Real Estate Management News - 09/28/2016

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September 28, 2016
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IREM® HEADLINES
Civil Unrest – Is Your Property Ready?
Is Sustainability a Business Imperative?
Recruiting and Retaining the Best

INDUSTRY HEADLINES
6 Don'ts for Apartment Landscaping
For Grocers Like Kroger, Smaller is Better
Why Sheds Are the New Shops—For Now
Guide for Reducing Carbon Emissions in Commercial Buildings Released
Boston Janitors Union Votes To Strike If No Deal Met By Sept. 30
San Francisco Wants to Fight Traffic With More Housing
The Next Phase in Green Building Is Healthier Buildings
Fox Valley Mall Beefs Up Security After Minnesota Attack
Best Mid-Sized Cities for Public Transit Ranking List Released Utilizing Redfin’s Transit Score Index
Commerce Tower in Downtown Kansas City Is Becoming a 'Vertical Neighborhood'
How Does a Mall Cope When a Big Tenant Like Macy's Closes?
Siemens Implements Energy Savings Upgrades at the Superdome


 
 

IREM Headlines


Civil Unrest – Is Your Property Ready?

The recent protests and violence in Charlotte, NC, and other cities across the country are a good reminder that property managers have to be ready for all kinds of potential emergencies. These civil disturbances are often non-violent, but can quickly escalate into conflicts that threaten the well-being of both people and properties.

A quick checklist of precautions for property managers finding themselves in the middle of a civil disturbance is available from Preparis, Inc. The key points in their "Responding to Civil Disturbance" checklist include:
  • Do NOT make comments that might anger the demonstrators
  • Lock building doors and secure sensitive areas
  • Follow law enforcement instructions
While the checklist is helpful, it doesn’t replace the need for a comprehensive Emergency Procedures Manual for the property. IREM’s Before and After Disaster Strikes: Developing the Emergency Procedures Manual, 4th ed. walks real estate managers through the necessary considerations when preparing for and reacting to any emergency – natural or manmade. A manager has a responsibility for protecting the property, and the tenants or residents who work or live there. The best way to do that is to always be prepared.
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Is Sustainability a Business Imperative?

Has the investment real estate market reached the point where sustainability is necessary? Is a consideration of sustainability in fact part of the fiduciary duty of real estate managers? These questions and more will be explored in the “Is Sustainability a Business Imperative?” panel discussion on Friday, October 21 at 9:30 a.m. at the IREM Fall Conference in San Diego.

Participation in the GRESB assessment continues to rise, large tenants are beginning to seek green space for the health and wellness benefits in addition to lower occupancy costs, and the millennial generation values green living and companies that make a positive environmental impact. The 2015 NMHC/Kingsley Resident Preference Survey found that 73 percent of renters were interested in renting in communities with sustainability certifications and would pay an average of $36.24 more in rent to do so. FannieMae estimates that on average, a 100,000-square-foot multifamily property spends $125,000 on energy and $33,000 on water annually. If this property saved 15% on energy and water costs, it would increase asset value by almost $400,000.

Other benefits of sustainability in real estate include:
  • Risk Mitigation: Against environmental risks, supply shortages, and the growing legislative trend to curtail carbon emissions or require benchmarking/reporting
  • Access to Investment Capital: a growing interest in green buildings from investors and lending institutions. For example, assets managed by signatories to the Principles for Responsible Investment are at $60 trillion worldwide, up from $30 trillion in 2010-2011.
  • Brand Reputation and Publicity: positive tenant/resident loyalty, as well as improved brand and property image among stakeholders and the community.
  • Competitive Advantage: a survey by MIT Sloan Management Review found that two-thirds of respondent companies believe sustainability is necessary to remain competitive in today’s market.
Visit www.irem.org/gogreen to get started on your sustainability program and earn the IREM Certified Sustainable Property certification.
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Recruiting and Retaining the Best

Webinar
Date: Monday, October 10, 2016
Presenter: Joshua Harris, Ph.D., CRE, CAIA, Director of the Dr. P. Phillips Institute for Research and Education in Real Estate at the University of Central Florida

How do you go about finding the most capable candidates for your team, and once you hire them how do you go about keeping them? Learn effective strategies for recruiting and retaining the best talent for your property management company. Topics include building professional development programs and systems, creating effective incentive alignment that keeps people engaged, and recruiting the best from universities and other talent pools.

Register now for the Recruiting and Retaining the Best webinar.
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Industry Headlines


6 Don'ts for Apartment Landscaping
Property Management Insider (09/21/16) Moneta, Brett

Landscaping is something that almost every apartment community must do. Often, though, it is difficult to see the cost benefit it generates. Apartment owners and managers should know that trees, shrubs, flowers, and grass can make a difference in people's decision to lease and renew. So, why do so many companies struggle with maintaining green apartment landscaping? Horticulturist and Vice President of Gardens for the Dallas Arboretum Dave Forehand offers apartment operators a partial list of what to avoid. One, do not over-mulch. Two, do not cover the root flare. Too many landscapers cover it with dirt because they like the clean look of a single trunk coming out of the ground.

