $1.4 billion in annual parking ticket revenue. In 2019, Chicago issued 2.06 million parking tickets. Through June 30 of 2020, the city gave out less than 500,000. New York City projected that it would lose $600 million in parking revenues in 2020.

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How Has COVID-19 Accelerated Dining Trends?

Originally published by Gary Tasman on March 30, 2021, for NAIOP.com.

If nothing else, 2020 taught us that we can all adapt to changing conditions and learn how to navigate through radical shifts in how we function day-to-day. This is the case not only for individuals and families but also for businesses. Millions of business owners and managers were forced to radically reinvent their business models to remain solvent during the COVID-19 crisis. This is especially true of the restaurant industry, which is rapidly accelerating new and pre-existing trends.

Stay-at-home regulations, social distancing, and public apprehension have forced restaurants to shift their models significantly to focus on delivery and carry-out to stay profitable. Fortunately for many establishments, this quick-service restaurant trend had already emerged pre-pandemic. Restaurants that had already embraced this shift were better positioned to weather the storm produced by COVID-19.

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The Vaccines are Here. What Happens Next?

Originally published  by Trey Barrineau for NAIOP Spring 2021 Issue

The rollout of immunizations to defeat COVID-19 has enormous implications for the commercial real estate industry.

In late 2020, the U.S. and other countries began distributing vaccines to control the COVID-19 pandemic. It is the single most important development in the year-long fight against the disease, which has killed and sickened millions around the world and crippled the global economy.

The stakes are high. The vaccines will not only save lives and boost the morale of hundreds of millions who have been forced to live constrained lives due to lockdowns and other public health measures; experts say they are also the most important factor in the overall economic recovery from the pandemic. The commercial real estate industry has been hit hard by the pandemic, particularly the retail, office, and lodging sectors.

“If we get 70% to 85% of the country vaccinated by the end of the summer, I believe by the time we get to the fall, we will be approaching a degree of normality,” Dr. Anthony Fauci, the chief medical advisor to President Biden, said in late January. “It’s not going to be perfectly normal, but one that I think will take a lot of pressure off the American public.”

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Senate Passes COVID Relief Bill

Originally published on March 9, 2021, for NAIOP E-Newsletter.

Over the weekend the U.S. Senate passed the $1.9 trillion pandemic relief package backed by President Joe Biden on a partisan vote of 50-49, with all Republicans present voting against the measure. Republican Sen. Dan Sullivan of Alaska was not present due to a family emergency. As a result, Senate Democrats did not need a tie-breaking vote to be cast by Vice President Kamala Harris.

The Senate made some modifications to an earlier version of the American Rescue Plan that had been passed by the House of Representatives, most notably omitting an increase in the minimum wage to $15 an hour that had been a controversial element in the House-passed bill. The House must now pass the bill with the Senate changes, which is expected this week. Democratic leaders want to get a final bill to Biden before March 14, the date when enhanced unemployment benefits expire.

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Reg Rates Increase Tomorrow! Register Today for the March 10 Political Event

Insights from Both Sides of the Aisle
March 10, 2021 | 9:00 AM - 10:00 AM EDT

Registration Rates Increase Tomorrow (Wednesday, 3/3)


Next week, hear exclusive insights on the current political climate at the state and federal levels from renowned political strategy consultants, Brad Crone (“The Democrat”) and Chris Sinclair (“The Republican”). Find out what both sides have to say about the changing real estate landscape, the new administration, and what key issues are impacting our state and industry. Submit questions for the speakers in advance here

This event is hosted by NAIOP Charlotte. All NAIOP NC members as well as nonmembers are invited to participate.

Our Speakers

Brad Crone
Campaign Connections
Brad Crone, 51, is president of Campaign Connections, a Raleigh-based consulting firm specializing in public affairs, public relations, and grassroots campaigns for trade associations, advocacy groups, and corporations. A North Carolina native, Mr. Crone has been providing governmental affairs and public relations consulting services since creating his firm in 1991. Prior to that, he was a daily newspaper publisher at The Thomasville Times in Thomasville, N.C. He was the first desktop newspaper publisher in the state with his weekly publication The Clayton Star, which he sold in 1989. Read more.






