Real Estate Management News - 09/13/2017

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September 13, 2017
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IREM® HEADLINES
2017 REME Awards Finalists Announced
Is it Ethical? (September is Ethics Awareness Month)
Managing Insurance Requirements in Owner/Contractor Relationships
IREM Maintains Presence in Brazil
Federally Assisted Housing Sees Rise in NOI

INDUSTRY HEADLINES
Natural Materials Help Make Office Work More Appealing
Amazon Opens Bidding to Cities for $5 Billion 'HQ2', a Second Headquarters
5 Long-Time Resident Retention Tips
How a Property Manager Used AquaDam to Save a Flooded Houston Apartment Building After Harvey
Hurricane Harvey's Multifamily Impact
Southlake Mall's Unsupervised Teen Ban 'Just Being Proactive'
RealtyMogul.com Launches Real Estate Investment Trust to Invest in Multifamily Apartment Buildings
CBRE’s Recipe for Shopping Mall Success: More Restaurants, Less Clothing Stores
How Security Systems Can Fuel Smart Building Savings, Streamline Functionality
Jim Clark Launches New Building Management App
Sooner or Later: Weighing the Feasibility of Proactive Maintenance
Aging Boomers Could Drive Demand For Medical Office Buildings Through 2055


 
 

IREM Headlines


2017 REME Awards Finalists Announced

The Institute of Real Estate Management (IREM®) is excited to announce the finalists for the 2017 REME Awards recognizing Real Estate Management Excellence! This year’s finalists run the gamut from regional to international in scope, covering both residential and commercial sectors, and they come from the US to Canada to China.

The REME Awards recognize and celebrate excellence in real estate management by highlighting real estate management companies and individual practitioners for innovative, leading-edge, business practices and initiatives, as well as sharing successful initiatives and fostering further innovation within the real estate management industry.

“Reviewing the many, varied and outstanding submissions for the REME Awards from across the country, and beyond, was a most interesting and exciting task for the judges. Passion and excellence is truly alive and well in our industry! We should be proud of all of those who submitted and their fine accomplishments,” said Saadat Keshavjee, CPM, CMOC, REME Awards Advisory Board Chair, with Amhurst Property Management, in Calgary, Canada. “A special thanks to all participants for taking the time to submit and congratulations to the finalists.”

“IREM is proud that the REME Awards provide the opportunity to showcase both practitioners and companies that are doing great things for our industry. To be able to highlight their innovation, creativity and excellence is an honor,” said Mike Lanning, CPM, IREM President, with Cushman & Wakefield, AMO, Kansas City, MO. “We hope that the finalists and winners can inspire others within the industry to continue to push themselves to develop new workplace initiatives and industry leading business practices.”

Read about all the finalists. Finalists will be recognized and winners announced at the Inaugural Gala Dinner and REME Awards event in Chicago, IL on Friday, October 13th, as part of the IREM Global Summit.
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Is it Ethical? (September is Ethics Awareness Month)

Professional ethics provides a guide for what we say and do. Everyone has a set of ethics and values that have been developed over a lifetime. Most people are generally ethical, and we take the time to apply ethics and values in our personal, as well as our professional lives. However, due to outside pressures and time constraints, we may not always apply our ethical standards to each decision we make.

Real estate managers face ethical challenges on a daily basis. A manager’s response to these challenges affects more than just personal reputation—it can determine success in business. The lack of professional ethics can quickly derail a company and a career. And, most employees will find it difficult to work with an unethical leader.

Because of its importance, members of IREM base their membership on adherence to the IREM Code of Professional Ethics. In fact, IREM was founded in 1933 with Ethics at its cornerstone—the first Code of Ethics was published in 1935.

Ethical issues often arise in everyday life and can sometimes be confusing. The “Five-Question Method” is a valuable framework for clarifying and examining ethical decisions.

Top Five Questions to Ask When Considering if Something is Ethical:
1. Is it illegal?
2. Who is affected by your decision? And how?
3. What are the consequences of the decision?
4. How do you feel about the situation?
5. Have you examined all the alternatives?

