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AI Applications in the Built Environment

Originally published on October 20, 2023, by Pamela Jew for NAIOP.

With ChatGPT suddenly mainstream, artificial intelligence has become a hot topic with the ability to disrupt any and every industry it touches. The commercial real estate industry is not excluded from this disruption, but the implementation of AI in the space leaves a lot yet to be discovered.

At NAIOP’s CRE.Converge conference this week, industry professionals discussed how AI is evolving and how it can change the commercial real estate industry. Ajey Kaushal, senior investment associate, JLL Spark Global Ventures led a conversation with Todd Huebsch, vice president, Yardi Systems Inc., David Knight, chief architect, Dealpath, and Olivier Maene, global product director, Avison Young. 

To begin, each panelist provided an overview of how their respective companies deploy AI. Huebech presented different AI solutions from Yardi, the largest software developer specializing in real estate, that it has already rolled out in 2023: chatbots, work orders, smart key and an assistant. Knight said Dealpath is questioning how much agency we give AI, and that the software company still believes in human decision-making for key decisions.

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Adopt or Adapt: Learning from Amazon’s Real Estate Approach

Originally published on October 19, 2023, by Kathryn Hamilton, CAE for NAIOP.

Amazon’s real estate strategies have stretched and been reshaped over the last decade as the company – like every retailer – strives to expand its reach and get closer to the consumer. The largest developer of industrial real estate in the world, the company has always leaned into the innovation and partnerships that fuel its corporate culture and deepen its impact.

At NAIOP’s CRE.Converge conference this week in Seattle, Amazon Vice President for Worldwide Real Estate Daniel Mallory sat down for an in-depth chat in front of an audience of 1,500 commercial real estate leaders. Jean Kane, former CEO of Colliers International-Minneapolis St. Paul and the incoming chair of the NAIOP Research Foundation asked Mallory about his perspectives on everything from the company’s sustainability efforts to today’s market challenges to future workforces and beyond.

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Industrial Real Estate and the North American Supply Chain Revolution

Originally published on October 20, 2023, by Logan Nagel for NAIOP.

Industrial real estate might have been one of the strongest-performing property types out there in recent years, but it is far from immune to change. During the panel “Industrial Real Estate and the North American Supply Chain Revolution,” held at NAIOP’s CRE.Converge conference in Seattle this week, Chad Griffiths, MBA, SIOR, partner and associate broker at NAI Commercial Real Estate, spoke with Matt Carroll, senior associate at Avison Young, about what’s in store for industrial properties in the coming years.

The background to modern-day industrial real estate is an ongoing dialogue about globalization versus deglobalization as the pandemic fades into the rearview mirror, Carroll said. There are proponents of manufacturing overseas and supporters of manufacturing in North America, as well as a paradigm shift from optimality toward optionality. “Optimality was … ’I want to be as efficient and low in cost as possible,’” he said. “And as we come out of the pandemic era, what you hear a lot of people talking about is having optionality…’If I can’t move all of my manufacturing back to the U.S., I want to least have the option to mitigate my risk by having the presence of manufacturing on this side of the hemisphere.’”

Another transformative force the panelists discussed was a recent rail merger, the acquisition of Kansas City Southern by Canadian Pacific. The merger will result in the first trans-American rail line linking Mexico, the U.S., and Canada, which Carroll described as like a tree with roots in Mexico. Griffiths said developers should consider opportunities for intermodal yards, airports and other industrial properties along the “trunk” of that tree.

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Trends and Considerations in Adaptive Reuse

Originally published on October 20, 2023, by Logan Nagel for NAIOP.

Low occupancy across the office sector as well as high demand for housing has many real estate development professionals asking whether adaptive reuse of commercial buildings may be an option to add supply during the housing crisis. A NAIOP CRE.Converge conference panel in Seattle this week investigated that very question, focusing on a successful conversion case study in Alexandria, Virginia, as well as exploring what it takes to get conversion projects across the finish line. 

Completed in 2020, The Foundry transformed an underutilized federal office building into a mixed-use residential property. It sold in 2021 for $262 million, after the developer paid $50 million for the property and $150 million in construction, design, and carrying cost. The sale was CoStar’s 2021 Deal of the Year. Office conversions give developers a number of benefits: they can provide opportunities in attractive markets with limited available open space while saving time and money compared to ground-up construction. At the same time, they also present their own challenges, particularly around layout and structural considerations.  

