Real Estate Management News - 05/22/2019

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May 22, 2019
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IREM® HEADLINES
President Trump Takes Stage at NAR Legislative Meetings
Building Managers Face the Future With Sustainability Strategies
Why Attend the IREM® 2019 Global Summit?

INDUSTRY HEADLINES
Why an Elevator Maintenance Plan Is an Absolute Necessity
How Apartment Buildings Are Making It Easier to Bike to Work
Walmart Unveils Plans for New 350-Acre Arkansas Campus
Fred's Closing 104 More Stores in Summer
Amazon Plans Two Eco-Friendly, 22-Story Towers With Parks, Day Care and Bike Path
New Orleans Leads U.S. Cities in Falling Apartment Rents, Report Says
Innovation, Talent Attract CRE Capital
As More Millennials Rent, More Startups Want to Lend to Them
Maximizing Leads and Conversions: Getting the Right Blend
Big Box Leases in Chicago Totaled Nearly 5 Million SF in First Quarter
This Renovated Cleveland Office Building Represents a Big Leap in Energy Efficiency
As Rents Soar, Middle-Income Central Floridians Fret


 
 

IREM Headlines


President Trump Takes Stage at NAR Legislative Meetings

For the first time in 14 years, a U.S. president addressed the National Association of REALTORS® (NAR) when President Trump appeared at the NAR Legislative Meetings in Washington, D.C., last week, speaking about real estate, tax cuts, infrastructure and deregulation. The strong economy was another theme as Trump remarked on the record low unemployment rate. “More people are working today than at any time in the history of our country. Many of those people will go out and buy a house,” said Trump, which drew a round of applause from the REALTOR audience.

As one of the five commercial affiliates within NAR, IREM took an active role in the Legislative Meetings, with IREM representatives taking part on NAR boards and committees whose agendas have an impact on property management. Among issues discussed were assistance animals and the guidance that is anticipated from HUD, extension of the National Flood Insurance Program and long-term reforms that are being sought, sources of income protection under the Fair Housing Act, and the proposed Equality Act.

At the property management forum, which drew a standing-room crowd, the topic of harassment was the principal theme, with the focus on property management’s responsibility with respect to tenant-on-tenant harassment. One of the biggest mistakes property managers can make in such a situation is to do nothing, according to Billy Cannon II, an attorney with the D.C. law firm Offit Kurman, who was on hand to provide insights. Beyond this piece of advice, he encouraged managers who become aware of tenant-on-tenant harassment to make reasonable accommodations, keep good records, treat people fairly, get advice when needed and take harassment seriously.
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Building Managers Face the Future With Sustainability Strategies

The concept of sustainability has morphed over the years, says IREM president Don Wilkerson, CPM, in his latest column for NREI, from a relatively simple focus on the building envelope to a movement of a more global--and personal—scale, encompassing everything from energy management to wellness and fitness.

Our industry, and IREM in particular, has responded to this call. Which is good news, because, as Don points out, according to the U.S. Green Building Council (USGBC), our schools, offices, grocery stores and other multi-tenant assets are responsible for nearly 40 percent of carbon emissions today.

How have we done this? In a column that brings the true span and nature of the sustainability challenge into sharp focus, he spells out the strides made by IREM and its membership to date.

But in an interesting twist, he also quotes data revealing that most lay people don’t connect sustainability with the buildings they occupy.

Whether or not occupants understand this vital link between assets and environment, “Building managers are on the front lines of building a sustainable strategy,” he says. “Your operations are elbows deep in the performance of these assets with the knowledge and (we would hope) the commitment to increase that performance at all levels.”

To read about the strides we’ve been making in depth, please click here.
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Why Attend the IREM® 2019 Global Summit?

The 2019 IREM Global Summit is where real estate management professionals get together to learn, grow and advance their careers. If you’re a real estate management professional interested in making new business contacts, learning the latest trends in our industry and building relationships, the Global Summit is a chance for you to connect with your IREM peers, be inspired and build your industry expertise, taking it in exciting new directions.

