Real Estate Management News - 04/10/2019

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April 10, 2019
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IREM® HEADLINES
IREM Earns 2019 ENERGY STAR® Partner of the Year – Sustained Excellence Award
DISI—IREM Initiative Recognizes Diversity in the Real Estate Management Industry
Global Growth: IREM Countries
The Tax Man is Calling—Are You Ready?

INDUSTRY HEADLINES
All-Gender Restrooms Now Comply with Code
Vacancy Rate at Shopping Centers Hit 10.2 Percent in First Quarter
As Deadline Looms for Sprinkler System Installation, NYC High-Rises Are Safer
Sustainable: Green Zones Offer Energy-Efficiency Incentives
As Prices Go Up, Office Space Use Goes Down in War for Talent
Reis: Apartment Vacancy Rate Holds at 4.8 Percent in Q1 2019
CVS Pharmacy Completes Rollout of Time Delay Safes in All of Its TN Pharmacies
Suburban Malls Flounder From Online Shift While City Shopping Locations See Surge in Redevelopment
How Retail Real Estate Can Benefit From Online Sales Growth
Bill to Ease Zoning Rules Near Transit and Jobs Throughout California Advances
Tech Sparks Transformation in Pittsburgh
Walmart Partners With Google for Voice-Assisted Grocery Shopping


 
 

IREM Headlines


IREM Earns 2019 ENERGY STAR® Partner of the Year – Sustained Excellence Award

IREM is proud to announce it received the 2019 ENERGY STAR Partner of the Year - Sustained Excellence Award, the highest honor for energy efficiency programs that feature ENERGY STAR tools and resources.

Awarded by the U.S. Environmental Protection Agency (EPA), the Sustained Excellence Award is presented to organizations that have already received ENERGY STAR Partner of the Year recognition for a minimum of two consecutive years, which IREM achieved last year. To earn the 2019 award, IREM advanced a number of initiatives that support sustainability programs and lead to better building energy efficiency outcomes. These initiatives include education, a certification program, research and insights into energy management practices.

IREM’s accomplishments will be recognized by the EPA and the U.S. Department of Energy at a ceremony in Washington, D.C. on April 11 with Angela Aeschliman, CPM, IREM Sustainability Advisory Board chair, accepting the award. “Whenever someone asks me, ‘What is one of the first steps in establishing an energy management program?’ I always say benchmarking with ENERGY STAR Portfolio Manager,” says Aeschliman. “ENERGY STAR tools and resources are foundational to efficiency in operations and vitally important to the real estate management industry.”
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DISI—IREM Initiative Recognizes Diversity in the Real Estate Management Industry

In an effort to make sure top talent in underrepresented minority groups gets acknowledged for achievements in the real estate management industry, IREM has re-named its Diversity Scholars program to the DISI program, or the Diversity & Inclusion Succession Initiative.

The program is designed to recognize a cross-section of people from the industry who are proven leaders and who identify with an underrepresented minority group. Showing appreciation for such professionals is important in business to aid in building succession plans and find new talent in the field. These leaders are recognized for their drive to advance their own leadership skills and their continued contribution to IREM in helping develop new talent in others.

IREM is an inclusive organization that embraces and values differences, and the DISI program aligns with IREM’s goal to create a more diverse profession. Of her experience in the program, 2018 DISI Leader Anna Javellana, ARM, said, “I found a network of passionate individuals who value diversity and inclusion as part of their overall commitment to the property management industry. By finding ways to be more inclusive, we broaden our ability to communicate and problem solve effectively. This is a true testament to why IREM is such an outstanding organization and continues to be a catalyst for the advancement of its members.”

IREM is accepting applications for 2019 through May 1. Find more information about eligibility and guidelines here.

Recipients receive:
• A complimentary registration to the 2019 Global Summit with a travel stipend up to $1,000
• A personalized mentor connection
• Recognition in all IREM communication outlets

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Global Growth: IREM Countries

As IREM continues to expand its global influence, its international chapters naturally also increase in size and number. Canada and Japan are two examples of how IREM’s growth has led to more opportunities for members around the world.

