Real Estate Management News - 08/24/2016

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August 24, 2016
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Industry Partners

Broadstone Little Italy Joins Elite Group of Sustainable Properties

Conventional Apartment Fundamentals Remain Strong
Greenbuild 2016 Speakers Announced
Still Time to Save! Register for the IREM Fall Conference

Target Adding Single-Stall Bathrooms at All Stores
If Malls Fail Some Day, What's Next?
Is Suburban Office Market Set for a Comeback?
Air Conditioning Market Projected to Reach $167 Billion by 2024
What’s the Deal: Full-Floor Spaces Lure Office Tenants to Times Square Building
The Hidden Allergy Trigger to Avoid in Multifamily
Recent Analysis Shows Many Big-City Renters That Earn Enough to Buy Prefer Convenience of Renting
Mall Owners Warm Up to 'Pop-Up Stores'
Back to Basics: Reducing Waste in Office Buildings
The Top 100 Green Designers and Contractors: New Standards Beyond Buildings
This New Apartment Building Has an ‘Uber Room’ to Wait for Your Ride
How Net-Zero Buildings Impact the Grid


Leadership Spotlight

Broadstone Little Italy Joins Elite Group of Sustainable Properties

IREM is proud to announce its latest Certified Sustainable Property, Broadstone Little Italy, which is perched above San Diego Bay, and crafted in the spirit of an Amalfi village but with an eye toward the future. A future that is possible thanks to continued sustainability efforts of its management company, Alliance Residential Company (an AMO firm).

The IREM Certified Sustainable Property is a prestigious sustainability certification program that focuses on the role of exceptional real estate management in green building performance. IREM’s sustainability certification provides properties with recognition for resource efficiency and environmental programs. To earn the certification, a property must first meet key baseline requirements, and then earn necessary points across energy, water, health, recycling, and purchasing categories. Tenants and residents increasingly associate environmental performance with quality, so the certification presents a prime opportunity to showcase quality, responsible real estate management.

“We’re really proud of the team at Broadstone Little Italy for working through and achieving the IREM Certified Sustainable Property designation,” states Kelly Vickers, National Director of Sustainability at Alliance Residential Company. “Sustainability is a group effort and supportive owners and operators help drive Alliance’s sustainability success.”

“The concept of green buildings has come a long way, from vague ideas of changing out lightbulbs to a corporate imperative, one that transcends energy efficiency to embracing health and wellness”, states Christopher Mellen, CPM, ARM, IREM President, The Simon Companies, Braintree, Mass. “We congratulate Alliance on their initiative in achieving this certification at Broadstone Little Italy.”

Learn more about how your property can become an IREM Certified Sustainable Property.
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IREM Headlines

Conventional Apartment Fundamentals Remain Strong

Excerpt from an August 19, 2016 IREM Blog posting

The conventional apartment industry experienced another spectacular year in 2015 with substantial growth in both rents and occupancy levels. And while it might be hard to duplicate the same success in 2016, the industry is poised for another good year.

The fundamentals remain strong, including continued job growth, reduced home ownership, and favorable demographic shifts. However, there are some potential clouds forming on the horizon that are starting to cause many owners and managers to moderate their expectations for 2016, including:
  • Rent tolerance – rent growth has outpaced wage growth in the past five years, with many renters exceeding the 30% rent-to-income ratio that is considered indicative of financial stress
  • Job and wage growth – wage growth has not kept up with job growth. And while there has been steady job growth during the last six years, it has been slower than in previous economic recoveries. The uncertainties of an election year also provides some concerns about future job and wage growth
  • Supply growth – the number of new developments is growing, and while there is still a tight market the absorption of new product could put pressure on rents and occupancy rates
Another factor for owners and managers is the geographic region of their properties. Just as the economic recovery has been uneven across the country, so too has the performance of apartments. While apartments in general have seen rising rents and occupancy rates, many areas have not shared in that success – and some have even seen declines in both rents and occupancy rates. The geographical and building type differences in economic performance makes IREM’s Income/Expense Analysis®: Conventional Apartments even more critical for analyzing an individual property performance.

The 2016 IREM Income/Expense Analysis Reports are available in softcover book, interactive PDF/Excel, Online Labs and Metro Reports.
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Greenbuild 2016 Speakers Announced

Greenbuild International Conference and Expo convenes in Los Angeles October 5-7, and the proceedings are shaping up, with plenary speakers recently announced. The theme of this year’s conference on all things sustainable real estate is Iconic Green, celebrating past, present, and future leaders in green building.

