Real Estate Management News - 09/18/2019

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September 18, 2019
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IREM® HEADLINES
Statewide Rent Control Passes in California
The Give-and-Take of Global Perspective

INDUSTRY HEADLINES
Florida Faces Apartment Shortage
Old Navy Plans to Open 800 More Stores
Bring These Five NASA-Approved Plants to Beat Office Stress
City Wants 20 Percent of Apartment Tenants to Drive Electric Cars
New Office Complex in Southern California Strives to Create a Silicon Valley-Like Campus Vibe
Canadian Investor Helps Valley Apartment Residents With Backpack Drive
JC Penney to Launch Outdoor Apparel Shops Within 100 Stores as It Attempts to Boost Sales
Millennials Said to Value Sustainable Apartment Features
Developer Asking Overland Park For Permission to Top Office Building With Lighted Art Display
New Jersey's 'Dream' Mall: 40 Million People and a Traffic Nightmare
'There's Just Too Much Vacancy': D.C. Developers Shy Away From Spec Office Projects
The Blake Group Says It's First in Connecticut to Reach Net Zero


 
 

IREM Headlines


Statewide Rent Control Passes in California

California is set to become the second state in the U.S. to implement statewide rent control measures. On September 11, Assembly Bill 1482 (AB1482) passed the California State Assembly, and Governor Gavin Newsom has indicated he will sign the bill into law. The bill caps annual rent increases at 5 percent plus the rate of inflation.

Along with the rent cap, the bill also applies “just cause” eviction policies to qualified housing across the state, so tenants can’t be removed without having violated the terms of the lease. In addition, the bill states that capital improvements may not be used to increase the rent beyond the cap for existing tenants. However, the cap does not apply to apartments built within the last 15 years, and single-family home rentals are exempt unless they’re owned by corporations or institutional investors.

The new law was spurred by the severe housing crisis that has gripped the state over the last few years. In particular, the San Francisco Bay Area has experienced an astronomical rise in housing costs, leading many lawmakers to look for solutions. At the same time, the rent control law comes as a blow to the real estate industry, which has just seen rent control legislation passed in Oregon and New York.

IREM takes the position that the government should not participate in establishing rent control and supports a property owner’s right to establish rents that produce sufficient income to accommodate the basic needs of residents and encourage investment in new construction and existing properties.
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The Give-and-Take of Global Perspective

Ahead of the IREM Global Summit, Real Estate Management News had the chance to chat with Jeevan J. D’Mello, who will be featured at the International Forum, an education session designed to bring the world conference attendees. D’Mello is currently a board member and international faculty member of the Community Association Institute (CAI). He trained professionally as an architect and served as the Chief Community & Customer Officer of Emaar Properties PJSC while the firm developed the “Living Wonder” of the Burj Khalifa. He will be discussing the construction of the Burj Khalifa and community management more broadly in the Middle East.

REMN: What could property managers in North America learn from real estate professionals in the Middle East?

D’Mello:
Property ownership has significantly risen in the Middle East in the past decade, due to many of the countries loosening their laws on foreign ownership. Along with the boom has come new ideas like innovation in the built environment, technology-driven smart-buildings and smart-cities. Governments have been on the forefront in leading the change, and real estate managers have been encouraged to embark upon many new and amazing techniques, solutions and technologies to deliver state-of-the art designs and solutions to make the life of the buyer and occupier easier. This spirit of innovation is something that is very commendable in this part of the world and should inspire professionals in North America and beyond in their endeavors while developing and managing their properties.

REMN: Are there any strategies you picked up in North America that you’ve been able to implement in the Middle East?

