Real Estate Management News - 03/13/2019

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March 13, 2019
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IREM® HEADLINES
IREM Message Rings Through Halls of Congress
UNT Students Win Dallas College Case Competition
Impacts of Declining, Aging Population Explored at IREM Asia Pacific Meeting

INDUSTRY HEADLINES
A Rapidly Growing Population: Boomer Renters
Vacant Storefronts Find New Life as Space for Recitals, Banquets and Pet Parties
Simon Property Group's CBD Kiosk Deal Is a Smart Way to Benefit from an Emerging Trend, Experts Say
Iconic Chrysler Building Will Sell at a Huge Loss
Dollar Tree to Shutter 390 Family Dollar Stores, Rebrand Others
Utah Legislature Adopts More Energy-Efficient Building Codes
Shaping Up Retail: Gyms, Fitness Centers Take Center Stage in Shopping Center Revitalization
Nordic Startup Wants to Make America´s Office Air Breathable Again
IBM Finds Security Flaws in Tools That Let Visitors Check in to Office Buildings
Charlotte Russe Will Close All of Its Stores and Start Liquidation
Hounds Are Heroes
Researchers Explore the Potential of Tall Timber Buildings


 

IREM Headlines


IREM Message Rings Through Halls of Congress

More than 100 meetings with federal legislative offices took place last week during the IREM Capitol Hill Fly-In. “It was great to have so many IREM Members travel to D.C. and discuss issues critical to property management with their legislators,” said IREM President Don Wilkerson, CPM, from Reno, Nev.

“The excitement over the last day and a half was palpable,” stated George Griffin III, CPM, and IREM senior vice president, from Houston. “Members were able to walk the halls of Congress and establish or continue relationships with their federal legislators. Not only did we build relationships,” continued Griffin, “but we also educated lawmakers on important issues affecting our industry, such as reauthorizing and reforming the National Flood Insurance Program (NFIP) and asking for guidance regarding companion animals.”

“Long-term reauthorization and reform of NFIP is long overdue,” said Lucinda Lilley, CPM, and president of the IREM San Diego Chapter. “It was so great that we had the opportunity to have a face-to-face discussion with our legislators on how this issue is affecting our industry and on the need to provide stability and reform to the program.” If the program expires, flood insurance will become more costly or even unavailable. While there is a growing private market for flood insurance, millions of small business and home owners currently depend on the federal program to protect their property against losses due to flooding, the most costly and common natural disaster in the United States.

Members also discussed the challenges they face with companion animals in multifamily housing. “It is imperative we work with our legislators to encourage HUD to issue guidance on this important issue,” said Dawn Carpenter, CPM, of New York, adding that “Property managers need guidance as companion animals have become more and more prevalent over the last few years.”
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UNT Students Win Dallas College Case Competition

A team of students from the University of North Texas (UNT) won the first College Case Competition sponsored by the IREM Dallas Chapter. Competing against them were student teams from Southern Methodist University and the University of Texas at Dallas (UTD). The competition kicked off in early February, with the judging taking place one month later as each team presented its solution to a panel of practitioners. The winning UNT team then shared its case solution at a chapter event held last week at the UTD Alumni Center. On hand to congratulate UNT team members and present them with their much-deserved awards was IREM President Don Wilkerson, CPM, from Reno, Nev.

The College Case Competition was an innovative student outreach event aimed at bringing awareness to local undergraduate students about opportunities in commercial real estate and careers in property management while providing the students a valuable learning experience.

The competition case was developed by Julie Lynch, who has worked with students as an adjunct professor in the area. Each team was supported by a faculty advisor plus two IREM Member coaches who assisted them with the challenge. Following the successful launch of this program, the IREM Dallas Chapter plans to make this an annual event.
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Impacts of Declining, Aging Population Explored at IREM Asia Pacific Meeting

The impact on real estate of an aging and declining population was the theme of the keynote presentation delivered by Professor Chihiro Shimizu of Nihon University during an IREM Asia Pacific Meeting held in Okinawa, Japan, last week. Shimizu began on a pessimistic note, highlighting demographic challenges such as population decline and concentration that the three Asian countries participating in the conference—Japan, Korea, and China— will face. He ended on a brighter note, with the observation that “New technology is coming to our society.” He cited 3D printing for bridges, homes and even cars, the Internet of Things, green buildings and new real estate technology companies as providing potential solutions.

