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Where the Stores are Closing

Posted August 11, 2017

Retail employment across the country has taken a hit in 2017, as chains including Macy’s, Sears and JC Penney have all shuttered locations. A new report from Reis indicates the country has too many retail outlets and predicts where to future closings may occur.

“A good way of measuring what markets may be over-retailed is to compare retail employment to population,” the report says. It finds Little Rock, Arkansas; Syracuse, New York; Omaha, Nebraska; Orlando, Florida; and Louisville, Kentucky, are the most over-retailed, based on their growth over the last five years. California’s San Bernardino/Riverside, Oakland-East Bay and Los Angeles markets came in as the least over-retailed, along with Tucson, Arizona, and Tacoma, Washington.

“While the numbers show that the retail industry could, in fact, be over-saturated, the impact of this saturation on the real estate industry may not be as troublesome as many would presume,” the report says. That’s partly because different businesses, such as restaurants, yoga studios, and medical centers are taking over vacated retail space. Despite challenges, “the retail industry is performing better than many would assume,” the report concludes.

Building for Resiliency

Posted August 10, 2017

A recent report prepared for the Energy, Kresge and Barr Foundations finds that adoption of building resiliency standards – which provide guidance for preparing buildings, infrastructure, and other systems for natural or man-made hazards – isn’t as widespread as it could be.

“[M]ost of the standards are in pilot phases or with their first customers, and many organizations are involved. Moreover, interviews and focus group conducted for this project revealed that facilities managers, participants in the real estate sector, and coordinators of business associations and on-the-ground projects had little awareness of the standards,” the report finds.

Further, it says real estate industry associations aren’t doing enough to promote information about resilient building techniques or the existence of standards. “The National Institute for Building Sciences, RELi, FORTIFIED, and other entities are leading efforts to quantify the costs and benefits of resilience, which can support effective policy design and encourage investment. Such research efforts could lead to more targeted, performance-based outcomes for resilient buildings, and a clear articulation of resulting monetary returns,” the report concludes.

NAIOP-backed Bill Passes House Committee

Posted August 9, 2017

The House Transportation and Infrastructure Committee last week voted unanimously to advance H.R. 1758, the Brownfields Reauthorization Act of 2017. As its name suggests, the legislation would formally reauthorize the brownfields program for the first time since 2006, when authorization for the program expired. Congress had continued to appropriate funds despite a lack of authorization, but at varying and often decreased levels. Reauthorization provides supporters of brownfields redevelopment efforts with added leverage in future funding fights. H.R. 1758 makes important adjustments to the program, giving states added flexibility in spending brownfields grant funds, and expanding the universe of eligible grant recipients to include non-profit groups.

Administered by the Environmental Protection Agency, the brownfields program assists states in the cleanup and remediation of properties where contamination is suspected. The fear of unknown and potentially exorbitant costs – particularly those stemming from liability – at these sites often forces developers to look elsewhere for new opportunities. As a result, brownfields go untouched, which can depress surrounding property values and deprive local communities of much-needed tax revenue. Remediation of brownfields sites can yield substantial returns on taxpayers’ investment. Since its inception, the brownfields program has created 10 jobs for every redeveloped acre, and has leveraged $18 in private and state development funds for every $1 of taxpayer-funded brownfields grants.

NAIOP joined several other members of the real estate community in support of the bipartisan legislation, and will continue to advocate for reauthorization of and funding for the brownfields program as the bill is considered by the full House of Representatives.

Congress, Make Tax Reform Take the Long View

Posted on August 8, 2017

Written by Thomas J. Bisacquino

The world today moves faster than it ever has before. Smartphones provide immediate access to people and information. Retailers deliver with blinding speed, often the same day. But not everything should, or can, be immediate. That’s true in tax policy, and in commercial real estate (CRE).

In the CRE industry, owners and operators often must wait years, even decades, to recoup their investments. Meanwhile, they keep pouring further spending into their properties to keep them up to code and to deliver the perks tenants demand. CRE doesn’t deliver immediate rewards, but forces owners to make the necessary long-term investments that will pay off for them and the economy.

