Real Estate Management News - 01/09/2019

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January 9, 2019
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IREM® HEADLINES
2019: A Year to Build on Success
New Publication Explores Changing Dynamic of Retail Real Estate
NFIP Extended Through May 31

INDUSTRY HEADLINES
10 Predictions for the Retail Real Estate Sector in 2019
Connecticut Efficiency Program Turns Focus to Smaller Commercial Buildings
5 Things to Consider When Turning Your Rooftop into Usable Space
From Bikes to Trains to Videogames to Vacant Properties: Toys ‘R’ Us Stores Are Selling Fast
Don't Neglect These Liability Red Flags at Your Properties
Hackers Use a Fake Wax Hand to Fool Vein Authentication Security
How to Reposition Your Office Building for a Higher Return
Orlando-Area Rents Rising Faster Than Any Other Big City
Department Store of the Future: Selling Art Off the Walls and Car Insurance at Checkout
Gaining Real-Time Building Performance Insights: Q&A with WSP
Log Cabins? No, These Wooden Buildings Are High-Rises
5 Unconventional Ways to Use Deserted Malls


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IREM Headlines


2019: A Year to Build on Success

IREM president Don Wilkerson is a glass-half-full kind of guy. He says as much in his latest column for NREI.

Despite some news reports predicting a soft 2019, Wilkerson remains optimistic. Much of that comes from the agenda IREM has set for itself as we swing into the new year.

“We’re building on programs designed to deliver on the promise made when we rebranded just a year ago,” he writes, including the growth of international membership and the continued outreach to younger professionals.

“We are at a critical juncture, not only in property management, but in the real estate industry as a whole,” Wilkerson says. “Such outreach is critical to our survival, not only in terms of age, but equally in terms of the changing demographic of the communities we serve. Stagnation is not an option.”

To read in full his response to the predictors of gloom and why the work ahead fuels his optimism, click here.
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New Publication Explores Changing Dynamic of Retail Real Estate

Shopping centers and malls are dynamic, ever-changing retail properties that have experienced, and continue to experience, change at a faster pace than perhaps any other property type. Shopping essentially has always been considered a form of entertainment—an experience that stimulates the senses and often leads to a purchase. However, online retailing and same-day delivery services have entirely revolutionized the shopping experience. This is seen in a greater shift toward digital marketing efforts on behalf of retailers, shopping centers and malls. And to keep up with the pace of online retailing, more stores are creating easier and faster check-out experiences to accommodate these changing consumer needs.

This shift in the retail world is one of the topics explored in the newly released second edition of Shopping Center Management and Leasing, a comprehensive guide for managing, marketing and leasing all types of retail properties—from street retail to multi-anchored strip shopping centers to super-regional malls. Written by co-authors Alan Alexander and Richard Muhlebach, CPM, the book examines how shopping centers and malls have evolved over time and how this evolution has changed the many roles and responsibilities of the shopping center manager along with the leadership qualities required to carry out the daily duties of the job.

Organized around five themes, the book opens with an introduction to the various types of retail properties, along with the industry’s response to the increase of online retailers, new retailer technologies, and the outlook to future retail uses. It then examines: shopping center operations, the heart of the management process; unique marketing standards and best practices, including digital marketing and social media strategies; core leasing duties, including negotiation of lease terms; and the development and renovation process from beginning to end.

This new edition of Shopping Center Management and Leasing is available from IREM and can be purchased online at the IREM Store.
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NFIP Extended Through May 31

On December 21, 2018, President Trump signed legislation specifically reauthorizing the National Flood Insurance Program (NFIP) through May 31 of this year.

Although this was good news, it was short-lived, as the Federal Emergency Management Agency (FEMA) declared a few days later that it would not be able to sell or renew flood insurance policies during the partial government shutdown. Insurers could, however, still pay claims on existing policies.

In making this decision, FEMA cited the Antideficiency Act, which generally prohibits federal spending in advance of appropriations, except in cases of "emergencies involving … protection of property." Nevertheless, the ruling was unexpected because in past government shutdowns, FEMA continued to operate the NFIP as authorized.

When FEMA made the announcement, it requested that the National Association of REALTORS® (NAR) provide property sales data to justify an exception to the Act and allow the program to resume selling flood insurance policies. NAR responded by handing over statistics confirming that 40,000 home sales are at stake each month when NFIP cannot write policies.

Thanks to the information NAR supplied, the agency’s position on the issue shifted, and on December 28, 2018, FEMA rescinded its decision and again allowed the sale, renewal and monetary endorsements for flood insurance policies. The guidance was retroactive to December 21, 2018, so the program could continue without interruption.