The IREM Asia Pacific Meeting, held March 5-6, was hosted by IREM’s three chapters in Japan and drew nearly 40 members from six chapters in Hawaii, Japan, China and South Korea. Each chapter president presented case studies and activity reports.

Speaking to the success that IREM has experienced in Japan, IREM Japan Vice President Yasuto Ute, CPM, said, “Success doesn’t happen overnight. It took a lot of work to increase our members.” All attendees were eager to share strategies, both in the industry and in the association, in order to attain that success. The IREM Hawaii Chapter discussed its annual forecast breakfast, and the IREM Korea Chapter reported on its seminar with North Korean professors of real estate, co-hosted by the Asian Real Estate Association of America (AREAA). Many common themes emerged, notably overcoming language barriers in business, providing IREM education for potential students outside main urban areas, and creating value for members in order to increase retention.

The second day featured a property tour. Yukari Kawabata, CEO of Okinawa Kuchikomi Real Estate, gave the conference an inside look at development proposals for Camp Kinser, a military base that is scheduled to be returned to Japanese control by 2025. The group also toured a model room that is being used to sell condominiums in Hiyori Ocean Resort, a building in development by Tokyu Resorts.

Michele Wong, CPM, ARM, from Hawaii, called the meeting “an ideal place for leaders of chapters to come together and share and gain new ideas to bring back to their chapters.”
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Industry Headlines


A Rapidly Growing Population: Boomer Renters
Multifamily Executive (03/10/19) Sowers, Scott

A recent RENTCafe study shows that the number of renters over the age of 60 increased by 43 percent in the past decade. By the year 2035, seniors are on pace to account for 33 percent of the total U.S. rental housing market and become the second biggest group of renter households. Austin, Texas, currently boasts the highest increase in the share of age 60+ renters, clocking in at a whopping 113 percent. It's followed closely by Phoenix with a 112 percent increase and Fort Worth (95 percent). When comparing the nation's 30 biggest cities, New York City has the largest share of senior renter households with 27 percent. According to the firm's past research, many older Americans are no longer enthusiastic about homeownership and intend to spend their golden years in rental situations.

The trend is rooted with empty-nesters suddenly finding themselves in big homes they no longer need nor are able to keep up. According to Florentina Sarac, the researcher who authored the study, they are drawn more and more to renting because of its flexibility and affordability. She observes, "Renting offers them comfort, meaning that maintenance responsibilities are handed over to someone else and they don't need to worry about taking care of the lawn or hiring technicians for repairs." Not surprisingly, the areas of the U.S. that attract retirees are also showing their age with regards to who lives there. The top 30 oldest cities all have a median age over 39.6 and are primarily retirement locales in three states -- Florida, California, and Arizona.
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Vacant Storefronts Find New Life as Space for Recitals, Banquets and Pet Parties
Wall Street Journal (03/05/19) Kadet, Anne

Despite declining rents, New York City’s storefront vacancy rate remains over 20 percent on such popular retail strips as Fifth Avenue and Times Square. Some see an opportunity for fun and profit from out of this depressing blight. In 2018, Elena Drakos opened small Prosper Gowork co-working spaces in a couple of Brooklyn storefronts and is in the process of opening a third this spring and another six around Brooklyn and Queens by year's end. She notes that many storefronts come with backyards that can serve as outdoor patios. Furthermore, they are often easier to rent than office space. Her locations are specifically geared toward working professionals like realtors who want to pop in for quick work sessions at convenient spots throughout the city without waiting for an elevator or checking in with a receptionist. Her members receive 24/7 access to all locations for $99 a month.

