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Pandemic, Shifting Markets Creating Risks, Opportunities for Capital Markets

originally published by JEFF ZBAR for NAIOP National

Capital Markets

While some assets in the real estate market have been jolted by pandemic-related fallout, some investors, managers, and property owners will look back on the COVID-19 era as the “golden era” of real estate investment.

While some sectors have struggled, like office and retail, certain sectors have seen tremendous growth. Managers with operational expertise with the right property type have found success.

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Automation and Digital Transformation in CRE

originally published by  ROCHELLE BRODER-SINGER for NAIOP National

Tech Pictures

Commercial real estate and construction have been notoriously slow to adopt new technologies. But digital transformation is coming to the industry. At CRE Converge 2021 in Miami Beach, experts discussed how several new technologies are affecting developers, builders, and owners:

Reality capture

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Alternative Means and Methods for Maintaining Project Momentum

originally published by BRIELLE SCOTT for NAIOP National

Contractor Pic

The post-pandemic construction boom has taken many forms. E-commerce and big box retailers are developing across the country, while at the same time, construction projects that were postponed during the pandemic have resumed. However, the lack of workforce at manufacturing facilities last year combined with the high demand for materials have led to price increases and lead-time delays.

In a session at CRE.Converge this week, a panel of experts led by Bill Finfrock, president, FINFROCK, shared some of the strategies used in construction to keep projects moving forward despite these challenges.

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Build-to-Suit vs. Spec: Which Building is Right For a Specific Company?

originally published by K.J. Jacobs for NAIOP National

Building Pic

Businesses that are young and growing might lean toward spec; older, established firms could favor build-to-suits.

When it comes to choosing the right building, there are several questions an organization must ask itself. Is the company at a place where it can invest in a building that will attract prospective employees? Is the company looking for a more temporary or flexible workplace? Is the facility able to support the organization’s needs for production, research, collaboration or innovation? 

Since each company’s requirements, goals and operations are unique, as are each facility’s offerings and characteristics, the answers will vary depending on who’s asking. 

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Help Needed With Survey for Economic Impacts of CRE

 

Dear NAIOP Chapter Executives:

The NAIOP Research Foundation is currently conducting a brief survey of U.S. members on development costs for office, warehouse/distribution, manufacturing and retail projects. This updated information is needed to complete the 2022 U.S. edition of the Economic Impacts of Commercial Real Estate, and we would appreciate your help promoting the survey to members who are likely to know about development costs for manufacturing and retail properties, as only a few respondents have provided information for these property types.

The survey takes about 2-3 minutes to complete, and we are now offering anyone who provides information on development costs (including those who have already completed the survey) with a $10 Amazon gift card. Please encourage members to complete the survey, either using the personalized link they received on Monday, September 20, or using this open link: https://research.zarca.com/r/hh79EQ If someone else at their firm would be better able to complete the survey or is more familiar with manufacturing or retail projects, members can send them the open link. The survey will now close on October 6.

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Communicating Effectively with CRE Community Stakeholders

Originally published for NAIOP

Building Picture

The logistics market is red-hot, but external forces are trying to cool it. A panel at I.CON West this week in Long Beach, California, addressed technical, regulatory and political challenges facing industrial real estate in Southern California, and shared recommendations for all developers working with decision-makers in their communities.

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Preparing your Commercial Property for the Market

Building Picture
Property values are soaring, and interest rates are at near-record lows. It’s no wonder many commercial property owners are considering selling their assets to take advantage of one of the strongest sellers’ markets in recent history.
Much like preparing to sell a home, commercial properties need to be appealing to potential buyers. But unlike your home, which might be improved significantly with some simple landscaping and a fresh coat of paint, commercial properties need more than just a physical facelift. They also need fiscal preparation.

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Buildings account for 39% of global greenhouse emissions — that could be an opportunity for investors

Originally written by Karen Gilchrist on September 17th, 2021 for CNBC.

Investing in sustainable buildings could offer a real solution to reducing emissions in one of the world’s most polluting sectors, said Taronga Ventures, an investment firm focused on sustainable innovation and tech.

Buildings currently represent 39% of global greenhouse emissions, according to U.N. data. Almost one-third (28%) of the global total is the result of running buildings — referred to as operational emissions, while 11% comes from building materials and construction.

