Real Estate Management News - 03/29/2017

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March 29, 2017
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IREM® HEADLINES
Protecting the Industry in Washington – You Can Help
What Really Happened in 2016 -- Get Free Property Income & Expense Data
Highlights: IREM Asset & Property Management Symposium/Northeast Regional Meeting
#REIC2017 Annual Conference

INDUSTRY HEADLINES
Renters Now Rule Half of U.S. Cities
Office Rents in Chicago Rose 20 Percent in 2016 — 2nd-Highest Increase in the World
Kayaks, Spoiled Steaks and Headaches: Packages Are an Ever-Increasing Dilemma for Building Managers
Bebe Stores Hires Advisers as Retail Shakeout Continues
Shopping Centers Brace for New Uses as Internet Erodes Retailers
Boston Officials Push to Allocate Less Parking for New Apartment Buildings
GameStop Closing at Least 150 Stores Amid Sales Decline
Partial Stakes Are Changing the Way Office Buildings Are Bought and Sold in NYC
Urgent Care Centers So Popular That Hospitals Are Jumping on Bandwagon
Is Your Apartment Website at the Top of Its Game?
The U.S. Apartment Boom, Measured in Construction Cranes
World's First 3D-Printed Skyscraper to Be Built in UAE


 

IREM Headlines


Protecting the Industry in Washington – You Can Help

IREM remains committed to defending the interests of the real estate management industry on Capitol Hill. IREM’s purpose is to serve as a reliable source for two audiences. The first is to provide public policymakers with factual, accurate information on how their decisions will impact our industry and the population in general. The second audience is the industry itself, keeping real estate managers informed on how legislation will affect them, and how to make their voice heard in Washington.

Key among the issues IREM is monitoring is the debate on tax reform, the goals of the administration and Congress, and the impact any changes would have on the industry. Some of the tax reform concerns include the issues of carried interest, 1031 exchanges, and depreciation deductions.

IREM is also pushing for reform to the Americans with Disabilities Act (ADA). In particular, the focus is on “drive-by lawsuits,” where an attorney will simply drive by a property, and if the site is lacking (even in the placement of signage) send a demand letter for payment, without even giving the property manager the opportunity to repair the violation. IREM fully supports all the protections provided in the ADA, but allowing attorneys to profit from frivolous lawsuits is not one of them.

IREM has also made it easier for you to make your voice heard in Washington. IREM’s new Federal Action Center allows you to keep track of what’s going on. It also allows you to connect with your elected representatives, either by participating in IREM’s In-District Visit program, or electronically. To learn more about IREM’s public policy efforts, check out our Public Policy Home.
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What Really Happened in 2016 -- Get Free Property Income & Expense Data

IREM’s 2016 Income/Expense Analysis reported that nationally: vacancy rates in the suburban office sector continues to trend downward; shopping centers and other brick and mortar retail stores were hit hard; the affordable housing sector was stable, and in some respects, thriving; the decline in home ownership continued to raise the number of renters occupying condominiums, co-ops, and PUDs; the conventional apartment industry experienced another good year of rent growth and occupancy levels.

Did those trends continue throughout last year, and more importantly, how did your local market compare to the national trends? Real estate managers know how valuable income and expense data is in ensuring successful property operations. Income and expense data is used for benchmarking, budgeting, forecasting, and planning. It’s a way to see how your property stacks up against similar properties in your market.

But, it is usually not cheap to find that data. It can cost hundreds or thousands of dollars to get reliable, useful data. Fortunately, you can now get one of IREM’s highly regarded Income/Expense Analysis reports for free! All you have to do is submit your 2016 property data to IREM.

IREM’s Income/Expense Analysis reports provide quality income and expense data for private-sector office buildings, conventional apartments, condominiums, cooperatives and planned unit developments; federally assisted properties and shopping centers in the top metropolitan markets in the United States and Canada. You'll have access to detailed data breakdowns including: Rent; Maintenance; Taxes; Payroll; Utilities; Insurance; and Vacancies.