Space rental platform Storefront currently has around 3,000 retail spaces available across New York for short-term rentals at rates ranging from $100 a day for a small Brooklyn storefront to over $50,600 a day for a 9,460 square-foot space near Central Park. Competing platform Appear Here offers approximately 750 retail spaces citywide. Angelo Zegna, head of stores at Appear Here, forecasts that urban shopping strips will be increasingly occupied by a revolving roster of retail tenants that vary by season -- sunglass shops in the summertime, gift shops during the holidays, and so forth. As rents fall, expect to see more storefronts occupied by physicians and other professionals who previously occupied second-floor spaces. Storefronts could also be used as workspaces for artists, designers, and architects who can use the windows to display their work.
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Simon Property Group's CBD Kiosk Deal Is a Smart Way to Benefit from an Emerging Trend, Experts Say
National Real Estate Investor (03/10/19) Wolf, Liz

Simon Property Group, the country's largest shopping mall operator, is introducing a new line-up of mall kiosks that will sell beauty and personal care products infused with cannabidiol, or CBD, a chemical produced by the cannabis plant. Simon is partnering with Ohio-based Green Growth Brands (GGB) to launch the 108 kiosks nationwide that will operate under GGB's Seventh Sense Botanical Therapy brand. Simon officials assure the products offered will be purely for topical use with products like vape pens or edibles not for sale. The passage of the 2018 Farm Bill late last year resulted in an explosion in CBD products, which are quickly finding their way into the mainstream health and wellness industry. Advocates say CBD has the calming effects of marijuana without the high. They further tout that CBD can help with everything from treating chronic pain to reducing anxiety.

The first Seventh Sense kiosk will open by the end of March at Simon's Castleton Square Mall in Indianapolis. The remaining kiosks will open throughout the remainder of this year, including locations at The Galleria in Houston and Roosevelt Field Mall in New York. Landing a national company like GGB is a boon for Simon as it and other mall operators continue to deal with struggling retailers filing for bankruptcy and shuttering stores. Many are looking to backfill sizable chunks of space. Some analysts say Simon is wise to be skipping its malls in more tertiary cities with this concept to begin with and focusing on major markets.
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Iconic Chrysler Building Will Sell at a Huge Loss
CNN (03/09/19) Isidore, Chris

Manhattan's landmark Chrysler Building will be sold for a small fraction of its previous sales price. RFR Holding, a New York real estate company, has agreed to purchase the iconic skyscraper for $150 million. Mubadala, an Abu Dhabi investment fund, purchased 90 percent of the building for $800 million in 2008. Tishman Speyer had owned the other 10 percent. It was unclear as of press time when the deal would close. The Chrysler Building sold fairly quickly after being put on the selling block just two months ago. CBRE Group handled the transaction.

According to CNN, "the incentive to sell the building at such a huge loss was due to the soaring rent the owners pay to Cooper Union, a New York college, for the land under the building." The rent is indeed increasing from $7.75 million to $32.5 million this year to $41 million in 2028. Rents in the building itself are not rising nearly that fast as it is competing against newer office towers with a host of modern amenities and large floor-to-ceiling windows.
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Dollar Tree to Shutter 390 Family Dollar Stores, Rebrand Others
Fox Business (03/06/19) Scipioni, Jade

Discount retail chain Dollar Tree this past Wednesday announced plans to close up to 390 Family Dollar stores nationwide in 2019 and convert around 200 more into Dollar Tree locations. The remaining 1,000 or so Family Dollar stores will get renovated under the company's $2.73 billion goodwill impairment charge against the value of the chain. Since acquiring Family Dollar for nearly $9 billion in cash and stock four years ago, the chain has been dragging down Dollar Tree's overall performance. The move likely got an added push by activist investor Starboard Value, which took an ownership stake in Dollar Tree back in January. Starboard has since been prodding the retailer to sell Family Dollar and offer a wider array of merchandise at different price points at its Dollar Tree stores.
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Utah Legislature Adopts More Energy-Efficient Building Codes
Deseret News (UT) (03/06/19) O'Donoghue, Amy Joi

Lawmakers in Utah have passed a bill requiring updated energy efficiency standards in the construction of new commercial buildings after July 1. Under HB218, the state's commercial construction codes would be required to adhere to at least the 2018 standard under the International Energy Conservation Code. As of press time, the bill was awaiting the governor's signature. Nearly 40 percent of area pollution on inversion days can be linked to area sources, including commercial buildings.

