Real Estate Management News - 04/11/2018

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April 11, 2018
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IREM® FAIR HOUSING MONTH SPOTLIGHT
Discrimination Prevention: The Evolution of Protected Classes
When a Pet is More Than a Pet

IREM® HEADLINES
IREM Earns 2018 ENERGY STAR®
Partner of the Year Award

Cut Out Room for (Tax) Error with a New IREM Webinar

INDUSTRY HEADLINES
Mall Vacancies Reach Six-Year High as Retail Slump Batters Local Economies
How Office Buildings Are Reducing Their Carbon Footprint
Families Are Fur Kids
4 Models of the Shopping Mall of the Future
Technology Spurs Growth in Zero Energy Buildings
Is Silicon Valley Vulnerable? Shooting at YouTube HQ Prompts Security Fears
Best Buy to Open First New U.S. Store in Seven Years
Apartment Conversions Prop Up the White Plains, N.Y., Office Market
How Smart Surfaces Improve Resilience
CRE Valuations Are Trending Down, Green Street Researchers Warn
Vast Majority of DC-Area New Office Construction Metro Accessible
Boulder Paves the Way for Net-Zero Energy Leases


 
 

IREM ® Fair Housing Month Spotlight


Discrimination Prevention: The Evolution of Protected Classes

Since it was first enacted in 1968, the Fair Housing Act (FHA) has made huge strides in protecting buyers and renters from discrimination when seeking a place to live. However, the FHA is not a blanket prohibition of any type of discrimination, but only of discrimination based on characteristics that have been designated as a “protected class.”

Even though the law has been enacted for half a century, the way it is applied and to whom is constantly evolving. When first enacted, the only protected classes under the FHA were race, color, religion and national origin, but over the next 50 years there have been important additions to that list. Just six years later, the U.S. Congress passed the Housing and Community Development Act of 1974. This law made sex a protected class, ensuring everyone would have equal access to housing regardless of whether they are male or female.

The most recent additions were added in 1988 as part of the Federal Fair Housing Amendments Act (FHAA). This act amended the FHA to prohibit discrimination because of an individual’s disability defined as a “physical or mental impairment that substantially limits one or more of major life activities (walking, seeing, hearing, learning, and working) or having a record of such an impairment, or being regarded as having such an impairment.” The Act also designated familial status as a protected class, which protects anyone who has a child under 18, has temporary custody or is seeking custody of a child under 18, or is pregnant.

Today there are 7 federally protected classes, but many state and local governments have added to that list. For example, sexual orientation and gender identity are protected classes under the fair housing statutes of at least 20 states and 200 localities. IREM formally recognizes the inclusion of sexual orientation and gender identity as an additional protected class, and NAR’s Code of Ethics prohibits sexual orientation and gender identity discrimination.

As a national organization, IREM believes its policies should reflect national, state, and local policies. Consequently, we believe IREM's positions on fair housing should not only include the protected classes under federal fair housing law, but also those protected by state and local laws.

To learn more about the Fair Housing Act and how it’s progressed to the version that exists today, check out this article from the March/April issue of JPM®. And click here to see more ways that IREM is commemorating Fair Housing Month and the 50th anniversary of the Fair Housing Act.
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When a Pet is More Than a Pet

There have been several articles in the news lately about animals that go beyond the role of a pet; service animals are trained to attend to specific needs of their owners, be those physical or some other debilitating circumstance. They provide valuable—sometimes crucial—services to their charges. Companion animals, although they receive no specialized training, are typically for individuals with mental disabilities or those in need of emotional support. For this reason, these animals are often protected by the Fair Housing Act as well as the Americans with Disabilities Act. Nonetheless, it can be challenging to know how, or even if, you must accommodate them within your properties; for that matter, it may be difficult to know if they actually provide these important services in the first place. The IREM webinar, Emotional Support Animals: One Dog, Two Dogs, Three Dogs, Peacock? taking place April 18th, will help you navigate through some of those gray areas when it comes to defining service and emotional support animals; who to turn to for verification that these animals meet the necessary criteria in order to be covered by law; and setting best practices for accepting them (or not) on your property. Register here--don’t miss out on the opportunity to learn more about this important and timely topic.
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IREM Headlines


IREM Earns 2018 ENERGY STAR®
Partner of the Year Award

IREM is proud to announce that it received the 2018 ENERGY STAR® Partner of the Year Award for its outstanding efforts in the Energy Efficiency Program Delivery category.
IREM received the award for the following programs and activities:

