Real Estate Management News - 07/11/2018

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July 11, 2018
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IREM® HEADLINES
Nearly One in Five Commercial Realtors Closed Deals with International Clients
Next Week: New Chances to Broaden Your Industry Insight

INDUSTRY HEADLINES
Vacancy Rate for Stores at US Malls Hasn't Been This High Since 2012
Office Napping Climbs Out From Under the Desk and Into High-Tech Pods
Macy's Plans 60 New Bluemercury Stores
Alliance Residential Launches Largest Nationwide Smart Apartment Home Rollout in Industry History
The 3 Keys to Developer and Owner Success in 2018
Connected Buildings Allow for Proactive Facility Management
Hobby Lobby, Burlington Likely to Move Into Empty Toys 'R' Us Stores
L.A. City Council Backs Spending Plan for $700-Million Office Tower
San Francisco Office Rents Climb for the First Time in Two Years
Nike's New Store Concept Uses Digital-User Data to Curate Merchandise
What’s the Outlook for Medical Office Buildings?
AF Group's Power Plant Headquarters Parallels Ford's Train Station Bid


 

IREM Headlines


Nearly One in Five Commercial Realtors Closed Deals with International Clients

A new report issued by the National Association of REALTORS® shows that nearly one out of every five Realtors practicing in commercial real estate closed a sale with an international client in 2017, and 35 percent said they have experienced an increase in the number of international clients in the past five years. NAR’s 2018 Commercial Real Estate International Business Trends report analyzed cross-border commercial real estate transactions made by Realtors during 2017. The study found that most Realtors who specialize in commercial real estate reside in smaller commercial markets where the typical deal is less than $2.5 million.

“The profile of smaller commercial markets is continuing to rise as many foreign investors are attracted to smaller-sized properties in secondary and tertiary markets, bringing Realtors confidence that increased sales and leasing activity will continue to occur in 2018,” said Lawrence Yun, NAR chief economist.

“Since 2016, world economies have regained their footing and have pressed toward higher ground. Global economic output increased in 2017, and commercial real estate continues to be a healthy investment for global investors,” Yun added. He went on to say that “Realtors’ international clients found U.S. commercial real estate markets to be a good value in 2017. About seven in 10 respondents reported that international clients view U.S. prices to be about the same or less expensive than prices in their home country.”

More about the NAR report and its findings can be found here on the IREM website.
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Next Week: New Chances to Broaden Your Industry Insight

Next week, IREM is offering ways to enhance your business expertise with two new webinars:

Tackle the Changing World of Talent Management

Over the next five years, 60 percent of commercial real estate professionals will be of retirement age. Will your firm survive a mass retirement? Will you have enough people in your pipeline to fill those positions? Will they have the right skills?

The War for Talent will prepare you for such a scenario. In this webinar, Diane Danielson, chief operating officer of SVN International Corp., will provide a glimpse into the industry's talent gap and how it differs from the rest of the labor market. She will also discuss how to adapt your companies and your practices to embrace the future. Finally, she will explore ways to make property management and commercial real estate more appealing to younger generations and how to rethink training systems in order to ensure they succeed.

This webinar will take place on Wednesday, July 18, at 2PM CST. Click here to register, and arm yourself with the knowledge you’ll need to win the talent war.

Meet the Challenges of Community Association Management

With board member and owner demands that could become time-consuming and patience-testing, managing community association properties can feel overwhelming. Community Association Management: Developing Effective Communication Strategies to Maximize Your Time and Return, taking place Thursday, July 19th at 1PM CST, will share practical techniques to ensure that it’s a successful and rewarding management option for you. Presenter Brad Randall, CPM®, and owner of Welch Randall Real Estate and Property Management, will cover setting expectations from the beginning by clearly defining various items within the management agreement. He will also discuss best practices to ensure effective communication with the Board of Directors, and offer tips on utilizing technology to streamline communication and automate CC&R enforcement.