Speakers include:
  • Opening Plenary: Outgoing USGBC CEO Rick Fedrizzi, California’s Lieutenant Governor Gavin Newson, and acclaimed journalist and film-maker Sebastian Junger.
  • Closing Plenary: USGBC COO and incoming CEO Mahesh Ramanujam, cultural innovator and architect Bjarke Ingels.
  • Master Series: stories from the green building movement; Elora Hardy, Founder and Creative Director, innovative bamboo architecture firm Ibuku; polar explorer and environmental advocate Sebastian Copeland; Antwi Akom, PhD, Co-Founder and CEO, neighborhood navigation app Streetwyze; noted seismologist Dr. Lucy Jones.
  • Education Sessions: Greenbuild 2016 offers a typically rich and diverse schedule of education sessions led by sustainability experts, commercial real estate executives, and industry leaders. Tracks include California, Community, Energy Efficiency, Financing & Implementing Green, Health and Well Being, Iconic Market, Markets, Master Series, Materials, Net Zero, People, People & Partnerships, Practice, four areas of Residential focus, and Special Sets.
The performer for the Greenbuild Celebration, scheduled for the evening of Thursday, October 6, has yet to be announced. Past performers have included Bon Jovi, Fitz & the Tantrums, Alabama Shakes, Train, and Maroon 5.

Register for Greenbuild 2016 at the Los Angeles Convention Center at IREM is a Sector Partner for the event, and we hope to see you there.

Explore IREM’s sustainability resources.
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Still Time to Save! Register for the IREM Fall Conference

You’re invited! Pack your sunglasses and head to San Diego for the IREM Fall Conference, October 18-21. Register by September 15th and save $100.

This year’s IREM Fall Conference will be one to remember. Inspiring speakers, fun networking events and motivating education sessions are guaranteed to keep you on your toes.

You can look forward to conference sessions like:
• 10 Trends in Multifamily Property Management
• Corporate Cyber Security: Every Company is Susceptible
• Mixing it Up: The Power of Well-Managed Mixed-Use Properties
• Evaluation of Staff and Structure for Optimal Results
• Transforming Leadership in the New Age of Real Estate

Just interested in education? Take advantage of the professional education day pass, giving you access to all the education sessions on Friday, October 21st – including the keynote session featuring Mike Walsh and Industry Leader lunch featuring Marla Maloney, CPM and Tony Long.

What are you waiting for? Register for the IREM Fall Conference today and save $100 on the registration fee.
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Industry Headlines

Target Adding Single-Stall Bathrooms at All Stores
USA Today (08/17/16) Bomey, Nathan

Target has announced that it will add single-stall bathrooms at all of its stores where that option is not presently offered, a direct response to the debate that erupted earlier this spring over its new transgender-bathroom policy. According to Target CFO Cathy Smith, the company will invest $20 million to add the single-stall bathrooms. The big-box retailer already has single-stall bathrooms that anyone can use at roughly 1,400 of its 1,800 locations. It should be noted that Target is not altering its transgender bathroom policy, which allows people to "use the restroom or fitting room facility that corresponds with their gender identity." Target spokesperson Katie Boylan said the chain decided to add single-stall, lockable bathrooms in all of its stores "because we're listening. We get it. Some like it, some don't. We're committed [to offering a welcoming environment [for all]."
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If Malls Fail Some Day, What's Next?
Florida Today (FL) (08/20/16) Price, Wayne T.

The article's author wonders if there are business operators, civic leaders, community officials, planners, architects, and/or design luminaries "working out a Plan B for mall space. It's not something most people, particularly those employed by retail, want to see and it's not going to happen tomorrow, or even 10, 20 years from now." However, the now-constant threat of large anchor retailers closing locations and leaving shopping malls exceedingly vulnerable does raise the question of how such large spaces can be re-purposed. Municipalities must keep in mind that these structures are responsible for very sizable property tax revenues. Some of the ideas uncovered make quite a bit of sense. Others ... not so much.