If you or one of your colleagues has a transaction in progress that requires the purchase of flood insurance, please email IREM's Government Affairs Department, so staff can compile and share this information with FEMA and Congress.
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Industry Headlines


10 Predictions for the Retail Real Estate Sector in 2019
National Real Estate Investor (01/04/19) Wolf, Liz

Now is the time to look at expectations for the retail property sector in the new year, and National Real Estate Investor columnist Liz Wolf asked several experts for their outlook on what 2019 could bring. Several agree that physical stores will come "out of the shadows." Among them is Gerald S. Divaris, chairman and CEO of Divaris Real Estate Inc. He remarks, "The truth of the matter is, retail is a vehicle of conveying manufactured products that the consumers want through various channels of distribution." Prediction two, the worst is over for bankruptcies in the retail sector. That's because many of the surviving chains and brands have learned to adapt to a changing landscape in smart ways. That said, changing consumer preferences will continue to be impactful in 2019. Consumers are buying more apparel online. They're also shifting from spending on clothes to entertainment, restaurants, travel, and beauty. Steve Jellinek, vice president at Morningstar Credit Ratings, comments, "These shifting consumer preferences strain mall operators as they face high re-tenanting costs and difficulty finding replacement tenants, particularly in weaker markets."

Another prediction for the new year? Online retailers will almost certainly beef up their real estate portfolios. Meanwhile, with the departure of Toys "R" Us, the toy market will be reinvented. Such retailers as Amazon, Target, and Walmart all see opportunity and are all competing for market share, many with toy stores-within-stores concepts. Another prediction that will likely come true is that retailers will continue shrinking store footprints. Even supermarkets will start to shrink, especially those that are now using delivery as a means of moving bulkier and less glamorous products like pet food and sugar. Other predictions: big-box vacancies will offer opportunities, structural changes could pose challenges, and omni-channel strategies will continue.
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Connecticut Efficiency Program Turns Focus to Smaller Commercial Buildings
Energy News Network (12/18/18) Dalton, Meg

Stamford 2030 District is a nearly five-year-old commercial building efficiency program that seeks to reduce energy use, water consumption, and transportation emissions in the city of Stamford, Conn., 50 percent by 2030. The city is one of 20 districts across the United States and Canada that have joined the 2030 District movement developed by the nonprofit Architecture 2030. The Stamford 2030 District provides local building owners, business leaders, and community partners with free benchmarking services and other resources that allow them to record energy and water use. That data is then shared with the district, which links members with potential service providers for improvements, such as replacing boilers or upgrading an HVAC system.

The district also arranges tours of members' properties to share best practices. Its most recent annual report, from 2016, shows the district overall performing 7 percent better than the baseline, with its member buildings performing 21 percent better. Emily Gordon, the district's program manager, says Stamford 2030 District is today focusing on small-to-medium buildings in the range. She observes that such owners often require more information about opportunities, adding that a "lack of staff and resources is a continuous challenge." The program currently covers more than 12 million square feet and continues to expand.
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5 Things to Consider When Turning Your Rooftop into Usable Space
Buildings (01/03/19) Kloepple, Sarah

Retrofitting an existing rooftop into things like a garden or event space can appear daunting. But most building owners, roofing professionals, and architects concur: When done properly, a usable rooftop is worth the investment. Usable rooftops can attract occupants and potential employees to a building. This is an added bonus for tenants who are trying to draw top talent in a tight jobs market. Today's occupants also crave amenities that improve well-being. In addition, rooftop spaces can contribute to a building's sustainability. One thing to consider is whether retrofitting your roof for solar panels is the correct move. Green rooftops can also be beneficial for lessening heat exposure and improving water management.

The article's author details five things to consider when transforming a rooftop into usable space. The first is the quality of views. Sure, it's an obvious question to ask, but it's highly important for investing in a rooftop space. "You spend all this money, and you go up on the roof – great. But what are you looking at? The side of another building?" remarks Gerry Tierney, associate principal at architecture and design firm Perkins+Will's San Francisco office. Two, structural load capacity. Retrofitting a rooftop space can add a lot of extra weight, so be mindful of structural load and building code requirements. Three, be aware that any HVAC or other mechanical equipment positioned on your rooftop must be accommodated. Four, a retrofitted rooftop space should be accessible and ADA-compliant. Finally, know that waterproofing is the most important consideration for any type of rooftop system.
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From Bikes to Trains to Videogames to Vacant Properties: Toys ‘R’ Us Stores Are Selling Fast
Wall Street Journal (12/25/18) Fung, Esther

Toys "R" Us has closed around 800 stores this year, and many of these shuttered buildings have been hot commodities on the open market. Following a failed restructuring, the toy retailer moved to liquidate all of its U.S. holdings near the end of this year's first quarter. Building owners, discount merchants, and other retailers have gobbled up the vacated properties during the past several months.