Perhaps an even simpler question could guide you: “Would you like to see your action talked about on the first page of your local newspaper?” If the answer is “no”, you might want to rethink about what you are doing.

For more guidance check out the chapter on Professional Ethics in IREM’s Leadership Handbook for Real Estate Professionals.
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Managing Insurance Requirements in Owner/Contractor Relationships

WEBINAR: Wednesday, September 20, 2017 – 3:00pm ET; 2:00pm CT; 1:00pm MT; 12:00pm PT

Insurance requirements are always an area of concern for both property owners and property managers. Understanding what coverage is needed to protect the asset, the owner, the property management company, and any contracted services can be daunting. Join Mitch Davis, insurance consultant to many property management companies, as he walks us through the ins and outs of managing insurance requirements, including what types are needed and why.

Mitch Davis is the Managing Member and Senior Consultant of the MB Davis Group, and is currently celebrating nearly 30 years of experience as a senior professional in the insurance industry. Mr. Davis currently serves as lead consultant for over forty significant clients in the real estate, financial services, manufacturing, internet security, chemicals, and retail industries, managing insurance programs that protect billions of dollars in assets.

Register Now!
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IREM Maintains Presence in Brazil

Increased competition. Continued institutionalization of the investment real estate market. The war on talent. Big data, data access, and mobile technology. These were just a few of the topics addressed by IREM leaders in Brazil earlier this month during a panel held at SECOVI-SP’s Real Estate Week in Sao Paulo. Taking part in the program were IREM President Michael T Lanning, CPM, who is also Senior Vice President and Market Leader for the Cushman & Wakefield, AMO, office in Kansas City, MO; IREM President-Elect J. Benjamin McGrew, CPM, CCIM, President of FiduciaryWest based in Reno, NV; and IREM’s Chief Strategy Officer Nancye Kirk. Also sharing the podium was Fernanda Lisboa, CPM, president of IREM’s Sao Paulo Chapter.

IREM leaders also were in Rio de Janeiro for a meeting with leaders of IREM’s Rio de Janeiro Chapter and SECOVI-RIO, with which IREM partners to deliver its ARM education program.

IREM has had a presence in Brazil, the world’s fifth largest country with over 200 million people, for more than 15 years. There currently are 78 IREM members throughout the country.

For more about IREM’s international program, go to https://www.irem.org/about-irem/international-programs.
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Federally Assisted Housing Sees Rise in NOI

The need for affordable housing has never been greater. The Joint Center for Housing Studies of Harvard University reported that in 2014 over 11 million households paid more than half their incomes for housing – a record high. Over 21 million households pay more than 30 percent of their income on housing. There is a critical shortage of affordable housing across the nation.

This shortage has led to a rise in NOI for all types of federally assisted housing. According to IREM’s 2017 Income/Expense Analysis Reports, elevator buildings reported median net operating income ranging from $6.12 to $7.40 per square foot; low-rise buildings ranging from $2.85 to $5.94 per square foot; and garden buildings ranging from $4.34 to $9.80 per square foot.

NOI Per Square Foot by Federal Subsidy and Property Type
Section 202: $7.29 elevator; $3.64 low-rise; $6.63 garden
Section 221(d)3: $7.40 elevator; N/A low-rise; $9.80 garden
Section 236: $6.12 elevator; $2.85 low-rise; $5.47 garden
Section 8 Elderly/Handicap: $6.46 elevator; $5.94 low-rise; $7.42 garden
Section 8 Family: $7.38 elevator; $4.80 low-rise; $4.34 garden

The performance of federally assisted housing communities varies significantly by geographic location, federal subsidy type and building type. Because of these differences, IREM’s 2017 Income/Expense Analysis Reports is a critical tool for analyzing an individual property performance. If you don’t need information broken down by region or metro area, you can find the national trends for conventional apartments, federally assisted apartments, office buildings, shopping centers, and condominiums/coops/PUDs in IREM’s Real Estate Income/Expense Analysis National Summary .
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Industry Headlines


Natural Materials Help Make Office Work More Appealing
Rochester Business Journal (09/07/17) Costanza, Mike

Architects report that more of their business clients are looking to incorporate natural elements and materials into their workplaces. The thinking is that creating a connection between the outside and the inside can boost employee productivity, foster greater workplace satisfaction, and reduce operating costs. Standard office designs once made relatively little use of wood, plants, sunlight or other parts of the natural world. Today's business owners and their employees tend to be less accepting of that style of workplace. People work a lot of hours, and most would like to have some balance there with their work environment. Employers might seek to achieve that balance by a variety of means. Among the most popular is daylighting, or natural lighting, in office buildings.