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EPA Releases Rule to Withdraw WOTUS

Posted on August 8, 2017

IMG_0072Fulfilling a portion of an executive order by President Donald Trump, the EPA and U.S. Army Corps of Engineers have released a proposal to rescind the Waters of the United States rule that expanded federal jurisdiction under the Clean Water Act.

The proposal (link is external) published in the Federal Register on Thursday, July 28 would nix the 2015 WOTUS rule and reinstate the definition of the streams and wetlands subject to federal oversight under the act that existed prior to its finalization.

The publication of the proposal constitutes the first part of a two-step process to meet the Feb. 28 executive order directing the rule’s review. The second step will be “a separate notice and comment rulemaking that will consider developing a new definition” for the extent of federal jurisdiction under the act, say the EPA and Corps in a pre-publication copy of the proposed rescission.

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More Companies Go Where Employees Already Are

Posted on August 7, 2017

In the twenty-first century, many employees can work remotely, making it theoretically possible for them to reside in far-flung, less expensive suburbs. But employers are moving in the opposite direction, abandoning smaller towns to relocate their headquarters in large cities.

Two of the latest to move are McDonald’s and Caterpillar. The Washington Post reports those companies are moving their headquarters out of Oak Brook and Peoria, Illinois. McDonald’s is moving to Chicago, Caterpillar to nearby Deerfield. They are not alone.

“Aetna recently announced that it will relocate from Hartford, Conn., to Manhattan; General Electric is leaving Connecticut to build a global headquarters in Boston; and Marriott International is moving from an emptying Maryland office park into the center of Bethesda,” the Post reports. “Such relocations are happening across the country as economic opportunities shift to a handful of top cities and jobs become harder to find in some suburbs and smaller cities.”

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Food and Beverage Companies Focus on Experiences

Posted on August 4, 2017

The global food and beverage market is growing, and that is helping pick up the slack as brick-and-mortar retailers struggle. According to a report from Cushman & Wakefield, the food industry’s growth is increasingly focused on delivering positive experiences to customers.

“Consumers today are driven by a sense of exploration or simply fear of missing out, and are always on the hunt for new experiences,” the report says. “Restaurants are providing novel, fun and memorable meals through pop-up restaurants, ‘secret’ venues and entertainment themed venues, offering customers a thrill for just finding the location.”

Cushman & Wakefield says the pressure to add restaurant space is reshaping the retail environment. “The space given over to cafés, bars and restaurants in shopping centres was traditionally less than 10% but, in some of the newer schemes it can be as much as 20% or even 30%,” the report finds.

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2017 Battle of the Bands Rocked! Check out winners and pictures

Posted August 3, 2017

NAIOP Charlotte hosted its second annual Battle of the Bands on Thursday, July 27th and it was a hit! Check out photos from the Battle.

Many thanks to Grievous Angels, Irrashional and The Holdouts for their outstanding performances! Congratulations to Grievous Angels who took home the trophy again this year!

We are appreciative of all of our partners in success, whose support allowed NAIOP Charlotte to donate $5,000 to The Harvest Center.

Planning Committee
Jim Gamble, Bohler Engineering | Mike Kramer, Bank of America | Henry Pharr, III, Horack Talley | Dawn Royle, Investors Title | Cheryl Steele, Horack Talley | Amy Sullivan-Hicks, ECS Carolinas



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Lessons Learned from California's Industrial Mandates

Posted on August 3, 2017

I.CON '17: Trends and ForecastsA panel of experts dove into new regulatory trends affecting industrial developers, industrial property owners and those in the trucking/logistics space at I.CON: Trends and Forecasts last month. Download the presentation and catch up on all conference sessions and recordings on the resources page.

Click here to read the full article.

What Makes this CRE Cycle Different?

Posted on August 2, 2017

NAIOP asked some of the Research Foundation’s Distinguished Fellows, the nation’s foremost commercial real estate, economic and public policy experts in academia: What makes this CRE cycle different?