With the advancement of the real estate management industry throughout the world in areas such as technical innovation, sustainability and legislative issues, the Global Summit is your chance to share your opinions, ideas, and learn from your peers around the globe. As IREM membership grows and new chapters open, you can meet and engage with members from Canada, Japan, Korea, China, Brazil and even from the newest chapter in South Africa. You’ll probably find you have a lot more in common with property managers from international chapters than you thought you did.

Need more reasons to attend? Find them here. Ready to register? Click here. We hope to see you there.
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Industry Headlines


Why an Elevator Maintenance Plan Is an Absolute Necessity
Buildings (05/17/19) Hussey, Cory

While the cost of a commercial elevator maintenance plan might be intimidating for some, it's actually one of the more practical investments building ownership and management can make considering how much unexpected service calls and repairs can cost. Maintenance plans are basically checkups for the systems. They are a proactive way of identifying potential issues before they become serious problems. Without such a plan, a single malfunctioning part can go unnoticed until something major happens and the building's elevator breaks down. Not inking a maintenance contract can result in high repair costs along with inconvenient downtimes and frustrated passengers. The important thing to remember is that elevators are complicated pieces of equipment that require extensive training to care for. Non-professionals should never try and service an elevator.

Even elevators with maintenance plans may need repairs from time to time because of the following common elevator issues: worn chains/cables, electronic glitches in an automated system, malfunctioning doors, and ruptures in hydraulic systems. The best way to ensure reliable operation of the equipment and a safe ride for passengers is partnering with an elevator service company for a maintenance plan and having systems checked on at least a monthly basis. Many such plans will include 24-hour emergency service and guaranteed monthly safety checks. Elevators in small buildings can have maintenance contracts that cost between $3,500 and $5,000 annually, while high-rise buildings might pay as much as $8,000 to $10,000 a year. The exact price will depend on the number of elevators and what types of systems they are.
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How Apartment Buildings Are Making It Easier to Bike to Work
Washington Business Journal (05/15/19) Mann. Clint

Bicycle lanes and bike-share options have sprung up around Washington, D.C., and its bustling suburbs. With some of the most notorious vehicular traffic congestion in the country, more people are turning to two wheels to get them to work, recreation, and elsewhere. Developers of luxury apartment buildings now consider bicycle-friendly amenities to be part of the necessary mix of options offered to residents. High-end living means high-end bike care, too, with everything from paid parking spaces and easy storage access to repair stations and pro-style shops in the amenity mix at various communities. The U.S. Census American Community Survey recently ranked the nation's capital third for the highest percentages of people who bike to work among America's largest cities. Indeed, since 2010, the percentage of D.C. residents who bike to work has almost doubled from 2.2 percent to 4 percent currently. Approximately 13,000 Washingtonian commuters get from home to work on a bike -- a number that's growing by 1,200 a year.

As a result, multifamily housing developers and investors are taking a second look at bike rooms and bike-friendly amenities as a key differentiator for their apartment communities. Nationwide, the availabilities -- from on-site drop off for repairs to exclusive community clubs -- vary by market and by geographic region. In general, a lot more than storage is being factored into the equation to draw in bicyclists. In some bike-loving markets, residents at certain apartment and condo complexes can arrive at home, turn over their bikes, and then retrieve them in mint operating condition. Some of these involve a subscription for the service. In other places, one free bike tune-up a year is included in the rent or condo fee. Finally, for do-it-yourselfers, bike repair studios have become almost as essential for upscale living as bike storage vaults. Some multifamily buildings even provide the tools.
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Walmart Unveils Plans for New 350-Acre Arkansas Campus
Fox Business (05/17/19) Ng, Shelley

Walmart took the wraps off its plans for its new corporate headquarters late last week. The yet-to-be-built, 350-acre corporate campus will be located in Bentonville, Ark., at the same site where the retail giant already operates office buildings and warehouses. Demolition, infrastructure, and utility construction is set to begin this summer. Over the next 18 to 24 months, the support and office buildings will be designed and construction will commence. Walmart's plan is to open the area in phases between 2020 and 2024, but conceded that the timing may change. Dan Barlett, executive vice president of corporate affairs, wrote an open letter: "[Associates] want a space that promotes real connections, creativity, and health. This means ample natural light, expanded food offerings, convenient parking, fitness options, and a child care facility."