Architectural features can also shed more natural light on office spaces. Diffusing skylights, for instance, are translucent and admit daylight without causing the heat losses and gains that clear skylights bring. Businesses can also spread the sunshine by placing more or bigger windows in their buildings. Finally, more than ever, architectual firms report having clients interested in adaptive reuse and renovation of existing spaces that truly take advantage of materials such as brick walls, exposed steel, concrete floors just to name a few.
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Amazon Opens Bidding to Cities for $5 Billion 'HQ2', a Second Headquarters
Reuters (09/07/17) Bose, Nandita; Randall, David

Amazon.com Inc. late last week announced plans to build a $5 billion second headquarters in North America. The announcement kicks off a competition between cities and states to offer incentives that could bring as many as 50,000 new jobs. The world's biggest e-commerce company intends to create "HQ2," which would be the "full equal" of its Seattle main office. The company is looking for a metropolitan area of more than one million people with an international airport and good mass transit. Cities and states immediately began saying they would bid, including Dallas, Miami, St. Louis, and Kentucky. Companies with two or more headquarters are rare, and distance could challenge the management abilities of Amazon's top leaders. It would also make it easier for the conglomerate to break up down the line.
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5 Long-Time Resident Retention Tips
Property Management Insider (09/07/17) Blackwell, Tim

The article details five simple incentives that The Apartment Association of Greater Dallas' Anne Sadovsky believes will encourage residents to continue living at the property and improve resident retention rates. Number one, make reserved parking a perk for loyal residents. Parking is an especially big issue in huge urban locales, and offering a resident his/her reserved space can prove to be very attractive. Residents may even be willing to pay additional for the parking. Two, "bring back that new apartment feeling." Apartments can be turned back into "brand new" units by simply painting and cleaning up. Three, create a sense of ownership. If the apartment property makes an upgrade as a reward for long-term residency and renewal, the renter gets the benefit without dipping into their wallet. The improvement can be as simple as putting in new nice lighting fixtures or adding a ceiling fan in the master bedroom.

Four, "become a part of the routine." Have the main office offer resdients premium coffee in the morning so they don't have to brew themselves or brave the long lines at their local Starbucks. "The amenity will not only save your customers money and commute time but let's them know they are valued," Sadovsky reasons. Finally, be sure to establish a sense of community. Apartment managers can plan simple events or social gatherings, usually at a nominal expense, so that residents gather and get to know each other. The idea is people will be less likely to move if they have strong bonds with neighbors. Sadovsky concluded, "While this is a business, it's also a lifestyle for our residents. It is their home so encourage them to stay."
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How a Property Manager Used AquaDam to Save a Flooded Houston Apartment Building After Harvey
Houston Business Journal (09/08/17) Takahashi, Paul

Debbie Sulzer knew she had to do something to save her flooded Houston apartment building following Hurricane Harvey. The Texas regional vice president of California-based Francis Property Management was overseeing leasing and operations of 7 Seventy, a Class A apartment community in Houston's Energy Corridor, when Harvey hit. Although 7 Seventy survived the hurricane's torrential downpours, the dam release from the nearby Addicks and Barker reservoirs flushed out a torrent of water that flooded the building's ground floor on Sept. 4. After witnessing AquaDams deployed along Interstate 10, one of Sulzer's project coordinators recommended that one be used at the 7 Seventy apartment community. Sulzer conferred with John Francis, the owner of Francis Property Management, who gave the green light.