D’Mello:
During my many travels to North America over the years, there is no doubt that I have learned and experienced a lot, however, the key learning that I have taken back home with me is the importance of networking, sharing, mentoring and learning from each other. I found the willingness to “share” a very pervasive value among North American professionals in the industry, and while it’s been slow to catch up in the Middle East, professionals here seem to have slowly picked up why this is a critical aspect of doing business. Conferences like the IREM Global Summit will go a long way in making such sharing and networking opportunities a part and parcel of professional life.
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Industry Headlines


Florida Faces Apartment Shortage
WUSF News (09/10/19) Brown, Delaney

A growing number of residents in Florida are turning to renting instead of homeownership, spurring a shortage of apartments in some markets. Data from the Florida Apartment Association indicates that the Sunshine State would need to add more than 600,000 new apartments by 2030 to keep up with both the increase in population and demand. The association's government affairs director, Amanda Gill, says, "We have over 900 people moving here every single day, and if we don't have housing for them, at some point, those individuals and their companies and their economic opportunity will go to another state."

The report estimates that an average of 47,814 new apartment homes would have to be built annually to address the state's needs in the next decade. However, Florida is projected to add only 33,688 rental units in 2019. Gill also warns that the apartment shortage will continue driving up rent at a time when developers statewide are facing higher material costs and regulatory fees. Gill estimates that about 32 percent of a developer's construction costs come from a combination of federal, state, and local regulations such as fire codes and inspection requirements. The Florida Apartment Association recommends that developers and government officials work together to reduce upfront construction costs and pass on savings to the general public.
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Old Navy Plans to Open 800 More Stores
Wall Street Journal (09/12/19) Thomas, Patrick

Gap Inc.'s Old Navy brand on Thursday announced plans to open hundreds of stores, as it gets ready to split from its parent company at a time when slower sales and Web-based competitors are challenging more and more bricks-and-mortar chains. Gap stated earlier in the year that it would separate its rapidly growing budget chain from the rest of the business, creating two publicly traded companies. For the past several years, Old Navy has outperformed its sister brands Gap and Banana Republic thanks to its lower price points and savvy marketing. So much so that Old Navy comprised almost 50 percent of Gap Inc.'s $16.6 billion of sales in 2018. Old Navy, which currently has around 1,200 stores, said its goal is to number 2,000 stores by opening sites primarily in smaller, underserved markets. Company officials did not specify a timeline. Old Navy opened 145 stores between 2016 and last year.
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Bring These Five NASA-Approved Plants to Beat Office Stress
Inverse (09/08/19) Larcombe, Danica-Lea

High-rise office buildings can contribute to poor health in workers. With limited natural sunlight, poor ventilation, and no fresh air, office cubicles can facilitate the rapid spread of germs and make workers fall ill with a cough or cold. Moreover, office-bound employees can suffer eye strain from artificial lighting emanating from a computer or overhead and develop headaches from chemical compounds given off by synthetic office materials. But a new report from the National Aeronautics and Space Administration (NASA) found that common indoor plants have the ability to purify the air, potentially reducing poor health, headaches, irritation, and stress. According to the NASA study, many common types of indoor plants are very effective at removing the volatile chemical compounds from the air, making an office seem more open and fresh compared to the stuffy, stale atmosphere it may have without plants.

It is recommended that offices have one medium-sized plant per 2.2 square meters to best remove indoor pollutants. Plants with larger leaf surface areas are more effective at filtering out the pollutants. NASA scientists recommend Devil’s Ivy, Bamboo Palm, Kentia Palm, Variegated Snake Plant, and the Peace Lily. All five of these plants can provide beneficial bacteria to counteract harmful bacteria that may make workers sick. Plant-associated bacteria serves to enhance the microbial biodiversity of the office space and balance the ecosystem. This could, in turn, lead to more productivity and fewer sick days from workers. Beyond those health benefits, studies over the past several decades have suggested that green spaces promote public health and reduce stress.
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City Wants 20 Percent of Apartment Tenants to Drive Electric Cars
Palo Alto Online (09/06/19) Sheyner, Gennady

