Real Estate Management News - 02/14/2018

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February 14, 2018
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IREM® HEADLINES
Rent Control Legislation Introduced in Washington State
Employee Onboarding Critical to New Employee Engagement
No Shortage of Options to Hone Your Skills

INDUSTRY HEADLINES
Five Nontraditional Ways to Increase Revenue for Your Multifamily Property
Landlords, Brands Brace for Less Shopping at the Mall
Amenity-Rich Office Campus to Make Its Way to Plano, Carrollton
Apartment Completions Reach 30-Year High in 2017
How to Integrate Millennials Into Facility Management
Study Finds Houston's Apartment Safety Programs Are Flawed
Dave & Buster's Is One Way Malls Are Filling All Those Empty Sears Stores
New York’s Commercial Property Slump Shows Signs of Slowing
What’s in Store for the Flexible Office Space Trend?
Canadian Government Investing $182M for Energy-Efficiency Research
Apartment Life Offers Challenges in Pest Control
Tax Law Erodes Historic-Building Credit, Threatening Some Projects


 

IREM Headlines


Rent Control Legislation Introduced in Washington State

Two rent control bills were introduced in the state of Washington—House Bill 2583 (HB 2583) and Senate Bill 6400 (SB 6400)—concerning local authority to address affordable housing needs through regulation of rent and associated charges. These bills would repeal the 1981 state preemption against rent control and permit local cities and counties to allow rent control on rented and leased residential properties as they see fit.

Hearings on both bills were conducted in their respective committees, and there was an abundant amount of testimony supporting and opposing the legislation. Neither bill was voted out of committee; therefore, they are dead for the 2018 session unless they are amended onto another bill or placed into the budget, which is highly unlikely. However, there is talk of reintroducing the legislation in 2019.

IREM is against government control of rents and is working to oppose the measure, in collaboration with its Washington Chapters and Public Affairs of Washington, LLC, a state lobbying firm utilized by the IREM Western Washington Chapter.

For more information regarding IREM’s positions on this and other public policy issues, please visit the Public Policy page on our website.

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Employee Onboarding Critical to New Employee Engagement

Bringing new employees into an organization, helping them acclimate to their new workplace and a new corporate culture, and supporting their transition from new employees to productive members of the team is a key management function.

As discussed in Principles of Real Estate Management, 17th Edition all new employees should receive training and orientation regardless of their competence or familiarity with their new duties. This is known as employee onboarding, which is a comprehensive approach to bringing in new hires that goes beyond simple orientation. Onboarding plans are intended to make new employees familiar with the overall goals of a management company or specific property and support them as they embark on early projects, in an effort to achieve success.

The ultimate payoff is to reduce turnover and encourage workers to stay with an organization for a longer tenure. Since every company has a unique culture and particular procedures, new employees should be properly introduced to the work environment as quickly as possible. An employee manual stating the company policies reinforces an orientation program. An employee manual should include but is not limited to the following:
  • General rules of employment. Hours of work, paydays, holidays, sick leave, vacations, etc.
  • Company’s policies affecting internal and external activities. Public relations, ethics, employee attitudes, promotion from within, discrimination, sexual harassment, etc.
  • Information about the company. A brief history, a statement of objectives and an organizational chart.
  • Other policies and procedures as required or needed. Proprietary information, confidentiality, fiduciary responsibilities, etc.
Once employees are established in the job, schedule regular performance reviews and conduct them as promised. These sessions should be structured to help employees increase their value to the firm. They are also a great opportunity to discuss any deficiencies or performance corrections that may be needed. Businesses commonly review employees’ performance at least once a year. In addition, new employees may receive employment reviews after their probationary period, which is often their first three months. A review early in the period of employment can be an opportunity for both employer and employee to reaffirm their employment decisions—or to agree that the decision was not right and go their separate ways.

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No Shortage of Options to Hone Your Skills

At IREM we know a career in property management is never static; professionals must stay relevant by continually learning and evolving. And we take pride in being able to offer real estate practitioners a variety of ways to expand their expertise. Here are just a few exciting and career-advancing opportunities we have coming up right around the corner:

Get ready for the upcoming spring leasing surge. On February 22, IREM Industry partner AppFolio is hosting an informative webinar, Leasing Season Survival Kit: Prep Now, Relax Later. Register here to learn about 2018 predictions, new trends and ways to utilize automation, so that your processes and workflow are operating at their highest potential when your business is at its busiest.