One possible re-use for mall space in the future is as a movie production studio. With the explosion of digital content and original productions from online entertainment services like Netflix, it is certainly an idea worth considering -- especially those states with favorable tax incentives for filming. Another possible use for a closed mall is as an indoor sports venue. Imagine indoor soccer fields, basketball courts, baseball clinics, and fitness facilities in an all-in-one building. A conversion to residential space is another possibility. Such a re-use project could also include a small grocery store or on-site coffee shop or maybe even a walk-in health clinic. Additionally, an entire mall could be converted into a school campus involving K-12 and/or a higher education institution. Finally, a closed mall could be the ideal site for a warehouse/fulfillment center for online purchases.
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Is Suburban Office Market Set for a Comeback?
National Real Estate Investor (08/19/16) Carr, Robert

Big city office markets are registering their strongest performance in decades, with America's unemployment rate falling to less than 5.0 percent and office vacancy in many regions dropping into the single digits. Analysts have cited the rise of the Generation Y workforce among the main causes, with Millennials' desire to cluster in central business districts (CBDs) to take advantage of the live/work/play environment. The question remains, though: "Will this generation follow previous ones and escape back to the suburbs in 10 years' time?" A new study by Avison Young, titled "Millennials and Re-Urbanization of the City," agrees with conventional wisdom that 18-to-36-year-olds are the driving force behind the recent flight to downtowns. The study states: "Embracing the diverse, urban lifestyle in large numbers, Millennials are directly affecting the revitalization of long-dormant urban areas in Detroit, downtown Los Angeles, Brooklyn, downtown Houston and Uptown Dallas -- among other locales."

Early Webb, president of U.S. operations for Avison Young, concedes that cities still have far to go to match the security offered by the suburbs for new families. By remaining in the suburbs, business tenants will still appeal to that family-orientated labor force. In addition, they will benefit from generally cheaper rents. While some suburbs have been hit hard with higher vacancy rates, many markets have seen tightening, especially with building owners offering increasingly competitive perks. "I'd say the death of the suburban office market is greatly exaggerated," Webb comments. "If developing in the suburbs, you have to think about what kind of live-work-play environment you can offer, with entertainment, transportation, and multifamily and single-family housing close by."
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Air Conditioning Market Projected to Reach $167 Billion by 2024
Buildings (08/18/16)

According to a new report from Transparency Market Research, the surging demand for air conditioning systems in commercial and residential buildings is only going to increase. Holding a revenue share of almost 40 percent last year, the commercial segment dominated the overall air conditioning systems market. Researchers forecast that this segment will preserve its lead at least through 2024, pushed by the growing usage of air conditioning systems in areas such as healthcare facilities and hotels. In 2015, the global market for air conditioning systems was valued at $104.4 billion. It is projected to top $167 billion by the end of 2024 thanks to the popularity of smart thermostats and the growing support for inverter air conditioners. Split air conditioning systems currently rank as the most dominant in the market, accruing a revenue share of more than 76 percent while also leading the air conditioning systems market by volume.
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What’s the Deal: Full-Floor Spaces Lure Office Tenants to Times Square Building
Wall Street Journal (08/21/16) Nonko, Emily

In Manhattan, a Times Square building has attracted new tenants due to its availability of modestly sized, full-floor office spaces. Handler Real Estate Organization has owned and managed the building at 561 7th Ave. for nearly half a century, reports CEO Scott Galin. For the past couple of years, leasing activity has picked up in the company's effort to reposition the building. Two companies recently signed lease agreements for full-floor headquarters. LiquidityBook, the financial-services tech firm, will occupy 3,944 square feet on the sixth floor beginning in 2017. Oasis Children's Services, an organization that specializes in hosting summer camps, also took 3,944 square feet on the third floor and will move in later this month.

Asking rent for the building is between the high $50s and low $60s per square foot, Galin reports. "We've attracted companies who only need 4,000 to 5,000 square feet but would like their own floor," he states. "To find office space like that anywhere in Midtown is a rarity." Bernie Suarez, a director at Oasis, acknowledges that the full-floor space was "a nice add-in." However, the bigger draw was relocating from Brooklyn's Dumbo area -- where Oasis has been based for the last 15 years, to a more central Midtown location. "Our employees can't afford to live in Brooklyn anymore," he concluded. "I wanted to make it easier for them and find a location with the easiest commute."
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The Hidden Allergy Trigger to Avoid in Multifamily
Property Management Insider (08/16/16) Blackwell, Tim

Along with the dust mite, cockroaches may be the most common cause of year-round allergy and asthma, says the Asthma and Allergy Foundation of America (AAFA). A relative of termites, cockroaches spread more than 30 kinds of bacteria including E. coli and Salmonella, a half-dozen parasitic worms and at least seven other types of human pathogens. Their saliva, droppings, and decomposing bodies contain allergen proteins known to trigger asthma and allergy symptoms, particularly in children. Apartment owners and operators can be sure that a good many residents are allergy and asthma sufferers. As a result, eliminating a source like cockroaches makes sense from a property management point of view.