• Live and online training on energy management, including a new course on benchmarking multifamily properties in the ENERGY STAR Portfolio Manager® benchmarking tool.
• Integration of ENERGY STAR tools and resources with the IREM Certified Sustainable Property certification, an affordable, achievable, and meaningful recognition for existing office, multifamily, and retail properties.
• Industry research on energy efficiency practices and perceptions among real estate managers, including benchmarking and use of ENERGY STAR tools and resources, as well as a forthcoming study on the impact of property certifications such as ENERGY STAR on the financial performance of multifamily communities.
• Participation in ENERGY STAR-related events and U.S. Environmental Protection Agency (EPA) participation in IREM events to provide ENERGY STAR information and updates to members and the industry.

This is the second consecutive year IREM has been named an ENERGY STAR Partner of the Year. IREM’s accomplishments will be recognized by the EPA and the U.S. Department of Energy at a ceremony in Washington, D.C. on April 20, 2018.
Click here to read IREM’s full press release and here for a complete list of 2018 winners and to learn more about ENERGY STAR’s awards program.
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Cut Out Room for (Tax) Error with a New IREM Webinar

How will the new Tax Cut and Jobs Act (H.R. 1), that passed December 22, 2017, affect the way your real estate business operates? How will it affect your clients’ goals, and how should you respond? It’s essential to be familiar with the ins and outs of this new legislation to ensure you don’t create any unintended liabilities for yourself or those represent. Start by attending our webinar, The New Tax Reform Law – What Real Estate Professionals Need To Know on April 25, where speaker Evan M. Liddiard, CPA, will cover the details of the law, its background, and how it impacts both real estate property and professionals. Mr. Liddiard, Senior Policy Representative of Federal Taxation for the National Association of Realtors (NAR), has over 30 years of experience in tax policy issues and will guide you through some of the finer points of the law and what it’ll mean to the real estate industry. Click here for more information and to register. The webinar is free to members and $59 for non-members.
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Industry Headlines


Mall Vacancies Reach Six-Year High as Retail Slump Batters Local Economies
Wall Street Journal (04/02/18) Grant, Peter

The vacancy rate in large U.S. shopping malls rose to 8.4 percent in the first quarter of 2018 versus 8.3 percent in last year's fourth quarter and was the highest since 2012's October-through-December period, according to the latest Reis Inc. study. Reis researchers studied 77 metropolitan areas for their results. They further found that community and neighborhood shopping centers in 41 of the areas witnessed an increase in vacancy during the year ending March 31. Bricks-and-mortar malls and shopping centers continue to be hurt by shifting consumer spending patterns and the rise of online retail. According to Reis, retailers occupied 453,000 more square feet of shopping center space at the end of last month than 2017's fourth quarter. "The completion of 712,000 square feet of new shopping center space also was 'much lower' than average," Reis said.
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How Office Buildings Are Reducing Their Carbon Footprint
CNN (04/02/18) Yurieff, Kaya

Companies are increasingly adding more outdoor spaces to their offices for employees to enjoy. Many are also incorporating nature into their workplaces' interior design, such as living walls of plants, Zen gardens, and greenhouses. Still other firms and organizations are creating buildings that are energy efficient or that even create more renewable energy than they consume. The building that houses New York City's Public Safety Answering Center, for instance, is comprised of such recycled materials as aluminum. Designed by architecture firm SOM, the building also has a green wall of plants inside that acts as a natural air filter. The Bill and Melinda Gates Foundation campus in Seattle has also put a major emphasis on sustainability. Designed by architecture firm NBBJ, it features a 1-million-gallon underground tank that stores rainwater to use for toilets, irrigation, and reflecting pools. A second tank stores chilled water overnight, which is recirculated during the daytime hours to cool the buildings and minimize energy use.