Take the next step toward implementing proven solutions for enhanced community association management, and register here for this informative webinar.
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Industry Headlines


Vacancy Rate for Stores at US Malls Hasn't Been This High Since 2012
USA Today (07/03/18) Thomas, Lauren

According to new Reis Inc. data, U.S. shopping malls have not been this empty since 2012, when the retail sector was reeling from the Great Recession. The firm's latest research report shows that the vacancy rate at regional and super regional malls topped 8.6 percent in this year's April-through-June period based on a survey of 77 U.S. metro areas. That is an increase from 8.4 percent as of March 31 and a high not seen since 2012's third quarter when the vacancy rate reached 8.7 percent. This news comes as a growing number of consumers shop via the Internet and Amazon nabs more and more market share from traditional retailers. The industry has been struggling to survive, with a number of chains closing physical stores or reorganizing altogether in bankruptcy. As a result, millions of square feet of store space has been put back on the market this year, much of it within malls.
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Office Napping Climbs Out From Under the Desk and Into High-Tech Pods
Chicago Tribune (07/05/18) Channick, Robert

A small, but increasing number of employers are encouraging sleep-deprived staffers to "grab a few winks" during the workday, providing rooms -- or, in some instances, high-tech napping pods -- to get their nap on. According to the Centers for Disease Control and Prevention, 33 percent of U.S. adults are not getting the recommended seven hours of sleep per night. This is contributing to a variety of problems, ranging from health issues to mistakes at work. Such cutting-edge companies as Google have been providing napping spaces for employees for nearly a decade. But it remains a vaguely guilty endeavor in many workplaces and a "fireable" offense in others.

Eastlake Studio, a Chicago-based architecture and interior design firm that works both with office buildings and individual tenants, is seeing increased demand for designated quiet spaces where napping is a contemplated use. "They're just looking for places where people can go get re-energized," observes Tom Zurowski, founding principal of Eastlake. "Certainly that need to just get away from all the noise and maybe take a nap is one of the options they want to provide." He states that Eastlake is installing everything from multi-purpose relaxation areas to meditation rooms for clients. His firm has yet to create a designated napping room with a bed. But it has crafted spaces with sofas, recliners, and even massage chairs aimed at helping employees throttle down.
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Macy's Plans 60 New Bluemercury Stores
National Real Estate Investor (07/02/18)

Bluemercury, the cosmetics brand acquired by Macy’s for $210 million in 2015, is poised to open about 60 new standalone stores through 2019 -- maintaining the chain's pace of expansion. More will open inside existing Macy's department stores, underscoring how Bluemercury has become an integral part of the chain's strategy to defend its turf from Web-based rivals and the rise of such chains as Sephora and Ulta Beauty Inc. This latest expansion will bring Bluemercury's total store count to nearly 220, with most of the new locations in smaller cities and towns where the brand does not already have a presence. These include Raleigh, N.C., and Jupiter, Fla. "We focused a lot on the coast and the big cities and so now we're looking to pick up a new customer," remarks co-founder Barry Beck. "There's no reason why a customer from Little Rock has to travel all the way to a big city like New York or Philadelphia or Miami to get these beauty products."

Bluemercury has opened nearly 100 new locations in the past three years, almost tripling its portfolio. Its flagship is a 2,700-square-foot store at a Hilton Hotel in Manhattan where it tests new products. Inside this landmark location is an artificial intelligence mirror that can scan and order items for delivery. Bluemercury's growth comes as the overall market for premium beauty is expanding. NPD Group reports that U.S. sales of the products, which are generally found in specialty cosmetics shops instead of drug stores, increased 6 percent to $17.7 billion last year led by a resurgent skincare industry.
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Alliance Residential Launches Largest Nationwide Smart Apartment Home Rollout in Industry History
Multifamily Executive (07/05/18)

Alliance Residential Co. -- in collaboration with Dwelo, Google, and Nest -- recently announced the launch of its "Alliance SmartHome" technology package across more than 25,000 luxury apartments nationwide. Utilizing thermostat and lighting control, digital home access, and voice-enabled control, the smart tech aims to deliver convenience and connectivity capabilities and provide property managers with operational efficiencies. The package features the Nest Learning Thermostat and Google Home Mini with Google Assistant built-in, along with smart locks, wall outlets, and light switches. Control of all devices is centralized via the Dwelo open platform, which is compatible with a broad array of consumer and commercial iOT devices.

Alliance ranks as one of the country's biggest developers and managers of multifamily housing. Company executives say Dwelo's support and ability to scale were important factors in Alliance's decision to partner with them. To this end, residents will be able to reach a support team of Dwelo employees 24/7. Also, thanks to Dwelo's cloud-based platform, it will always be on the latest version of the firm's technology. Alliance President Jay Hiemenz concludes, "Home automation in single-family homes has been trending for years now, and our residents desire that same high-tech home system in an apartment. We created Alliance SmartHome to deliver the features our customers want while addressing the unique challenges of multifamily integration."
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The 3 Keys to Developer and Owner Success in 2018
Multifamily Executive (07/06/18) Bock, Tom

A recent Trulia poll reveals that only 25 percent of Americans believe 2018 will be a better year to buy a home than last year, leaving many to seek multifamily housing. With this tug-of-war between homeownership and renting, there are three key trends multifamily owners and developers should keep in mind for the second half of this year. One, renting continues to thrive among millennials. Generation Y has been late to the home buying game for several reasons, most notably slow income growth, careers that may require frequent moves, and the perception that suburbs lack the accessibility and amenities of an urban center. Renting gives millennials the flexibility they desire, and many have been in a position to negotiate rent discounts, free parking spaces, or waived utilities fees.

