Real Estate Management News - 11/25/2014

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November 25, 2014
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LEADERSHIP SPOTLIGHT
Real Estate Sector Celebrates The Launch Of New International Property Measurement Standard (IPMS) For Office Buildings

IREM® HEADLINES
Business Strategies for Real Estate Management Companies
Liberty Property Trust: the Business Case for Demand Response
Negotiating: How to Handle “Dirty Tricks”

INDUSTRY HEADLINES
IREM Panelists Forecast a Sunny 2015
Hand Dryers Spread Bacteria in Restrooms
Apts., Industrial Benefit As Economy Rallies
Robotic Security Guards: Coming Soon to a Mall Near You?
New Technology Tackles Holiday Package Delivery Crunch
Whole Foods Plans In-Store Spa at Ink Block Site
Some East Texas Apartment Complexes Are Prohibiting Fresh Christmas Trees
Staples Boost Profits by Shutting 170 Stores
Spend Management: Save Money by Standardizing Your Property
Why It Pays for Houston's Class B and C Properties to Go Green
Trane Adds Water-Source VRF Systems to Growing Ductless Portfolio
Walmart to Install Up to 400 Solar Projects


Leadership Spotlight


Real Estate Sector Celebrates The Launch Of New International Property Measurement Standard (IPMS) For Office Buildings

A new standard that will bring transparency and consistency to global real estate markets has been launched today. The International Property Measurement Standard for Offices (IPMS for Office Buildings) is the result of a global effort to create a uniform method for measuring property and is set to replace dozens of existing standards currently in use around the world.

“Globalization is not a coming trend – it is here and it is a fact of life,” said Lori Burger, CPM, president of IREM, which is a member of the coalition that led the development of this standard. “There continues to be a steady increase in cross-border investments and in international capital flows. In what has become a global real estate market, the need for transparency, for a common language, and for international standards becomes paramount. The launch of these International Property Measurement Standards for Office Buildings is a huge step forward.”

In 2013 commercial property market transactions were estimated to be more than $1trillion worldwide according to Real Capital Analytics, with investors and corporate occupiers increasingly operating across international borders. Despite this, many of the standards used within the industry are local market specific, making consistency and comparability a significant challenge.

IPMS for Office Buildings will lead to increased transparency and consistency across real estate markets that will benefit the way property assets are managed and, ultimately, how financial decisions are made by investors, corporate occupiers, buyers and sellers.

The IPMS for office buildings is the first in a series of international property measurement standards that will include IPMS for residential property, IPMS for industrial property and IPMS for retail property.

Historically, property has been measured differently throughout the world. According to research by global property firm JLL, depending on the standard used the area quoted in different markets for an equivalent building could vary by as much as 24%.

These inconsistencies have led to confusion in markets, and even led businesses to develop their own costly processes for measuring and benchmarking property assets. Investors too, including pension funds, have had to factor in variation in quoted property size when making decisions about acquiring new property.

The work to create this new global measurement standard has been spearheaded by a Coalition of more than 50 professional organizations,of which IREM is one, and has been produced following global consultation by a team of 18 independent industry experts. The new standard will define which areas are included when measuring a property and which are not.

The response from industry has been overwhelmingly supportive and governments too are expected to support the adoption of IPMS as means of promoting transparency and international best practice. The Dubai Government has already announced plans to make IPMS mandatory in response to a growing international investor base moving into Dubai’s commercial property sector. More than 100 businesses have already signalled their intention to request or use IPMS measurements within their organisations by signing up as Partners of the IPMS initiative.
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IREM Headlines


Business Strategies for Real Estate Management Companies

Whether you’re starting your own firm or want to grow an established business, the just-released third edition of the IREM publication “Business Strategies for Real Estate Management Companies,” will show you how to attract and retain clients, market your business more aggressively, expand the services you offer, and boost your company’s profits in today’s changing climate. This new edition also features six case studies of real estate management companies in their infancy, providing an inside look into the trials and tribulations likely to be encountered by a fledgling enterprise, along with tips and lessons learned.

Among the specific topics the publication explores in depth, with seasoned insights and “how to” guidance:
  • Hiring and retaining talent
  • Understanding the dynamics of the manager and client relationship
  • Creating a winning management proposal
  • Taking over a management account
  • Handling legal issues and ethical practices
  • Managing and mitigating risks.
Order your copy today!
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Liberty Property Trust: the Business Case for Demand Response

Liberty’s sustainability initiatives started years ago with the development of LEED buildings. They are now responsible for green practices in over 80 buildings, representing 20 million square feet. As a leader in sustainability, Liberty benchmarked its managed portfolio with ENERGY STAR Portfolio Manager (ESPM) to set a baseline.