Even when apartment units appear cockroach free, it's important to check again. The National Pest Management Association offers a number of tips for cockroach control that property managers can pass along to apartment residents, as well as administer around the leasing office and common areas. One, keep apartments -- especially the kitchen and bathrooms -- free of crumbs and debris. Two, vacuum frequently. Three, disinfect all counters and food surfaces. Four, never let dirty dishes pile up in the sink. Five, take out trash frequently, and store in a sealed receptacle. Six, transfer open boxed food items from cardboard into sturdy, sealed containers. Seven, throw away any foods that have gone past their expiration dates. Eight, for those with four-footers, keep pet food in a sealed container and wash pet bowls frequently. Finally, reduce moisture by repairing any and all leaks or installing a dehumidifier in damp spaces.
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Recent Analysis Shows Many Big-City Renters That Earn Enough to Buy Prefer Convenience of Renting
Multifamily Biz (08/15/16)

Across the nation's biggest rental housing markets, nearly 14 percent of on-market renters have strong credit scores, relatively high incomes, and could afford to purchase the median home in their market. As the homeownership rate has declined over the last decade, a broader socio-economic swath of Americans are renting than at any time in recent history. According to an analysis of financial qualifications reported via the Zillow Renter Profile feature, this means people who could afford to buy are renting instead, increasing competition for limited available homes for rent. The three markets with the largest segments of on-market renters who have the credit score and income necessary to become homeowners are San Jose, San Diego, and San Francisco. Los Angeles, New York, and Seattle also made the list of metros with fairly big segments of current renters who are financially qualified to buy.

Zillow examined the self-reported credit scores and incomes of renters who were on the market during the first and second quarters of this year in determining which metros have the highest number of financially stable, and thus most competitive renters vying for the attention of apartment owners and managers. In general, markets with lower homeownership rates have higher proportions of on-market renters with both strong credit and high incomes. But even when controlling for the homeownership rate, booming markets closely associated with the technology industry -- such as San Jose and San Francisco -- tend to have exceptionally high proportions of highly qualified, on-market renters. At the other end of the spectrum, markets that tend to have higher homeownership rates like Houston and metros that were hit especially hard during the housing bust and foreclosure crisis, such as Cleveland and Detroit, have lower shares of renters who report both strong credit and high incomes.
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Mall Owners Warm Up to 'Pop-Up Stores'
Wall Street Journal (08/16/16) Fung, Esther

More and more shopping mall owners are turning to short-term retailers known as "pop-up stores" to entice foot traffic and boost revenue. The trend comes as department stores and other tenants struggle to combat the growth of online retail. Such major shopping center owners as Westfield Corp. and Simon Property Group are dedicating more staffers and mall space to the short-term stores. Such retailers were previously seen only as seasonal business opportunities to lure customers in during holidays. Other landlords used them as transitory fillers to address temporary vacancies. Now they are being increasingly viewed as necessary fixtures to minimize vacancy rates and keep cash flow stable. In some cases, certain malls are offering a rotating cast of pop-up stores virtually year around.

The moves indeed come amid tough times for big retailers. Macy's Inc. recently announced plans to permanently shutter 100 department stores, or 15 percent of its store base. In the last year, everyone from Office Depot to J.C. Penney Co. to Gap Inc. have all announced store closures. "By giving more leasing flexibility and offering to help design a concept for the physical space to upstarts that might not be able to commit to five- or 10-year deals," the article's author concludes, "mall owners are hoping to refresh and enliven their properties." In especially high demand are pop-up stores that introduce local brands, perform merchandise demos, and offer shoppers the opportunity to interact directly with designers.
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Back to Basics: Reducing Waste in Office Buildings
Proud Green Building (08/17/16)

