Real Estate Management News - 08/26/2015

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August 26, 2015
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LEADERSHIP SPOTLIGHT
Virginia Tech Student Joseph Jajonie II Awarded 2015 IREM Student of the Year Scholarship

IREM® HEADLINES
Not all apartment building types share in success
The Disaster Experience: Never Be Caught Unprepared Again
Find Your Next Job or Fill That Open Position with IREM Jobs

INDUSTRY HEADLINES
Office Today, Apts. Tomorrow: Office-To-Residential Conversions Expanding Across More U.S. CBDs
Pedaling at Work Can Improve Employee Health
Federal Lawsuit Says Columbus Apartment Complexes Don't Meet Accessibility Requirements
Apartment Market Continues Hot Streak with Six Months of Rent Growth According to Axiometrics
Shattered Office Tower Glass Unsettles People in Downtown Regina
From Shopping Centers to 'Entertainment, Dining Centers'
Building Owners Sue Pittsburgh Over Security Law
What's Hot: New Stovetop Technology to Prevent Kitchen Fires
Survey Results: REITs Embrace Sustainability
Why a Wooden Office Tower May Symbolize the Future of Multi-Story Construction
Construction Lenders All-In for Apartments
Luxury High-Rise Fosters a University City That Never Sleeps


 

Leadership Spotlight


Virginia Tech Student Joseph Jajonie II Awarded 2015 IREM Student of the Year Scholarship

Joseph Jajonie II, a student attending Virginia Polytechnic Institute and State University (Virginia Tech), Blacksburg, Virginia, is the recipient of the 2015 Student of the Year Scholarship awarded jointly by the Institute of Real Estate Management and the IREM Foundation.

The IREM Student of the Year Scholarship recognizes an outstanding college/university student who has demonstrated a record of academic achievement and interest in pursuing a career in real estate management.

In a personal essay required to qualify for the scholarship, Jajonie says, “I know that whatever field I choose in real estate, I will always be aiming to help others.” In addition to being a full-time student, Jajonie prioritizes his role within his local community. He serves as an Ambassador for both the Program in Real Estate and Department of Building Construction, as well as the founder and current President of the Real Estate Club at Virginia Tech.

Carrie E. Woodring, CPM, Director of Real Estate, Virginia Tech Foundation, recommended Jajonie for the award. She says, “Joe is active in many student organizations including real estate clubs and student government at Virginia Tech. Joe is also a student member of IREM Chapter 38. Joes is articulate, presents himself in a professional manner, and is a very impressive young man; so improves that I hired him as a student intern to work in our real estate office during his senior year at Virginia Tech.” Woodring also says “Joe will be a wonderful asset to the real estate industry.”

Find out more about the Student of the Year Scholarship.
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IREM Headlines


Not all apartment building types share in success

While the conventional apartment sector had another great year in 2014, not all types of apartment communities shared in that success. According to the data collected in IREM’s new Income/Expense Analysis®: Conventional Apartments (2015) publication, low-rise apartment buildings with 12-24 units saw a 12.9% decline in Net Operating Income (NOI) – from $5.66 per square foot in 2013 to $4.93 per square foot in 2014. Low-rise apartment buildings with 25 or more units only saw a 0.6% improvement in NOI, from $6.26 per square foot to $6.30 per square foot.

Garden style communities saw a healthy 6.3% increase in NOI, from $5.56 per square foot in 2013 to $5.91 in 2014. Elevator buildings did almost as well, seeing a 5.9% increase in NOI, from $10.45 per square foot to $11.07 per square foot.

Uncollected income due to vacancy and other forms of rent loss varied very little compared to 2013. All four property types changed less 1%. Overall, low rise buildings with 25 or more units had the highest vacancy and rent loss reporting at 6.0 percent as a percentage of gross possible income. Low-rise buildings with 12-24 units reported the lowest vacancy and rent loss of the four property types at 3.7%.