Date: Thursday, February 22
Time: 11:00 AM PT / 1:00PM CT/ 2:00 PM ET

Real estate professional and IREM Member Dr. Deborah Phillips, Ph.D., CPM, wants to help you establish habits that will strengthen your ability to lead others (and yourself!) in her webinar, Habits and Rituals: Keys to Next Level Leadership, on February 21. Dr. Phillips will show you how to increase your effectiveness by improving four significant areas that regularly play into your everyday activities; mental framing; time management; projects, priorities and processes; and communicating. Click here to register.

Date: Wednesday, February 21
Time: 12:00PM PT/ 2:00PM CT/ 3:00PM ET

Strive to be “Agents of Change” and attend the IREM Tri-State Conference & Expo on February 22 and 23, presented by IREM’s New Jersey, Delaware Valley, and Southern New Jersey Chapters. In addition to a multitude of instructive multifamily and commercial industry education sessions, keynote addresses will be delivered by Emmy award-winning speaker, Mark Scharenbroich, and Dennis Budinich, Chief Culture Officer at Investors Bank. For more information on sessions and activities, and to register, visit the IREM Tri-State Conference & Expo website.

Dates: Wednesday, February 21 and Thursday, February 22
Location: Borgata Hotel Casino & Spa, Atlantic City, N.J.
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Industry Headlines


Five Nontraditional Ways to Increase Revenue for Your Multifamily Property
Forbes (02/09/18) Kiser, Lee

There are opportunities for additional revenue other than rent in many apartment properties. The article's author details several nontraditional techniques that might help you drive additional revenue. One, consider that there may be additional dollars in your parking lot. Indeed, there are several companies trying to get into "Airbnb for parking" -- companies that will put their sophisticated software and smartphone apps into place at no cost to the apartment owner, then profit-share the additional revenue they generate. Such firms include ParqEx, SpotHero, and Parkwhiz. Outsourcing amenities is another nontraditional way to raise revenue. More owners are contracting with companies to add amenities to their apartment community's existing package. Sometimes the owner benefits directly, other times the operator can simply charge a higher rent because there is an amenity in place that gives your complex a competitive advantage. A prime example is on-site dry cleaning. Pressbox puts lockers in an apartment building; residents can drop off their laundry and dry cleaning, then pick it up in the building, and it's all handled via an app.

In addition, some apartment landlords are using machine learning and artificial intelligence for optimal pricing. "Sometimes additional revenue is not only about raising your rent to the right level," the article's author writes, "but actually lowering it to the right level to reduce your vacancy carry." New companies are emerging and using data analytics and machine learning to predict a wide array of apartment variables. Two such firms are Enodo and HouseCanary. The cost of these services and other services is nominal and can substantially add to an apartment property's overall revenue.
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Landlords, Brands Brace for Less Shopping at the Mall
CNBC News (02/11/18) Thomas, Lauren

E-commerce platforms will account for 33 percent of total retail sales by 2030, a new A.T. Kearney report forecasts. This rapid and impending transformation is leading traditional brands to rethink how they arrange their stores. Landlords, meanwhile, are reconsidering their tenant mixes. Many are bringing in more food and entertainment options. Michael Brown, author of A.T. Kearney's "Future of Shopping Centers" report, states, "Right now, we see traditional retail space built for 20th-century shopping behaviors. . . . Now, we are in the 21st century, and we have to rethink how we use the space to engage consumers. We're starting to see a slow transition." Part of that transition is major retail property owners scaling back on apparel. One example is American Dream Meadowlands, a massive retail development now underway in New Jersey and spearheaded by Triple Five Group. It will include an indoor ski slope and a KidZania play area. Another example is Simon Property Group, which is bringing residential, office and hotel uses to its King of Prussia Mall in Philadelphia. For its part, Westfield (which was recently acquired by Unibail-Rodamco) is considering the addition of a concert venue at its Promenade Mall in Woodland Hills, Calif.