In 2011, Liberty began a smart grid building research and development project on 10 existing buildings in the Greater Philadelphia Area. The purpose of the project was to take existing buildings of all vintages, optimize the buildings for efficiency, and establish demand response capability. In accordance with this plan, Liberty updated the buildings’ controls to afford its tenants more customization over their thermal comfort and lighting conditions.

Liberty went from a bill-scanning benchmarking project – manually uploading utility bills into a database – to real-time energy monitoring. “At first, many building engineers didn’t see the value of adding data tracking and monitoring to buildings with existing Building Automated Systems (BAS),” shared Fred Dougherty, Liberty’s Vice President of Portfolio Technology, “but after installation, the real-time data served as a “check and balance” system. Data monitoring allowed building engineers to measure the accuracy of their BAS and make adjustments, rather than assuming the BAS operated as it should.”

The measures installed in Liberty’s Smart Grid project buildings included HVAC control upgrades, lighting and lighting controls upgrades, and retro-commissioning, to identify underperforming equipment and make necessary adjustments to re-optimize facility systems. These efforts resulted in an average savings of $0.92 per square foot across the ten buildings.

A major goal for the smart building project was to identify tenant impact during a demand response event. Dougherty shared that “Through testing and surveys, and with help from Rutgers Center for Green Building, we learned that tenants typically do not notice participation in a demand response events, even when 10% of a building’s load is shed.”

Liberty’s smart building and demand response program balances its tenants’ desires with the interest in creating high performance pieces of real estate. Liberty recommends optimizing energy efficiency before implementing a demand response program. By installing energy efficient lighting and HVAC equipment first, it maximized the effectiveness of the demand response program.

Liberty plans to continue using Smart Meter data monitoring to drive sustainability projects and improvements and participate in demand response programs where applicable. The program results are encouraging: the ESPM score improved across all Liberty’s buildings, and all but one of the project’s buildings received Energy Star certification. On average, the energy conservation measures installed reduced each building’s energy consumption by 15%. Most importantly, their tenants are happy; enjoying improved comfort, and lower energy bills.

Learn how IREM can help with your sustainability initiatives at www.iremsustainability.com
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Negotiating: How to Handle “Dirty Tricks”

There are many tactics used by hardline negotiators that border on being illegal, unethical, or at least unpleasant. This “tricky” bargaining is an attempt to pressure the other party to cave in on the test of wills. Unfortunately, even when a person recognizes that the other party is using tricky bargaining tactics, they usually respond by either putting up with it (not rocking the boat), or responding in kind with their own dirty tactics. Neither approach leads to a process resulting in a solution that satisfies everyone’s interests and builds better relationships. These tactics generally fall under three categories:
  • Deliberate Deception: Including false facts; ambiguous authority (e.g., the car salesman technique: “I’ll have to consult with my manager before I could agree to anything less than what I’ve offered.”); less than honest intentions; etc.
  • Psychological Warfare: Including relying on threats; being aggressive; “good cop/bad cop” routine; creating stressful situations; etc.
  • Positional Pressure Tactics: Including a refusal to negotiate; escalating demands; “take it or leave it” lock-in positions; calculated delays in talks; etc.
There are a lot of different dirty tactics. Fortunately, they can all be handled in a similar manner. If someone is using unfair tactics, simply call them out on it, “It sounds like you can’t make a final decision on this. Perhaps I should talk to the person who can, or postpone our discussion until you get more direction.” Or, “I didn’t think anyone still used the old ‘good cop/bad cop’ routine.” Generally, when the other person knows that you know an unfair tactic is being used, they will stop using it.

Another way is to simply ignore the tactics, if possible, and redirect the conversation back to principled negotiation focusing on the parties’ interests, objective criteria for evaluating offered terms, and inventing mutually beneficial options.

To learn more about how to improve your negotiating skills, check out IREM’s Leadership Development White Paper on Negotiating.
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Industry Headlines


IREM Panelists Forecast a Sunny 2015
MetroWire Media (11/21/14)

A panel of commercial real estate players handed down their insight as to what lies ahead for the Kansas City market to members of the Institute of Real Estate Manangement (IREM) this past week. Moderated by Vince Dasta of DST Realty, Bryan Johnson of Colliers International told attendees that overall vacancy for the office sector has fallen to 11.4 percent from 12.5 percent in 2013, with construction activity on the upswing, too. Lookin ahead, Johnson expects demand for space will be more focused on Kansas City's urban core and not its suburbs. "We're seeing a lot more efficient, more dense space with more common, open meeting areas and fewer private offices," he remarked. "Businesses are looking to attract the Millennial generation, who want to be in places that are favorable for live, work, play."

