Real Estate Management News - 06/13/2018

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June 13, 2018
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IREM® HEADLINES
Johannesburg Program Boasts Successful Second Year
Seeing Through the Haze: Managing Marijuana
Take the IREM Energy Efficiency Survey for a Chance to Win a $100 Amazon Gift Card

INDUSTRY HEADLINES
Amenity-Laden Buildings Are Suburban Landlords’ Latest Tool to Attract Tenants
Rooftop Pools, UFC Gyms and Cycling Studios: Fitness Centers Filling Retail Void at Chicago-Area Malls
Yardi: National Average Rent Rises $4 to $1,381
San Francisco’s 1986 Cap on Office Space Now a Hurdle — but Fix May Be in Works
Stay Longer, Spend More: Shopping Centers And Hotels Find Common Ground
Apple Expands Indoor Maps Availability at Airports and Malls
The Death of the Small Apartment Building
The Next Wave in Experiential Retail: Coworking
Hudson's Bay to Close Up to 10 Lord & Taylor Stores as Losses Mount
Pop-Up Hotel to Operate Out of Upscale Baltimore Apartment Building
Should Shopping Malls Ban Teens? Many Already Have
'End-of-the-Road' Office in Ely Gets on the Internet Fast Lane


 

IREM Headlines


Johannesburg Program Boasts Successful Second Year

Last week, for the second year in a row, promising students from the University of Witswatersrand (Wits), in Johannesburg, sat for the CPM final exams to complete their journeys to become CPM Members. They will join the nine CPM Members and 11 Candidates who have already graduated from this program since its inception last year. Their instructor, Fred Prassas, CPM, observed, “The students were energized by the challenges presented, learning to transform theory into applied knowledge.”

IREM’s partnership with Wits University and the South African Institute of Black Practitioners (SAIBPP) provides Wits University real estate students the opportunity to become IREM members by completing all the education requirements locally. All parties involved are hopeful that the program will become part of the standard winter offerings at the university.

IREM became affiliated with SAIBPP in the early 1990s through Mr. Saul Gumede, CPM, and IREM’s first member in South Africa, who fostered the signing of the first protocol between the organizations. Since he joined IREM, Mr. Gumede has worked tirelessly to build an IREM membership base in South Africa. He is excited to see his vision come to fruition with this program. Gumede states, “The South African property industry will benefit from the IREM courses conducted in Johannesburg over the past two years. Already the program has had close to 50 students to date.”

The South African government does not currently recognize a formal accreditation program or designation for property management. Local organizers are confident that the IREM curriculum will become the standard for real estate management practitioners in South Africa.

IREM’s program in South Africa was recently recognized by the American Society of Association Executives (ASAE) and will be awarded a 2018 Power of A Silver Award. The Power of A Awards recognize a select number of organizations annually that distinguish themselves with innovative, effective and broad-reaching programs and activities that positively impact the U.S. and the world.
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Seeing Through the Haze: Managing Marijuana

As the legalization, to varying degrees, of marijuana becomes more prevalent throughout the US, the disconnections between regulations set forth by state and federal governments become more challenging to reconcile. What’s being done to close those gaps—and what property managers should be aware of in the meantime—is what IREM President Donald B. Wilkerson, CPM, covers in Straight Talk About Pot Shops, his latest column for NREI. In it, he cites a scenario outlined in the latest issue of Journal of Property Management, and experienced firsthand by CPM Robert S. Griswold, to illustrate how difficult it can be to navigate the different levels of regulation. Wilkerson also speaks with Megan Booth, senior policy representative at the National Association of REALTORS®, who stresses the importance of knowing your state laws and local courts so as not to put your property and business in jeopardy or run afoul of ADA regulations. Says Booth, “You could have a conflict when you deny someone accommodation and the state says they should receive it. Know how your local courts treat the issue.”