Brown remarks, "It's no longer a shopping mall but a consumer engagement space, which opens up a world of opportunities for developers in terms of how they use this space." In turn, retail businesses are curating destinations that include less inventory and more of a service or experiential component. These include such online-first retailers as Boll & Branch, Fabletics, Outdoor Voices, and Rent the Runway. The general idea is that shoppers visit their brick-and-mortar stores to see and touch items in person before buying them via the Internet or making the purchase there. Ultimately, the goal is just to introduce consumers to the brand. "We want to give consumers whatever they want, which speaks to a broader retail trend: Getting a product when you want it and how you want it," concludes Philip Krim, CEO of mattress brand Casper.
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Amenity-Rich Office Campus to Make Its Way to Plano, Carrollton
Dallas Business Journal (02/09/18) Carlisle, Candace

A new five-building, amenity-rich office campus could soon get underway at International Business Park, a 300-acre mixed-use development spanning Plano and Carrollton, Texas. Dubbed 6161 Plano Parkway, the proposed campus would total approximately 967,000 square feet of space and is already being shopped to would-be tenants. One building is in the process of being constructed, while the other four could be built either speculatively or built-to-suit a specific tenant shopping for new digs. Plans indeed include a central amenity center with a 4,300-square-foot fitness facility, a tenant lounge with coffee bar and a grab-and-go mini-market, and a 108-seat conference room and event space.

Building a new amenity center will be a first for Billingsley Co., which has been steadily adding to its property amenities throughout North Texas, notes Partner Lucy Burns. She adds, "Over the past few years, we have been adding more amenities at all our properties, so having everything in one building is a natural progression. From the materials we selected to the abundant use of glass, these building are really going to elevate the campus." The corporate campus will also boast a private outdoor space for first-floor tenants, which, Burns said, is a rarity for this particular submarket.
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Apartment Completions Reach 30-Year High in 2017
Multifamily Executive (02/07/18) Croce, Brian

Apartment completions reached a 30-year high last year and topped the 2016 level by 30 percent, RealPage data shows. In 2017, a total of 364,713 rental units were completed in the nation's 150 biggest metro areas, more than twice the long-term average and growing the U.S. apartment stock by 2.1 percent. The peak in completion volume was driven by 15 metros where construction has been especially active in urban core areas, RealPage researchers add. Those 15 metros contributed nearly 50 percent of America's new apartments in the last year. Overall, the most units in 2017 were completed in Dallas (25,104), followed by New York (22,666) and Houston (20,759). Annual completions tallied between 10,000 and 16,000 units in the typically high-supply markets of Washington, D.C.; Atlanta; Seattle; Los Angeles; Chicago; and Austin, Texas.

Despite all-time-high supply volumes, absorption across the top 150 markets essentially kept pace, RealPage adds, holding at a steady 95 percent. However, there is evidence that apartment owners and operators have reined in their pricing strategies in an effort to fill new units. For the country overall, rent growth was 2.6 percent -- down from the roughly 4 percent to 5 percent increase common from 2014 through 2016. RealPage researchers expect the apartment sector to see supply volumes ease this year.
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How to Integrate Millennials Into Facility Management
Buildings (02/07/18) Feit, Justin

It is important for facilities management professionals to learn how to integrate the younger generations -- namely Millennials and Generation Z -- into the business. With the average age of facilities managers continuing to rise, these two demographics will need to be tapped for fresh talent and as a source of new ideas. Of course, this can be difficult. Perhaps the best way to integrate younger generations into building management is to better promote the industry to the younger audience. Bridging the gap in understanding helps recruiting and retention of young and promising employees. "When you think about Millennials, it's that they are one of the most educated generations ever because their parents pushed college," comments Lisa Ryan, Chief Appreciation Strategist at Grategy, a professional training company. "Now you have a generation with tons of student loan debt, that's unable to find jobs in their area of study, and they feel like they are losing." Because facilities management professionals' work is essential to their individual organizations, it is important to articulate that and provide meaning for prospective younger workers.

Millennials are often maligned in the media for being lazy and entitled, but that is an unfair assessment, states Ryan. Many have adopted a goal-oriented work style and are the first generation to grow up in the Internet age. Their embrace of technology has not only enabled Millennials and Generation Z to process large volumes of information at any given moment, it has also provoked a reconsideration of where work needs to be done. The facilities management industry must factor that into how it brings in talent. In addition to recruiting young talent, building owners and operators should also try to learn from them and challenge old notions of how business is conducted. "It is important to listen and value contributions, no matter the level of expertise," Ryan concluded. "Build relationships so that Millennials will stay. We need to invest our trust and interest and to learn from them as much as they learn from us."
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Study Finds Houston's Apartment Safety Programs Are Flawed
Insurance Journal (02/09/18)

A recent University of Texas School of Law report found that Houston’s programs aimed at ensuring apartment safety are "flawed, fractured, and improperly managed." The 16-month study was released Feb. 6 and is titled "Out of Order: Houston’s Dangerous Apartment Epidemic." Researchers looked at the city's regulation of apartment communities and enforcement procedures and found that over 25 percent of the approximately 4,000 apartment complexes subject to inspection by Houston Public Works lack certificates of occupancy. In addition, the findings showed that responsibility for apartment safety programs is divided among several city departments that do not share data.