Detailed information on conventional apartment building income and expenses is available by market, and region in the full report. Similar information is also available in separate reports for the following property types: Office Buildings; Shopping Centers; Federally Assisted Apartments; and Condominiums, Cooperatives and Planned Unit Developments. Learn more about IREM’s Income/Expense Analysis® publications.
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The Disaster Experience: Never Be Caught Unprepared Again

IREM Executive Edge
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Have you made your plans yet to attend IREM Executive Edge? Get ready for three powerful days of essential, career-building education and networking for residential and commercial managers of all skill levels.

Chances are that while you read this an unexpected disaster is causing a company stress and confusion and is affecting its ability to provide service and support to its customers and stakeholders. Disasters of every shape, size, look, and feel happen all the time; affecting businesses, jobs, lives, and families. Are you prepared to handle a disaster if one occurs on your watch?

Bob Mellinger, founder and president of Attanium Corp, will guide you through a real-life disaster situation as it unfolds in this highly interactive experience. Working in small teams, you will make critical decisions as the scenario develops…and deal with the consequences of those decisions.

Do not be caught unprepared! Apply the principles of disaster management to effective business continuity planning

• Improve your crisis communications and decision-making skills
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Learn more about this session and the rest of the unparalleled education slate.

Knowledge in our industry is constantly evolving. Be sure you evolve with it at IREM Executive Edge.

Register by September 15 and save $50 on this must-attend industry event!
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Industry Headlines


Office Today, Apts. Tomorrow: Office-To-Residential Conversions Expanding Across More U.S. CBDs
CoStar Group (08/19/15) Drummer, Randyl

An interesting trend is developing in some downtown markets: vacant and obsolete office buildings are being converted into apartments. Companies that wouldn't consider a downtown location back when the space was available are coming back, drawn by the large number of Generation Y-age workers who favor a trendy downtown address. While office-to-residential conversion has long been popular in revitalizing the downtowns of heavily populated central business districts (CBDs) in various East Coast markets, recent proposals by developers to convert older, underutilized office buildings to multifamily housing are gaining steam in such markets as Kansas City, St. Louis, Milwaukee, and Cleveland. Meanwhile, the removal of outmoded and high-vacancy office buildings from downtown inventories has resulted in dramatic occupancy gains in those markets where the trend has gone mainstream. This, in turn, has paved the way for new investment to satisfy demand both for more office-to-residential conversions and spurring new ground-up office development to replace some of the lost stock.

A recent survey of office data by CoStar Portfolio Strategy market analysts shows office-to-residential conversion activity happening in almost 50 percent of the top office CBD markets nationwide, with the prospect of adding roughly 11,500 apartments and condominiums to downtown inventories. In downtown Cleveland, for instance, increasing demand for multifamily housing has led to the sale of several mostly empty and functionally obsolete office buildings ripe for conversion. According to JLL, trades of potential office conversions and other distressed properties during the first six months of 2015 contributed in a major way to the biggest office sales volume in the Cleveland market since 2008. With regards to the Cleveland market, Newmark Grubb Knight Frank managing director David Hollister states, "We had an over-abundance of illiquid, older Class C office product. That has changed, and it's been very good for the city. To have that segment of the office market tighten up now has been wonderful."
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Pedaling at Work Can Improve Employee Health
Buildings (08/19/15)

Permitting office workers to use a portable pedaling device that fits under their desks while working can help them be more healthy, reports a new University of Iowa study. The research, published in the American Journal of Preventive Medicine, shows that workers who pedaled during their day were more likely to report weight loss, exhibit improved concentration while on the job, and use fewer sick days than workers who pedaled less. Researchers monitored 27 office workers, who spent an average of 50 minutes per day using the pedal device over a 16-week period. The team further learned that both comfort and privacy were important, noting that some employees can be self-conscious using either company exercise facilities or such devices as treadmill desks set up in common areas. After the study's conclusion, 70 percent of participants opted to keep the pedaling devices provided to them, meaning the practice is not only healthy but also could be sustainable over time for many workers.
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Federal Lawsuit Says Columbus Apartment Complexes Don't Meet Accessibility Requirements
Columbus Dispatch (08/20/15) Ferenchik, Mark; Price, Rita