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Four Challenges in Industrial Real Estate Today

Digital Industrial Pic
Originally published for NAIOP
A panel of experts took on the biggest challenges in industrial real estate in the closing panel of the first day of I.CON West 2021, held this week in Long Beach, California. From supply chain stressors to volatile pricing to labor shortages and building design, the issues seem bigger than ever for commercial real estate’s hottest sector. Here’s what these industrial leaders had to say on these topics:
  • Supply chain challenges
  • Spikes in Rent and Demand
  • Building Design and Location
  • Predicting the Future

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New Report: Industrial Space Demand Forecast

Industrial Space Demand Remains Strong 

Demand for industrial real estate continues to be strong as the long-term trend toward e-commerce (and away from in-store sales) continues with no end in sight. With nearly 100 million new square feet delivered nationally since the beginning of the year, 450 million square feet currently under construction and another 450 million planned, the demand for industrial real estate still outpaces supply.1

Because of this, authors Dr. Hany Guirguis and Dr. Michael Seiler forecast that the total net absorption in the second half of 2021 will be 162.6 million square feet with a quarterly average of 81.3 million square feet. In 2022, the projected net absorption is 334.6 million square feet with a quarterly average of 83.6 million square feet. An improvement in the outlook for the economy in 2021 and 2022 is behind the upward revision of the 2022 forecast. For example, the real GDP growth rate is now forecast to be 7% in 2021, above the previous forecast of 5% growth. As economic growth is projected to revert toward long-term growth rates in 2023, net absorption in the first half of the year is forecast to be 160.5 million square feet, for a quarterly average of 80.2 million square feet. 

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New Report: Industrial Space Demand Forecast

Originally published by Hany Guirguis, Ph.D., Manhattan College and Michael J. Seiler, DBA, William & Mary in August 2021

Industrial Space Demand Remains Strong 

Demand for industrial real estate continues to be strong as the long-term trend toward e-commerce (and away from in-store sales) continues with no end in sight. With nearly 100 million new square feet delivered nationally since the beginning of the year, 450 million square feet currently under construction, and another 450 million planned, the demand for industrial real estate still outpaces supply.1

Because of this, authors Dr. Hany Guirguis and Dr. Michael Seiler forecast that the total net absorption in the second half of 2021 will be 162.6 million square feet with a quarterly average of 81.3 million square feet. In 2022, the projected net absorption is 334.6 million square feet with a quarterly average of 83.6 million square feet. An improvement in the outlook for the economy in 2021 and 2022 is behind the upward revision of the 2022 forecast. For example, the real GDP growth rate is now forecast to be 7% in 2021, above the previous forecast of 5% growth. As economic growth is projected to revert toward long-term growth rates in 2023, net absorption in the first half of the year is forecast to be 160.5 million square feet, for a quarterly average of 80.2 million square feet. 

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Lessons in Mitigating Risk on a Megaproject

Originally published in NAIOP's Development Magazine Spring 2021 Issue by Ann Moore.

Waterfront development in California used multiple strategies to get off the ground.

Megaprojects can transform landscapes, improve quality of life and deliver significant economic benefits to their communities. When they are sited on a waterfront in a binational urban area, they take on even more complexity. In Southern California’s San Diego County, a megaproject will transform a formerly blighted stretch of waterfront into a thriving destination. The project team is pursuing innovative ways to reduce the risk that could be instructive to other development teams. 

A megaproject is defined by its scale and complexity. Typically costing $1 billion or more, such projects take many years to develop and build, involve multiple public and private stakeholders and impact millions of people, according to the Oxford Handbook of Megaproject Management. A considerable upside also brings great risk, which must be managed to improve the chances of success. 

On approximately 535 acres, the Chula Vista Bayfront is larger than Disneyland and one of the last significant large-scale waterfront development opportunities in Southern California. Once defined by a power plant and an aerospace factory, this brownfield waterfront is ripe for redevelopment in the U.S.-Mexico border region of 6.5 million people. The location is about a 15-minute drive from the busiest land border crossing in the western hemisphere. More than 100,000 people cross the San Diego-Tijuana, Mexico, border every day. Thus, the project site can target a market that includes U.S. citizens, Mexican nationals, and travelers using airports in San Diego and Tijuana. 

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Measuring the Impact of Smart Building Technology Investments

Originally published by Marta Soncodi for NAIOP's Spring 2021 Issue.

A new ratings system quantifies how effective they are across several important criteria. 

Investing in smart building technology may not be seen as a priority after commercial real estate investments were hit especially hard in 2020. However, if improving tenant experience was being considered before the pandemic, it’s now an imperative.

Why should commercial real estate owners consider investing in smart building technology upgrades? Based on research and industry analysis, fully integrated smart systems can increase building efficiency, optimize facility operations, improve occupant safety, security and wellbeing, and enhance end-user preferences. And, in light of the pandemic, stakeholders — commercial real estate companies, building owners, managers, and tenants — should examine the competitive advantages of smart building technology. 

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2020 NAIOP NC Project of the Year Winner: Optimist Hall & The RailYard at South End

Originally published by Pat Fogleman, Executive Director of NAIOP North Carolina on August 25, 2020.