With regards to the local retail sector, several shopping centers in Kansas City are seeing major renovations to adapt to today's changing consumer environment. Expect more of that going forward, states Kessinger Hunter's Audrey Navarro. "Many of those (shopping centers) might come down and not exist in their traditional sense," she commented. "We've got sites across the metro that have changed in terms of traffic patterns, and those traffic patterns never be viable for retail in the next 10 to 15 years, so you'll continue to see that activity." The grocery sector should remain strong, though, as that is one retail experience that can't be recreated online. As for the area's multifamily housing sector, there are currently about 7,000 apartments under construction and another 7,000 in the pipeline. High-end rental units appear to be the trend locally, and the metro has been behind the curve for years when it comes to such construction.
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Hand Dryers Spread Bacteria in Restrooms
Buildings (11/20/14)

While modern bathroom hand dryers are more environmentally friendly than paper towels, new research suggests that they could be harboring harmful bacteria. According to a recent research report from the University of Leeds, the space surrounding jet dryers is more contaminated than the air near paper towel dispensers. Furthermore, the research found that nearly 50 percent of germs can stay airborne for more than five minutes after the drying cycle ends. Published in the Journal of Hospital Infection, the study tested a harmless form of bacteria applied to researchers' hands to mimic hands that had been improperly washed. Researchers subsequently measured air bacterial counts around jet dryers, warm air dryers, and paper towel dispensers. The study found that the amount of germs recorded near jet air dryers was 4.5 times higher than around warm air dryers and a whopping 27 times higher than air surrounding paper towel dispensers.
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Apts., Industrial Benefit As Economy Rallies
GlobeSt.com (11/19/14) Bubny, Paul

A new report by Marcus & Millichap says two of the prime beneficiaries of a rallying economy have been apartments and the industrial property sector. When it comes to multifamily housing, it's due to improving employment numbers among the age demographic most likely to rent. "More than two-thirds of individuals ages 20 to 34 rent apartments, and the employment market for this group continues to improve," confirmed Hessam Nadju, chief strategy officer and senior vice president at Marcus & Millichap. "Following a drop last month, the unemployment rate for 20- to 34-year-olds sits at 7.5 percent, down from more than 12 percent four years ago when the U.S. economy started adding jobs." The firm predicts that new residents will continue to emerge as additional individuals enter the labor force and exert downward pressure on vacancy rates.

When it comes to industrial real estate, Marcus & Millichap notes that consistent movement of goods from U.S. ports to manufacturers, retailers, and distributors has supported a significant increase in transportation and warehouse staffing. "New space needs are also arising in warehouse and distribution properties, keeping the national industrial vacancy rate on course to fall 100 basis points this year to 7.1 percent," Nadji states. Including the addition of over 13,000 positions last month, more than 100,000 workers have been hired since Jan. 1 to handle the stocking and movement of goods
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Robotic Security Guards: Coming Soon to a Mall Near You?
techlicious.com (11/18/14) Van Allen, Fox

The Massachusetts Institute of Technology (MIT) Technology Review recently reported that Knightscope, a California-based startup, has created a line of robotic security guards. The new, five-foot tall K5 robots are designed to patrol shopping malls, warehouses, and other facilities that currently use human security guards. The bullet-shaped robots use a range of sensors and cameras to understand their surroundings and detect potential intruders. Anything suspicious is wirelessly reported to a nearby human command center. While the robots are unarmed, they have the capability of emitting a loud, ear-piercing alarm. The company is marketing the new robots as a cost-effective alternative to human security guards. But while the money savings are appealing, there are a number of hurdles the technology needs to overcome before the robots start patroling local shopping centers and other facilities. Such machines might instill fear in ordinary, law-abiding citizens and children if they are deployed during normal operating hours. In addition, so far, they have been prone to tipping over as they navigate walkways and uneven surfaces, which is no small problem considering their 300-pound weight.
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New Technology Tackles Holiday Package Delivery Crunch
Business Wire (11/20/14)