A couple of fair-housing associations have filed a federal lawsuit against Ohio-based Preferred Living Real Estate Investments and several affiliated firms that says their Columbus-area apartment communities are not as accessible to people with handicaps as federal law requires. The lawsuit claims that the various complexes lack design elements required by the Fair Housing Amendments Act. These properties include Palmer House and Clifton Park on the Northeast Side; Andover Park on the Far West Side; Alexander Square on the Far North Side; and, finally, Taylor House on the Northwest Side. The suit says the four complexes are "replete with accessibility problems," including ground-floor apartments that do not have accessible routes to amenities and clubhouses; curbs without curb cuts; leasing offices with steps leading to the entrance; out-of-reach light switches and electrical outlets; and insufficient floor space for wheelchairs at sinks, toilets, and bathtubs.

The suit was filed this past Wednesday by the Central Ohio Fair Housing Association and the Miami Valley Fair Housing Center. Jim McCarthy, president and CEO of both groups, said they conducted their own investigation and did not receive complaints from anyone. The federal act requires that certain apartment communities erected after March 13, 1991 -- generally, those with four or more rental units -- be designed and built with features for people with disabilities. Derek Mortland of the Center for Disability Empowerment remarks, "I'd like to see far more of these lawsuits. That's probably the only way it's going to be fixed."
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Apartment Market Continues Hot Streak with Six Months of Rent Growth According to Axiometrics
MultifamilyBiz.com (08/18/2015)

According to Axiometrics, the national apartment market could be in its hottest long-term streak since the Great Recession, with six straight months of 5.0 percent or greater annual effective rent growth as of July 2015.  Last month's annual effective rent growth rate of 5.2 percent indeed brought the streak to the half-year mark and was the highest rate reported since July 2011.  "Despite a record amount of new supply being delivered this year, the 2.1 percent job growth recorded in July -- and the 200,000-plus jobs added per month in most months during the past year -- has increased the renter pool," said Stephanie McCleskey, vice president of research for Axiometrics.  "Furthermore, the apartment industry is still playing catch-up for all the units not built during the recession and immediate aftermath."  

The national occupancy rate remained high in July, though it decreased by 11 basis points from June's 95.3 percent to 94.2 percent. Oakland (14.5 percent) once again ranked No. 1 on the list for effective rent growth in July, followed by Portland (13.8 percent) among Axiometrics' top 50 markets as determined by number of units. The Bay Area metros of San Francisco (11.0 percent) and San Jose (10.4 percent) eclipsed Denver and Sacramento to capture third and fourth places. The former's effective rent growth returned to double digits after three consecutive months in the 9 percent range. McCleskey remarked, "This may be a blip on the screen, since we forecast moderation in Bay Area rent growth, though the markets will remain among the strongest in the nation." California continued to rank as the dominant state on the list with a half-dozen of the top 17 markets, followed by Florida with three markets.
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Shattered Office Tower Glass Unsettles People in Downtown Regina
CBC News (Canada) (08/17/15)

Building managers are looking into the glass of a downtown Regina office tower in Canada after an incident where a panel from one of the top floors shattered.  It was the third such incident affecting the 20-story building, according to news reports.  Local citizens have expressed concern over the building, and some have said they are afraid to walk near the tower after glass fell to the ground and into the street.  Steve Enns, a vice president for the property management company Harvard Developments, said they are uncertain why the glass panel failed.  "It's not uncommon for glass to break on a newly constructed building," Enns said. "This building, unlike others, is built with tempered glass and that type of glass tends to have more incidents than a building that is constructed without tempered glass."