NAIOP North Carolina comprised of NAIOP Charlotte, NAIOP Piedmont Triad, and NAIOP Raleigh Durham, is recognizing our 2020 project winners. NAIOP is proud to recognize projects that positively influence our communities and industry in North Carolina.

The winning projects will be officially announced during an upcoming NAIOP NC webinar this September. The award presentation was initially scheduled to be held at the 2020 NAIOP NC conference at Pinehurst in March but due to COVID-19 the conference has been rescheduled to March 2021 at which time we will again recognize our 2020 winners along with our 2021 winners.

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View NAIOP NC Award Winners 

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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Apply for NAIOP’s National Forums Program

The National Forums program brings together industry professionals in select groups to share industry knowledge, develop successful business strategies and build strong relationships in a confidential and non-competitive setting. Learn more about this unique opportunity and apply for appointment today. 

The Forums provide a unique opportunity for members to openly discuss project challenges, business opportunities and lessons-learned in a confidential and non-competitive setting. Over time, fellow members become a trusted circle of advisors.

The National Forums are an excellent way to become involved, stay in touch and develop new connections with key industry leaders.

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Preparing for a New Normal in Commercial Real Estate

Originally published on June 5, 2020 by Shawn Moura, Ph.D. 

The coronavirus pandemic has accelerated social and economic changes that were underway before the outbreak, while also leading consumers, workers and employers to adopt new preferences and behaviors. Collectively, these changes will require that commercial real estate firms adopt new approaches to design, customer relations and business operations to be successful in the future. Christopher Lee, founder and CEO of CEL & Associates, offered his predictions for how the outbreak will reshape demand for commercial real estate in the U.S. and outlined steps that firms can take to remain competitive during a recent NAIOP webinar.

Lee observed that the commercial real estate market is currently about halfway through a downturn. Although the Federal Reserve’s intervention in credit markets and fiscal stimulus measures have mitigated some of the outbreak’s effects on the economy, “all of that is going to burn off fairly soon unless another economic stimulus comes forward.” Substantial economic uncertainty and fears about the coronavirus have paralyzed decision-making in most markets. Buyers are concerned about the pandemic’s effects on building revenues and expenses as well as potential liabilities from infections, and some may no longer be able to secure favorable financing for an acquisition. Sellers are uncertain whether they should sell now or wait out the pandemic, and are unsure whether they will have good options for investing the proceeds of a sale.

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Integrating WELL into Industrial Properties

Originally published by Heath Abramsohn in the Spring 2020 Issue

The Rockefeller Group Logistics Center in Piscataway, New Jersey, opened in October 2019. It marked the culmination of four years of collaboration between Piscataway Township, Middlesex County and the companies involved with the project. With five buildings totaling 2.1 million square feet across 228 acres, the effort transformed a former brownfield site into a productive asset that should create more than 1,500 permanent jobs.

However, for the commercial real estate industry, an especially newsworthy aspect of this $250 million project could be the introduction of a concept that has the potential to revolutionize the way developers and users approach industrial space.

One of the park’s five buildings will not only be LEED Platinum but will go a step beyond by seeking WELL certification. Once certification is complete, it will be only the second WELL-certified U.S. industrial building, and the first such building in the world to achieve both LEED Platinum and WELL certifications. That means that the facility is not only energy efficient and environmentally friendly; it is also healthy for the people who work there.

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Upcoming Webinar: What’s Next for the Dynamic Industrial Market?

Whether you are developing, investing or brokering industrial real estate, you know the product has been hot and continues to expand. E-commerce, last-mile delivery, two-story urban distribution centers and more continue to shape all aspects of the multifaceted industrial market.

Join NAIOP on Monday, April 20th and get the inside track on upcoming opportunities in the sector with Dr. Hany Guirguis, Professor, Economics & Finance, Manhattan College and Dr. Tim Savage, Clinical Assistant Professor, NYU SPS Schack Institute of Real Estate. They will provide insights and data from the new NAIOP Industrial Space Demand Forecast, identify linkages between overall economic activity and the demand for industrial real estate, and engage in a live Q&A session with attendees.

Industrial Intensification Grows Up

As e-commerce and technology push industries to evolve, businesses are placing greater importance on integrated workspaces. These are places where design, manufacturing, distribution and showroom activities occur within a single building.

At the same time, companies must deal with land supply constraints, increases in space demand, and economic and population growth. These trends are driving new opportunities for industrial lands intensification, such as multilevel developments (sometimes referred to as “vertical” or “stacked”), while challenging old planning regulations.

Industrial properties are no longer single-story buildings located on the urban fringe. New forms of industrial intensification provide more space for companies to expand and boost employment growth within communities.

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