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Could COVID-19 Pandemic Spur Changes in Parking Minimums?

Originally published in the NAIOP Source E-Newsletter on February 18, 2021.

Dusty parking codes and parking minimums have contributed to the creation of between three and eight parking spaces per car in the U.S., cost real estate developers untold billions of dollars, and caused gridlock in urban centers. But now, these decades-old rules may be in for a dramatic overhaul as parking demand drops as much as 90% in many areas of the country, and municipalities and businesses consider these empty spaces for other uses.

Traditionally, municipalities have not allowed the cost burdens of “free parking” placed on developers to sway parking policy, according to Christine Banning, IOM, CAE, president of the National Parking Association, writing in the Spring 2019 issue of Development magazine. What could now change these parking minimums is the need for cities and towns to convert parking spaces into other uses, such as outdoor dining spaces, in an effort to save these small businesses. Residents, eager for lunch or dinner out with family and friends, are backing these changes.

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Biden and Commercial Real Estate: 4 Intersections to Watch

Originally published on November 9, 2020, by Tom Acitelli for the Commercial Observer.

The incoming Biden administration‘s decisions on a range of issues could impact the commercial real estate market and industry directly. Here are the four areas to watch as the former vice president transitions to the presidency this winter.

The pandemic

The coronavirus pandemic is by far the biggest challenge that commercial real estate faces. The virus has emptied offices and hotelscaused a spike in loan delinquencies and a drop in real estate investment trusts’ stock performancestanked leasing and sales; and banged perhaps the loudest death knell yet for brick-and-mortar retail. Until the coronavirus is under control, industry analysts, owners and brokers say a return to (a new) normalcy in the market and the industry is out of the question.

President-elect Biden is vowing a much more direct federal attack on the virus. President Trump in the closing days of his campaign said repeatedly that the nation was “rounding the turn” on the pandemic. The country has instead recorded more than 90,000 new coronavirus cases a day since Nov. 4, the highest figures of the pandemic.

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Analyzing the Current and Future Impacts of COVID-19 on CRE

Originally published on November 16, 2020, by Linda Strowbridge for NAIOP's Blog

In “Midyear Economic Impacts of COVID-19 on the U.S. Commercial Real Estate Development,” commissioned by the NAIOP Research Foundation, Stephen S. Fuller, Ph.D., professor emeritus at George Mason University’s Schar School of Policy and Government, detailed changes in different commercial real estate sectors and described how CRE could drive the recovery of the U.S. economy.

We asked him for further insights on what the government could do to facilitate growth in commercial real estate and what factors could influence the pace and strength of the recovery of the U.S. economy. 

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Construction Uncertainty Continues as Pandemic Persists

Originally published by Ken Simonson in NAIOP's Fall 2020 Issue.

The outlook remains hazy as COVID-19's broad impacts disrupt the country.

After more than six months of pandemic-related turmoil, there is no sign that the outlook is getting clearer for construction spending, labor, or materials cost and deliveries. Additionally, the back-pedaling in states that had reopened has made the uncertainty about the future even greater.

Like many sectors, construction experienced enormous upheavals in the spring. After employment reached a 13-year high of 7.6 million in February, the industry lost more than 1 million jobs during the next two months. The industry added back 611,000 jobs in May and June as construction firms made rapid use of Paycheck Protection Program loans to recall furloughed workers and restart projects in states and cities that ended shutdown orders. Despite the rebound, total construction employment in mid-June (the monthly employment counts are based on the payroll period covering the 12th of each month) was nearly half a million jobs shy of the February level.

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COVID-19 Challenges: Approaching a Mortgage Lender for Help

Originally published by Trey Barrineau on September 22, 2020  in tNAIOP Summer 2020 E-Newsletter.

The COVID-19 crisis shut down many businesses, reducing cash flows for building owners, and creating challenges in paying mortgages. Lenders are offering forbearance agreements and other loan modifications to borrowers so they can avoid defaults, but what is involved? Development magazine details important advice for borrowers who own buildings where tenants are in trouble.

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BREAKING: North Carolina Moves to Phase 2.5

Originally published in the Real Estate & Building Industry Coalition (REBIC) Newsletter on September 1, 2020.