"It's good for the corporate image to be responsible and align [yourself] with sustainability," remarked Dominique Bonte, vice president of end markets at ABI Research. "At the same time, it conveys an image of innovation and showcases how the company designs buildings [and uses] green technology to achieve that objective of carbon neutral." The chief objective is for buildings to become self-sufficient, and eventually be able to produce more energy than they use. The Bullitt Center in Seattle is an example of the direction buildings could be going. Among the building's features are solar rooftop panels and waterless toilets that transfer human waste to composters to be used as fertilizer. In addition, rainwater is captured in a tank and converted into drinking water. Finally, the building is net positive, which means it has generated more energy from the solar panels on its roof than it has used over the last five years.
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Families Are Fur Kids
Multifamily Executive (04/01/18)

Recent findings from a RealPage Analytics study of millions of individual apartment-lease transactions showed a 38 percent increase in pets per apartment from 2010 to 2017. During that same time span, the number of children per apartment declined 14 percent. There were 21 kids and 16 pets per every 100 apartment households in 2010. By last year, those figures had nearly reversed themselves, with 18 kids and 22 pets per every 100 apartment households. With more Americans living in apartments, many are discovering that dogs, cats, and other critters are a natural for apartment living. They take up less space than kids, eat less, and don't need their own bedrooms. The same goes for their bathroom needs. Cats only require a litter box, while dogs prefer the outdoors.

Millennials, in general, are less likely than the previous generation to own a home or automobile, be married or live with a partner, or have kids. But they do have more pets. As a result, pet-friendly apartments are becoming the norm rather than the exception. For instance, a 2016 American Humane Society study found that 98 percent of apartment communities in metro Denver accepted cats, 93 percent accepted small dogs, and 66 percent accepted large canines. But that doesn't necessarily mean property owners and operators have properly addressed the pet ownership trend. The best apartment communities for renters with four-footers are also located close to veterinary facilities and pet supply stores and offer such on-site amenities as dog parks and even pet daycare.
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4 Models of the Shopping Mall of the Future
Forbes (04/08/18) Danziger, Pamela N.

U.S. shopping mall vacancy rates through the first quarter of 2018 are at the highest level since the end of 2012, while overall retail real-estate vacancies stood at 10 percent as of March 31, according to Reis-compiled data. A Green Street Advisors report suggests that filling those retail vacancies will only get harder. Green Street found that some 70 percent of the 950 malls studied experienced a decrease in national retail in-line tenants. Furthermore, the closures of those in-line tenant locations are dispersed across "the quality spectrum," not just in lower-quality malls. Moving forward, the major challenge for malls is to view retail spaces in a new way, as places where people engage with brands, experiences, entertainment, service providers, and even live and work. Malls will angle to become the new American “Main Street,” where people feel a real sense of community and belonging.

The latest AT Kearney report describes four different models for the mall of the future: Destination centers, values centers, innovation centers and "retaildential centers." The idea of the destination center is the easiest to envision, as flagship stores will still play a prominent role with greatly enhanced experiences added into the mix like restaurants, theaters, event spaces, museum exhibitions, and even things like indoor skating and water parks. Values centers, meanwhile, will be venues that share customers' values and preferences of the surrounding community." Such properties are anchored by an idea, or concept, and not a major retailer. Innovation centers, meanwhile, are digitally-powered so that every store and the center itself is gathering real-time data in order to satisfy shoppers and evolve with them. Finally, "retaildential" centers will seek to redefine living over the store.
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Technology Spurs Growth in Zero Energy Buildings
FacilitiesNet (04/03/18) Zimmerman, Greg

According to the New Buildings Institute's annual Getting to Zero Status Update report, the number of verified zero energy buildings has increased 700 percent over the last six years. This dramatic increase is due to the introduction of several new technologies that make it is easier to create more energy efficient buildings. In particular, Internet of Things devices and technologies are proving to be very useful. Robert Knight, senior associate, intelligent building practice, at Environmental Systems Design, says the technology allows buildings to get the most from the energy that is consumed. Meanwhile, machine learning technology can make changes to a building's energy consumption in real-time. Despite these advantages, experts point out that using these technologies requires skilled human workers with a strong level of expertise in the field.
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Is Silicon Valley Vulnerable? Shooting at YouTube HQ Prompts Security Fears
Fortune (04/04/18)

Several corporate headquarters in California's Silicon Valley are questioning their security after a shooting outside the offices of YouTube this past week. YouTube's corporate campus in San Bruno, where three people were injured by gunfire, is laid out much like other tech offices nearby. It consists of a group of buildings within close proximity, spread across a suburban area. Locals and employees can wander freely together in the vicinity, and security guards typically stay at desks inside the buildings. In an age where shooting rampages have become increasingly common, openness can work against companies, said Jeff Harp, a retired FBI agent in San Francisco who consults for technology companies. While employees are required to badge into buildings, access to many outdoor areas is generally accessible to all. Harp said the incident could prompt building management staffers to tighten security.
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Best Buy to Open First New U.S. Store in Seven Years
Minneapolis Star Tribune (04/08/18) Kumar, Kavita