Palo Alto, Calif., officials are preparing to put $9 million behind a campaign to get apartment residents to move away from gasoline-powered vehicles and embrace electric cars. Roughly 15 percent of households in Palo Alto already own or drive an electric automobile. More than $5 million of the $9 million would go towards upgrading local apartment buildings to make it easier for electric car drivers to park and charge their vehicles. As of now, there is an insufficient number of chargers, leading potential converts to hold off on buying. But under the city's new plan, there would be 200 to 400 new charging ports installed at as many as 90 apartment buildings, nonprofits, and schools across the city. These new charging ports would be enough to maintain between 1,800 and 2,400 electric vehicles on the roads, which accounts for nearly 20 percent of the population in multi-family buildings.

Separately, Palo Alto wants to increase the number of registered electric vehicles at apartment communities by 1,000 over the next three years. Recent statistics show that one-third of new cars in Palo Alto in 2017 were electric, and many electric car drivers have responded positively to the thought of purchasing a new or second electric vehicle. And 70 percent of Palo Alto respondents to a survey on electric vehicles reported that they would be "extremely interested" in buying one if they knew charging would be more readily available citywide. Palo Alto expects to receive about $8 million from the Low Carbon Fuel Standard program, operated by the California Air Resources Board. Palo Alto will also use $1 million in matching funds granted by the California Energy Commission.
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New Office Complex in Southern California Strives to Create a Silicon Valley-Like Campus Vibe
Building Design + Construction (09/06/19)

Developer Lincoln Property Co. is planning to transform what was once a Marine Corps Air Station in Tustin, Calif., into an office and mixed-use complex reminiscent of Silicon Valley office campuses. Lincoln Property teamed up with the design studio Rios Clementi Hale Studios to create the sprawling office campus, known as FLIGHT Tustin Legacy. During Phase I of construction, 11 buildings went up, offering 470,000 square feet of offices, food halls, and parking garages. Rios Clementi Hale Studios intentionally designed the buildings to refer back to the property's past as an air station, so that the buildings are uninterrupted and double-height like air hangars. Inside the buildings, elements like staircases, elevator shafts, and lobbies have been pushed to the perimeters, increasing usable interior space. Roughly 100,000 of the 470,000 square feet are dedicated to amenities like eateries and retail shops.

FLIGHT incorporates pedestrian-friendly streets and plenty of open space, including spaces specifically designed to host outdoor meetings. Moreover, the campus is adjacent to the 26-acre Tustin Legacy Park and very close to a Metrolink station providing a public transportation option. According to Mark Motonaga, creative director at Rios Clementi Hale Studios, FLIGHT is intended to "not only redefine work life and the traditional office layout, but to provide a flexible environment that can accommodate any type of tenant." Next up is Phase II of construction, which will focus on a 20-acre piece of land east of Phase I and add another 500,000 square feet to FLIGHT. Suffolk, the general contractor for FLIGHT, used a "build smart" approach in order to get Phase I finished on schedule. This means that sophisticated virtual, design, and construction (VDC) tools were utilized throughout the process. Suffolk also used Lean Construction principles to increase efficiency and decrease waste.
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Canadian Investor Helps Valley Apartment Residents With Backpack Drive
Phoenix Business Journal (09/12/19) Gonzales, Angela

A Vancouver-based investment firm is continuing to solidify its ties to the Phoenix area's multifamily housing sector. Western Wealth Capital already owns 26 apartment buildings in and around Arizona's largest city and is looking to acquire more. In the meantime, the company has reinforced its commitment to the community there by having a backpack drive for residents of its apartment communities. Many of the buildings owned by Western Wealth are located in at-risk neighborhoods and Title IX districts.