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Huntersville Mayoral Candidates Forum to be Held October 20th

 

The Charlotte Observer along with Neighborhood TV and WSOC will be hosting a Huntersville mayoral forum on Friday, Oct. 20th.  This year Huntersville will elect a new mayor in November to guide the town in the coming years. Incumbent Mayor Melinda Bales is not running for reelection, leaving an opening for newcomer candidates Dan Boone, Christy Clark and Derek Partee.  Hear all three talk about issues facing Huntersville and answer questions at a forum discussion on Friday, Oct. 20 at 11 a.m. at Red Rocks Cafe in Birkdale Village, 8712 Lindholm Dr, Huntersville, NC 28078.

The forum will be moderated by the Observer’s local government editor Josh Bergeron and WSOC’s Joe Bruno.  Submit any questions you think should be asked by sending an email to [email protected] with “Huntersville mayor” in the subject line.

Steps to Reduce Embodied Carbon Emissions in Industrial Real Estate

Originally published on October 17, 2023, by Nate Maniktala, LEED AP, MBA for NAIOP.

Commercial real estate leaders who are looking to reduce the greenhouse gas emissions associated with the construction of new industrial buildings can make use of new measurement tools, data and information, including from the “Embodied Carbon in U.S. Industrial Real Estate Benchmark Survey.” Now that the first article in this series covered the basics of embodied carbon emissions, where they come from, the environmental impact, and the importance of measuring the impact associated with building materials, this piece will focus on steps to achieve a lower embodied carbon footprint.

While the steps to lowering the embodied carbon footprint of a project or portfolio are simple, they are not necessarily easy:

  1. Establish a baseline by conducting an embodied carbon study.
  2. Change design standards and material tracking requirements.
  3. Build differently.
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High-tech Solutions to Keeping Chocolates Cool at an Atlanta Cold Storage Facility

Originally published on October 16, 2023, by Kathryn Hamilton, CAE for NAIOP.

A 1.5 million-square-foot cold storage facility an hour south of Atlanta sits unassumingly among farmlands and other distribution warehouse facilities containing everything from mattresses to salad dressing to office supplies. Inside its doors though, racks and rows of premium chocolates are stacked high in an international chocolate producer’s distribution facility for the Southwest.

Built by Alston Construction and operated by Geodis, the facility began as a pilot project and was leased early on by the chocolate company, which gave the company the ability to do some customization during development. Completed in 2018, the tilt panel building is insulated with 4” insulated metal panels, along with insulated overhead doors with food grade seals. It has a 60-mil thermoplastic polyolefin (TPO) roof membrane over LTTR-28 (long-term thermal resistance) insulation, with all gaps filled with closed cell spray foam.

Of the total facility, 750,000 square feet is cooled to 55 degrees, and another 150,000 square feet is lowered to a chilly 42 degrees in what’s called the “5C room,” which houses one of the other brands of the chocolate producer that is required to be stored at lower temperatures.

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NC Department of Transportation (NCDOT) to Approve Commercial Permits Through Accela

Effective immediately, NCDOT will be utilizing Accela (The City of Charlotte's Plan and Permit Platform) to approve Subdivision permits and Plats.  They are also testing out the process for Commercial permits.  For continuity and a better user experience, please submit your plans to the City through Accela and NCDOT through its existing portal.  Here are additional details:

  • Please contact the NCDOT review engineer for that area.
  • Email subject line: Include the NCDOT Permit Number and Accela number provided through the NCDOT Permit Portal to identify the project quickly.
    • Plats: Include the NCDOT-approved permit number associated with the plat.
  • NCDOT Comments: Staff comments will be through the NCDOT Permit Portal.
    • Accela plan will have a generic comment stating that NCDOT comments will be available through the NCDOT Portal.  
    • Plans must also be submitted through the NCDOT Portal.
If you have any additional questions about this new process, please get in touch with Hassan Malik, Acting District Engineer - NCDOT via email or at (980)523-0000 or (980)264-0386.

Community Area Planning

Community Area Plans provide community-level guidance for the built environment including land use, design, transportation, and open space within the city's 14 sub-geographies.

These plans complement the Charlotte Future 2040 Comprehensive Plan and are an important part of the city’s planning framework which ensures all planning efforts are aligned and aimed at implementing Charlotte’s vision for the future.