Submitting your data is easy and hassle-free. Visit IE.IREM.org today to experience our convenient, user-friendly submission site, and get a free Income/Expense Analysis Report eBook and a free Individual Building Report for your property.
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Highlights: IREM Asset & Property Management Symposium/Northeast Regional Meeting

Over 350 asset and property managers were in New York last week to attend the 7th Annual IREM Asset & Property Management Symposium. Highlights included a keynote address from Joseph Manasseri, Senior Managing Director at Cushman & Wakefield Cushman, and sessions addressing challenges in asset & property management and technological advances in the field.

In his remarks, Manasseri stressed the importance of value creation. And he knows a little about creating value for his owners – he manages over 50 million square feet of real estate in the Tri-State region. When asked what advice he’d give his younger self, he responded, “Take risks and chances when you’re starting out – do what you’re passionate about. I’d also recommend finding a mentor you can relate to and be candid with. Bottom line, get out there and get to know people.”

Panel sessions focused on the changing dynamics of the profession, with discussions running a gamut of topics like the global economic effect, the new generation of workers, e-commerce, and ransomware attacks. Attendees left the event with a plethora of best practices and new concepts to put into action at their own organizations.

IREM Chapter Leaders from across the northeast also gathered at an IREM Regional Meeting held in conjunction with the symposium to discuss the importance a strong, contemporary chapter network is to achieving IREM’s strategic goals and industry relevance. During his opening remarks, Mike Lanning, CPM, 2017 IREM President said, “IREM Chapters are the backbone of this organization and are often the primary connection for members and practitioners to engage with the Institute as a whole. That’s a very powerful position.”

The Regional Meeting in New York marked the first of four such meetings that will take place across the U.S. over the next few months – all with the same theme and goal of strengthening and supporting IREM Chapters. Each Regional Meeting is collocated with a signature industry event, and in New York, the IREM Asset & Property Management Symposium punctuated attendees’ Big Apple experience.
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#REIC2017 Annual Conference

Join real estate industry leaders in Halifax, NS for three days of informative sessions, engaging social events and celebrating achievements, June 13-15, 2017. The Real Estate Institute of Canada (REIC) annual conference hosts a diverse range of real estate professionals from across the globe. Register today to reserve your space at this event.

This is not a trade show with countless booths, but an opportunity to build important and meaningful industry relationships. The #REIC2017 conference consists of leadership and professional development sessions, networking opportunities, as well as the REIC Annual General Meeting and 2017 Pursuit of Excellence Awards gala.

Sponsorship packages are still available. Take advantage of this unique opportunity to promote your products and services to a range of delegates. Reach professional real estate decision makers across Canada with year-round recognition. There are sponsorship levels to suit every budget.
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Industry Headlines


Renters Now Rule Half of U.S. Cities
National Real Estate Investor (03/23/17)

According to most recent U.S. Census Bureau data compiled for Bloomberg by real estate brokerage Redfin, 52 of the 100 largest U.S. cities were majority-renter in 2015. Furthermore, 21 of those cities have shifted to renter-domination since 2009, ranging from such hot housing markets as Denver and San Diego to more lukewarm locales like Baltimore and Detroit. There is good reason to think the trend toward renting will continue. For one, a 2015 Urban Institute report predicted that rentership would keep rising through the end of the next decade due to demographic trends that include graying Baby Boomers who downsize into rental housing. Of course, most low-income families don't rent by choice, while there are plenty of higher-income households who rent because they can't afford to buy exactly what they want.

"We don't have enough affordable supply in either rental or for-sale markets," observes Nela Richardson, chief economist at Redfin. She encourages those cities that are interested in promoting renter-friendly policies to rethink their zoning policies to encourage more construction. Moving forward, city leaders will need to check old assumptions about the role renter households play in their communities. Homeowners have traditionally been regarded as more engaged, with more at stake in commnities -- a view that can unfairly short-change renters. Andrew Jakabovics, vice president for policy development at Enterprise Community Partners, concludes, "It goes a long way just to make sure you're valuing renters and making sure voices are heard when it's time to allocate resources to schools or parks or transit lines."
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Office Rents in Chicago Rose 20 Percent in 2016 — 2nd-Highest Increase in the World
Chicago Tribune (03/26/17) Ori, Ryan

Rents for high-end office space in Chicago increased nearly 20 percent in 2016, the largest increase in the United States and second-highest in the world, reports the latest CBRE data. The Windy City's one-year jump is particularly striking considering it is typically known for less dramatic fluctuations in property values and rents than those seen in such coastal locales as New York City and San Francisco. Rents in Chicago's newest and best-located office buildings were up from an average of $32.40 in 2015 to $38.84 a square foot last year. Analysts say Chicago's 19.9 percent increase for top-quality space was due to a trio of factors: one, a relative lack of new buildings since the Great Recession; two, the lowest overall vacancy downtown in nearly 16 years; and three, a trend of corporations moving workers downtown from either the suburbs or outside the Chicago area.