Western Wealth CEO Janet LePage and Executive Vice President John Rials recently traveled to Phoenix to host an event for residents of those buildings, handing out more than 3,000 backpacks and school supply kits in preparation for the school year ahead. Since LePage started the investment firm five years ago, she has donated almost $250,000 to the apartment communities her firm owns. For instance, each holiday season, managers of each Western Wealth property nominate a family in need. Western Wealth leaders read through the nominations and the winning family does not have to pay rent for December.
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JC Penney to Launch Outdoor Apparel Shops Within 100 Stores as It Attempts to Boost Sales
CNBC (09/10/19) Thomas, Lauren

J.C. Penney has announced that it will open outdoor shops next month at 100 of its 830 department stores. The shops will sell apparel and excursion gear in an attempt to boost sales and expand into the outdoor market. J.C. Penney's outdoor shops will carry merchandise from three new national brands -- American Threads, The American Outdoorsman, and Hi-Tec -- as well as established brands like Nike, Puma, and Adidas. In addition, J.C. Penney is creating its own in-house outdoors brand called St. John's Bay Outdoor, which will be available in 600 stores and online starting in mid-September. St. John's Bay Outdoor will focus on men's apparel that is versatile enough to be worn outdoors and out for a night on the town. Each of the 100 outdoor shops will be roughly 800 square feet.

The outdoor venture marks J.C. Penney's latest attempt to revive its slowing sales. The department store chain saw its sales drop 7 percent in the second quarter, driven in part by e-commerce and by J.C. Penney's struggles to select the right assortment of inventory. In the past, J.C. Penney has attempted to boost sales by bringing in Sephora for miniature makeup shops, offering salons inside its department stores, and partnering with ThredUp to promote second-hand clothing. J.C. Penney's shares are currently trading at under 90 cents. Last month, the New York Stock Exchange sent the retail chain a letter warning that it was no longer in compliance with listing rules because its stock had been trading below $1 for 30 consecutive days. J.C. Penney's has six months to regain compliance.
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Millennials Said to Value Sustainable Apartment Features
Spokane Journal of Business (08/29/19) Nellis, Natasha

An AMLI Residential study shows apartment residents -- especially millennials -- are interested in green amenities and building features. Black Realty Management President Kim Sample notes that such features are appealing to a host of potential renters and thinks most people would opt to live in environmentally conscious apartments if offered the choice. Sample says millennial clients are more likely to favor apartments with such smart home features as mobile temperature control and light-emitting diode lighting, or sustainable perks like community gardens and comprehensive recycling plans. Greenstone Homes owner Jim Frank points out that energy-saving measures like triple-pane windows are becoming standard construction elements. The cost-effectiveness of energy-efficient apartments is another likely factor in their popularity among younger renters.
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Developer Asking Overland Park For Permission to Top Office Building With Lighted Art Display
KSHB-TV 41 (09/09/19) Keegan, Charlie

A commercial developer in Overland Park, Kan., is turning to the local government for approval of a rooftop design element. Block Real Estate Services has developed a series of office buildings in Overland Park and wants to install a lighted artwork display on the roof of one existing building and several others currently under construction. Block Real Estate Services plans to rotate what is displayed on the rooftops throughout the year, cycling through friendly designs such as leaves and the night sky. The developer confirmed that it does not plan to use the lighted displays for advertising purposes of any kind. Overland Park does not have any laws pertaining to lighted displays on building rooftops, but some city officials have expressed concern whether a lighted display would distract drivers on a nearby highway. Overland Park is expected to continue weighing the proposal through at least mid-October.
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New Jersey's 'Dream' Mall: 40 Million People and a Traffic Nightmare
National Real Estate Investor (09/03/19)

New Jersey's behemoth American Dream retail and amusement complex is scheduled to open on Oct. 25, and project owner Triple Five Groups expects crowds to rival those at its Mall of America in Minnesota. Retail will account for 45 percent of the complex's approximately three million square feet, with such tenants as Saks Fifth Avenue, Hermes, Century 21, a kosher food market, and a 20-restaurant dining terrace. The Western Hemisphere's biggest indoor theme park, North America's only indoor snow skiing, and a DreamWorks water park will be among the complex's entertainment offerings, which will cover 55 percent of the mega-mall.