Process Overview

The Community Area Planning process includes five phases. The first four phases are scheduled to be completed from 2023 – 2024.

  • Phase 1, Setting the Stage, identified each community’s greatest needs to ensure expected growth benefits everyone. The results of Phase 1 are available in the Community Reports.
  • Phase 2, Creating Great Places, is underway. This phase will ensure future development supports each community’s priorities by reviewing and refining the Place Type designations within the Charlotte Future 2040 Policy Map. Learn more about sharing your voice in Phase 2 below!
  • Phase 3, Supporting the Vision, is scheduled to begin next Spring. Stakeholders will help identify infrastructure projects and supportive programs needed to realize the community’s vision. Be on the look out for information about virtual and in-person workshops beginning in April and ending in June. 
  • Phase 4, Planning for Action, will begin in the Fall 2024. Staff will develop a strategy for putting the plan’s recommendations into action. 
  • Phase 5, Review & Adoption, is scheduled to begin in 2025. 
Learn more about Community Area Planning

 

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Industrial Space Demand Forecast, Third Quarter 2023

Originally published by Hany Guirguis, Ph.D., Manhattan College and Michael J. Seiler, DBA, College of William & Mary in August 2023 for NAIOP.

Given current economic conditions and recent demand trends, the authors estimate that quarterly net absorption of industrial space will average 52.6 million square feet over the next two years. Total net absorption for the second half of 2023 is forecast to be approximately 104 million square feet; full-year absorption in 2024 is forecast to be around 205 million square feet; and absorption in the first half of 2025 is forecast to be approximately 111 million square feet (see Figure 1 for quarterly projections).

The Industrial Market

The industrial market remains relatively healthy, although not as strong as it was last year. After several quarters of demand for industrial space outstripping supply, the reverse has been true since the third quarter of 2022. Construction starts and transactions have slowed, reflecting higher interest rates, tighter lending standards and cooling demand. Supply and demand for industrial space appear to be converging toward a slower pace of growth that is more aligned with pre-pandemic trends.

The national vacancy rate stands at a historically healthy 3.7%, though vacancies vary greatly between different geographic markets. Port markets on both the East and West Coasts have the lowest vacancy rates, with markets in the Midwest having slightly higher rates. Average net asking rents are up 9.9% year-over-year.1 Interestingly, vacancy rates have increased slightly alongside rent growth. This reflects the delivery of new high-quality industrial space that can command higher rents. New deliveries have outpaced absorption, contributing to the uptick in vacancies. Land constraints in port markets present a barrier to new construction, contributing to lower vacancy rates and higher rents in those markets.

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CRE Sentiment Index: Growing Concern over Market Conditions

The NAIOP CRE Sentiment Index for September 2023 is 46, slightly down from the April 2023 reading, and indicating that respondents expect conditions for commercial real estate to worsen over the next 12 months

Key Findings:

  • Respondents have a negative outlook for every component that comprises the Index except for asking rents, which they expect to be slightly higher next year. However, they now expect effective rents to fall slightly more than they had predicted in April, and their outlook for occupancy rates remains negative, suggesting higher asking rents will provide little relief.
     
  • Respondents now expect capital market conditions to deteriorate less rapidly than they had predicted in April. They expect future equity availability will be almost as high as it is now, suggesting that equity flows may be close to bottoming out. Nonetheless, they still expect debt to be less available than it is now, and for cap rates to increase. In response to a question that is not used to calculate the Index, developers and building owners indicated they expect interest rates to be slightly higher than they had predicted in April.
     
  • Developers and building owners expect their own deal volume to shrink but at a slower rate than in April. Their outlook for a reduction in the dollar volume of new projects and acquisitions echoes respondents’ expectations for a slowing decline in capital availability.
     
  • Respondents still expect general industry conditions to worsen, but less than they previously expected. The score for general industry conditions (45) is calculated separately from the CRE Sentiment Index. Its continued rebound is most likely due to a less pessimistic outlook for the economy overall. Asked separately from the questions that comprise the Index, developers and building owners indicated they expect no change in local economic conditions over the next 12 months, an improvement from April.
      
  • Respondents now expect employment in their own firms to decline slightly over the next year, suggesting that deteriorating market conditions are now being felt more directly by commercial real estate firms.
View Full Report

Working with Communities: The Importance of Partnerships in Our Industry’s Success

Originally published on October 2, 2023, by Kim Synder for NAIOP.