Mark J. Eppli

Mark Eppli
Secretary/Treasurer, NAIOP Research Foundation
Founder and CEO, Agracel, Inc.

“Commercial real estate debt levels, debt growth, and underwriting discipline. Since 2009 (the last peak), commercial real estate debt levels grew at 1.4 percent annual rate and over the last five years (the last trough) have grown at a 5.2 percent annual rate. The same statistics eight and five years before 2009 were over 10 percent, well outpacing inflation. Additionally, as CMBS lenders are net negative lenders (i.e. more loans coming due than new loans), commercial banks are more important in this cycle and since Q4 2015 have been tightening their lending standards. All mortgage debt (including single-family) outstanding remains below 2009 levels. So what makes this cycle different, reasonable mortgage lending growth and better mortgage debt discipline, will make for a longer development cycle.”

 

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The Future of Family-owned CRE Businesses

Posted on August 1, 2017

Written by Ron Derven

Ballog PhotographyHow can family-owned businesses stay competitive in the commercial real estate industry?

FIVE MEMBERS of NAIOP’s Family-owned Business I and II Forums offer their insights into the future of family-owned CRE businesses as well as some of their strategies to successfully manage and convey the business to the next generation. They also provide their insights on the benefits of the following:

  • Creating a generational overlap so that the older generation can pass on its wisdom to the younger one.
  • The importance of getting “real world” work experience outside of the family business.
  • Making sure that new family members coming into the firm develop skills in at least one area of commercial real estate to add value to the company.
  • Allowing only those family members working in the business to manage it.
  • Ensuring that family members coming into the business gain the respect of other employees and the industry.
  • How to avoid playing favorites when it comes to family.
Click here to read the full article.

Millions of New Apartments Needed in the Decades Ahead

Posted on July 31, 2017

The U.S. will need to build some 4.6 million new apartments between now and 2030, according to a forecast by Hoyt Advisory Services. That’s about 328,000 per year. Hoyt carried out the research for the National Multifamily Housing Council and the National Apartment Association.

The forecast expects much of the growth to be in the South. “Southern states driven by economic growth, low costs and diversified demographic growth continue to lead demand forecasts with metropolitan markets in Texas and Florida ranked in 5 of the top 6 places,” it states.

The report notes that many things could change the forecast over the coming decades. For example, federal housing policies could be altered, and it’s impossible to predict exactly how many people will immigrate to the U.S. in the years ahead. Those factors, and others, could drive down the need for apartments.

House Hopes to Pass Budget Plan Before Recess

Posted on July 28, 2017

Republican leaders are trying to pass a budget before the House of Representatives goes on recess at the end of the week. The proposal would “set the stage for a potential $203 billion rollback of financial industry regulations, federal employee benefits, welfare spending and more,” The Washington Post reported.

The bill passed the Budget Committee last week. The GOP calls it “a plan for fiscal responsibility,” and says it would balance the budget without raising taxes or cutting Social Security. However, the plan is facing a tough battle; some parts of it are opposed by House conservatives, other parts by Republican moderates.

The bill aims to do more than set spending priorities. It would also be a stepping stone lawmakers could use in the Senate to avoid a filibuster and advance one of President Donald Trump’s top issues. “This is the tax reform budget,” Ways and Means Chairman Kevin Brady (R-TX) said. “It’s critical that our party in the House comes together to pass this budget.”

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Office Sector Booms in Second Quarter 2017

Posted on July 28, 2017

The U.S. office sector bounced back in the second quarter of 2017, absorbing 12.8 million square feet of space, according to Cushman & Wakefield. That’s more than twice the 6.3 million square feet taken up in the first quarter and the highest level since the third quarter of 2016. Cushman & Wakefield expects solid absorption in the near future as well.

“Even eight years into the cycle, office-using job creation remains healthy and solid in most markets,” the company’s chief economist Kevin Thorpe says. “Moreover, the leading indicators, such as job openings, suggest that business expansion will remain healthy, and by extension, so will demand for office space.”

Cushman & Wakefield finds that rents jumped to a new high nationally, and that construction is ramping up to meet demand. The company says “16.1 msf of new office space was completed across the U.S., the largest amount of space completed since the second quarter of 2009.”