Three, Forehand says, "don't let your young tree canopies go unpruned." Trees need to be carefully pruned and shaped when they are young, or you run the risk of taking off large branches later. That takes more work and can damage the tree. Four, don't use the wrong tools. Landscape crews should not try and mow an apartment property's entire lawn with a ride-on mower, nor should they use trimmers instead of single-blade edgers. Five, do not "mow and blow." That leaves the job unfinished, ruining curb appeal. Finally, don't over-fertilize. "Fertilizing once in the spring and once in the fall is usually good enough," Forehand concludes.
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For Grocers Like Kroger, Smaller is Better
National Real Estate Investor (09/22/16) Mitchell, Donna

After posting its second-quarter numbers, supermarket operator Kroger earned mixed reviews from industry analysts. The retailer appeared to perform well, registering a 1.7 percent increase in net earnings and a 7.3 percent gain in total sales, excluding fuel. The company reported that total sales climbed to $26.6 billion. But it was not enough to lift the chain's entire revenue picture, which missed analyst projections by $220 million. As of June 30, the company also operated 785 convenience stores via five divisions. These stores align with the direction most retailers are headed in, to operate profitably with smaller brick-and-mortar footprints. Analysts, though, wonder: "Will the convenience stores help Kroger shore up its existing strengths?"

Despite Kroger's size -- it operates 2,781 food stores through an array of divisions in 35 states and Washington, D.C. -- the company avoids sprawl in the markets where it does business. Its strategy is to enter into new markets and establish a critical mass. "After that," the article's author writes, "it tends to make sensible decisions about what store sizes are required to operate well." Kroger's convenience stores are widely considered a win for the company, especially as it handles the format more deftly than such other grocery competitors as Wal-Mart. There remains one area -- online -- where Kroger and its smaller rivals like Publix are not so eager to penetrate. It turns out that retailers like Kroger don't have to embrace e-commerce. A recent poll found that 78 percent of 1,000 adult respondents said they made regular consumables purchases at grocery stores, and just 4 percent made regular consumables purchases online.
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Why Sheds Are the New Shops—For Now
Wall Street Journal (09/23/16) Wilmot, Stephen

It's looking more and more like the hottest commercial-property investment on the global market is the distribution warehouse. To be sure, e-commerce has made distribution warehouses hot property. Investors, though, shouldn’t forget the usual real-estate risks. It's true that distribution sheds -- sometimes referred to as big boxes after their functional design -- used to be mostly ignored by major property investors. The argument for years was that location mattered less for industrial space than it did for stores and offices. As a result, building owners couldn't count on supply constraints to boost rents. E-commerce has definitely upended that picture. Retailers -- both online-only players like Amazon and bricks-and-mortar chains -- are scrambling to rent distribution space to serve Web orders. They typically are looking for a large hub in the middle of an operating region.

Retail shops reside on the other side of this trend. Shopping malls that once dominated their areas have suddenly found themselves with heated competition from the Internet. Consequently, property valuations in many areas have fallen into decline. The most forward-thinking mall owners have turned their centers into leisure destinations, boasting fewer stores and a broader mix of eateries, cinemas, and even so-called "PokeStops" for "Pokemon Go" addicts. Investors thinking of shifting their money out of shops and into sheds must tread carefully for three reasons. One, shares in most distribution specialists trade at premiums to underlying book values. Two, there is the risk of overdevelopment. And, three, "the appeal of property as a long-term, bond-like investment sits uneasily with the theme of accelerating technological change," concludes the article's author.
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Guide for Reducing Carbon Emissions in Commercial Buildings Released
Buildings (09/22/16)

Now available is a free, 60-page handbook for reducing carbon emissions resulting from energy consumption in buildings. Written by a Robert Sauchelli, a former ENERGY STAR Buildings Program Manager, the handbook details how government lawmakers, countries, and regional economic organizations can work together and reduce carbon emissions, while also providing practical solutions for properly addressing its causes and effects. The guide also makes the case to building owners, operators, and tenants to motivate them and improve the energy efficiency of their structures and businesses simply by being made aware of the financial benefits. The goal is to avoid new, tighter regulations or stricter building codes.
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Boston Janitors Union Votes To Strike If No Deal Met By Sept. 30
CBS Boston (09/24/16)

Over the weekend, a Boston janitors' union voted to walk off the job cleaning and maintaining the city's office buildings if a deal with the Maintenance Contractors of New England is not reached by the end of this month. Members of Local 32BJ of the Service Employees International Union have been demanding full-time work in some of Boston's most famous towers and the Massachusetts Bay Transportation Authority (MBTA) transit system. 32BJ ranks as the biggest property service workers union in the country, boasting 18,000 members in Massachusetts and Rhode Island. These professionals clean and maintain such landmark Boston office buildings as the John Hancock and Prudential Towers, as well as the MBTA. "We're talking about 2,000 buildings across Massachusetts," noted union Vice President Roxana Rivera on Saturday. "The MBTA, we're talking about the State House. They clean all those buildings, and we're basically saying today that we're ready to strike."