Best Buy has announced that it is adding a 36,000-square-foot store into a newer mixed-use lifestyle center called Station Park near Salt Lake City -- its first new U.S. store in seven years. A fall 2018 grand opening is planned. While this doesn't appear to be the start of a significant new trend for Best Buy, it is notable that the Minnesota-based electronics retailer remains open to and looking at opportunities for new stores now that it has emerged from a turnaround. Some skeptics thought the chain would not survive the online retail revolution. Not only has it done so, but it recently posted its best holiday quarter in 14 years with same-store sales increasing 9 percent. Still, the big-picture for Best Buy and the rest of the retail sector will likely remain one of downsizing the number of stores especially as consumers increasingly shop online. For instance, Best Buy is still planning to close its remaining 250 mobile phone stores in the U.S. in the coming months. Those small-format stores are mostly situated in shopping malls and are a fraction of the size of its big-box stores.

Best Buy has also been closing roughly a dozen or so of its much bigger big-box stores a year. In 2017, it closed 18 after shuttering 11 the year before that. Now, the chain has a little more than 1,000 stores nationwide. "Our stores are a vital component of our multichannel strategy and we believe they are an important competitive advantage," Best Buy summed up in its most recent annual report. "In fiscal 2019 and beyond, we will continue to look for opportunities to optimize our store space, renegotiate leases, and selectively open or close locations to support our operations, as evidenced by our recent announcement to close all of our remaining Best Buy Mobile stand-alone stores in the U.S." Best Buy has been investing in its remaining brick-and-mortar locations by setting up in-store shops to showcase some of its largest vendors, most notably Samsung and Sony. It has also been using its stores to ship online orders to customers.
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Apartment Conversions Prop Up the White Plains, N.Y., Office Market
Wall Street Journal (04/08/18) Morris, Keiko

After years of high availability rates and stagnant rents, the White Plains, N.Y., office market is getting a boost from a boom in apartment construction taking place. Developers have been converting more and more office buildings into rental apartments. In some cases, they are demolishing and rebuilding new towers, aiming to draw both younger workers and empty nesters to amenity-laden complexes situated close to restaurants, stores, and mass transit. In doing so, they are creating more of a 'round-the-clock atmosphere. White Plains, located north of New York City, has around 4,000 apartments in its development pipeline. Most of them are in the central business district (CBD).

By removing obsolete office buildings built during the 1970s through the '90s, developers are effectively reducing supply and helping to lift rents for other office properties. William V. Cuddy Jr. , a CBRE executive vice president, observes that removing the lower-priced office space from the market inevitably leads to higher average asking office rents that will continue to rise. He adds, "And it is making it a much more attractive environment for companies to relocate because they like the live-work vibe that is the White Plains culture." However, the declining vacancy has yet to prompt new office developments. "Landlords have started to invest in lobbies and amenities," concluded Mack-Cali Realty Corp. CEO Michael DeMarco. "But buildings that aren't worthy of investment dollars are still being torn down or converted to residential."
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How Smart Surfaces Improve Resilience
Buildings (04/06/18) Feit, Justin

"Delivering Urban Resilience," a report written by clean energy advisory firm Capital E, touts the adoption of smart surface technologies as a means to healthier and more cost-effective buildings and urban areas. The report examines how citywide measures to bring smart surface technologies would affect three urban areas: the District of Columbia.; Philadelphia; and El Paso, Texas. The authors concluded that with such surfaces as cool roofs, green roofs, solar PV roofs, and porous and high albedo pavements, cities could become more resilient, reduce energy costs, and mitigate climate change and excess heat. Lead author Greg Kats states, "This report shows how citywide adoption of these smart surface technologies would save cities billions of dollars and cut greenhouse gasses while achieving transformative benefits like making cities cooler, more resilient, healthier, and more equitable."