Two, luxury condominiums are proving to be the way to go for buyers. Indeed, a rejuvenated interest in urban living has motivated baby boomers, in particular, to move to cities and buy condos as they look to downsize. The third trend for multifamily housing owners and developers to keep top of mind is they must provide unique living experiences. Because of financial constraints and circumstances, some have been unable to follow through with an active pipeline of projects. For those who persevere and buy land to build on, location and amenities should be the No. 1 priority for a successful development. Studies have shown residents want walkability to parks, supermarkets, restaurants, and places that offer life experiences. Amenities should include everything from parking and storage to on-site fitness facilities and 24-hour security.
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Connected Buildings Allow for Proactive Facility Management
Buildings (07/05/18) Maldeis, Neil

A proactive approach with connected buildings and technology can help property owners and managers plan and address issues before they arise, resulting in better building outcomes. The idea is to transition from reactive to proactive facility management. In the short term, proactive building management can help make day-to-day decisions more informed. Long-term, proactive facility management can help drive down bottom-line costs and improve lifecycle costs. For instance, such systems as heating, cooling, and lighting can have controls and monitoring attached to them that pulls data and deciphers it, giving building management valuable information and insights.

To take advantage of a connected building for a proactive approach to facility management, the article's author writes that there are five key components. Number one is smart technology and equipment, which allow for data and insights collection that leads to better control of the building. Two, there is "integration and connection." In the best connected buildings, the systems are integrated, so users don't have to look at multiple programs to get actionable data. Three, almost any building can run better, and the path to improvement can be found through analytics. Remote access is the fourth key component. Remote access via dashboards and mobile interfaces enables facility owners and managers to have secure viewing of real-time data and the ability to adjust better to suit peak and off-peak needs. Finally, today's buildings are increasingly complex, and partnering with industry experts can help ensure systems are performing their best.
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Hobby Lobby, Burlington Likely to Move Into Empty Toys 'R' Us Stores
Wall Street Journal (07/05/18) Yerak, Becky

More than 700 Toys "R" Us stores in the United States shuttered their doors for good recently. Now, Hobby Lobby, Burlington Stores, and TJX are among the retailers expected to fill the vacated spaces, according to one of the nation's largest owners of open-air shopping centers. Conor Flynn, CEO of Kimco Realty Corp., said the standard Toys "R" Us stand-alone stores -- each roughly 35,000 square feet -- are likely to be sought by off-price retailers, fitness centers, and specialty grocers. Hobby Lobby reached the 800-store mark in January, and the retailer plans to open at least 60 new locations this year. Meanwhile, discount retailer Burlington had 647 locations in the first quarter, and the chain plans to add at least 35 stores this year.
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L.A. City Council Backs Spending Plan for $700-Million Office Tower
Los Angeles Times (07/03/18) Smith, Dakota

The Los Angeles City Council moved forward last week with a construction and financing plan for a $708 million downtown office tower for city workers on the site of Parker Center, the L.A. Police Department's former headquarters. Council members voted unanimously to back a public-private development model, which involves hiring an outside development team to oversee the project's construction, financing, operations, and maintenance. Officials say the tower, which would rise at least 27 stories, would provide centralized office space for city workers currently working out of other downtown buildings. The city could then sell its unused office buildings or end leases at sites it does not own. The tower is the first project in a proposed makeover of the Civic Center, a staid neighborhood dominated by government buildings. City officials want more shops and eateries to make the Civic Center "blend into the rest of downtown," states Jose Huizar, the Los Angeles councilman who represents the area.
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San Francisco Office Rents Climb for the First Time in Two Years
San Francisco Business Journal (07/06/18) Torres, Bianca

JLL reports that San Francisco office rents crept up for the first time in more than two years during the second quarter, increasing 2.2 percent to nearly $76.28 per square foot. Researchers note that rents are moving up despite years of blockbuster leases because most of the new office space coming on the market in San Francisco is leased up. For the last several years, new buildings helped relieve the booming demand. But the city hit a dry spell for new office space. Susan Persin, JLL's research director for Northern California, remarks, "It was the prospect of space coming on the market that kept rents stable, but that's gone away now." The office vacancy rate dipped to nearly 7.7 percent during the three-month period that ended June 30 versus 8.2 percent in 2015, notes JLL.