This marked the first time that AquaDam has been applied to a multifamily housing property. Francis Property Management bought a 1,300-linear-foot-long AquaDam, had it shipped in from Mississippi, and deployed the 3.5-foot-tall flood barrier around the southwest corner of 7 Seventy on Sept. 6. The property manager ran four gas-powered water pumps round the clock. After almost two full days, the floodwater has been completely pumped out of the apartment complex's first floor. "It was a big risk, but it worked out perfectly," Sulzer stated. "AquaDam saved the asset, without a doubt." She noted that the AquaDam, installation, and water pumps cost Francis Property Management around $160,000. But it enabled property management to begin the mitigation process sooner and start getting power back to the property.
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Hurricane Harvey's Multifamily Impact
Multi-Housing News (09/08/17) Rosario, IvyLee

The devastation of Hurricane Harvey has destroyed approximately 15 percent of the multifamily housing stock in the affected region of Texas. Apartment owners and operators are working on assessing damage, beginning reconstruction, and getting on-site operations back in working order as soon as possible. When dealing with a natural disaster of any kind, the first thing on any owner's mind should be the safety of residents. Michael Knight, vice president of operations for Better World Properties LLC, says owners and operators need to act quickly in order to keep their properties running. He adds, "The longer you wait, the more your residents will move onto other communities. You're going to stop making money and you will get left behind." Although such situations need to be handled quickly, they shouldn't be handled sloppily. According to Knight, apartment owners should never take the easy way out and pretend to fix problems, such as putting up sheetrock on walls before they are completely dry or not fixing rental units fully before residents come back. "You can't just mop up the water and call it done," he illustrates.

Jeff Adler, vice president of Yardi Matrix, notes that the real struggle will mainly be at the lower end of the apartment sector. "Most of the people impacted are those in the low economic scale, leaving them to double up with other families because there are no other housing options," he laments. With regards to rebuilding, there are several key elements that must come into play. Federal recovery grants typically require public participation in the planning process, environmental and historic preservation review, and consideration of future resilience and sustainability. Rebuilding also requires extensive coordination across multiple levels of government and often a long list of private stakeholders. To this end, several multifamily companies are coming together to provide relief. The Lennar Corp. is one example. Along with its subsidiaries, Lennar pledged $1 million to the United Way of Greater Houston Flood Relief Fund.
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Southlake Mall's Unsupervised Teen Ban 'Just Being Proactive'
NWITimes.com (09/08/17) Pete, Joseph S.

Southlake Mall in Hobart, Ind., is no longer permitting teenagers under 17 without adult supervision on Friday and Saturday evenings. Any teens 17 or younger must be accompanied by an adult at least 21 years old from 4 to 9 p.m. on those two nights. One adult can accompany up to a half-dozen teens. Kristi Jackson, Southlake Mall's marketing director, comments, "We're pleased we have this policy in place so the community can enjoy a family-friendly, pleasant shopping experience at Southlake Mall." She added that Southlake's new policy was not specifically prompted by any recent occurrences. Instead, mall management is just being "proactive." It should be noted that the policy does not affect the AMC Showplace Hobart 12 cinema or teenagers who work at the mall, who will have to show a valid ID and proof of employment during policy hours.

Mall security will be posted at doors at entrances beginning at 4 p.m. They will pass out copies of the policy and ask shoppers to show proof of ID, which can include everything from driver's licenses and military ID to a passport or visa. Signs will also be posted detailing the new policy. "Southlake's management team reviewed and incorporated best practices from similar mall programs around the country," an official mall statement read. Indeed, more than 100 malls across the U.S. have implemented restrictions on teens, typically on Friday and Saturday nights, reports the International Council of Shopping Centers. To make adult shoppers feel more comfortable, shopping centers including the Mall of America and the St. Louis Outlet Mall have adopted curfews or supervision requirements after incidents of unruly behavior.
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RealtyMogul.com Launches Real Estate Investment Trust to Invest in Multifamily Apartment Buildings
MultifamilyBiz.com (09/08/2017)