Similar to IREM Regions in the United States, a country is officially recognized by the association as an IREM Country when it has three or more chapters. Canada and Japan both fall into this category. Canada currently has seven chapters and is represented by IREM Canada Vice President Ron Penner, CPM, CRP. Once represented by a single chapter with a membership base in the hundreds, in 2017 Japan split into three chapters to provide more localized support for members. Japan is represented by IREM Japan Vice President Yasuto Ute, CPM, CCIM.

IREM also supports annual meetings held in IREM Countries through a Leadership Conference designed to strengthen chapters. This year, Yokohama is the host city for Japan’s conference, taking place June 3-5, and the conference in Canada will be June 4-6 in Niagara Falls. These events present excellent opportunities to expand international contacts and learn about property management best practices in other countries. Look online for more information about the IREM Japan and
IREM Canada and Real Estate Institute of Canada
annual meetings.


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The Tax Man is Calling—Are You Ready?

The April 15 deadline to submit 2018 tax returns is fast approaching – and those returns will incorporate lots of changes as a result of the Tax Cuts and Jobs Act that goes into effect this year. Key provisions that impact real estate owners and operators include:
  • 1031 (like-kind) exchanges—limited to “real property” (vs. “personal property”)
  • Carried interest—now requires a three-year holding period to qualify for long-term capital gains treatment
  • Mortgage interest deductions—limited to the first $750,000 in principal value
  • Corporate tax rate—reduced from 35 to 21 percent
  • Pass-through business—can apply a 20 percent deduction of qualified business income from pass-through businesses, with the exception of income from some service industries
  • State and local tax deductions—limited to a combined $10,000 for income, sales and property taxes
Perhaps the major change that will affect most returns is that the standard personal deduction has been increased to $12,000 for singles and $24,000 for married filing jointly. With a number of exemptions now limited or eliminated, it is anticipated that nine out of 10 filers will take the standard deduction this year.

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Industry Headlines


All-Gender Restrooms Now Comply with Code
Buildings (04/02/19) Penny, Janelle

A couple of new amendments to the International Plumbing Code (IPC) are aimed at ensuring equitable bathroom access and more efficient bathroom design. One of the two amendments requires signage on single-user bathrooms to indicate they are open to any user regardless of gender. The second one allows the creation of all-gender, multi-stall designs with shared sinks and each toilet in a private compartment. The latter offers an alternative to the traditional sex-segregated facilities previously required by the IPC. Both were adopted into code at the organization's recent annual meeting and will appear in the 2021 edition of the code.

There are a number of reasons to implement all-gender restrooms in various buildings and facilities, regardless of whether they are single-user or multi-user designs. One, there are public safety and public health issues. Transgender people often face harassment in sex-segregated bathrooms. Two, there is the matter of accommodating people with special needs. For example, families with kids who are too young to use restrooms by themselves often face a difficult decision when it comes to using sex-segregated public restrooms. Senior or disabled adults who have caregivers frequently face a similar problem. Three, permitting anyone to use an all-gender restroom cuts down on the waiting time disparity by letting people use whichever restroom has a stall available.
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Vacancy Rate at Shopping Centers Hit 10.2 Percent in First Quarter
Pymnts.com (04/02/19)

According to the latest Reis Inc. data, the vacancy rate of community shopping centers in the United States topped 10.2 percent in the first quarter -- up from the same period a year ago, but unchanged from 2018's fourth quarter. Reis reports that the vacancy rate in 28 of the 77 metro areas it measured rose during this year's January-through-March period. A year-over-year increase in vacancy rates is expected to continue. An official Reis statement read: "As the retail sector continues to undergo restructuring, a number of retail real estate markets face more vacancies and falling rents. This pattern is expected to continue as more stores will close this year."