Click here to read Wilkerson’s full NREI article.
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Take the IREM Energy Efficiency Survey for a Chance to Win a $100 Amazon Gift Card

IREM is studying the role of real estate management practitioners in energy efficiency. We hope you will take about 10 minutes of your time to participate and share your unique experiences with us. Your involvement in this survey will help IREM develop more resources for you and your teams, to aid you in managing the energy at your properties more efficiently.

Your input regardless of your property type is much appreciated, even if you do not have formal energy efficiency practices. Your responses will be reported in aggregate form only. And in appreciation, you will receive:

• A chance to win one of five $100 Amazon gift cards
• One free registration to the IREM online course, Accessing and Using Energy Data to Improve Property Operations

Click on the link below to complete the survey by Wednesday, June 27.

Take the Survey

Please do not repeat the survey if you have already completed it via the email sent to IREM Members on June 12.

Questions about this initiative? Email Todd Feist, IREM’s sustainability program manager, at tfeist@irem.org.
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Industry Headlines


Amenity-Laden Buildings Are Suburban Landlords’ Latest Tool to Attract Tenants
Wall Street Journal (06/10/18) Morris, Keiko

Owners of suburban office parks have resorted to everything from food trucks to on-site yoga studios to keep their space occupied. Now another feature is emerging: a stand-alone building devoted entirely to amenities. One example is the Warren Corporate Center, an office park in Warren, N.J. Owned by a venture of Rubenstein Partners LP and Vision Real Estate Partners, the partners are investing nearly $12 million to build a 19,000-square-foot structure just a short stroll from the office park's five buildings. It will house a landscaped roof deck, a basketball court, a fitness facility, dining options, a conference center and meeting spaces. "It's all based around the hospitality experience brought to the office world," explains Stephen Card, a principal of Philadelphia-based Rubenstein. The goal is to offer features designed to create an urban-style environment to attract and retain top talent. Jeremy Neuer, executive vice president at CBRE Group Inc., observes, "The landlords who are winning are providing unique experiences around tenants. If they're not investing, they're going to lose."

Another example is in Kearny Point, N.J., where developer Hugo Neu Corp. is renovating an early 20th-century brick building into a public food hall with a bar and brewery on a 130-acre office and industrial campus. The firm is also adding walking paths and an amphitheater for events and concerts, among other features. Investing in these and other amenities is paying off for some building owners. For instance, Rubenstein got the idea of a stand-alone amenity building from its redevelopment project of a three-building campus in Whippany, N.J. The campus was only 50 percent leased six years ago when a venture of Rubenstein and Vision bought the campus for $25 million. The venture increased its occupancy by adding an amenity building that included a cafe and fitness center. In 2017, the venture sold the campus to Barclays PLC for $69 million.
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Rooftop Pools, UFC Gyms and Cycling Studios: Fitness Centers Filling Retail Void at Chicago-Area Malls
Chicago Tribune (06/08/18) Zumbach, Lauren

Shopping centers for years shunned gyms and workout studios as potential tenants, believing customers would clog parking lots without patronizing their stores post-workout. However, changing shopping habits and the rise of online retail have pushed mall operators to turn their empty stores into places for customers to do more than just shop. Increasingly, that means gyms and fitness centers. Consumers are growing more health-conscious, so "it's the perfect storm," comments Jason Press, vice president at real estate firm JLL. The trend is clearly growing. The amount of space leased by fitness centers and gyms in malls and upscale open-air shopping centers has increased nearly 69 percent nationwide over the last five years, according to CoStar Group. Over that time span, the number of leases has nearly doubled.