The union is pushing for fair wage hikes and safeguards against unreasonable workloads, according to a statement. The Maintenance Contractors of New England said that, after two days of “constructive” talks this week, they agreed to family healthcare with no employee contribution and a wage increase, among other points. "As a result, the MCNE believes today's union strike vote is unnecessary,” a group statement read.
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San Francisco Wants to Fight Traffic With More Housing
Multifamily Executive (09/23/16)

A proposed "transportation demand management" (TDM) program is now being mulled in San Francisco that would require apartment developers to feature different ways of cutting down on traffic. Developed by the city's planning department, its municipal transportation agency, and the county transportation authority, the program would require developers to earn points from a 26-item checklist that includes offering everything from subsidized transit passes to a fleet of bicycles. A few TDM measures, such as bike lockers and showers, were already sprinkled into the city planning code. However, senior planner Wade Wietgrefe says that such stuff generally only made it into projects one of two ways: on a voluntary basis or as a mitigation following an environmental review. Now, developers would have to incorporate driving-reduction efforts before their projects get City Hall approval. "They're going to decide, 'Do I want to provide 50 parking spaces if I need 20 points of TDM measures? Or do I want to provide 25 parking spaces because that'll get me closer?'" remarks Wietgrefe. The measure was passed by city planning commissioners in August and is now in front of San Francisco's board of supervisors.
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The Next Phase in Green Building Is Healthier Buildings
Environmental Leader (09/21/16) Hardcastle, Jessica

Environmentally friendly buildings are becoming widely popular across the United States. However, some developers are looking to take green buildings to the next level. There is indeed a growing interest in making buildings that are also healthy for the occupiers. The Drive Toward Healthier Buildings 2016 report finds that two-thirds of U.S. landlords have expressed interest in developing healthier commercial buildings, in particular. Furthermore, 79 percent believe the buildings can improve employee satisfaction and engagement.

The top five healthy building features include: daylighting exposure, products that improve thermal comfort, spaces that promote social interaction, better air quality, and products that improve acoustical comfort. Those features also make work environments healthier for employees. The benefits of healthier buildings can also be reaped by numerous groups. A report from the U.S. Green Building Council and Dodge Data & Analytics found that healthier buildings can create benefits for owners, developers, managers, and investors.
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Fox Valley Mall Beefs Up Security After Minnesota Attack
Chicago Tribune (09/23/16) Leone, Hannah

Fox Valley Mall in Aurora, Ill., is one of a number of shopping centers nationwide ramping up security in the wake of recent violent incidents at other malls around the country. Scott Samson, general manager of Fox Valley Mall, said his venue will have heightened security measures, including making security officers more visible. He stated that there will be "vigilance on the part of the entire mall team," adding that it's "not short term" either. That position was echoed in a statement issued by a manager with Chicago Premium Outlets also in Aurora, which is among 71 premium outlets and 230 total properties run by the Simon Property Group. "Safety and security is always our top priority at Chicago Premium Outlets," the e-mailed statement from Phil Whitsel read. "We continually assess any potential threats and work with our security company and local police department to make appropriate adjustments."

For its part, the Aurora Police Department is continuing to assist both malls when needed. Aurora Police Lt. Jeff Wiencek comments, "We are just continuing to work with our partners at the malls. They have been good in the past on sharing information and reaching out." Meanwhile, West Dundee Police Chief Andrew Wieteska said his department works with the Spring Hill Mall in West Dundee, Ill., to prevent incidents like the recent stabbings in a Minnesota shopping center from happening. "We do a regular monthly meeting where our liaison officer meets with mall management and mall security," Wieteska noted. "They go over any kind of security threats or security incidents." That preparation also includes active shooter training with shopping mall officials, including both tabletop exercises and role playing.
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Best Mid-Sized Cities for Public Transit Ranking List Released Utilizing Redfin’s Transit Score Index
Multifamily Executive (09/19/16)

Cambridge, Mass., is ranked as the best mid-sized U.S. city for public transit, according to the latest Redfin research. With a Transit Score of 72.3 out of 100, Cambridge is considered to have "excellent transportation," meaning that public transit is convenient and available for most trips. Walk Score, a Redfin company, created the Transit Score to rate cities and locations by the usefulness of their public transportation options. Jersey City, N.J., which placed No. 2 with a score of 70, also fell into the "excellent" category, while the remaining eight cities in the top 10 all have scores within the 50 to 69 point range. Walk Score designates those markets as having "good transit with many nearby public transportation options."