The asking rent and the effective rent, which excludes concessions by building owners, was up 0.4 percent in the first quarter versus the last three months of 2018. Reis researchers found the average rent stayed flat with that fourth quarter. Meanwhile, Reis noted that the vacancy rate at regional shopping malls rose 0.3 percent to 9.3 percent driven by the closure of more than two dozen Sears department stores. For community shopping centers, the net absorption -- or the available space sold during the quarter -- declined 7.4 percent to 949,000 square feet from January through March compared to the same three-month period a year prior. To address retail vacancies, some property owners have been repurposing the space to showcase direct-to-consumer Internet brands.
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As Deadline Looms for Sprinkler System Installation, NYC High-Rises Are Safer
amNY.com (04/02/19) Brown, Nicole

Hundreds of high-rise office buildings in New York City have been made safer over the last 15 years due to a requirement to install sprinkler systems. The installations are mandated by Local Law 26, passed in 2004 and resulting from recommendations from a task force assembled in the aftermath of the Sept. 11, 2001, terrorist attacks to review safety standards. Over 1,200 office buildings that are at least 100 feet high and were constructed prior to 1984, when sprinklers became a requirement, have until July 1, 2019, to complete the installations. "The high-rise buildings in New York City are safer than they were 15 years ago," Daniel Colombini, director of fire protection at the consulting engineering firm Goldman Copeland, notes. "It's really an incredible feat that's been accomplished here." Colombini's firm has helped nearly 50 buildings comply with the law.

Installing sprinklers in the remaining high-rise buildings could cost around $20,000 per floor or hundreds of thousands of dollars per floor, though, depending on when the work can be finished and how difficult the installation is. Buildings that fail to meet the upcoming deadline will receive violations and fines, according to the city's Department of Buildings (DOB). Less than two dozen of the more than 1,200 buildings have received extensions from the agency because they were able to prove "undue hardships," most notably certain structural conditions. "We encourage any remaining building owners who are not in compliance to get to work and not leave this to the last minute," a DOB spokesman said.
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Sustainable: Green Zones Offer Energy-Efficiency Incentives
Finance & Commerce (04/02/19) Jossi, Frank

Under Minneapolis' Green Zones program, businesses have access to extra subsidies for such things as solar installations and energy-efficiency improvements to commercial and residential buildings. Solar installations on 30 public and privately owned sites added 6.2 megawatts of clean power in 2018. The city's two green zones represent just 14 percent of Minneapolis' businesses, but comprised 43 percent of the solar installations, notes Patrick Hanlon, director of environmental programs in the Minneapolis Health Department. This year, the city allowed solar developers to submit one proposal for multiple installations on residences and businesses, leading to an increase in submissions. Of the 65 solar projects the city approved for a subsidy, at least 25 were in the green zones, Hanlon points out. A 40-kilowatt system producing 50,000 hours would receive $17,500 in a green zone versus $12,500 somewhere else in the city.
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As Prices Go Up, Office Space Use Goes Down in War for Talent
Bisnow (04/04/19) Schenke, Jarred

Despite higher construction costs and, consequently, rising rents, office space users still have an appetite for shiny new digs in Atlanta. At the same time, more companies are trading their roomier, older floor plans for open office concepts that pack in more workers per square foot. "It's not your father's office building anymore," observes Daniel Corp. Executive Vice President Fred Roddy. Roddy is part of a lineup of Atlanta's top commercial property professionals who will discuss topics of design, mixed-use development, and leasing trends at Bisnow's Office of the Future event April 17. Companies are continuing to flock into the city's urban core to lease up Atlanta's newest prime office space. They range from NCR's new headquarters and Norfolk Southern's upcoming office tower in Midtown to such major brands as Google, Pandora, and Starbucks claiming stakes in trophy towers locally.

Such deals are coming as office rents are reaching record highs, partly reflecting the escalating costs of construction and materials. Urban rents today for Class A office space average $34 per square foot in Atlanta. A decade ago, that average was $27 per sq. ft., notes Transwestern. However, that number belies a much harsher truth. Rents in Atlanta's newest towers easily top $40 per sq. ft., particularly if there is deck parking. Even new suburban offices are seeing gross rents in the mid- to high $30 range, Roddy noted. Regardless of location, today's office buildings must be designed, at least on the interior, with "today's table stakes" of lots of shared workspaces, gathering spots, and a lobby with a hotel-like feel to attract tenants. Finally, extravagances in office design were long reserved for C-suite executives. Now, firms are boasting their top executives are being placed in open office plans along with rank-and-file employees.
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Reis: Apartment Vacancy Rate Holds at 4.8 Percent in Q1 2019
Multifamily Executive (04/02/19) Salmonsen, Mary