Toys "R" Us sites have generated higher demand than such other recent retail bankruptcies as Bon-Ton Stores Inc. and Hhgregg partly because many Toys "R" Us leases have significant remaining terms at rents well below market. Additionally, there has been solid demand for the former toy-store buildings because their variety of sizes and configurations make them suitable for everything from automobile dealerships to health-care operators. Not all Toys "R" Us stores have moved, as some drew bids too low to appease creditors. Others didn't secure any bids at all. Nearly 270 store leases have been rejected.
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Don't Neglect These Liability Red Flags at Your Properties
Multifamily Executive (12/28/18) Powell, Jane

Structural issues at apartment properties can present a certain degree of financial liability and risk for current and future owners, lenders, and investors. Seeking out small signs and reversing correctable issues via proactive due diligence such as building assessments is vital to mitigating risk. The article's author details four potential liabilities to consider at current and prospective apartment properties. One, balconies and exterior stairs are often overlooked as a potential source of water intrusion and life-safety liabilities. As such, they should be regularly monitored for indications of conditions leading to structural distress, including cracks in the concrete topping or supports, peeling paint, rust stains, and corrosion.

Two, garages are certainly a liability risk for those apartment properties that have them. Look for concrete-surface deterioration and/or concrete that looks like it is peeling, popping out, or flaking. Other early warning signs of water intrusion and deterioration of structural elements include corrosion and/or rust stains. Three, there is the matter of accessibility. Non-accessible properties pose a risk for lawsuits and costly legal battles. Common items of contention range from parking accessibility to non-accessible restroom configurations. Finally, seismic retrofits. There are two frequently identified types of seismically vulnerable buildings. The first is wood-frame “soft story” buildings, where the ground floor is used for parking and built with open walls on one face of the building. The second is nonductile concrete buildings, which are prone to crumbling and collapse under seismic forces.
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Hackers Use a Fake Wax Hand to Fool Vein Authentication Security
The Verge (12/31/18) Porter, Jon

Researchers have used a fake hand made out of wax to bypass Hitachi and Fujitsu scanners that cover about 95 percent of the vein authentication market. Vein authentication is commonly used to control access to buildings. Jan Krissler and Julian Albrecht copied their target's vein layout from a photograph taken with an SLR camera modified to remove its infrared filter. Although constructing the wax hand eventually only required a single photograph and a construction time of 15 minutes, it took 30 days and more than 2,500 test photos to get to that point.

Krissler and Albrecht recently demonstrated the method at Germany's annual Chaos Communication Congress. Now that the method has been proven to work, other researchers will likely work to create a more efficient and reliable process. Vein patterns are considered to be more secure than imprints of fingerprints because they cannot be left behind on surfaces just by touching them.
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How to Reposition Your Office Building for a Higher Return
Forbes (01/03/19) DiMeglio, Vinny

There are a number of ways owners can reposition their buildings to create more value. First impressions mean everything, especially when courting tenants to sign a lease. It's also important to keep existing tenants happy so they will continue to sign back up. Consequently, cracks in the sidewalks outside should be fixed, the parking lot should be pothole-free, and landscaping should be fresh and healthy. Investing in updated exterior signage is also a smart idea. "These costs can be returned many times over based on extrinsic value tenants will place on a building that's in good shape," according to the article's author.

Once inside, lobbies should feature everything from modern furniture to energy-efficient lighting to fresh paint. For those buildings that lack a full cafeteria, owners and operators should consider outsourcing to one of a broad array of grab-and-go food vendors who can provide options. Get rid of the old tenant directory and replace it with a touchscreen that shows both the building's tenant roster and local amenities. Wi-Fi is another cheap idea. Today's employees look for flexible work solutions. Giving them the opportunity to work outside the office can be a big plus. Other increasingly popular amenities include on-site fitness facilities and shared conference rooms. The article's author is senior managing director of Colliers International's office in Princeton, N.J., where he specializes in office leasing and sales.
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Orlando-Area Rents Rising Faster Than Any Other Big City
Orlando Sentinel (12/20/18) Arnold, Kyle

A new report by Zillow reveals that average rents in the Orlando metropolitan area grew to $1,472 in November, a 4.4 percent increase over the last year, with Orlando-area renters paying more than the U.S. average for renting a home or apartment. Staying in Florida, Tampa ranked third on the list with a 2.9 percent rent increase. Riverside, Calif., placed second (3.9 percent). Rounding out the top five were Phoenix and Pittsburgh (both 2.2 percent). Jaimie Ross, president and CEO of the Florida Housing Coalition, notes that workers in the Orlando market saw a strong year for income growth at 3.5 percent last year, according to the Bureau of Economic Research, but that increase was not sufficient for dealing with the increase in rents.