In Chicago, nearly a dozen gyms have leased space in malls and multi-tenant shopping centers in each of the last five years. Examples include the Equinox fitness club at 900 North Michigan Shops and a rock climbing gym at Block 37 on State Street. Property professionals say more gyms are headed to Chicago-area malls, most notably a three-story Life Time club with a rooftop pool on the site of a former Sears Auto Center at Oakbrook Center. Sean McCourt, vice president at CBRE, sees it as part of a broader interest in catering to the "self-care" trend, with salons and massage providers also expanding.
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Yardi: National Average Rent Rises $4 to $1,381
Multifamily Executive (06/07/18) Salmonsen, Mary

U.S. multifamily housing rents increased by $4 to $1,381 a month in May, according to Yardi Matrix's latest Matrix Monthly report. Rents have climbed by $14 in the last three months and $15 year to date – a weaker rate of rent growth than the same period a year ago when monthly apartment rents increased $25 from January to May. Researchers note that the top four metro markets for rent growth are concentrated in the Southern and Western Sunbelt regions. Only two major metros registered rent growth above 4.0 percent year over year in May: Orlando (5.3 percent) and Las Vegas (4.9 percent), followed by Sacramento and Tampa at 4.0 percent each. Conversely, a glut of new apartment supply in once-high-growth markets has resulted in decelerating and even negative rent growth in such cities as Austin (-0.5 percent year over year) and Portland (0.4 percent).
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San Francisco’s 1986 Cap on Office Space Now a Hurdle — but Fix May Be in Works
San Francisco Chronicle (06/04/18) Dineen, J.K.

San Francisco Mayor Mark Farrell and Supervisor Aaron Peskin last week announced they think they've found a solution to a problem posed by Proposition M, a 1986 cap on development that threatens to block millions of square feet of new commercial space South of Market. The fix has the potential to usher in several high-profile projects, including the new San Francisco Flower Mart. It has its roots in a short-lived real estate trend that swept the city in the mid-2000s: a rash of conversions that transformed older office buildings into residential condominiums. Peskin and Farrell have teamed up to co-sponsor an ordinance that would allow office space converted to residential use to be reallocated as commercial space available to be developed. That amounts to about 1.3 million square feet.

The law would need Board of Supervisors' approval, but would not have to go before the voters. Voters originally passed Prop. M to stop the so-called "Manhattanization" of San Francisco's Financial District. It limits the amount of office development the city can approve to 950,000 square feet a year. The space under the cap accumulates during economic downturns when there is little incentive to build. But it is quickly gobbled up during boom times, such as the current one, when developers are vying to create homes for companies willing to pay rents of $100 a square foot or more for new space. There is currently around 2 million square feet of space available under the cap, with another 950,000 square feet to be added this fall -- not nearly enough to accommodate the approximately 6 million square feet of pending projects.
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Stay Longer, Spend More: Shopping Centers And Hotels Find Common Ground
Forbes (06/08/18) Gose, Joe

The International Council of Shopping Centers (ICSC) recently held its annual RECon convention in Las Vegas to discuss and explore industry trends, challenges, and opportunities. This year's agenda included a panel on hotels as alternative uses in shopping centers. "Hilton has been coming to the ICSC show for almost 20 years, and we used to be stowed away in this really small room and nobody would ever come by,” panelist Tom Lorenzo, a Hilton Hotels & Resorts vice president who oversees development in the Northeast and Canada, told attendees. "But we've seen quite a transformation of interest where you, as retail developers, seem to be contemplating putting hotels in your projects." Pairing lodgings with nearby shopping is not a new concept. Shopping centers and retail-oriented mixed-use projects have included hotels in recent years. Today, though, retail developers are adding hotels with more frequency and are placing them in increasingly prominent and integral locations.