The apartment vacancy rate was unchanged in the first three months of this year at 4.8 percent, an increase from 4.7 percent a year earlier and 4.3 percent at the start of 2017, the Reis 1Q2019 Apartment Sector Preliminary Trends Release shows. Both the U.S. average asking and effective rents climbed by 0.5 percent from January through March, down from 0.9 percent growth in 2018's fourth quarter. The average asking rent has climbed by 4.4 percent since March 31, 2018, and the average effective rent by 4.2 percent. Net absorption, meanwhile, was 37,159 rental units in the latest quarter. That was lower than the previous three-month period's 49,558 units absorbed.

While the first quarter has historically tended to have the lowest net absorption activity, this year's was weaker than most -- down by more than 10,000 apartments from the first quarter of 2018. Reis senior economist Barbara Byrne Denham expects greater new apartment construction supply in 2019 than last year, when 254,000 new units came online. Only 15 major metros registered a vacancy rate increase in the first quarter, a sizable decrease from 40 in the last three months of 2018. Posting the highest vacancy rate increases were Charleston, S.C.; Columbia, S.C.; Orlando; Denver; and Austin, Texas. Metros with the biggest decline in vacancies included Palm Beach, Fla., and Tulsa, Okla. Only eight metros registered an effective rent increase above 1.0 percent from January through March, led by Chicago and Colorado Springs, Colo.
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CVS Pharmacy Completes Rollout of Time Delay Safes in All of Its TN Pharmacies
PR Newswire (04/04/19)

All 169 CVS Pharmacy locations across Tennessee now have time-delay safes. CVS first implemented time-delay safes in Indianapolis, which experienced a 70 percent decline in pharmacy thefts among the stores where the safes were installed. The time-delay function cannot be interrupted, helping deter would-be thieves who seek to enter and exit the targeted site as quickly as possible. All CVS Pharmacy locations with time-delay safes display prominent signage to inform the public that such safes are in use. Other initiatives implemented by CVS Health to help combat prescription drug abuse include community education and safe disposal of unused medication.
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Suburban Malls Flounder From Online Shift While City Shopping Locations See Surge in Redevelopment
Milwaukee Independent (04/07/19) Hess, Corrine

After the Brookfield Square shopping mall in suburban Milwaukee lost anchor tenants Sears and Boston Store in 2018 along with a number of other smaller retailers, elected officials went to work and are now in the process of creating a special taxing district to help revive the mall and other businesses. At the same time, Brookfield Square is eager to appeal to those consumers who are looking for more entertainment and experience-focused retail. By the end of this year, the mall will open a Marcus Theater movie tavern along with the state's first WhirlyBall game venue. In downtown Milwaukee, meanwhile, a plan is underway to invest approximately $9 million in city financing to continue mixed-use redevelopment of its long-struggling Grand Avenue Mall, which was recently rebranded as The Avenue.

But adding amenities might not be viable in smaller markets throughout Wisconsin and the rest of the country where distressed malls are having a harder time coming back to life. CBL Properties has been reinventing dying malls since 2013. In the upscale Nashville suburb of Franklin, Tenn., CBL added a bowling alley and restaurant district at its CoolSprings Galleria Mall. Stacey Keating, a spokeswoman for CBL, notes that sales at that property have increased 30 percent over the past five years. To be sure, while the company is investing in wealthier communities, it has walked away from others. In 2016, for instance, CBL turned the Wausau Center Mall back over to its lender after the struggling shopping center lost two of its three anchor tenants.
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How Retail Real Estate Can Benefit From Online Sales Growth
National Real Estate Investor (04/03/19) Obando, Sebastian

The continued growth of online sales has obviously taken a toll on retail real estate. But some industry experts are pointing out savvy retailers and landlords that are finding ways to navigate the evolving landscape. "Most people think, 'Oh, online sales are going to take over all retail sales.' That's not true," argues Brandon Famous, executive managing director at CBRE. "What it will do is enhance brick-and-mortar retail to a significant degree." He notes that brick-and-mortar retail sales volumes still outpace e-commerce by a significant margin. Overall, in-store brick-and-mortar sales tallied around $4.4 trillion in 2017, while pure-play e-commerce topped $262 billion, reports JLL. In other words, approximately 87 percent of retail sales is still done in the real world. "Brick-and-mortar will always have that stronger ratio or percentage than online sales," Famous remarks. "Right now, it's about 85 to 15, it may get to 80-20, looking out five years, I don't see it going past 75-25."