Since assuming the position of NAIOP chair in January, I’ve had the pleasure of visiting chapters from Orlando to Milwaukee to SoCal, talking with thousands of members about current market conditions, the forces impacting our industry, and our future as an organization. Four topics have frequently arisen during these conversations, regardless of chapter location or size. These include:  

1. Community Relations. In today’s environment, it’s essential that developers fully understand the impact of their product type on the communities in which they operate, particularly regarding the types of jobs, hours of operations and the environmental impacts of their project (traffic, water, energy, etc.). Whether developing in South Florida, New Jersey, Chicago or Los Angeles, our chapters report increased anti-growth sentiment and the importance of engaging with the community early and often.

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Congress Fires Its Speaker

Originally published on October 4, 2023, for NAIOP.

At this time last week, most observers of Washington politics believed that a shutdown of federal government operations was all but inevitable, having been inundated with media reports warning of a looming fiscal crisis. The current fiscal year was set to expire at midnight on Saturday, Sept. 30, unless a temporary stopgap measure known as a continuing resolution (CR) was passed by the House of Representatives and the Senate and signed by President Joe Biden. Speaker of the House Kevin McCarthy had failed to win over a small cadre of far-right conservatives to support versions of a CR that would have funded several Republican priorities such as increased funding for border security.

With only a five-seat margin in the House, McCarthy could not pass a CR without turning to Democrats. For their part, Democrats for weeks had demanded a so-called “clean” CR – one without extraneous policy provisions that would maintain current funding levels for a period of time. As the Senate appeared to coalesce on a funding measure with higher spending levels, House Democrats shifted their preference toward the Senate version. A far-right faction within the House Republican conference, led by Rep. Matt Gaetz (R-FL), had threatened to strip McCarthy of his speaker’s gavel if he relied on Democrats to pass a CR. The conventional wisdom was that McCarthy would not risk his position and a fiscal stalemate would result.

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Growth Management Working Group: "Mooresville Moratorium is a No Go."

On April 10, 2023, the Mooresville Town Board established a working group for the purpose of evaluating and exploring the feasibility of implementing a development moratorium.  

The working group has completed its assignment and its recommendations are as follows:

  • Complete the update of the OneMooresville Plan and the UDO to better align future growth.
  • As part of the OneMooresville Plan and the UDO, identify areas with adequate infrastructure and encourage development in those areas that are walkable and provide access to other multimodal transportation choices.
  • Identify and investigate areas which are not possible to serve with existing town resources to determine if these areas qualify for a limited moratorium.
  • When the housing study is complete, integrate the findings into the UDO and OneMooresville Plan with the goal of achieving an appropriate balance of housing options.
  • Continue to investigate local transportation bonds and federal and state grant opportunities to improve intersections and other mobility options such as sidewalks, greenways, micro-transit, and expansion of the Mooresville Main bus system. Annexation decisions should include critical analysis of the ability to provide complete and adequate infrastructure and services such as school capacity, utilities, multimodal transportation, and public safety.
  • All new development project decisions should include a review of by-right and previously approved developments to determine the total impact of the project on the surrounding area.
  • Promote the implementation of the Traffic Management Center to manage current road infrastructure.
For additional information, please visit the Town of Mooresville's Growth Management Working Group web page.

Want to help?  We invite YOU to get in a room with these leaders, roll up our sleeves, and get to work helping them move forward the right way.

State to Fund Union County Water and Sewer Needs

The recently passed North Carolina State Budget contains millions of dollars for Union County to make sorely needed improvements to its water and sewer systems.  The final version contains the following funding allocations:

  • Union County Water/Sewer - $26,000,000
  • Waxhaw Greywater System - $1,500,000
  • Wingate Water/Sewer System - $12,000,000
  • Marshville Water/Sewer - $1,000,000
  • Muddy Creek Water/Sewer - $11,000,000 

These funds are significant and should assist in enabling the County and associated municipalities to meet its current and immediate future water/sewer infrastructure needs.  The bill will become effective on October 2nd as Governor Cooper has announced his intention to let it become law without his signature.  To view the State Budget in its entirety, click this link.