According to the new National Multifamily Housing Council (NMHC) and Kingsley Associates 2014 Package Delivery Survey, 24 percent of the nation's apartment communities currently use specialized software to manage residents' packages on-site. The research shows that a typical apartment community can receive as many as 100 packages a week -- a number that can easily double during the holidays. Rick Haughey, NMHC Vice President of Industry Technology Initiatives, states, "Residents rank a package delivery holding area as the second most popular community amenity behind fitness centers, so there’s a huge incentive for apartment community managers to wrangle the growing volume of deliveries." When a resident orders an item for delivery, package carriers have tried to deliver to the door first in 77 percent of apartment communities surveyed versus going straight to the management office. However, that number plummets to just 20 percent of high-rises. If the resident is not home, package carriers will take it to the management office 70 percent of the time. David Smith, COO of Kingsley Associates, remarks, "Managing deliveries is a real issue facing the industry. There is inherent risk and valuable time associated with sorting, storing and notifying residents of package deliveries at the community-level. Senior executives are clearly taking note of the escalating staff hours spent managing the process, particularly during holidays."

That's why it is no wonder that so many apartment firms are turning to technology to "tame the package beast." For high-rise apartment buildings, 60 percent are now using specialized software to manage parcel deliveries. Because so many of the solutions are new, they have yet to be widely adopted. Overall, the survey determined that apartment managers are just as likely to notify residents via text or e-mail (26 percent) as they would use the phone (26 percent). Furthermore, such manual methods as old fashioned paper notices are used 18 percent of the time. A new trend for apartment managers is the use of package lockers, as 9 percent use a locker system that allows residents to pick up their deliveries at their convenience.
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Whole Foods Plans In-Store Spa at Ink Block Site
Boston Herald (11/23/14) Corsano, Erica

Supermarket operators looking to offer more than just in-store banking to draw in customers may want to take notes from Whole Foods. The health-conscious grocery chain is set to unveil its first-ever spa inside its new, 50,000-square-foot flagship store opening on the former site of the Boston Herald in the new year. "It's more about getting both done at the same time, versus a day at the spa," remarks regional president for Whole Foods, Laura Derba. "We are always looking for something that is innovative, exciting, and fun and our customers and consumers today really want convenience."

The spa is a collaboration with Milk + Honey, a Texas-based spa and salon chain, which will manage the site and have its product line sold at Whole Foods beginning in early December. "I think that a spa is not a luxury, it should be part of everyone's regular habits, like grocery shopping," remarks Alissa Bayer, co-owner of Milk + Honey with her husband. The complex where the new Whole Foods is opening also includes three apartment buildings that are pre-leasing. Boston Herald publisher Patrick J. Purcell, who sold the site to National Development, is a minority investor. The spa is slated to open with the new store in January and will offer everything from facials, manicures, and pedicures to hot shave services, shoe shines, and waxing.
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Some East Texas Apartment Complexes Are Prohibiting Fresh Christmas Trees
KETK NBC (Texas) (11/21/14) Kuchinsky, Phil

As the holiday season rapidly approaches, apartment residents in East Texas are having to check with their apartment managers to see if fresh Christmas trees are allowed before making that purchase. Christmas trees are notorious for going up in flames, and a number of older apartment communities in the region lack sprinkler systems in case of such an event. This standard of prohibiting fresh trees where there is not an adequate sprinkler system was established by the Nation Fire Protection Agency. According to Longview Fire Marshal Johnny Zachary, a Christmas tree fire in an apartment can be especially detrimental due to the connected nature of the units and the amount living in any given building.

The dry pines of such tree pose a hazardous threat due to the heat of Christmas lights and other materials. According to Zachary, "When they do burn, they burn very rapidly. When we did testing, within 30 seconds the entire room can be engulfed in fire. Within an apartment complex not only do you have that room to be concerned within that particular apartment, but we have to be concerned with the surrounding apartments." Zachary further cautions that another hazard to consider this holiday season is overloading circuits when it comes to plugging in multiple lights and decorations.
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Staples Boost Profits by Shutting 170 Stores
CNNMoney (11/19/14) Egan, Matt

Staples announced plans on Wednesday to close an additional 30 stores this year in addition to the 140 previously announced. In accelerating its ongoing campaign to slash costs, third-quarter profits soared 61 percent. Janney Montgomery Scott analyst David Strasser reports that store closures have enabled the office supplies retailer to cut its rent costs by $25 million since Jan. 1. Furthermore, Staples plans to try out a mini-store model that has been championed by Best Buy. Basically, the way this model works is companies like Microsoft and Samsung pay Best Buy to show off their products in a devoted section of the store. Staples now plans to test out a similar mini-store model to show off technology and furniture products.
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Spend Management: Save Money by Standardizing Your Property
Property Management Insider (11/20/14) Blackwell, Tim