Only Belfast, Northern Ireland registered a bigger increase in 2016 (25 percent), shows CBRE's Global Prime Office Rents survey. Nationally, Chicago had no problem topping suburban Seattle, which saw an 11.6 percent increase in trophy tower rents, and downtown Seattle, where the gain was 11.4 percent. The CBRE research shows why developers continue jockeying to add the next office high-rise to Chicago's skyline. This optimism comes despite lingering worries that so-called "shadow space" -- i.e., large holes created by tenants moving to brand-new towers from existing properties -- will push down rents this year and beyond.
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Kayaks, Spoiled Steaks and Headaches: Packages Are an Ever-Increasing Dilemma for Building Managers
Forbes (03/24/17) Banister, Jon

Nationwide, apartment managers are having to find new ways to handle the skyrocketing volume of packages residents are getting delivered and the increasingly diverse items they have to sign for. It's even changing the way some developers are designing new buildings. As recently as a couple of years ago, your typical apartment resident might have one package delivered every week or so, observes Josh Burroughs, senior development director for Swenson, a top multifamily housing builder in Silicon Valley. Now, with widespread use of such services as Amazon Prime and Google Express, busy residents are replacing routine shopping trips to the supermarket and big-box retailers with home delivery. Some are even averaging a package or more a day, Burroughs states. "The shipping movement has crossed multiple demographics," he adds. "It's not just Millennials. It's middle-aged folks and seniors that have figured it out. It just makes your life more efficient, but everyone freaks out if your package says it's delivered and it's not there."

But the challenges can be many. Some residents may receive a package from a food vendor like Omaha Steaks or Blue Apron while away on a vacation, and the spoiling food can end up stinking the apartment building's package room. As a solution, some apartment operators are installing commercial-grade refrigerators in their storage rooms. In addition, a number of other buildings have installed automated locker systems where residents can pick up packages. The UPS or FedEx employee who delivers the package places it in a locker of corresponding size and sends a notification to the resident, who receives a code they can type in and open the locker. "Automation is really the key," states Bozzuto vice president Stephanie Rath. "Being mobile and technologically connected is so valuable to our residents." Of course, ever-larger package rooms will likely be needed. In existing buildings, property managers will often repurpose a first-floor janitor's closet or utility room for package storage.
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Bebe Stores Hires Advisers as Retail Shakeout Continues
Wall Street Journal (03/22/17) Rizzo, Lillian

Bebe Stores Inc. has hired financial adviser B. Riley & Co. to help it explore strategic alternatives, as well as engaged an unnamed real estate adviser to assist it with options related to its commercial property lease holdings. Wall Street Journal sources, though, do not expect a Chapter 11 filing anytime in the California-based retailer's near future. For such retailers as Aeropostale Inc., Limited Stores Co., Sports Authority Holdings Inc., Wet Seal Inc., and others, the biggest problems have been sizable debt loads and a large brick-and-mortar presence. With no secured debt, Bebe has only one of those problems. The publicly traded retailer is expected to address its real estate issues in the coming months by substantially reducing its footprint. Bebe currently operates 134 retail locations and 34 outlet stores in the United States, Canada, and Puerto Rico.
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Shopping Centers Brace for New Uses as Internet Erodes Retailers
Orlando Sentinel (03/21/17) Arnold, Kyle

The financial woes of several national retailers are leaving holes at shopping centers throughout Central Florida and elsewhere, and property owners are looking for new businesses that are not susceptible to Amazon and other online retailers. Anchor retailers ranging from J.C. Penney to Sears to Macy's are indeed closing stores nationwide. Increasingly, non-retailers are taking the spaces, including fitness centers, health clinics, and vocational schools. Most of these altentative tenants are eager to advantage of cheap rent in high-profile areas. David Gabbai, a retail real estate broker with Colliers International, remarks, "Maybe you can put a dentist's office into a smaller space, but what else out there is really immune to the Internet?” 24 Hour Fitness, in particular, has used some of those openings to gain a foothold in such markets as Central Florida. It helps that the company is willing to re-imagine old big-box stores as new opportunities for expansion, with spaces big enough to add swimming pools, steam rooms, and so forth.