Recycling is one of the most basic steps for an organization looking to enhance its sustainable practices. This is often referred to as resource management or waste management. Although socially conscious companies can establish recycling policies and set goals, it is really up to the building ownership and management to ensure the right programs and avenues are in place to allow their commercial tenants to achieve those goals, reports the U.S. Green Building Council. The article's author lists four common strategies to overcome them to help building owners and tenants reach their recycling goals. Number one is knowledge. Prior to implementing a recycling program, know what's being thrown away and what portion could have been recycled. Only when armed with knowledge can building owners and operators formulate a plan of action. Number two is infrastructure. It is mission-critical to work with buildings and waste management groups to adjust the size of on-site containers.

Number three is convenience. Building management should make recycling containers easily accessible, such as placing recycling bins at employees' desks. Tenant space recycling is ultimately all about convenience. Finally, there is the matter of education. Display instructional materials prominently at trash and recycling receptacles that show what materials can go into recycling bins. Recycling rules can vary significantly between work and home, so education is vital. Also note that the recycling process can begin even before a building is occupied, even when it is being constructed. For example, cardboard, paper, plastics, and metals can be converted into new goods. In addition, crushed concrete can be turned into gravel or dry aggregate for new concrete.
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The Top 100 Green Designers and Contractors: New Standards Beyond Buildings
Engineering News-Record (08/11/16) Tulacz, Gary J.

As the market for sustainable design and construction continues to grow in tandem with the overall market, new standards are emerging to cover markets beyond buildings. However, changing ideas about what green building entails have many industry players and clients struggling to keep pace. Although the general market for sustainable design has held steady, it has enjoyed only incremental gains over the past several years. The pending implementation of the U.S. Green Building Council's (USGBC) LEED v4 standard is a major development, with construction firms saying it is addressing their concerns about the impact green building technology improvements will have on building occupants.

However, many firms and owners say LEED v4's scope is too narrow, excluding trends such as net-zero and occupant health. With studies showing adopting current best practices can yield at least 50 percent greater energy efficiency for no additional cost, "we need to rethink the entire design process and eliminate the distinctions between design and sustainability," says Perkins Eastman's Lance Hosey. Meanwhile, sustainable design and construction efforts have expanded from buildings to other markets, with the USGBC and its Green Building Certification promoting multiple new certifications such as Performance Excellence in Electricity Renewal, Sustainable Sites, and the ParkSmart Green Garage Certification.
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This New Apartment Building Has an ‘Uber Room’ to Wait for Your Ride
Multifamily Executive (08/19/16)

The Vintage on 16th -- a new apartment community in Washington, D.C. -- will be offering its residents a waiting room for those using ride-sharing services such as Uber and Lyft. Now under development by Valor Development, The Vintage on 16th will not offer any parking at all, although it is providing electric-bike sharing. In the lobby, architects have carved out a 260-square-foot niche for anyone waiting for their car service to arrive, complete with a TV and magazines. "We are thinking about how people live and move around," explains Joe Bous, a principal at Valor Development. Bous said that referring to it as an Uber Waiting Room is just a friendly moniker. The room is meant to serve residents waiting for all sorts of car services and transportation. Most notably, it will have a real-time display of transportation options at any given location. Dubbed the TransitScreen, this display will show nearby bus and [subway] wait times, Capital Bikeshare options, and how close the nearest Uber is.
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How Net-Zero Buildings Impact the Grid (08/08/16) Lee, Paul

Net Zero Buildings (NZBs) or Zero Energy Buildings (ZEBs) are becoming increasingly commonplace. Although NZBs, which produce just as much energy as they consume, have the potential to provide enormous benefits to society, it is important to understand their role in the energy grid to avoid any pitfalls. NZBs still get roughly half their energy from fossil fuel and one current problem is the lack of energy storage options. The reason why the net zero model currently works is because during times of excess solar, that energy is sent into the grid to supply someone else's need for power. Not only do we have to depend on fossil fuel, but the high ramping results in inefficient operation with customers paying for dirty power that are only used for a few hours during the day.

On the economic side, as more renewables go online and the demand for traditional power goes down, so will the price of electricity. This means that the utilities lose revenue and have less money to maintain their fixed costs in transmission lines and generation facilities. The potential impact on utilities would be harmful for buildings still dependent on the grid.
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