RealtyMogul.com, a leading online marketplace for commercial property investing, announced the launch of the company’s second REIT. Called MogulREIT II, it aims to invest in apartment communities nationwide that have demonstrated consistently high occupancy and income levels across market cycles. In addition, MogulREIT II plans to invest in apartment properties that offer value add opportunities with appropriate risk-adjusted returns and potential for appreciation objectives. The U.S. Census Bureau's latest Housing and Vacancy Homeownership Report shows the U.S. apartment sector experienced a strong recovery, as evidenced by the steady drop in vacancies and an average annual effective rent growth of 3.9 percent per year between 2010 and 2015. RealtyMogul CEO Jilliene Helman, remarks, "The massive Millennial generation is the largest share of the American workforce and highly values rentals, which satisfy their desire to maintain a flexible lifestyle. We're even seeing an emerging demand among baby boomers, who are moving back into city centers from their home in the suburbs."

The plan is for MogulREIT II to only consist of properties that satisfy RealtyMogul's rigorous zero-based underwriting process, which analyzes each potential deal via a combination of proprietary in-house analytics and underwriting. RealtyMogul also spends more than $1 million a year for the use of third-party data and technology to vet each deal. The process is so intensive that fewer than 1 percent of the requests RealtyMogul reviews pass its high underwriting standards.
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CBRE’s Recipe for Shopping Mall Success: More Restaurants, Less Clothing Stores
REJournals.com (09/08/17) Rafter, Dan

More owners are boosting the fortunes of their struggling indoor shopping malls by reworking the mix of merchandise they offer, moving away from traditional apparel stores and adding more restaurants, entertainment options, and even healthcare under one roof. The problem is that this bold fix for malls is one that is easier said than done. The latest CBRE research showed that there are still two main categories of retailers that occupy most of the space in the naton's indoor malls: department stores, which occupy 48.7 percent of mall space; and apparel, accessories, and shoes, which takes up 29.4 percent. However, bof those retail categories saw slow retail-sales growth from 2011 through last year. Meanwhile, those retail categories that are seeing stronger growth still account for a relatively small percentage of indoor mall space. CBRE data shows that eateries only occupy 4.6 percent of overall mall space, sporting goods retailers occupy just 3.1 percent, home furnishings 1.6 percent, and health and personal care stores 1.2 percent.

This mix is no longer working for many U.S. indoor malls. "The American mall itself isn't anywhere close to dead; It's the old mall model that is dying," remarks Melina Cordero, CBRE Americas Head of Retail Research. "Converting malls' tenant bases to include more of the categories that in-person shoppers now favor won't be an easy or quick fix. But it is a necessary evolution for the mall industry to maintain its place as a cornerstone of American retail." One challenge is most retailers lease space in malls for a decade or more at a time. The good news for mall owners, though, is that struggling retailers are becoming more amenable to efforts to reposition the malls in which they are based. CBRE researchers conclude by pointing to the recent successes of super-regional malls as evidence that indoor malls can thrive by changing their tenant mix. Such malls specialize in offering diverse retail options, relying heavily on restaurants, movie theaters, bowling alleys, and adult-targeted arcades.
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How Security Systems Can Fuel Smart Building Savings, Streamline Functionality
Security Sales & Integration (09/08/17) Focke, Rick

Building automation, security, and access control systems are increasingly coming together, providing both building managers and security integrators opportunities to work together on cost-, time-, and problem-saving solutions. Whether integrators have just begun adding building automation to their services or are fully embracing the convergence of security and building automation systems, the myriad data these systems put forth make it possible to create both a safe building and a smarter one. For example, by knowing the occupancy of a particular building or sector within a building, captured through entry and/or exit readers, it becomes possible to implement everything from proper heating and cooling to lighting and fresh air ventilation controls based on the number and location of individuals. With heating and cooling systems, the best savings will come in the least-used areas. Meanwhile, access control systems can be programmed to control lighting circuits based on occupancy. Once a card is presented to the reader, the system can be programmed to then begin switching on the appropriate lights based on where that individual's office or assigned workspace is located. Unlike motion sensors, there is no minimum "on" times with a programmed system. Once the building occupant logs out, the lights go off.

