Northeast Feature Archive

victory

The modern craft beer brewery has emerged as a niche community anchor with flexible business models and loyal customer bases across the United States, particularly in the Northeast. Combining elements of retail, industrial and hospitality models, craft breweries have quickly become one of the most dynamic and trendy business types in major cities and small towns, alike. Some of the largest and most popular craft breweries in the United States are based in the Northeast, including the two largest: Pennsylvania-based D.G. Yuengling & Son Inc.; and Boston Beer Co., the parent company of Samuel Adams. Vermont has the most breweries per capita in the United States with more than 66, according to the national Brewers Association’s most recent nationwide census in 2018. The census identified more than 155 breweries in Massachusetts and more than 354 breweries in Pennsylvania — and those numbers have only increased over time. “Massachusetts and Pennsylvania both have a long history in brewing, and there’s a lot of variation from region to region — even city to city,” says Bart Watson, chief economist for the Brewers Association. “Breweries appeal to their hyper-local community and also can bring in a lot of tourism and outside dollars. During …

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Mike Coyne Walker & Dunlop

Think Boston multifamily is overbuilt or overheated? Think again. Due to superb fundamentals and a slowing development pipeline, Boston is now regarded as the number one metro area for multifamily investment. From 2019–2030, Boston will need to add 51,007 units to accommodate population growth, an average of 4,637 units per year. Recent development (2014­­­–2017) averaged 3,334 units per year. Population and job growth are expected to remain strong, fueling continued demand for multifamily housing and countering arguments that the Boston market is overbuilt. Many developers nationally are interested in the market. The construction pipeline for multifamily properties features organizations with headquarters as far away as Portland, Phoenix, and Dallas. The Houston-based Hanover Company, for example, has four properties totaling over a thousand units in the Boston development pipeline. Boston is a seller’s market as well, with deals typically attracting multiple bids, and it is easy to see why. For investors, Boston is a market with an average cap rate of roughly 4.5 percent. This is the same cap rate as Raleigh or Central Florida — two markets generally considered to be more volatile than Boston in the case of a recession. A Reliable Hub Becomes a Vibrant City “Historically, people …

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Foreign investors in U.S. commercial real estate are on pace this year to sell more assets than they acquire on an annual basis — something that hasn’t happened in seven years. Through the first three quarters of 2019, foreign investment in U.S. commercial real estate totaled $30 billion, compared with $60.6 billion during the same period in 2018, according to Real Capital Analytics (RCA).The New York City-based commercial property research firm tracks deals of $2.5 million and above. To be sure, the lack of large entity and portfolio transactions driven by foreign buyers that beefed up last year’s cross-border sales volume are partly to blame. But so are a number of other factors, which have largely relegated many foreign investors to the sidelines. Those factors include premium pricing, a prolonged period of high hedging costs, and an economic expansion that has lasted so long that it resembles the second game of a baseball double-header. The falloff in demand has affected core office assets in major markets in particular, say commercial property experts, but cross-border buyers continue to expand into secondary markets and a broader range of properties (see sidebar). Nevertheless, commercial property experts remain confident that foreign investors are on …

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Bob Yoshimura of Lee & Associates: I would characterize the industrial sector as the most sought-after asset class across all commercial property types.

Real estate buyers spent a record-setting amount of cash in the sector in the third quarter and remain bullish on the properties amid healthy absorption and rent growth. The industrial real estate sector, traditionally known as the land of big, boring boxes, has become the darling of real estate amid the growth of e-commerce. Investors have poured hundreds of billions of dollars into industrial properties over the last five years alone, and not even the prospect of new construction potentially outpacing demand has tempered enthusiasm. “With online sales continuing to grow at a faster rate than general retail sales, there is no lack of continued tenant demand for industrial warehouses and flex and distribution space,” says Rebecca Wells, CCIM, senior vice president and principal of commercial real estate service provider Lee & Associates in Indianapolis. “We expect investment activity will continue at a red-hot rate through the end of this year and into 2020.” Industrial sales totaled $40.6 billion in the third quarter this year, the highest dollar volume ever recorded in a single quarter for the property type, according to Real Capital Analytics, a New York-based researcher that tracks commercial property deals of $2.5 million or more. An $18.7 …

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PHILADELPHIA — Will today’s emerging aging-in-place technologies, designed to help the elderly remain in their own home for a longer period of time, lead to significantly reduced demand for seniors housing? The question was a hot topic at the InterFace Seniors Housing Northeast conference last Thursday in Philadelphia following a recent front-page article in The Wall Street Journal under the following headline: “Boomers Want to Stay Home. Senior Housing Now Faces Budding Glut.” The piece argues that aging-in-place technology poses a challenge to builders of senior living communities, particularly at a time when developers are adding new supply at a healthy clip and occupancy rates remain relatively stagnant. Nationwide, the occupancy rate for seniors housing (assisted living and independent living combined) was 88 percent in the third quarter of 2019, up 30 basis points from the prior quarter, but down from 90.2 percent in the fourth quarter of 2014, according to the National Investment Center for Seniors Housing & Care (NIC) based in Annapolis, Maryland. Seniors housing developers added 21,332 units in 2018, more than double the number added in 2014, The Journal reported based on NIC data. Venture capitalists and other companies are expected to invest about $1 billion this year …