North Carolina’s new ‘Phase 2.5’ starts Friday at 5 p.m.

  • Indoor fitness facilities and bowling alleys can open at 30% capacity
  • Museums can open at 50% capacity
  • Playgrounds allowed to open
  • Mass-gathering limits raised to 25 indoors, 50 outdoors

Places that still remain closed include:

  • movie theaters
  • night clubs
  • amusement parks
  • bars

The order announced today has no effect on restaurants, which are at 50% capacity, or schools, which are mostly online.

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Registration is Open! Post-Pandemic Economy Trends and Tangents is on October 20

Tracking Trends and Tangents as We Reimagine
Our Post-Pandemic Economy (and Lives)

Tuesday, October 20, 2020 | 9:00am - 10:00am


As COVID continues to take a toll on the world, come learn about real estate repurposing, relocating people and companies, reshoring, remote everything, robots, ROI, and rising risk during this virtual event on the state of the economy and gain insight into what it will now look like over the next couple of years. Submit questions in advance here.

Our Presenter

Ted Abarnathy PhotoTed Abernathy is the Managing Partner of Economic Leadership LLC, a consultancy that is currently working in more than a dozen states to develop economic and workforce strategies. Ted has 35 years of experience in directing economic development and workforce development programs. From 2008-2013, Ted was the Executive Director of the Southern Growth Policies Board, a 42-year old public policy think tank that provided economic development research, strategy, and marketing advice, to states and communities across the South. He also served as an economic development policy advisor to the Southern Governors Association. Read More.

Event Sponsor Opportunity

 
Increase your company visibility and bring more people! Receive five (5) registrations for $150 plus be recognized on the event webpage, on event email promotions, and during the event. Click here to confirm today!
 

Registration

 
Registration for members is $25 and $35 for non-members through October 15. Beginning October 16, the registration fee will increase to $35 for members and $45 for non-members. Prior registration is required. Zoom details will be sent 24 hours in advance of the event.
Click Here to Register

 

Questions

 
If you have questions about the event, please contact the NAIOP Charlotte office at [email protected]
 

NAIOP August Coronavirus Impacts Survey Suggests Continued Gradual Improvement for CRE

Originally published by Shawn Moura Ph.D. on August 27, 2020.

Last week, NAIOP conducted its fifth monthly survey of its U.S. members on the impacts of COVID-19. Since April, the association has examined the pandemic’s effects on commercial real estate and how firms have responded. Respondents to the survey report continued, gradual improvement in rent collections, deal activity and conditions for ongoing development projects. However, their expectations for the duration of the pandemic remain virtually unchanged since July. 

The survey was completed by 210 NAIOP members between August 17-20, 2020. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders and investors. 

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The Impact of COVID-19 on CRE Capital Markets

Originally published by Tejaswi Ponnada Parker on August 28, 2020.

The second-quarter contraction in commercial real estate (CRE) capital markets evokes memories of the significant liquidity and price discovery challenges encountered during the global financial crisis (GFC). However, the two crises share little else in common, at least up to this point. While the GFC indiscriminately impacted volumes and pricing across commercial property types as a result of the significant financial market stress, the impact of the pandemic on capital markets thus far has been more selective, widening the gulf between “winner” and “loser” property types. We begin with a brief overview and then dive into a cross-sectional and time-series comparison at the aggregate sector, sub-sector, and market level, in a bid to identify trends and understand investor risk sentiment.

Second-quarter 2020 volumes per Real Capital Analytics (RCA) reported the steepest year-over-year (YoY) decline in any single quarter since the GFC recovery. Over the last 10 years — the longest economic expansion in U.S. history — annual deal volumes steadily increased. They first peaked in 2015, a record year of deal-making for large-scale portfolio and entity-level transactions, before reaching an all-time high[1] of $592 billion in 2019. Transaction volume is often a barometer of liquidity in capital markets—and individual, portfolio and entity sales all reported a steep contraction in the second quarter this year. But how does liquidity today compare with that observed during the GFC, and more importantly, are these trends here to stay?

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Force Majeure During a Pandemic: What You Need to Know

Originally published by Grace Winters and Timi Anyon Hallem in NAIOP's Summer 2020 Issue

It’s crucial to review contracts during uncertain times.