This is part of a broader strategy to find uses that will drive additional traffic to these shopping centers. In turn, centers are becoming a preferred destination for hotel investors eager to provide more amenities to their customers. Panelist Eric Jacobs, Marriott International's chief development officer for select brands in North America, remarked, "It's just the evolution of real estate. Travelers want to know that they can walk to entertainment, retail and restaurants." In May, Marriott and Simon Property Group made headlines by announcing they would add at least five hotels to Simon shopping centers in the future. To be sure, hotels are not a panacea for struggling shopping centers. Developers first need to determine whether hotel demand exists at a location. Except for tourist or regional shopping destinations, that often requires a significant business presence nearby. In addition, because lodgings experience daily lease turnover, retail landlords developing hotels need to be aware they are taking on a complex business with substantially more risk than simply owning real estate.
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Apple Expands Indoor Maps Availability at Airports and Malls
Mac Rumors (06/07/18) Rossignol, Joe

Apple Maps has gained indoor maps for an additional four international airports and one shopping mall. An indoor map is now available at the Trinity Leeds shopping center in England, reads Apple's iOS feature availability page. Indoor maps at shopping malls make it easier to find the exact location of stores, eateries, restrooms, elevators, escalators, and stairs on each floor. The feature enables users to filter stores by categories, such as clothes, shoes, beauty, food, and more, with detailed place cards for each. When the feature launched with iOS 11, indoor maps were only available in a handful of malls and airports worldwide. But Apple has been steadily adding locations over the last year. The list now includes terminals and shopping malls in such cities as Baltimore, Berlin, Boston, Chicago, Dallas, London, Los Angeles, New York, San Francisco, Toronto, the District of Columbia, and more.
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The Death of the Small Apartment Building
Bloomberg (06/05/18) Fox, Justin

Big apartment buildings are going up at a record pace in the United States, often at the expense of smaller ones. Housing observers warn this is a problem. Developers in the U.S. built approximately 358,000 units of new multifamily housing in 2017. According to the annual Characteristics of New Housing data released by the Census Bureau a week ago, the new apartments are concentrated in bigger and bigger buildings. The 187,000 units in buildings of 50 or more units completed last year marked a record high. Meanwhile, there were only 27,000 apartments/condos/duplexes completed in buildings of two to nine units, down from their 1973 peak of 288,000. Analysts observe that much of the shift has to do with the rise of no-growth, not-in-my-backyard politics since the 1960s -- a political movement that has been strongest in homeowner-dominated suburbs.

As a result, as BuildZoom chief economist Issi Romem demonstrated in a study earlier this year, nearly all the housing construction in expensive, space-constrained coastal metro areas like Boston, Los Angeles, and Seattle is now happening in and around established urban centers. As barriers to new construction -- land costs, labor costs, zoning rules, and so forth -- have increased, the threshold project size needed to turn a profit has increased even in less expensive metro areas. One other factor is that REITs, limited partnerships, limited liability companies, and the like have taken over from individuals as the dominant players in multifamily housing. Such institutional investors tend to have a greater interest in developing big projects than in constructing fourplexes here and there.
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The Next Wave in Experiential Retail: Coworking
Bisnow (06/07/18) Williams, Champaign

As retail property owners scramble to stay relevant, a jewel of the office sector is coming to retail. "Coworking isn't just isolated to the office environment, it's spreading really fast," states Colliers International National Director of Retail Services Anjee Solanki. In the case of Spacious, a company that transforms eateries during their off-hours into temporary workspace, this has already become a reality. The San Francisco-based firm recently closed on a $9 million funding round with plans to open as many as 100 coworking locations within street-level storefronts in New York City and San Francisco. Spacious co-founder and CEO Preston Pesek remarks, "Traditional retail in the face of Amazon and e-commerce is going to have to figure out how to reinvent themselves. Landlords have been super-interested in what we're doing because we represent the ability to experiment and activate the retail storefront."