He added that when tempered glass breaks, it shatters into small pieces. "Tempered glass is among the safest types of glass to use on a building," he said. "Normal glass will break in large shards, versus tempered glass which falls apart in small pebbles." Enns and his management team are now meeting with consultants to determine possible next steps, which could include the testing of other panels. Enns will also consult with the general contractor who oversaw the building's construction and glass experts based in Toronto. An investigation into previous incidents at the property noted the glass that failed contained traces of nickel-sulphide, called an inclusion. Under intense exterior heating conditions, such inclusions may expand more rapidly than the surrounding glass and could result in a break. Unfortunately, there were no pieces of glass left in the frame from the most recent incident that could be examined for such inclusions.
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From Shopping Centers to 'Entertainment, Dining Centers'
GlobeSt.com (08/13/15) Dolce, Natalie

According to Melina Ferraez, director of marketing at Victoria Gardens, consumers can expect to see the ongoing shift from retail-based shopping centers to entertainment and dining centers continue in the years to come.  Ferraez points out that "the Millennial generation will continue to drive trends in retail, as well as their younger counterparts, who are likely to have their own unique demands."  She said the key for shopping center owners and operators is to add everything possible to avoid becoming stagnant or complacent with a center design or tenant make up.  "Retail centers must constantly evolve to reflect changing tastes and accommodate new generations of shoppers," added Farraez.  Brandon Famous, Americas head of retail occupier advisory and transaction services at CBRE, agrees. He forecasts that there will be further integration of e-commerce with bricks and mortar over the next 15 or so years, with retailers continuing to focus on the consumer experience in order to remain competitive and stay relevant.
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Building Owners Sue Pittsburgh Over Security Law
Pittsburgh Post-Gazette (08/19/15) Zullo, Robert

The Building Owners and Managers Association of Pittsburgh has followed through with a threat to sue the city over a law passed back in May that created new training standards and other requirements for security guards, janitors, and maintenance workers in large buildings.  The association's suit seeks a preliminary injunction and challenges the authority of the city to impose requirements on private businesses.  Greg Evashavik, one of the lawyers who filed the suit on behalf of the group, told the council in April that the proposed law violated the state's home rule charter law.  City Councilman Ricky Burgess, who sponsored the Safe and Secure Building Act, said "the intent of the legislation is to have more training in the dangerous and unpredictable world we are living in."  The law requires covered workers in certain buildings to pass a training class certified by the city's Fire Bureau.
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What's Hot: New Stovetop Technology to Prevent Kitchen Fires
Property Management Insider (08/19/15) Blackwell, Tim

Built-in sensory technology that turns off electric coil burners to prevent kitchen cooking fires is about to become a hot commodity in apartment communities and other settings.  The appliance industry and fire prevention officials are close to implementing a newly adopted standard that will require all new electric stovetops to shut off before cookware contents reach ignition temperatures associated with common cooking oils.  Kathleen H. Almand, vice president of research for the National Fire Protection Association, said that research conducted by the group's Fire Protection Research Foundation has resulted in the development of a built-in sensor that will shut off burners just before grease catches on fire.  She said the sensor will soon be standard hardware on new stovetops.  Types of cooking oils, pans, and pan size were considered in determining the burner shutoff moment.  It should be noted that a rollout date has not been set yet for the new standard.
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Survey Results: REITs Embrace Sustainability
BOMI Canada (08/18/15)

According to the Institute of Real Estate Management's (IREM's) recent job analysis survey, property managers aligned with real estate investment trusts (REITs) generally place greater stock in sustainability over other respondents.  In general, the submissions from over 1,400 American and Canadian accredited property and asset managers reveal less committed attitudes, with more than 50 percent of survey respondents considering green practices of "moderate," "low," or "no importance." Study findings further show a divergence among property sectors and job functions. The majority of office building managers did rank developing and implementing sustainable practices as "important" or "very important" job tasks, while significantly fewer residential managers held that view.