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Owners of properties with environmental contamination already carry the financial burden of removal or remediation costs, whether they cure the problem themselves or sell to a buyer who is sure to deduct anticipated remediation expenses from the sale price. Fortunately, New York law allows those property owners to reduce their property tax burden to reflect their asset’s compromised value. Tax Types Most local governments in the United States impose a property tax on real estate as a primary source of revenue, levied and calculated by either ad valorem or specific means. Latin for “according to value,” ad valorem taxes are imposed proportionately based upon thecurrent market value of the property. Thus, the higher the market value, the higher the real estate tax. Specific taxes, on the other hand, are fixed sums without regard to underlying real estate value. School, county and town governments nearly always compute real property taxes using the ad valorem method, whereas lighting, garbage or sewer districts typically apply specific taxes. Because school and county/town taxes account for the overwhelming majority of a property tax bill, property owners frequently use assessment litigation concerning the market value of the subject property to reduce assessments and, as a result, …

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With some of the oldest members of Generation Z coming onto the rental scene seeking out their first college and post-college apartments, developers and property owners must start paying closer attention to this new audience. While Gen Z and millennials have quite a bit in common, they also differ in some fundamental aspects and demand different standards of living in residential spaces. Just when owners and property managers are finding their footing with millennials, Gen Z will reshape the rules. Who is Gen Z? Gen Z is the population born in and after 1995. With the oldest members having just graduated college in the last few years, this is the beginning of their descent on the rental market. Since they came of age during the Great Recession and watched their parents struggle to make ends meet, Gen Z has a more conservative approach to spending compared to millennials. They are also less likely to uproot and relocate for a new job, as telecommuting and the freelance career path allows them to create their dream job right where they are. Gen Z is a generation that has grown up with standard two-day delivery, on-demand TV shows, movies downloaded within a minute …

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Student loan figures indicate a growing affordability problem in higher education. The Federal Reserve reports that student loan debt in the United States is almost $1.6 trillion today, with 42 percent of people who attended college — which represents 30 percent of all adults — incurring at least some debt from their education.  With a focus on technology-based degree programs, the cost to attend college is rising. But it’s not just tuition that’s going up. According to College Board, the cost of housing exceeds the cost of tuition at four-year, public universities. For the 2017-2018 academic year, students paid an average of $9,970 for in-state tuition while room and board ran $10,800. “There’s a real need to get to the middle of the market and to build quality housing that students can afford,” says Joe Coyle, president of Michaels Student Living. Michaels Student Living is a specialized area of expertise within The Michaels Organization, a leading affordable housing developer in the United States. “Housing is a big part of what contributes to the high cost of attending college. We have to work together to find ways to mitigate this. It’s going to become more and more important.” While the student …

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Digital connectivity and rising costs are rapidly transforming industries across the country, and healthcare is certainly no exception. Digital health solutions and the material realities of the economy, along with a changing regulatory landscape, are reshaping the way providers deliver care. For example, the increased uses of telehealth, artificial intelligence (AI) and more community-based facilities (such as urgent care centers) are changing the spaces providers need. This activity is in turn altering the real estate, construction and project management strategies for healthcare providers. Healthcare real estate professionals, from in-house capital project leaders to general contractors and project managers, should be aware of two trends particularly driving this sea of change in healthcare real estate: evolving technology and an industry-wide transition to value-based care. These trends are fueling the creation of larger, centralized healthcare systems with more expansive networks of agile, strategic facilities. Specifically, the industry is moving away from inpatient hospital settings and toward ambulatory care and community-based facilities as part of a larger healthcare system. In turn, built-environment professionals are being commissioned for more agile, specialized and technologically enabled capital projects over more geographically dispersed areas. With this activity comes change to how real estate professionals deliver projects for …

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Two years ago Chinese regulators restricted capital from leaving its shores, driving down foreign investment in U.S. commercial real estate to well below the record of nearly $100 billion set in 2015. But cross-border inflows in 2018 were on pace to exceed 2017’s total of roughly $52 billion, according to commercial property research firm Real Capital Analytics (RCA). Hurdles threaten to trip up the momentum, however. The Federal Reserve Board’s tightening monetary policy, which has set it apart from most other developed countries in the world, has increased the risk that future currency fluctuations could eat away at returns when foreign investors sell a property and convert the proceeds back into their country’s currency. As a result, the cost to insure, or “hedge,” against adverse currency moves has increased over the last several months. Those factors are also making other global markets like Europe and Asia more attractive. Additionally, trade disagreements and shifting regulations, including heightened efforts to thwart money laundering and to prevent foreign acquisitions of sensitive U.S. assets or properties near them, also are making it harder for some offshore buyers to deploy money in the United States (see sidebar). “Offshore investment is muted at the moment,” says …

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