Second, opening a brick-and-mortar store boosts a retailer's web traffic by an average of 37 percent in subsequent months, the latest ICSC data shows. For this reason, such digitally native brands as Bonobos, Warby Parker, and UNTUCKit are now increasingly opening physical stores. Third, discretionary spending is expected to remain strong at least for the foreseeable future thanks to increased take home pay. Finally, with digital brands entering the physical retail space, omnichannel will be critical for retailers to navigate the new retail landscape. Omnichannel allows consumers to choose where and how they purchase retail products. More shoppers will want the ability to shop at a physical store, on a mobile phone, on a computer, on an iPad, or any other electronic device and then to select whether the purchased items will be picked up in a store or shipped to one's residence.
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Bill to Ease Zoning Rules Near Transit and Jobs Throughout California Advances
San Jose Mercury News (04/03/19) Murphy, Katy

A closely watched proposal that would permit apartment buildings to be erected close to public transportation hubs and job centers throughout California -- regardless of local zoning rules -- cleared its first hurdle last week. Senate Bill 50 is the second attempt by state Sen. Scott Wiener (D-San Francisco) to boost the Golden State's scarce housing supply by loosening strict zoning rules and easing off-street parking requirements near train stations and bus stops. In addition, the legislation applies to so-called "jobs-rich" areas, including broad swaths of the Bay Area, even if they lack an extensive public transportation network. It received a 9-1 vote from the Wiener-headed Senate Housing Committee.

The proposal marks the latest example of a tug-of-war between a handful of Sacramento legislators and local governments over housing development and parking requirements. As much of California deals with a chronic housing shortage and affordability crisis, Wiener and others have contended that the state must step in to allow more housing to be built near where people work and the public transportation they use -- "legalizing apartment buildings," as he has often called it.
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Tech Sparks Transformation in Pittsburgh
Commercial Property Executive (04/05/19) Stef, Corina

In the last several years, Pittsburgh has successfully diversified its economic base to include education, finance, health care, and technology. Regarding tech, the metro area now houses such major players as Amazon, Apple, Google, IBM, Intel, and Uber. Factor in corporate expansions, a strong start-up scene, and an emerging coworking sector, and it's obvious that the demand for premier office space is on the rise in such submarkets as Downtown and South Side/Technology Drive.

Nick Francic, managing director at JLL, points out that 33 percent of metro Pittsburgh's leasing activity was bolstered by technology companies last year and was primarily focused around the urban fringe. "Pittsburgh's universities are providing the high-caliber research and the talent needed to grow technology firms," he noted. "Tenants from the suburbs are migrating toward the urban core in an attempt to recruit the talent coming out of the universities." But he cautions that Pittsburgh may be experiencing rapid growth in too short a time period. The challenge currently on the plate is being able to grow the population and talent pool at a rate to accommodate new businesses entering the market.
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Walmart Partners With Google for Voice-Assisted Grocery Shopping
CNN (04/02/19) Meyersohn, Nathaniel

Walmart this past week announced a partnership with Google that will enable its shoppers to order groceries for home delivery and pickup via Google Assistant. By the end of the current month, voice shopping for pickup will be available at over 2,100 Walmart stores and online delivery at more than 800 locations. Walmart customers' purchase histories will be linked to Google Assistant. Consequently, the assistant will know which type of products individual customers prefer. The partnership with Google gives the Arkansas-based retail giant a better chance to win over customers who purchase groceries via voice assistants. Voice shopping currently comprises a very small fraction of retail spending, but analysts forecast it will become substantially more popular in the coming years.
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News summaries © copyright 2019 SmithBucklin



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