Oviedo Mall in Florida filled a former Bed Bath & Beyond with a Zoo Health Club and a children's education and day-care facility dubbed O2BKids. The nearby West Oaks Mall took a former Sears department store and transformed it into a call center for Xerox. The owners of West Oaks add that apartments and vocational schools are helping fill empty space there and bring customers closer to support retailers. Many of these projects are happening in areas with an excess of retail space. "Stores don't always have a use for these buildings, and it's not necessarily a bad thing," Bobby Palta, a retail real estate broker for CBRE Orlando, concluded. "So maybe it becomes a call center or a government office or a library. Every neighborhood has a need."
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Boston Officials Push to Allocate Less Parking for New Apartment Buildings
Boston Globe (03/25/17) Logan, Tim

In some communities in and around Boston, elected officials see partially empty parking lots at apartment communities and wonder whether the time has come to ease space requirements for new construction. In the city itself, efforts are under way to make housing more affordable by building fewer parking spaces. But those plans don't always sit well with neighbors, who worry the newcomers' vehicles will invade street spaces. Many apartment developers, particularly those building near MBTA public transit stops, are pitching projects that dip below the city’s long-held rule of thumb of one parking space per apartment. Of the 76 residential buildings approved by the Boston Planning & Development Agency (BPDA) in 2016, 30 came with fewer than one space per apartment. Both developers and city leaders expect that number to grow.

"The need for 1-to-1 parking is obsolete," declares Bruce Percelay, chairman of the Mount Vernon Company. "Millennials don't even like to buy cars." Percelay's firm is currently developing an apartment building in surburban Brighton with more parking for bicycles than automobiles. The lesser parking commitment can help with a project's financials, too, of course. Building an underground garage can cost $50,000 or more per space, experts say, adding significantly to the tab in what's already one of the country's priciest construction markets. Boston's parking crunch has been a point of emphasis at several City Council hearings in the past few months. Some councilors have expressed skepticism that less parking is the solution to the space squeeze. Among them is Michael Flaherty, who states, "It would be delusional for the [BPDA] to think that these people moving into these buildings are not going to be owning and driving vehicles."
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GameStop Closing at Least 150 Stores Amid Sales Decline
Wall Street Journal (03/24/17) Armental, Maria

Hit hard by a shift to digital downloads, GameStop Corp. last week announced plans to close at least 150 of its more than 7,500 stores worldwide and expand its nongaming businesses. The videogame chain's sales and earnings decreased by double digits in the latest period, while the brand lost some market share because of discounts. Meanwhile, collectibles have been one of GameStop's success stories that is expected to become a $1 billion annual business by the end of 2019. Sales in this niche surged 59.5 percent in 2016. GameStop had 86 collectibles-only stores up and running as of the end of January. It plans to open an additional 35 such stores between now and the end of the year.
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Partial Stakes Are Changing the Way Office Buildings Are Bought and Sold in NYC
Bisnow (03/23/2017) Shirayanagi, Kouichi

In New York City, more and office building owners are shopping their assets, looking for buyers of non-controlling ownership interests as a way to capitalize on their growing value. As confidence in the economy grows, commercial landlords are looking to monetize and keep control of their buildings. Meanwhile, new investors are eye opportunities to enter the commercial real estate sector alongside a local expert who knows all the ins and outs of effectively managing a building. Both parties in a partial interest sale are typicaly looking for a way to take advantage of tax rules that incentivize dividing a building's ownership instead of selling it entirely. "There is a record amount of uncommitted capital, there is limited property and low interest rates," states JLL managing director Glenn Tolchin. "These three factors mean there is an opportunity for partial sales."