A separate report from Rentcafe focusing on apartment properties also showed that monthly rents are going up. It said those prices increased 6.1 percent over the last year to an average of $1,389 in the Orlando metropolitan area. "Maybe some people have given up on buying a home and went back to renting," suggests Zillow's Jeff Tucker.
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Department Store of the Future: Selling Art Off the Walls and Car Insurance at Checkout
Wall Street Journal (12/24/18) Kapner, Suzanne

Department stores have been losing share to discounters, fast-fashion retailers, and off-price chains for decades. Their share of retail sales stood at 1.58 percent at the end of last year versus 5.54 percent in 1998, according to the U.S. Census Bureau. "Department stores need radical surgery if they are going to survive," said Craig Johnson, president of consulting firm Customer Growth Partners. "They need something big and impactful to signal that they are about the future, not the past." He and other industry professionals say doing nothing is too big a risk.

Department store chain Carson's, for instance, is testing a new business model in Evergreen Park, Ill. The company's store there is much smaller than most of its other locations and only occupies one floor. New products are put on display every day, and an e-commerce warehouse is located on an upper floor. The store is also closed twice a week, and car insurance can be purchased at registers. Other companies are experimenting with their own overhaul plans for their aging department stores. Analysts say the changes are needed if this retail format is going to survive into the future as consumer shopping habits change.
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Gaining Real-Time Building Performance Insights: Q&A with WSP
Energy Manager Today (12/17/18) Danigelis, Alyssa

Cory Mosiman of the engineering and professional services firm WSP USA recently detailed how property managers can make buildings more energy efficient through the use of data. Mosiman states, "The biggest challenge right now is finding value in the data, and that’s something we’re continuously working on in, trying to understand, and help other people understand." The question then becomes: When you are starting to look at data across disparate systems, how do you design a holistic approach? Mosiman replies, "There are open-source efforts to coordinate metadata schemas across different groups and stakeholders -- mechanical, electrical, contractors, systems integrators, all these people -- so we know what the other person is talking about. Not only that, but you need to provide a mechanism for machine-to-machine communication and portable analytics across buildings." This, in turn, will enable portfolio-level consistency.
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Log Cabins? No, These Wooden Buildings Are High-Rises
New York Times (01/01/19) Hughes, C.J.

Timber is once again becoming a popular building material for a wide variety of projects. Despite concerns over flame resistance, strength, and costs, wood is being used for office complexes, apartment communities, and campus buildings. The timber construction sector received a big push in December when the International Code Council said some wooden buildings could be as high as 18 stories without being a safety risk.

Meanwhile, the general public is showing interest as well for multiple reasons. Wood is a more environmentally friendly building material compared to concrete and steel. Trees are also a renewable resource, and wooden structures can boast unique interior designs while exteriors remain traditional in appearance. Despite these benefits, wood must overcome bias that has been around for decades. John Peronto, a principal at the engineering firm Thornton Tomasetti, notes that steel can buckle under extreme heat. "But we've gotten comfortable using steel and concrete products, so the question's been: 'Why would we change?'" he said. There has also been a decline in old growth forests, which has resulted in the rise of mass timber products.
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5 Unconventional Ways to Use Deserted Malls
Battle Creek Enquirer (MI) (12/19/18) Blakely, Natasha

As shopping malls increasingly face the loss of department store anchor tenants, potential solutions for the empty space include clinics, government offices, art exhibitions, entertainment venues, and even churches. For instance, the Urgent Care Association's 2015 Benchmarking Survey revealed that the most common urgent care center location is shopping centers or strip malls, at 34.1 percent. One of the prime examples is Southpoint Mall in St. Johns, Mich. It has an Ouch Urgent Care center. Meanwhile, a 2017 Wall Street Journal article noted that at least 111 malls and shopping centers nationwide had places of worship in them. With regards to arts and culture, department stores leave behind massive spaces when they close. This is one of the main reasons why libraries and museums have started to fill in such gaps.
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News summaries © copyright 2019 SmithBucklin



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