The campus design will feature bicycle and walking trails, along with more than 15 acres of lakes. Walmart said building a new headquarters has been a company goal for years and hopes the complex will attract a new talent pool. "The new facilities will help accelerate change, accommodate a more digitally native workforce, and encourage more collaboration and speed," according to the retailer's website.
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Fred's Closing 104 More Stores in Summer
USA Today (05/16/19) Tyko, Kelly

Discount chain Fred's announced this past week that it is closing 104 underperforming stores as part of its ongoing effort to "rationalize its store footprint." The new round of closings comes just over a month after the Tennessee-based retailer initiated "going out of business" liquidation sales at 159 other stores. It also follows an evaluation of store performance and timing of lease expirations, according to an official company statement. The latest round of closings is expected to be completed by the end of next month, with SB360 Capital Partners managing the liquidation sales for Fred's. Arkansas, Georgia, Mississippi, and Tennessee are losing the most locations.
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Amazon Plans Two Eco-Friendly, 22-Story Towers With Parks, Day Care and Bike Path
Washington Post (05/17/19) Sullivan, Patricia

Amazon has submitted preliminary plans for the first part of its new headquarters in Arlington County, Va., announcing that it will construct a pair of 22-story office towers that meet high energy-efficient and environmental standards and include storage for 600 bicycles. Amazon Vice President John Schoettler said the company is aiming for "an urban campus that will allow our employees to think creatively, to be a part of the surrounding community, and to remain connected to the region's unique culture and environment." The 2.1-million square-foot project would house nearly 50,000 square feet of ground-floor retail space, along with a day-care center serving both employees and area residents. Also, just over an acre of open space would be built, according to preliminary plans filed with the county -- open space that would feature a dog park and a bicycle path that connects with existing bike paths.

In addition, a four-level, underground parking garage with 1,968 spaces has been proposed. Amazon also promises to provide each newly hired part-time and full-time staffer with their choice of a Metro SmartTrip card, one year's membership in a bike-share program, or a year's membership in a car-share program. Plans further include a carpool or vanpool program. The headquarters site was initially planned as a residential-retail project to be called Metropolitan Park. "Amazon's change of use and its request for more height and density than current zoning allows will require County Board approval after it works its way through several planning steps," according to the article's author.
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New Orleans Leads U.S. Cities in Falling Apartment Rents, Report Says
New Orleans Times-Picayune (05/13/19) Larino, Jennifer

Average rent in New Orleans fell last year and the city registered the biggest dip in monthly rates for one- and two-bedroom apartments among major U.S. cities, according to a new analysis by Rent.com. The online marketplace found that renters in New Orleans paid $1,418 on average for a one-bedroom apartment in December 2018. At the same time, the city saw the sharpest decrease in one-bedroom rent in the nation -- down 11.4 percent year over year. Similarly, rent for local two-bedroom units fell at a nation-leading pace. To be sure, the average rent in New Orleans was well below the priciest market, New York City, where a one-bedroom apartment goes for $4,164 on average. Los Angeles placed No. 2 at $2,728 for a one-bedroom unit.