"The city of Houston is operating a largely dysfunctional system for addressing tenant safety that appears to have little or no oversight by city leaders," states Heather Way, director of the law school's entrepreneurship and community development clinic. "The identification of dangerous apartment conditions in Houston remains primarily complaint-based and, even then, Houston fails to adequately inspect and otherwise follow up on complaints." The study comes almost a decade after a Texas law passed requiring Houston to "establish minimum habitability standards" for multifamily rental buildings and inspect those properties.
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Dave & Buster's Is One Way Malls Are Filling All Those Empty Sears Stores
CNBC News (02/07/18) Whitten, Sarah

With more and more traditional mall anchor tenants shuttering stores, Dave & Buster's is staying the course on its expansion plans for this year. The company, known for its arcade-style games and sports-bar dining, has high expectations for increasing its number of locations in 2018, projecting growth of nearly 14 percent. As of the end of last year, Dave & Buster's had signed 29 leases for locations that are on pace to open between now and 2019. Dave & Buster's CEO Steve King expressed confidence in his company's unit growth plans, especially as the chain starts to roll out locations with smaller footprints. Dave & Buster's locations tend to be between 25,000 and 43,000 square feet depending on the venues. But King and his colleagues have been testing out an even smaller model, about 17,000 square feet, in Arkansas this year. The smaller location opened this month and is aimed at helping the company expand in markets with a smaller population density. These smaller sites maintain the size of the arcade portion, but shrink the space for back-of-house operations and eliminate dedicated spaces for special events and the dining room. At the same time, the D&B Sports bar and dining area is bigger in size.

The company presently operates a little more than 100 stores. But company officials have mapped out nearly 100 more sites throughout the nation that would not cannibalize existing stores. Analysts note that vacancies in shopping malls have presented Dave & Buster's with an opportunity to snag prime real estate in highly trafficked areas, including the outside "anchor" spot. Dave & Buster's opened 14 new stores last year, seven of which were located in malls. Traditionally, around 33 percent of the company's locations have been in shopping malls, with the other two-thirds split evenly between free-standing buildings and locations that are in semi-attached buildings like strip shopping centers. "Mall developers like us," King concluded. "They can measure that we drive traffic to their malls in a way that an anchor might have done previously." He added that mall operators have been seeking out Dave & Buster's "quite aggressively" to fill its empty large spaces, but the company remains careful about choosing the right locations to move into.
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New York’s Commercial Property Slump Shows Signs of Slowing
Wall Street Journal (02/11/18) Morris, Keiko

After a two-year sales plummet in New York City's commercial real estate market, signs are emerging that a bottom could be near. Local property professionals are optimistic that more deals will take place this year, pointing to an uptick in signed contracts in the fourth quarter. Expectations of stabilizing commercial property sales come after an accelerated slide. Sales dipped 33 percent to a five-year low of $31.3 billion in last year, reports Ariel Property Advisors. In total, sales of properties including office towers, residential rental buildings, and development sites have decreased more than 50 percent since their most recent peak in 2015. While analysts and brokers are not projecting a vigorous bounceback, most do think the worst is nearing an end.

To be sure, the gap between bids and the prices sellers wanted has widened since 2015, and many sellers opted to wait. New developments added to the supply of rental apartments and luxury condominiums, putting pressure on multifamily housing landlords to offer concessions. While some brokers are expecting the number of sales to stabilize in 2018 and possibly increase, fears of spikes in borrowing costs due to higher inflation could temper those prospects. "It takes 18 months to two years before it becomes common knowledge that the market is in a correcting state," concluded Bob Knakal, chairman of New York investment sales for real estate services firm Cushman & Wakefield.
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What’s in Store for the Flexible Office Space Trend?
National Real Estate Investor (02/09/18) Kirk, Patricia

Amol Sarva is co-founder and CEO of Knotel, a flexible office provider headquartered in New York. His firm focuses on offering flexible headquarters spaces for small- to medium-sized firms, custom-designed to reflect each company's own brand and workplace culture. Similar to other co-working operators, Knotel provides educational programs for tenants and social events. However, it does not provide freebies like a coffee bar. Sarva was recently interviewed by National Real Estate Investor on the evolution of the office sector to include flexible space and the role both disruptive start-ups like Knotel and traditional office space owners will play in the shift to flexible formats. He remarked, "Tenants want flexibility in real office space. Previously, a company's only option was traditional space. Growing companies come to us because they can't predict their space needs in one to three years' time."