By implementing these various surfaces -- or any combination of them -- buildings can contribute to reducing costs associated with poor air quality, pollution, and excess heat. The research found that investment in smart surface technologies would yield $1.8 billion in the nation's capital, $3.6 billion in Philadelphia, and $540 million in El Paso over four decades. The report concluded: "The payback time for these solutions varies greatly: cool roofs offer very fast payback in all cases, while several other solutions offer the largest net benefit in one or more city."
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CRE Valuations Are Trending Down, Green Street Researchers Warn
National Real Estate Investor (04/06/18) Diduch, Mary

According to Green Street Advisors, commercial real estate investors can expect property prices to trend downward in the near future. "Value appreciation has practically stopped in aggregate," observes Joi Mar, senior analyst at Green Street. Her firm's Commercial Property Price Index slipped 1 percent last month and has registered little change over the last couple of years. Still, there are variations among sectors. Prices on industrial assets posted an 11 percent gain year-over-year, but mall valuations have fallen by 15 percent during the same time span, according to the Index. Mar adds that two recent deals in the mall niche -- Brookfield Property Partners' acquisition of General Growth Properties (GGP) and UnibailRodamco's purchase of Westfield Corp. -- have dragged retail valuations down further. While the latter transaction suggested that mall cap rates were in the right ballpark, the more recent GGP deal suggests that cap rates are 10 percent lower than thought. This prompted Green Street to mark down its mall asset values by an average of 5 percent.

Overall, industrial and mall values have drifted apart 25 percent over the last year. Transaction volume is also down, but Green Street analysts believe the volume would be even lower if debt capital was not so widely available. Andy McCulloch, managing director at Green Street, notes that investors can currently expect returns of nearly 6 percent, on average, for assets in most core sectors and a little bit higher returns for niche sectors. To be sure, the property price indices of other firms reflect somewhat different findings. For instance, Real Capital Analytics's CCPI shows that prices climbed nationally in February by 0.5 percent from the month before. Separately, Ten-X Commercial's monthly pricing index found that prices rose from February to last month by 0.5 percent -- the index's second consecutive gain.
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Vast Majority of DC-Area New Office Construction Metro Accessible
WTOP (DC) (04/03/18) Clabaugh, Jeff

The Silver Line is bringing more of the Washington, D.C., metro area's office submarkets into the Metro subway-accessible category. This, in turn, is helping the vast majority of new regional office buildings that came online in 2017 fit the definition. In its 2017 Commercial Indicators Report, the Metropolitan Washington Council of Governments reports that of the 4.8 million square feet of new offices that opened in 2017, 83 percent is located within a half-mile of a Metrorail station -- the most since 2014. Also last year, overall commercial construction projects near Metrorail stations increased. Northern Virginia accounted for over 50 percent of all new commercial real estate construction in 2017, totaling 7.9 million square feet. Suburban Maryland, meanwhile, contributed 2.5 million square feet of new commercial real estate construction and the District of Columbia accounted for 2.3 million square feet.

Office space grew the most of the new development in the D.C. region last year, increasing by 50 percent. Such other types of commercial spaces as industrial, health care, hospitality, and retail all decreased. Five of the 10 biggest commercial construction projects in terms of square footage were office buildings. The regional office vacancy rate was 14.2 percent at the end of 2017, a slight decline from the year prior. COG Regional Planner John Kent concludes, "Office buildings typically generate more employment per square foot than other land uses. Adding office space means local companies are expanding or firms are locating to the region."
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Boulder Paves the Way for Net-Zero Energy Leases
Colorado Real Estate Journal (04/01/18)

Boulder, Colo., has one of the most aggressive new construction energy codes in the country, with the goal being substantially reduced energy consumption in commercial and industrial buildings. Those buildings account for 54 percent of the city's greenhouse gas (GHG) emissions. But to meet Boulder's aggressive climate goal of 80 percent carbon reduction by 2050, the city also must address its leased buildings. More than 50 percent of Boulder's commercial and industrial buildings are leased, producing as much GHG emissions as the entire transportation sector. Boulder tapped Rocky Mountain Institute (RMI) to accelerate the adoption of advanced green lease practices.

Net-zero energy (NZE) commercial buildings are highly energy efficient, producing enough carbon-free energy (on-site or through off-site procurement) to meet the annual energy consumption of the building's operations. RMI will provide tailored trainings to building owners, operators, and tenants and work directly with property owners in Boulder to provide consulting and assistance around NZE and advanced green leasing. These trainings will help build the business case for building owners and tenants to strive toward NZE buildings. RMI has also released its NZE Leasing Best Practice Guide.
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