Kevin Emerson, energy efficiency program director for Utah Clean Energy, notes that many commercial buildings in Utah are already built beyond minimum standards because of heightened interest in energy efficiency. Adoption of the updated energy efficiency codes was recommended to the Utah Legislature by the state's Uniform Building Code Commission, on which Emerson holds a seat.
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Shaping Up Retail: Gyms, Fitness Centers Take Center Stage in Shopping Center Revitalization
Phoenix Business Journal (03/08/19) Brown, Brandon

Looking to boost customer foot traffic and attract better revenue-generating tenants, a number of Phoenix's shopping centers are embracing niche fitness concepts and the booming wellness market. Gyms and fitness concepts have been frowned upon in the retail sector for decades. But, lately, a slew of new players have entered the market and are pulling people away from their homes and offices where they make online purchases and back into shopping centers. These niche gym and fitness concepts are backed with unique revenue and expansion models and are playing a big role in today's leasing environment. Big-box gyms are certainly seeing the benefits of the quickly growing health and wellness trend. At the same time, smaller concepts are seeing unique growth because they are able to quickly create a dedicated customer base and expand across markets via franchising. Such boutique fitness concepts range from a local spin and yoga studio like the Madison Improvement Club to fast-growing national brands like OrangeTheory Fitness.

They have become so popular with building owners and the general public that Kerry Linthicum, CBRE's vice president of retail leasing, said she now has at least one in every property she represents. "The way the world is changing, now everyone can stay at home. Whether they are having their food or retail delivered to them, they are not getting out of the house," Linthicum remarked. "Property owners love all the fitness because they are bringing customers back into the shopping centers." According to the Global Wellness Institute, the global health and wellness market is now a whopping $4.7 trillion business. Large-format gym concepts range from 10,000 to 50,000 square feet. By contrast, niche fitness boutiques are only taking up between 2,000 and 5,000 square feet.
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Nordic Startup Wants to Make America´s Office Air Breathable Again
Forbes (03/12/19) Mares, Michael

Today's new office buildings are more energy-efficient and eco-friendly than ever before. But it seems that the humans who work in these offices have somehow been neglected. Tomas Novotny, founder of the Nordic startup 720 Degrees, is looking to to change this. He set out to collect tons of data from various office environments, analyze it, and let his software program figure out how to transform the spaces to more pleasant working environments. 720 Degrees' cloud-based solution for indoor environmental quality monitoring is now being used in hundreds of facilities throughout Europe, including CBRE, GE Healthcare, and IBM. The Helsinki-based company is now eyeing bigger markets, with New York City being the next area of focus.

This move overseas is being propelled by a recently announced investment of €2.9 million from Pi Labs, J&T Ventures, Tekes, and some angel investors from the United States. Novotny remarks, "Currently, facility managers often rely on outdated methods of controlling a building or facilities environment, resulting in a loss in property value and deficiencies in occupant experience." 720 Degrees' analytics provides building owners, tenants, occupants, and management with real-time information and offers automated suggestions on how to improve facilities for employee health and productivity. The 720 Degrees solution analyzes more than a dozen indoor environmental parameters from temperature to carbon dioxide to noise. Novotny concludes, "You need to realize that human beings evolved as outdoor creatures. Offices represent an artificial environment, very much unlike the natural conditions we have been used throughout most of our evolution."
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IBM Finds Security Flaws in Tools That Let Visitors Check in to Office Buildings
Fast Company (03/04/19) Melendez, Steven

Digital systems that enable visitors to check in and get access badges have become more and more common in office buildings. IBM researchers, though, say some of the devices have hidden flaws that could render facilities insecure. "We found that you could break out of the kiosk and interact with the underlying Windows operating systems, and from there do things like drop malware or open up the database," reports Daniel Crowley, research director at the IBM X-Force Red security unit. Accessing the database could let people know who else was visiting the office, which could be sensitive information. It could also make it possible for them to impersonate expected visitors to get into offices without permission.