Another component of the energy-saving capabilities tied to access control is ventilation. The amount of fresh air in a building is governed largely by building codes. But it is usually expressed in the amount of fresh air per minute per person. Consequently, if the number of workers in an area can be measured via the access control system, then the amount of fresh air can be adjusted, saving the expense of conditioning that outside air. Deploying access control data can also serve as a planning tool for future building projects. Having the details on occupancy -- i.e., who is onsite, what hours is the building most used, etc. -- can become a critical tool for bottom-line decisions about property expenses. Such data information can also be used in day-to-day planning, such as knowing how many people are likely to be at work so security details, parking attendants and other building support staff can be scheduled accordingly.
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Jim Clark Launches New Building Management App
Multifamily Executive (09/06/17)

Jim Clark, founder of Netscape and WebMD, has launched a start-up for building management. Dubbed CommandScape, the app aims to heighten building security and improve control systems. It enables building managers to keep an eye on assets and manage their property from anywhere at any time. The app works with both commercial and residential properties. CommandScape, which was created with cybersecurity in mind, uses encryption to allow consumers to connect to the system instantly in addition to preventing unauthorized access. With this technology, users can remotely allow or deny access to specific rooms and areas of a building. The program made its debut on Aug. 22. It can control lighting and shade, as well as conduct video surveillance and incorporate motion detection. In the months to come, it will feature building management controls, including climate control, energy monitoring, and access control.
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Sooner or Later: Weighing the Feasibility of Proactive Maintenance
Buildings (09/01/17) Feit, Justin

Maintaining the equipment in your building's systems is a critical and typically routine practice for facility managers. The article's author writes that strategic maintenance tactics could eliminate some of the costs and headaches associated with reactive maintenance. The question then becomes: "Is a proactive maintenance plan right for the equipment in your facility?" Proactive maintenance is a highly involved process because it focuses on anticipating issues that might arise, as well as considering root causes of equipment failure and identifying when a problem might occur. Consequently, placing systems in a proactive maintenance plan can involve scheduled checks and maintenance over regular intervals and continuous condition monitoring based on the needs of each piece of equipment. Ken Stack, vice president of Solutions & Transitions at C&W Services, remarks, "We would like to perform proactive maintenance on anything that isn't bolted down, anything that moves or anything we can tag, but most of the time we don't have the staff or the budget to perform that level of proactive maintenance. That level also probably isn't the most effective from an outcome and financial basis."

The decision-making process behind proactive maintenance should be based on assessing the financial ramifications of a particular system or piece of equipment not working properly. Results are truly dependent on the specific attributes of individual buildings. "What may work well in one building might cause unnecessary costs in another," the article's author writes. Meanwhile, the threat of downtime is one of the most critical factors that goes into considering a proactive maintenance plan. By developing and adhering to a plan, facility managers can expect fewer breakdowns with better energy efficiency and longer life expectancy of equipment. The author concludes the article by detailing the four modes of maintenance: one, a reactive maintenance plan, which essentially takes care of issues as they arise with a "run-to-failure" approach; two, a preventive maintenance plan, which works specifically with time-based intervals determining maintenance and service to equipment; three, predictive maintenance plan, which relies on determining when equipment will wear out instead of using time intervals; and, finally, a proactive maintenance plan that combines components of the previous approaches.
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Aging Boomers Could Drive Demand For Medical Office Buildings Through 2055
Bisnow (09/05/17) O'Keefe, Lara

As Baby Boomers continue to age, demand for medical office space is growing with them. The U.S. Census Bureau projects that the number of Americans age 65 and up will double to 92 million by 2055. The segment will comprise approximately 23 percent of the nation's population by that time. The medical office building sector has seen an increase in investor interest in 2017 partly because the number of Boomers who require medical services. CBRE data shows that U.S. medical office building vacancy rates, which have been decreasing for the past seven years, are now sitting at 8 percent thanks to strong first-quarter absorption that continued to outpace completions. CBRE Healthcare Capital Markets Executive Vice President Lee Asher concludes, "Because there is demand for healthcare everywhere, investors are generally more willing to look outside the primary markets compared with traditional office investment, and this is apparent in pricing metrics." The markets boasting the lowest first-quarter vacancy rates were Nashville (2.8 percent), New York (3.2 percent), and the San Francisco Bay Area (4.2 percent).
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