CRCBR 30th Anniversary Celebration

Cheers to 30 Years!
October 26 | 3:30pm-5:30pm | Goldie’s

Get ready to celebrate with industry leaders! Celebrate CRCBR’s 30th year as one of the largest and most successful regional commercial real estate associations in the United States! We are serving great food, drinks, games, and live entertainment, with chances to win incredible door prizes. Band and festivities begin at 3:30pm. This event is open to members and non-members.

Registration and Sponsorships

Event registration is open. Congratulate CRCBR or unleash business development opportunities with an event sponsorship! Questions, please email [email protected] 

Register Here

It’s Time to Bring Draw Management into the 21st Century

Originally published on September 28, 2023, by Billy Olson for NAIOP.

Construction projects have many moving parts, stakeholders and dependencies. If money doesn’t flow smoothly from lender to borrower, a project can quickly become delayed. Because construction loans are funded in increments, rather than all at once, managing draws are of the utmost importance.

One way to think about draw management is to conceptualize it as the project’s heartbeat. While there are other components to a project’s overall health, it’s difficult to imagine a project doing well if its heartbeat is off pace. But just as pacemakers exist to keep real hearts healthy, software can ensure draw management is executed seamlessly and on-schedule.

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No Guarantees for Year-end Tax Legislation

Originally published on September 20, 2023, by Aquiles Suarez for NAIOP.

Usually, at this time of year, members of Congress and advocates for industry are strategizing on how best to position their tax priorities for inclusion in a year-end tax package. In many instances, success has depended on a tax title becoming part of a massive, must-pass omnibus spending bill that comes together in December, when senators and representatives desperately want to get home for the holidays.

But this time could be different. While fighting in Congress over spending bills is nothing new, the heated politics surrounding this year’s federal government funding battle, and the resulting animosity if a government shutdown does materialize, could linger well beyond October and make reaching an agreement on a tax bill all the more challenging.

The Tax Cuts and Jobs Act (TCJA), which was passed in 2017 during the Trump administration, added various tax credits and deductions and made changes to depreciation, expensing, and other tax provisions that affect businesses. Many of these provisions have expired or are expiring in the coming years, or are being gradually phased down. Businesses would like to see them extended. Others are tax provisions that the business community wants to change. Tax provisions expiring in 2024 or 2025 are less likely to be dealt with this year, but House Ways and Means Chairman Jason Smith (R-MO) has introduced legislation restoring and extending provisions that have expired this year and revising some unexpired provisions based on industry input.

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Examining the Impact of Embodied Carbon in Industrial Real Estate

Originally published on September 19, 2023, by Julia Wattick for NAIOP.

Every industry is being challenged to reduce greenhouse gas emissions, especially with the U.S. government’s commitment to combat climate change and increase funding for these efforts. The construction industry has a considerable impact on global greenhouse gas emissions primarily due to its significant contributions to operational and embodied carbon, accounting for 28% and 11%, respectively, of total emissions.

To examine the impact of industrial real estate emissions and reduction strategies, BranchPattern, a national sustainability and engineering firm, recently released its 2023 Benchmark Study on Embodied Carbon in U.S. Industrial Real Estate in partnership with five major industrial real estate developers: Affinius CapitalBridge IndustrialBrookfield PropertiesIDI Logistics, and Prologis. Representatives from these companies are speaking at NAIOP’s upcoming CRE.Converge conference on Oct. 19 about the study’s findings and broader implications of materials selection as an effort to combat climate change. The panel will examine how the real estate industry defines carbon emissions, the typical contributors, and ways to reduce embodied carbon emissions. Read on to learn more about this important topic and why it’s coming to the forefront for building owners and developers.

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Swirling Political Forces Could Derail Passage of Federal Continuing Resolution

Originally published on September 6, 2023, by Eric Schmutz for NAIOP.

Welcome to September! With temperatures starting to cool down, kids heading back to school, and football season kicking off, it’s easy to forget that the federal fiscal year ends at the end of the month. That means that there are only 11 days when both the House and the Senate are scheduled to be in session before the current federal funding authorization expires. Moreover, only one of the annual appropriations bills has passed the House and none have passed the Senate.

In most years, the House and Senate leadership would simply agree to a continuing resolution (CR) that maintains existing federal policy and holds funding at current levels for a certain period to prevent a government shutdown before Oct. 1. Leadership would then negotiate an omnibus package that includes all 12 of the annual appropriations bills, and just when congressional members are desperate to get home for the winter recess, pass it late at night and leave town. 

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