The systems are mostly designed so they can be used without an attendant How exactly they are deployed likely varies from site to site, Crowley notes. The IBM research team probed the software for the devices, although they didn't investigate any cloud-based visitor tracking tools. According to Crowley, he got the idea for the research after discovering there had not been much published research into security issues around visitor management systems. Among the affected systems are EasyLobby Solo, eVisitorPass, Envoy Passport, Lobby Track Desktop, and The Receptionist for iPad.
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Charlotte Russe Will Close All of Its Stores and Start Liquidation
USA Today (03/07/19) Tyko, Kelly

Charlotte Russe has decided close all of its remaining stores and sell its intellectual property. The fashion retailer issued a statement that read: "[We] are optimistic about the future of the brand and remain in ongoing negotiations with a buyer who has expressed interest in a continued brick-and-mortar presence." In a court hearing in Delaware this past week, Judge Laurie Selber Silverstein approved the sale of Charlotte Russe's assets to SB360 Capital Partners LLC, a liquidation company.

The California-based mall chain filed for Chapter 11 bankruptcy protection early last month and outlined plans to permanently shutter 94 stores. The chain also put itself on the selling block and said it would liquidate if it didn't find a buyer. Charlotte Russe's bankruptcy marks the latest in a series of similar cases among mall retailers that have not been able to identify a sustainable path amid declining foot traffic and intense digital competition.
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Hounds Are Heroes
Forbes (03/05/19) Steele, Jeffrey

Dogs are factoring more into luxury rental property social media marketing than ever before. The growing appeal of pet amenities at many newer apartment complexes has prompted property developers and managers to use socially-connected canines to spread the word about their brands and to build rapport among residents who are dog owners or simply dog lovers. On social media, dog postings consistently prompt some of the very highest levels of engagement overall. "People seem to love posting about their dogs even more than posting about themselves," observes Rob Bond, president of Bond Companies, co-developer of new Chicago luxury rental community Spoke Apartments. "These connections we create on social media not only tell us that residents and their pets feel welcome and like what we have to offer. They also offer a genuine glimpse of what pet owners can expect from life at Spoke."

Among Spoke's residents is Sir Buckley Doodle, a dog who routinely tags the apartment building in his Instagram posts -- posts that range from videos of him playing with his friends at the covered dog run to thanking the Spoke management team for naming him "Pet of the Month." To be sure, Buckley has no formal partnership with Spoke. His owner is just one of the cohort of social-media-savvy renters leveraging Instagram to relate their pets' daily lives. One social pet who does have an official capacity with her apartment community is Daisy, the house canine at NEXT, a Fifield Cos.-developed luxury apartment building in Chicago. The cute Newfoundland adroitly handles several official duties, including: greeting visitors; accompanying prospects on tours of the property; and, of course, posting about her days at NEXT on her Instagram account, daisyatnext.
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Researchers Explore the Potential of Tall Timber Buildings
Civil & Structural Engineer (03/05/19)

Justin Brown, a University of Canterbury in New Zealand engineering doctoral candidate, is conducting research that could have impacts on timber as a building material. Specifically, Brown and his team are exploring whether or not timber can be used in the cores of buildings. Currently, most buildings rely on a concrete or steel core to resist seismic forces. Brown hopes to prove that a timber building core can be just as strong and cost effective as traditional cores. His work involves the large-scale testing of cross-laminated timber core-walls. "There are already all-timber, multi-story buildings being built today," he remarks, "But this research would allow for a new type of timber structure to be built. Through large-scale experimental testing of a timber core-wall, engineers will have data and design tools to design multi-story timber buildings with improved seismic resilience."
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News summaries © copyright 2019 SmithBucklin



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