When it comes to the multifamily housing sector, there is a need for standardization to make spending practices more consistent, which results in cost savings and fewer headaches in managing a portfolio of apartment communities. Throughout the process, it is essential to identify vendors, best products, and price that will work across all properties. Standardization also removes emotion from the process, reducing unnecessary costs. There are five components of a successful standardization program -- one that can help a portfolio save money and achieve consistency on day-to-day purchases by owners and managers. The first is negotiation. While a property may work with only one supplier, a comparison of invoices across a portfolio might reveal that each property is paying a different price for, say, a gallon of paint. Ideally, managers should negotiate a standardized rate for paint no matter where it is purchased. The second component is communication. It must be a priority that everyone is on the same page before proceeding with standardized practices.

Third, there is reporting. Once a standardization program is created, operations staff should closely monitor it to ensure that agreements and internal purchasing procedures are being followed. A fourth component is "manageable workflow/process." In this regard, accountants and regional supervisors need complete visibility into site level spending at the time of purchase all the way through the receipt of goods. Finally, compliance should be made a priority, as well.
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Why It Pays for Houston's Class B and C Properties to Go Green
Houston Business Journal (11/18/14) Takahashi, Paul

While LEED-certified buildings may cost slightly more to build or retrofit, they are more energy efficient. That, of course, translates into cost savings over the long haul. Such facilities often prove more marketable and can command higher rents and asking prices than non-LEED buildings. But according to Gavin Dillingham, a research scientist with Houston Advanced Research Center, not all building owners understand the value proposition of going green. "Class A gets it," said Dillingham. "Class B and C folks need a lot more education to build capacity."

He uses the Houston market as an example. Of the 296 Class A office buildings citywide, 28 percent have LEED status, according to CBRE Group. By comparison, just 2 percent of Houston's 571 Class B office buildings and none of the city's 375 Class C office buildings have LEED status. While the increased cost plays a role, the green gap is primarily due to a lack of awareness about the cost savings of obtaining LEED certification, theorizes Jonathan Wilson, manager of client development at Texas-based Schneider Electric Energy & Sustainability Services. To encourage more Class B and Class C property owners to invest in green retrofits, Houston officials are getting involved by partnering with the Institute of Real Estate Management to relaunch the Houston Green Office Challenge, which invites local businesses to compete for the distinction of being the most green company in town.
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Trane Adds Water-Source VRF Systems to Growing Ductless Portfolio
achrnews.com (11/19/14)

Trane confirms that it has expanded its ductless portfolio to include new Trane Water-Source Variable Refrigerant Flow (VRF) Ductless Systems. According to the firm, these new systems are designed specifically to provide energy-efficient solutions for multi-tenant and diversely occupied buildings. They use water as the energy exchange medium to heat and cool the system condenser. To this end, water-source VRF enables building occupants to adjust the temperature in individual spaces for increased comfort. It also allows building owners and operators to calculate the actual energy use of each leased space for more accurate tenant billing and turn off airflow to unoccupied areas. Property managers have the flexibility to turn off airflow to unoccupied areas, which may lead to substantial energy savings. "The growing portfolio of ductless products gives Trane one of the most comprehensive equipment, control, and tool offerings in the industry," concludes Jeff Peters, ductless portfolio leader at Trane. "Trane has the people and expertise to partner with contractors and engineers to help deliver intelligent solutions for every customer and any building."
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Walmart to Install Up to 400 Solar Projects
Today's Energy Solutions (11/14)

Wal-Mart Stores Inc. has announced plans to install up to 400 new solar projects at facilities nationwide over the next four years. This advances the Arkansas-based retail giant's global commitment to drive the production or procurement of 7 billion kWh of renewable energy by the end of the current decade and its goal to be supplied by 100 percent renewable energy. To facilitate these installations, Wal-Mart picked proposals from SolarCity and SunEdison, a couple of preferred solar energy providers, following a request-for-proposals (RFP) process. Working with a number of solar providers, the retailer has installed nearly 260 solar projects to date throughout the United States. Its commercial solar deployment is now 105MW, more than twice the capacity of the next biggest business. This has saved upwards of $5 million in energy expenses, demonstrating that Wal-Mart can keep costs low for customers while reducing environmental impact.
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