CBRE last week released a study, which found that there is as much as $1.7 trillion in "dry powder" investment funds to deploy in commercial real estate this year. Of all Manhattan office sales worth $10 million or more last year, 28 percent were partial stakes in buildings -- an increase from 17 percent in 2014, states JLL researchers. The success of closing a partial deal comes down to creating a balancing act. On one side, there is taking into account the economic interests of the partners. On the other side, there is implementing new control mechanisms in the joint venture that lead to the smooth execution of the agreed-on business plan.
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Urgent Care Centers So Popular That Hospitals Are Jumping on Bandwagon
Allentown Morning Call (PA) (03/20/17) Peterson, Margie

The Urgent Care Association of America (UCAOA) estimates there were 7,357 urgent care centers nationwide in 2016, up 10 percent from the previous year. Many of these are freestanding buildings, while numerous others are located in strip malls and office complexes. Dr. Gregory Brusko, senior medical director of the Lehigh Valley (Pa.) Physician Group, observes: "Nationally, there's a shortage in primary care physicians, that's a big factor. I think folks' attitudes about obtaining health care has changed considerably as it relates to convenience and time." People who have primary care physicians might have to wait several days for an appointment, notes Shaun Ginter, a board member of the UCAOA and president of Urgent Care Centers of New England. Many people with minor problems also opt for urgent care centers to avoid the long wait times at hospital emergency rooms.
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Is Your Apartment Website at the Top of Its Game?
Property Management Insider (03/23/17) Steele, Larissa

With peak leasing season right around the corner, apartment owners and operators are being urged to take a closer, more analytical look at their websites. If your apartment community's website isn't optimized for search engines, opportunities are being missed to attract prospects online. Backlinko recently examined approximately one million Google search results and discovered a lot about best practices in search engine optimization (SEO) for 2017 that any multifamily housing property can implement. Site speed, smooth navigation, and overall user experience is key. The question needs to be asked: "Is your website providing the best user experience for potential residents?" Today's renters are using mobile devices to search for apartments more than ever before. Taking steps to ensure your community's site has a responsive design will ensure users can access your content from mobile devices. According to Backlinko's research, fast-loading sites rank substantially higher than pages on slow-loading sites, mostly because of lower bounce rates.

Flawless site navigation coupled with easily accessible information provide potential residents with an engaging session on your site and are more likely to convert to a lead. At the same time, though, the practice of keyword stuffing can actually do more harm than good for your site. The research further showed that sites with content considered "topically relevant" greatly outperformed those that did not cover a topic in-depth. Backlinks remain an extremely important Google ranking factor. According to the article's author, "backlinks or an incoming hyperlink from one web page to another shows the relevancy of your site." Finally, having a positive online reputation has been proven to boost apartment communities' rankings. Since many review sites can be a good source for backlinks, establishing a positive online reputation management should be considered an important factor in creating higher ranking websites.
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The U.S. Apartment Boom, Measured in Construction Cranes
Wall Street Journal (03/22/17) Chen, Stefanos

According to the Crane Index, Chicago has more cranes working on multifamily housing projects than all other major U.S. cities. As recently as November, Chicago has 56 cranes being used, with 31 of them are building residential projects. Seattle and Denver came in at second and third on the list, respectively. All this new construction marks an apartment boom for the Windy City. Aaron Galvin, the owner of Luxury Living Chicago Realty, says Chicago is on pace to add over 6,500 new rental units in 33 buildings this year. The building boom is partly being spurred by Chicago's rising tech industry, which is luring workers from other cities and states.
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World's First 3D-Printed Skyscraper to Be Built in UAE
The Independent (United Kingdom) (03/14/17) Sulleyman, Aatif

Cazza in Dubai plans to build the world's first 3D-printed skyscraper. The construction firm did not disclose details about the height of the building, nor has it publicly set commencement or completion dates for the project. What has been confirmed is the building will be erected in the United Arab Emirates. Cazza CEO Chris Kelsey says the company had considered implementing 3D-printing technologies for low-rise buildings, but developer inquiries into building a 3D-printed skyscraper prompted the firm to conduct research on adapting the technology to taller structures.

Buildings have been 3-D printed before, and the key benefits are low costs and speedy completion. "Through our technologies, we will be able to build architecturally complex buildings at never-before seen speeds," according to Kelsey. “It is all about economies of scale where the initial high technology costs will reduce as we enter the mass-production phase." Concrete and steel will be at least two of the materials printed by Cazza. New features will be added to offer greater adaptability to high wind speeds.
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