Nevertheless, local rates remained above the U.S. average. Renters in American cities paid an average of $1,362 for a one-bedroom unit last year, a 4.3 percent increase from 2017. To be sure, local trends in apartment rates can be hard to pin down, as not all apartments appear in online listings. Furthermore, rent varies wildly by geography, which can skew the average rate. Rent.com researchers searched the website's apartment inventories for the top 100 biggest American cities to track year-over-year changes in the average rent for studio, one-bedroom and two-bedroom apartments, covering the period from December 2017 to December 2018. According to the Rent.com analysis, cities that had a steep year-over-year decrease in one-bedroom apartment rates also included Jersey City, N.J; Madison, Wis.; Corpus Christi, Texas; and Portland, Ore. Cities with the largest bump in one-bedroom rent ranged from Newark, N.J., to San Diego to Des Moines, Iowa.
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Innovation, Talent Attract CRE Capital
Commercial Property Executive (05/17/19) Murray, Barbra

JLL's recently released Innovation Geographies report shows that cities with the highest innovation capabilities and high talent concentrations account for a greater portion of real estate investment volume. According to the study, these cities have outperformed economically over the past couple of decades and have also experienced highly robust commercial real estate performance. This translates into the fastest and most vigorous office rental growth in the last 10 years. The research covers 109 cities around the globe. San Francisco, London, and San Jose top the list of JLL's Global Leaders cluster, leading the charge in both innovation and talent. San Francisco took the top spot as the most innovative city in the world and also had the second-highest talent concentration. London ranked fifth in innovation, but leads the world in talent. For its part, San Jose placed as the sixth most innovative city and has the fourth-highest concentration of talent. Boston, Paris, Seattle, Sydney, New York and Tokyo all placed high, too.

These nine metros currently account for over 73 percent of global commercial real estate investment, according to the JLL report. Researchers, though, note that leadership in both innovation and talent is not a prerequisite for outstanding real estate performance. Cities that rank high in either one of the two sectors are also witnessing positive real estate numbers. Washington, D.C., did not crack the list of the top 20 most innovative cities, for instance. But it boasts the third-highest concentration of talent in the world. Plus, it has registered a 260 percent increase in real estate investments since the global financial crisis. Finally, Germany's Stuttgart recorded the fourth-highest number of international patent applications in Europe between 2015 and 2017. In turn, the city saw real estate investment volume increase almost threefold.
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As More Millennials Rent, More Startups Want to Lend to Them
Wall Street Journal (05/13/19) Parker, Will

Startup rent lenders like Domuso, Till, and Uplift increasingly are courting Millennials, who are resorting to credit to cope with climbing rents and stagnant wages. "As rents have gone up, we get more and more e-mails and phone calls where people would ask us if they could pay their rent over time," states StayTony founder Tony Diamond, whose business targets upscale apartments in such markets as Atlanta and Los Angeles. His and similar businesses offer much lower terms than payday lenders, whose annual interest rates run up to 700 percent in some states. Meanwhile, 2017 data show that 3 percent of 100,000 renters polled paid their rent with credit cards and that up to 16 percent would do so if their building owners accepted such forms of payment.
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Maximizing Leads and Conversions: Getting the Right Blend
Multifamily Executive (05/19/19)

The convergence of apartment leasing, living, and marketing with data analytics is changing the way multifamily housing is being marketed. So much so that digital marketing is on the verge of a new frontier where apartment owners, operators, and managers can dial into precisely what kind of message they want to send. "In the past, you could pick up a magazine, flip through the pages, dog-ear the pages and hope the map was right and drive to the property to see what you could find," said RealPage Inc. Senior Vice President of Business Development Brock MacLean, But properties that invested thousands of dollars in apartment rental magazines or in the new age of online marketing were not always able to match a certain type of renter to a certain type of property or available apartment. The message now can get much more precise for an apartment community that may be well occupied in one- and two-bedroom apartments, for instance, but has a surplus of vacant three-bedroom units.