As global markets, economies and governments marshal their resources to respond to the COVID-19 pandemic, real estate professionals must assess their options to address and absorb the impact. A critical and time-sensitive activity is analyzing the force majeure provisions in important agreements and preparing to make creative arguments to achieve the most favorable outcomes.

What is Force Majeure?

A well-written force majeure provision broadly excuses nonperformance of contractual obligations when there are unavoidable events outside the party’s control that were not reasonably foreseeable, either when the contract was written or in the exercise of due care. Typical clauses include “acts of God” (such as earthquakes, floods or other natural disasters), actions — or inactions (such as unanticipated governmental action, delay or restraint, terrorism and wars), and usually some version of a catch-all provision referring to “other events outside of the control of the parties.” Many force majeure provisions specifically exclude increases in the cost of labor, fuel or materials; labor shortages; economic hardship; and transportation delays, unless they are affecting a wide area beyond the property in question.

 

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US Federal Reserve Changes its Approach; New Reports on Climate Change and Opportunity Zones

Originally published in the NAIOP E-Newsletter on September 1, 2020 

The Federal Reserve last week announced it was ending its longstanding practice of preemptively hiking interest rates to stave off inflation. Chairman Jerome Powell said the central bank would instead focus on maintaining low levels of unemployment, even if it comes at the expense of higher prices for consumers. The Fed is expected to maintain its benchmark rate – which was cut twice back in March in response to the COVID-19 pandemic – at near-zero percent levels for the foreseeable future. 

Over on Capitol Hill, Senate Democrats are out with a new report. Called The Case for Climate Action, it recommends trillions of dollars in investments to cut greenhouse gas emissions and reach net-zero emissions by 2050. In terms of buildings in the commercial and industrial space, it highlights options for “decarbonizing everything,” but the plan is far less specific than the one released in July by House Democrats. Sen. Brian Schatz (D-HI), who chairs the select committee that published the paper, said many of the recommendations are intentionally open-ended in order to “maintain flexibility going into the next Congress.” 

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NAIOP’s July Coronavirus Impacts Survey Results: CRE Continues to Recover

Originally published by Shawn Moura Ph.D. on August 3, 2020.

Last week, NAIOP conducted its fourth monthly survey of its U.S. members on the impacts of COVID-19. Since April, the association has examined the pandemic’s effects on conditions in commercial real estate and evaluates how firms have responded. The July survey results reveal that commercial real estate fundamentals are improving, but that the pandemic continues to impact development projects and appears likely to remain a significant challenge for longer than many had initially expected.

The survey was completed by 347 NAIOP members between July 15-20, 2020. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders, and investors.

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Washington Responds to COVID-19

Originally published by Aquiles F. Suarez, Toby Burke , and Alex Ford for NAIOP's Summer 2020 Issue

Congress and the Federal Reserve took unprecedented action to shore up businesses, including commercial real estate.

As the COVID-19 pandemic began to shut down the economy, lawmakers in Washington responded, reaching agreements on several bills intended to help the country survive the economic chaos caused by the pandemic. Congress passed three relief bills in March, and the House passed a fourth bill in May that was headed for further negotiations with the Senate.

“Phase I” was H.R. 6074, the Coronavirus Preparedness and Response Supplemental Appropriations Act, signed March 6. It provided approximately $8 billion in additional funding to federal health agencies and eased regulations to allow for over-the-phone consultations between Medicare recipients and their health providers. The bill also empowered the Small Business Administration (SBA) to issue an Economic Injury Disaster Loan declaration, which makes loans of up to $2 million available to small businesses.

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Amazon Could Provide a Peek at Industrial’s Post-COVID Future

Originally published in NAIOP's Summer 2020 Issue by Ed Kimek, AIA, NCARB

The e-commerce giant understands how to connect products and consumers.

Commerce was changing before the outbreak of COVID-19, from the exponential trajectory of e-commerce, to the growth in consumer demand for more immediate goods, to the rise of urban industrial development to fulfill last-mile needs.

The unknowns of this novel virus have accelerated that change to a tipping point. The structures of commerce, and the development that supports it, may be altered for good. This crisis is proving the necessity of a resilient supply chain.

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