CBRE Senior Managing Director of Retail Services in the Americas Todd Caruso is among those not entirely sold on the model. He said the idea of pop-up coworking locations in vacant retail sites may not be the best defensive strategy for landlords eager to revive blighted locations in the short term. Caruso did say, though, that coworking concepts within shopping centers is a viable long-term solution in this evolving retail environment. He also pointed to WeWork's recent purchase of Lord & Taylor's flagship department store in Manhattan where it plans to repurpose the top floors for coworking.
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Hudson's Bay to Close Up to 10 Lord & Taylor Stores as Losses Mount
Financial Times (06/05/18) Yuk, Pan Kwan

Canada's Hudson's Bay has decided to permanently shutter 10 Lord & Taylor department stores after reporting wider losses for the first quarter. The flagship Fifth Avenue location in New York City is among the stores to be closed as the company looks to focus on increasing Lord & Taylor's online presence and helping the mid-market retailer's turnaround efforts. Hudson's Bay currently operates 48 Lord & Taylor stores, with the chain accounting for just 10 percent of its total stores. Hudson's Bay Executive Chairman Richard Baker states, "In addition to making the right strategic decisions to improve our business, we will continue to explore all opportunities to leverage the strength of our real estate portfolio to create value for our shareholders."
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Pop-Up Hotel to Operate Out of Upscale Baltimore Apartment Building
Baltimore Sun (06/07/18) Cohn, Meredith

The developer of a new apartment building in downtown Baltimore has teamed up with a hotel start-up to offer some of the rental units as hotel rooms as it seeks tenants in Charm City's highly competitive multifamily housing market. WhyHotel is set to operate a "pop-up" lodging in the new upscale apartment building located at 225 N. Calvert St., a concept it is bringing to other newly erected apartment towers in other U.S. cities. Developed by Monument Realty, the Baltimore building is presently leasing about 350 one- and two-bedroom apartments for $1,800 to $2,500 a month. According to Michael Darby, principal of Monument Realty, the hotel makes good business sense because putting people inside immediately creates "vibrancy" and provides income.

WhyHotel tested the idea in 50 units of a big apartment building known as the Bartlett just outside Washington, D.C. In the months the hotel was there, it was up to 85 percent occupied. WhyHotel President and co-founder Bao Vuong comments, "We partner with new multifamily builders on their apartment buildings and take around 50 percent of the units and operate a 24/7 staffed hotel. In 18 to 24 months, as the building naturally fills with long-term residents, we wind down. It de-risks the project." The apartments, which will be furnished for hotel guests, offer traditional hotel services by WhyHotel staff. At the outset, the rates will be $129 for a night or $74 a night plus a cleaning fee if the stays are longer. Guests can stay as long as 90 days.
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Should Shopping Malls Ban Teens? Many Already Have
NJ.com (06/05/18) Gray, Matt

More than 100 shopping malls nationwide now have some sort of curfew in place intended to cut down on shoplifting and large gatherings of rowdy teens. Most of these entail limiting shopping hours on Friday and Saturday nights for those 17 or younger and unaccompanied by an adult. While malls have seen trouble with kids since the first centers opened their doors decades ago, social media has created fresh challenges. Now kids can plan meet-ups to cause trouble, and the resulting mayhem often gets filmed and shared on the Internet -- bad publicity for the malls involved. Owners and operators have to be especially mindful on certain highly visible dates. On Dec. 26, 2016, for instance, large-scale teen fights were organized via social media and reported at several malls nationwide.
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'End-of-the-Road' Office in Ely Gets on the Internet Fast Lane
Minneapolis Star Tribune (06/09/18) Louwagie, Pam

The new Ten Below Coworking space in the Minneapolis suburb of Ely, Minn., boasts the city's first superfast fiber-optic broadband connection available to the public. Organizers are hopeful it will serve both locals and visitors who need better Internet access to conduct business. Project coordinator Richard Stuart remarks, "We have a lot of folks who come and enjoy our outdoor amenities and everything that there is to do here in Ely, but some folks still need to be tethered -- even if it's for a few hours at a time -- back to their home offices." Reliable Internet is a must. The Ten Below Coworking space is modeled after those in bigger cities. However, the fees charged are significantly less, ranging from $15 for a one-day pass to $175 for a monthly pass with 24/7 access. Ely Mayor Chuck Novak says the space is part of a larger plan to bring Internet fiber to the rest of downtown.
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