IREM analysts hypothesize that heightened accountability may be one big reason why REITs embrace sustainability. "Many REITs are publicly traded, and even when they are privately traded there may be a greater need to display a higher social conscience for stakeholders and investors," states the executive summary of the results. "As REITs are often larger than other real estate firms, they are also more susceptible to government regulations and policies related to sustainability." At the same time, survey participants tended to broadly endorse tenant education and environmental awareness. For instance, site managers in multi-residential communities generally agreed on the importance of promoting energy and water conservation. The executive summary concluded: "While most real estate managers may not rank sustainability tasks highly, a majority at least agrees that it is important or very important to at least know about sustainability practices."
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IREM Job Analysis Executive Summary

Check out IREM’s Job Analysis Executive Summary

Why a Wooden Office Tower May Symbolize the Future of Multi-Story Construction
Curbed National (08/12/15) Sisson, Patrick

The first tall-timber building in the United States -- the seven-story, 210,000-square-foot Timber, Technology and Transit (T3) office building -- broke ground at the end of last month in Minneapolis.  The new home of the Hines development firm, designed by architect Michael Green, aims to represent a technological leap forward that may be the vanguard of sustainable construction.  Green's eponymous Canadian firm built the seven-story Wood Innovation and Design Center in Prince George, B.C., which is currently the tallest timber building in North America.  To meet code, the T3 project has a concrete foundation and a steel skeleton, but most of the rest of the structure will be wood sourced from the West Coast.  Huge panels of engineered lumber make up the core and floorplates, supported by engineered wood columns.  Their density makes them fire-retardant, energy efficient, and insulating.  

Although many projects are using cross-laminated timber and heavy wood construction, Green is most excited by the recent forestry school expansion at Oregon State University, which is advancing the technology behind timber construction.  Moving forward, building tall-timber buildings in the seismic West Coast or windy Midwest will require unique systems and designs.  Builders, regulators, and architects will have to work together to develop and share regional knowledge.  "We have a new means of building that can help us realize a new era of architecture, a post-climate era," Green concluded.  "As this develops, we'll see how this changes the look of our cities and buildings."
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Construction Lenders All-In for Apartments
National Real Estate Investor (08/18/15) Anderson, Bendix

Earlier this year, construction lenders seemed worried that too many apartment buildings were already under construction and vacancy rates were going to rise. This, in turn, would cause lenders to limit their lending. But demand for apartment communities has continued to grow, and construction lenders are now eagerly making loans.  Developers are expected to add 230,000 new apartments this year, according to research firm Reis Inc.  "Everyone thought things weren't going to be as good as it's been," says Michael Riccio, co-head of national production for CBRE Capital Markets. "The fundamentals still look pretty good. The apartment market has been much more resilient that we thought."  Interest rates offered by construction lenders seem likely to stay low, even after the Federal Reserve inevitably raises benchmark interest rates.  Federal Reserve officials have all but promised to raise such rates by a few basis points later this year, perhaps as soon as September.
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Luxury High-Rise Fosters a University City That Never Sleeps
Multifamily Executive (08/19/15) Ballinger, Barbara

When Philadelphia's Science Center -- a 17-acre research park in the University City neighborhood, decided to turn a parking garage into a mixed-used development to help make the area a 24/7 destination -- Southern Land was eager to win the request for proposal.  The Nashville-based developer built a 28-story structure, which they believed would signal the Center's forward-thinking mission.  The plan called for 363 residential units, with alternating bands of high-performance glass and metal, an angled design to capture the views, and LEED Silver specifications.  Beneath the apartments is 15,600 square feet of retail and restaurant space, while the property's resort-style saltwater rooftop pool is one of a multitude of amenities aimed at Millennials.  Since the building started leasing earlier this month, 20 percent of the units have been leased.  The building has added "good urban density and a liveliness to achieve the 24/7 neighborhood desired," said BLT architect and design principal Michael R. Ytterberg.
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