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Inspiring Creativity through Innovative Workspaces

Posted on July 27, 2017

Written by Brielle Scott

Incubators, accelerators, start-up spaces – the lines are often blurred on what these buzzed-about terms mean. In a new report from the Brookings Institute, “Innovation Spaces: The New Design of Work,” authors Julie Wagner and Dan Watch shed some light on these spaces and the trends contributing to their proliferation.

The report outlines three key factors influencing the design of innovative workspaces:

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Preparing for a Post-NAFTA Global Marketplace

Posted on July 26, 2017

A group of experts from CBRE, Costar and NAI discussed the potential upheavals that could result from changes to NAFTA and ways to implement strategic business plans to protect your investments at I.CON: Trends and Forecasts last month. Download their presentation and catch up on all conference sessions and recordings on the resources page.

Click here to read more.

How to Attract Institutional Capital

Posted on July 25, 2017

Written by Kelvin Tetz and Greg Martin

Local and regional developers who want to build relationships with institutional investors will need to implement these reporting and operating guidelines.

MANY REAL ESTATE owners, operators and developers seeking long-term growth are interested in institutional relationships, but building such relationships can seem daunting. Investment partners with billions of dollars to invest rightly need proven and capable partners. How does a local or regional real estate firm get into the institutional-investment club? The key is to get one’s existing house in order, so that investors who court these local or regional partners can more easily understand and embrace the real estate firm’s strategy.

While every firm has its own development strategy, one key to leveraging that success to attract institutional attention is to implement the reporting methods that institutions need their partners to use. Examples of internal components for local and regional operators to consider include 1) building an institutional-quality reporting system; 2) having a proper understanding of key issues, such as U.S. generally accepted accounting practices (GAAP), fair-value reporting and international financial reporting standards; and 3) creating operating guidelines that articulate the operator’s practices.

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CMBS Delinquencies on a Downswing

Posted on July 24, 2017

Credit rating giant Morningstar reports the delinquency rate for commercial mortgage-backed securities dropped to 3.09 percent in May. That reverses a five-month-long trend. CMBS delinquencies were down five basis points from April, but remain 18 basis points higher than in May of 2016. 

“We believe the delinquency rate is close to peaking as there’s not much left that we expect to default at maturity, resolutions remain high, and issuance is starting to pick up,” Morningstar writes. “The delinquent unpaid balance of commercial mortgage-backed securities amounted to $23.84 billion, down a modest $38.4 million from the prior month and up $1.35 billion from the year-earlier period.”

Morningstar finds office and retail remain the weakest sectors.

Cost of North American Construction Disputes Declined in 2016

Posted on July 21, 2017

Legal disputes over construction contracts slow down building projects, costing both sides time and money. The Arcadis Construction Disputes report for the year 2016 shared some positive and negative trends in legal disputes.

“For the third consecutive year the average value of construction disputes in North America have dropped slightly in 2016 to US$21 million,” the report finds. “It appears the U.S. construction industry has become more sophisticated in their approach to managing risk and early intervention appears to be an effective means to keep average dispute values in check.”

That’s the good news. “This average dispute value is lower than most parts of the world; however, the average time taken to resolve disputes increased by two months over the previous year,” Arcadis points out.

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Renewable Energy Delivers at Record Level in March

Posted on July 20, 2017

The U.S. Energy Information Administration reports more than 10 percent of the country’s electricity was generated by wind or solar in March, the most recent month for which information is available. It’s the first time these renewable energy sources have provided that much power.

The administration notes that wind and solar combined to provide 7 percent of the nation’s electricity in 2016. It predicts that, “based on seasonal patterns in recent years, electricity generation from wind and solar will probably exceed 10 percent of total U.S. generation again in April 2017, then fall to less than 10 percent in the summer months.” Wind and solar tend to produce more electricity in the spring and fall than in the summer or winter.

The organization adds that, “about half of all utility-scale solar power plants in the United States use some form of sun-tracking technology to improve their seasonal output.”