Many property owners are repositioning older buildings as flexible, collaborative office spaces instead of sharing the higher revenue with flexible space operators like Knotel and WeWork. Sarva was asked if he thinks this will have any impact on his firm's expansion or that of Knotel's rivals. He replied, "Building owners think what we do is easy to copy, but they would have to reinvent their entire business to do it properly. "First of all, many owners don't understand what we do. They think flexible space is about entrepreneurs or freelancers in small, shared spaces that rent by the month." Knotel's model, though, can accommodate companies with payrolls of 100 or more employees, and many become long-term clients. Also, he notes, traditional building owners lack the capacity to create office space that is seamlessly flexible. Sarva goes on to predict that flexible space will gain market share in time.
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Canadian Government Investing $182M for Energy-Efficiency Research
ConstructConnect (02/08/18)

The Canadian government has unveiled a C$182 million investment to boost energy efficiency and address climate change by improving how homes and buildings are designed, renovated, and constructed. The funding, which is part of the Green Infrastructure Fund, will go toward the research, development, and demonstration of solutions supporting the adoption of high-efficiency building codes; a program to help industry find and test cost-effective, technical solutions for high-performance buildings; and the development of new energy standards for homes and buildings. Of the investment, C$48.4 million will fund research, development, and demonstration of energy-efficient buildings.

Buildings and homes are responsible for about 17 percent of Canada's greenhouse gas emissions. The federal government is working with provinces, territories, and industry on energy code development, data sharing, research and development, and market transformation strategies for the building sector. This initiative builds on the Pan-Canadian Framework on Clean Growth and Climate Change (PCF) and Canada's Buildings Strategy.
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Apartment Life Offers Challenges in Pest Control
GoErie.com (02/10/18) Fox, Henry

Some bugs can be a nuisance. But others can result in infestations. It is important for apartment owners and operators (and their residents) to know their bugs before sounding any alarm bells. Many large apartment properties have regularly scheduled pest control services to handle such seasonal invaders as ants and spiders. As successful as those treatments are, some pests still persist and have to be dealt with. Perhaps the pest most falsely accused of moving from an adjacent apartment to another are fleas. Know that a neighbor's flea infestation can be shared, but only under certain circumstances. Adult fleas are permanent parasites on warm blooded hosts. They do not hop off and on and crawl around a room like stink bugs or cockroaches. "The fact an apartment might be totally infested, separated by just a wall or ceiling, is irrelevant," the article's author writes. "The only way a true flea infestation can be spread is by a flea-plagued animal dropping eggs into your environment." Apartment residents who share common hallways or an open basement space are the biggest potential victims of the infested animal. Such shared spaces are essentially an extension of the infested pet's domain.

True and legitimate paranoia occurs when a fellow apartment resident has bed bugs. Such blood feeders will commonly be in search of a new host, particularly when a few factors arise: one, an infested apartment becomes vacant; two, a treatment application pushes the pests to another apartment. Bed bugs prefer to eat regularly, but they can go months without a blood meal. Furthermore, they can sense the carbon dioxide human beings emit from more than 75 feet away. Once a rental unit is vacated, the remaining pests begin "searching for their next nosh" via electrical outlets, along duct work, and through shared plumbing lines. Not only does the empty unit serve as an infestation source, the furniture and possessions of the transient apartment tenant are now relocated to another structure to carry on the tradition of sharing.
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Tax Law Erodes Historic-Building Credit, Threatening Some Projects
Wall Street Journal (01/19/18) Calvert, Scott; Kamp, Jon

The recent reform of the U.S. tax code has changed the federal historic tax credit, which provides reimbursement for 20 percent of certain costs on certain rehabilitation projects. The new tax law spreads that reimbursement over five years instead of one. Developers, banks, and preservationists say this change lowers the value of the reimbursement. The credits have been successful at turning old sites like warehouses and department stores into apartments, offices, and hotels. Some experts warn that with the credits spread over five years, certain rehabilitation projects will go unfinished. Some states are taking action to save the credit program and projects under development. The federal program, which has been in place since 1976, has helped rebuild more than 42,000 buildings.
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