Another brokerage firm, CBRE, noted a rent uptick of 55 cents per square -- or 0.7 percent -- to an average of $73.58 per square foot from January through March. Most bigger blocks of space of 30,000 square feet or more are seeking between $80 and $89 per square foot, up from $70 to $79 per sq. ft. compared to the end of 2016. Average asking rates in downtown San Francisco climbed 3.4 percent year-to-date, topping $75.54 per square foot — a new historical high — states CBRE. "Large tenants sized 100,000-square-foot or more are the dominant source of market demand, but their expansion plans are challenged by a lack of similarly sized available space," concludes Colin Yasukochi, CBRE's director of research and analysis in San Francisco. "This demand-to-supply imbalance should keep rents elevated through 2019." He added that there are currently two tenants for every chunk of 100,000 square feet or more that is available.
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Nike's New Store Concept Uses Digital-User Data to Curate Merchandise
Chain Store Age (07/06/18) Wilson, Marianne

Nike is in the process of launching a retail format that aims to break new ground in using technology to provide a shopping experience that caters to local tastes. Dubbed Nike Live, the new concept is inspired by and built as a hub for local members of the company's NikePlus loyalty program. The first one, Nike by Melrose, is set to open on July 12 in Los Angeles. It boasts a streamlined interior and will operate as an experimental digital-meets-physical retail pilot. According to Nike, the products and services in this specific store will be based on a deep understanding of the neighborhood. More neighborhood-specific stores are on track to open in cities around the world, including Tokyo, next spring and beyond.

The store will offer a selection of nike.com best-sellers and city-specific products, with the inventory determined by the company's digital commerce data. The technology will analyze buying patterns, app usage, and engagement of its local NikePlus members to stock shelves. New apparel, footwear, and accessories will fill the store on a bi-weekly basis -- a Nike first. The L.A. store's features include a "Sneaker Bar" designed to make trying on and purchasing footwear quick and easy. In addition, customers can try out products on a treadmill in the "Trial Zone."
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What’s the Outlook for Medical Office Buildings?
National Real Estate Investor (06/27/18) Diduch, Mary

The article's author provides six key updates on the medical office building (MOB) sector. One, there is a lot of development, and it's happening all over the nation, reports Mike Hargrave, principal at Revista. According to the medical real estate research firm's construction report, the U.S. can expect to see nearly 22 million square feet of medial office space delivered this year. Two, development is not outpacing demand. According to Revista data, this new construction represents only 1.5 percent of existing stock. "It's not like that inventory's growing at a pace that demand can't keep up with," observes Hargrave. Three, construction trends differ geographically. In such states as Colorado, Missouri, and Texas, new development can happen quicker. In more regulated states, meanwhile, Hargrave notes that "you may see hospitals leasing space in a retail strip.

Four, the so-called "retailization" of medical real estate has been driven by demographics and technology. According to a recent study of the sector by Avison Young, there are between 1,500 and 2,000 mobile clinics nationwide, over 2,000 retail clinics, and approximately 5,600 ambulatory surgical centers. Furthermore, the shift from retail to healthcare use is easier than most would think, as such facilities tend to have high visibility, easy access, and a sizable floor space. Five, the sector's fundamentals are stable. MOBs have registered especially stable occupancy rates, a trend that most analysts expect to continue. Finally, there has been a shift in who is buying. Healthcare REITs were previously the dominant force in purchasing institutional grade class-A medical assets. Hargrave states, "That changed coming into 2018, and really whether it's the big three REITs or whether it's the MOB-focused REITs, their cost to capital has gone up."
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AF Group's Power Plant Headquarters Parallels Ford's Train Station Bid
Crain's Detroit Business (06/24/18) Livengood, Chad

As Ford Motor Company looks to restore downtown Detroit’s Michigan Central Station, observers have noticed parallels to AF Group's conversion of a shuttered 1930s coal power plant in Lansing, Mich., into its national headquarters. AF Group leaders saw an opportunity to repurpose a skyline-defining building in the state capital that seemed more likely to meet a wrecking ball than house an insurance company. The group is now the largest private employer in downtown Lansing, and since they moved in, the city's waterfront has seen the construction of new residential housing and the redevelopment of several one-time industrial buildings across the river. "The impact it can have on an urban setting is pretty phenomenal," says Steve Roznowski, CEO of construction company Christman.
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