The American Dream was proposed in 2003, but it faced some false starts, followed by ownership changes and financial hard times. The complex is just west of Manhattan in the Meadowlands region of New Jersey -- one of the most densely populated regions in the nation. Triple Five Group expects 40 million visitors, but they will have to contend with heavily congested roads. To the dismay of many, New Jersey does not plan to link the site by rail from Newark Liberty International Airport, and there are no plans for any new train service. The state is only adding bus routes with extended hours and stops. By comparison, Triple Five Group relies on express buses, free shuttles, and Minnesota's most-traveled light-rail route to carry people to Mall of America. American Dream is opening at a time when fewer than half of U.S. malls are expected to survive ongoing store closings, according to Bloomberg Intelligence. But Triple Five Group remains optimistic due to its attractions mix and close accessibility to New York City.
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'There's Just Too Much Vacancy': D.C. Developers Shy Away From Spec Office Projects
Bisnow (09/04/19) Banister, Jon

A number of developers are reluctant to start new speculative office projects in Washington, D.C., as vacancy rates in the nation's capital soar. In the first quarter of 2019, there was a 12.8 percent vacancy rate in D.C., but that number jumped to 13.5 percent by the end of June. Experts attribute the increase to the influx of new office space hitting the market. In the second quarter, new office buildings contributed an additional 1.3 million square feet of space to the Washington market. Looking ahead, an additional 16 buildings with 3.4 million square feet of space are scheduled to be finished by the end of 2020. While developers have been happy to build without committed tenants for the past few years, some have said they will be more cautious moving forward. "We've historically built buildings on a spec basis, but we probably wouldn't be starting one in the next couple of years" because of the high vacancy rates in and around the city, acknowledged Republic Properties Corp. President Steven Grigg.

Meanwhile, Doug Firstenberg, a principal of Stonebridge, said he would also avoid spec projects downtown. For its part, WashREIT has a large portfolio of properties in D.C., but tends to avoid speculative projects because it is a public company. According to Anthony Chang, vice president of WashREIT, Class B speculative buildings have done well because many of them have been taken off the market for repositioning projects. But he said that Class A buildings face more challenges "unless [they] have something special." Skanska, meanwhile, has secured three leases for its Capitol Riverfront office building that was constructed as a speculative project. With those leases, the building is up to 76 percent leased. But Skanska boss Mark Carroll said that the company felt no obligation to immediately move forward on any new spec projects, and that it would wait out the market until it becomes friendlier to such development again.
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The Blake Group Says It's First in Connecticut to Reach Net Zero
Journal Inquirer (09/03/19) Vasile, Zachary

The Blake Group recently reported that its manufacturing, distribution, and testing center is the first building in Connecticut to earn “net zero verification” from the New Buildings Institute, a nonprofit that maintains a registry of energy-efficient commercial properties in the United States and Canada. Company officials said the facility generates at least 150 percent of its annual power needs through on-site geothermal, photovoltaic, and solar installations. Those include rooftop solar arrays, which produce 92,000 kilowatt-hours of electricity; daylight harvesting and passive solar systems; a fresh air energy recovery ventilator exhaust unit that recaptures heating and cooling energy; and thermally enhanced radiant tubing, which reduce circulator water pumping.

The company makes and markets integrated boiler controls, exhaust and selective catalytic reduction systems, heat recovery devices and economizers, filters, and high-efficiency pumps and valves, among other offerings. "This building enables us to test and learn how to get the most out of the technology and share what we learn with our customers," said Blake Group President Fred Cuda. As plans came together, Cuda noted, the firm saw a chance to use the same energy-saving systems built into its own products to power its new home. "The project was an opportune time to live our commitment to sustainable energy through our own building," he said. Since its August 2017 completion, the facility’s renewable energy has offset about 35 tons of carbon, which is equivalent to taking eight cars off the road each year.
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