Identifying trends through lease transaction data combined with basic marketing techniques has opened the door for owners and operators to get better value for their efforts. Without sufficient data, properties can't adequately market to the types of prospective residents who can fill immediate vacancies. One tool is RealPage Business Intelligence dashboards, which help property managers track metrics from lead generation fundamentals to critical measurements of days on market and lease rates on specific floor plans or unit types. On an even higher level, leasing and screening data can provide migration metrics like where apartment renters are moving to and from. This offers apartment managers confirmation of where and when they should spend their multifamily marketing dollars.
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Big Box Leases in Chicago Totaled Nearly 5 Million SF in First Quarter
GlobeSt.com (05/16/19) Jordan, John

In the greater Chicago market, new leases and lease expansion deals in the big box retail sector totaled nearly 4.9 million square feet in the first three months of this year, a 31 percent increase over the 3.7 million square feet leased a year prior. The quarterly vacancy rate was the lowest since 2017's April-through-June swing. Colliers International's Chicago office reports that the vacancy rate for big box buildings of more than 200,000 square feet fell by 54 basis points to 8.53 percent as of March 31. The 23 lease deals that netted almost 5 million square feet of activity resulted in the net absorption of 3.8 million square feet in a market that is comprised of 585 facilities totaling more than 257 million square feet.

Colliers Chicago vice president Craig Hurvitz, the report's author, notes that seven big box development projects totaling 2.7 million square feet were delivered from January through March. Meanwhile, 28 projects totaling 13.5 million square feet were under construction by the end of the quarter. All are expected to be delivered by the end of the year. The first quarter vacancy rate for buildings in the 200,000-square-foot to 499,000-square-foot range decreased by a half-dozen basis points to 9.82 percent. Finally, the rate for buildings greater than 750,000 square feet plunged by 42 basis points to 7.16 percent.
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This Renovated Cleveland Office Building Represents a Big Leap in Energy Efficiency
Energy News Network (05/09/19) Kowalski, Kathiann M.

The Cleveland metro area's first project financed via Commercial Property Assessed Clean Energy (C-PACE) is expected to be completed next month. In addition to the C-PACE financing, the energy efficiency upgrades at the four-story Shaker West Professional Building are occurring as a result of green leasing provisions. The combination of green leasing with C-PACE lets small business tenants reap benefits from energy efficiency through lower utility bills. Meanwhile, the repayment arrangement helps the building's owner -- in this case, Man Holdings -- recoup its costs for the upgrades.

Washington, D.C.-based Institute for Market Transformation sought to address the issue of split incentive by developing model lease documents and other tools to encourage energy efficiency in buildings. To get businesses to adopt them, it teamed up with business organizations like the Greater Cleveland Partnership's Council of Smaller Enterprises (COSE). Nicole Stika, vice president for energy services at COSE, says energy audits play a key role in providing businesses with "firsthand knowledge about where their buildings are using energy and where they should be dedicating their resources." An energy audit backed by FirstEnergy's Ohio utilities identified key projects in the Shaker West building. COSE also has a network of energy efficiency and renewable contractors, some of which provide discounts to its members. Those discounts and energy efficiency rebates provided roughly $16,000 in benefits for Man Holdings.
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As Rents Soar, Middle-Income Central Floridians Fret
Orlando Sentinel (05/06/19) Arnold, Kyle

According to new data from Apartment List's Rentonomics, Central Florida rental rates have grown at about twice the national average during the past five years. It cost $1,280 to rent a two-bedroom apartment in Orlando during April, up from $1,003 in January 2014. Apartment List housing economist Chris Salviati noted that at today's prices, a two-bedroom apartment is considered unaffordable to about 55 percent of the region's households that would have to spend more than 30 percent of their income on rent.

About 40 percent of homes in Central Florida are rentals versus the national average of 36 percent. In the suburbs, monthly rents are even higher, averaging $1,600 in Lake Mary, $1,540 in Oviedo, and $1,460 in Ocoee/Winter Garden for a two-bedroom apartment. While apartment builders are trying to hold down prices by building more rental units, they are finding it difficult to keep pace with the region's population growth. Apartment Association of Greater Orlando CEO Chip Tatum laments, "We just can't build quick enough to keep up with demand." With occupancy rates for apartments in metro Orlando at 94 percent, rents likely will continue to rise.
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