Except for Buffalo, all of the cities highlighted in the study are connected to the public transportation system(s) of major cities nearby. Typically, it's the country's biggest cities that have the reputations for having the best access to public transit. However, Redfin chief economist Nela Richardson points out that often times so-called "commuter cities" also have great transportation and they tend to be more affordable. Living in these areas can provide residents with most of the amenities they'd get living in a major city. "Having ample public transportation that can get you to where you need to go in your own city, as well as other larger cities nearby, is important for sustainable urban growth across America," concludes Richardson.
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Commerce Tower in Downtown Kansas City Is Becoming a 'Vertical Neighborhood'
Kansas City Star (09/19/16) Stafford, Diane

A "vertical neighborhood" is under construction in downtown Kansas City and will boast over 300 residential units, a restaurant, fitness facilities, office spaces, a bank, a satellite university facility, a childcare center and an indoor dog park. An existing office tower is undergoing a $139 million residential conversion to be completed in August 2017. Commerce Tower, developed by Commerce Tower Group LLC and Revive Capital Development LLC, will be competing for tenants with at least 3,000 new apartment units under construction in the city's center. However, the development team believes the building's amenities and community focus are a step above the competition. An LEED Gold Certified status may also appeal to renters who want to cut their utility bills. Commerce Tower owner Knight estimates that utility costs will be 20 to 30 percent lower than comparable units. Even without an official pre-lease announcement or a model apartment ready, the tower already has secured 30 future residents. "The demographic of renters is changing," notes Mike McKeen, president of building manager EPC Real Estate. "We're seeing more renters by choice, those who are pursuing a lifestyle who don't feel like the American dream is owning a home."
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How Does a Mall Cope When a Big Tenant Like Macy's Closes?
Los Angeles Times (09/22/16) Peltz, James F.

Irvine Co. got some bad news when Macy's announced that it would be closing its department store at the company's Irvine Spectrum Center in early 2016. But instead of looking for a new tenant, Irvine Co. has been looking for 20 of them. As part of a $150 million overhaul of the open-air shopping mall, the two-story Macy's building has been demolished to make room for a collection of smaller merchants. Irvine Co. executives have called the Macy's pullout "a unique opportunity to re-balance" the shopping center. Retail landlords nationwide are facing similar challenges and could follow Irvine's lead. Several big-name chains have been trimming their store rosters or have gone out of business entirely. In August, Macy's Inc. was at it again, announcing plans to permanently shutter 100 stores nationwide in early 2017 on top of the previous 40 closures.

To be sure, not every mall has the financial resources of privately held Irvine Co. to revamp its properties. For some, the loss of a department-store anchor tenant would be a heavy blow. "The mall owner is left with a box that is incredibly difficult to fill,” states Lea Overby, a managing director of research at Morningstar Credit Ratings. Macy's disappearing stores, in particular, point up an acute problem for malls, which traditionally have two or three department stores as anchor tenants. They are so crucial that, in many instances, they pay little or no rent to the mall operators and often own their stores. Additionally, smaller retail tenants sometimes have clauses in their leases allowing them to renegotiate their rents if an anchor closes. Garrick Brown, vice president of retail research for the Americas at Cushman & Wakefield, forecasts that the number of malls in the United States would drop from about 1,100 presently to as low as 800 in the next decade.
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Siemens Implements Energy Savings Upgrades at the Superdome
Air Conditioning, Heating & Refrigeration News (09/21/16)

The Mercedes-Benz Superdome in New Orleans is in the process of receiving technological advancements and energy efficiency upgrades through a partnership between the Louisiana Stadium and Exposition District (LSED) and Siemens. The energy savings performance contract provides improvements to the stadium’s lighting, comfort systems, and energy management platform, resulting in cost savings and a better experience for visitors. The infrastructure and energy changes are estimated to save the LSED $6.5 million in energy and operational costs over the next 10 years. "The savings realized through this project will have a huge impact," says Kyle France, chairman of LSED. "We spend about $5 million in utilities annually, so even a small percentage in savings turns into real dollars for our operations."

Siemens has replaced the stadium's outdated chillers and is implementing its Demand Flow energy efficiency solution to optimize temperature settings. The new chiller plant will also help reduce humidity and improve occupant comfort. Lighting throughout the stadium will be more efficient, easier to operate, and provide better guest safety and visibility. Lastly, the Superdome's facility management team will be able to use the Siemens Navigator platform to monitor system performance, energy demand, and energy supply. The LSED reports that the stadium has not experienced any service interruptions or event delays while implementing the energy efficiency measures.
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