Heartland Feature Archive

Pandemic Puts Outdoor Amenities, Middle Markets into Multifamily Spotlight

by Kristin Harlow January 5, 2021

The impact of COVID-19 on the multifamily sector may not have been as severe as its effect on the retail or office asset classes, but there are still many ways that those professionals active in the multifamily space adapted to pandemic-driven changes. Some of these adjustments, such as virtual apartment tours, are likely permanent. Here are four pandemic-related trends expected to influence the multifamily sector in 2021, according to a roundup of Midwest-based real estate experts. Incorporating biophilic design With the COVID-19 pandemic encouraging Americans to stay outdoors for gatherings in effort to reduce transmission of the virus, there is a greater emphasis on the outdoors and nature. Expect multifamily developers to focus more on bringing the outdoors in via building designs, floor plans and amenities. Large outdoor terraces and rooftop amenity areas are becoming increasingly prevalent in new projects, particularly those in urban environments. At Optima Lakeview, a Chicago-area multifamily project currently under construction, developer Optima Inc. incorporated a landscaped interior atrium that will run through the building’s core and bring in natural light. “Green spaces not only improve the air quality for our residents but also those living near our buildings because vertical gardens filter pollutants and carbon …

January 5, 2021

Content Partner Heartland Feature Archive Lument Midwest Missouri Multifamily Ohio RED Capital Group Wisconsin

Cleveland, Milwaukee & St. Louis Multifamily Forecasts Indicate Case for Caution

by Sarah Daniels November 19, 2020

In earlier research, we found that investors may find advantageous risk and reward tradeoffs during the pandemic in often overlooked Midwest secondary markets. For the most part, average rent and occupancy metrics in these markets continued to rise throughout the summer, recession notwithstanding. Together, their inviting cap rates, rising NOI and low historic income volatility form a fairly compelling investment predicate. We also found that positive performance attributes were not limited to the region’s most robust economies. Even metropolitan markets that have experienced slow demographic growth — like Cincinnati and Detroit — posted surprisingly good revenue growth. Can the same logic be extended to metropolitan areas experiencing actual demographic decline? A review of recent trends in three “high-yield” markets with negative population growth – Cleveland, Milwaukee and St. Louis – shed some light on the question. View higher resolution version of chart above here. With respect to occupancy, the answer is yes. In fact, property level data published by Yardi suggest that market conditions in each of these metro areas has been constructive since February. Between February and October, average occupancy among stabilized same-store property samples increased by 14 basis points in Cleveland and 10 bps in St. Louis, in …

November 19, 2020

Content Partner Heartland Feature Archive Lument Michigan Midwest Multifamily Ohio RED Capital Group

Slow and Steady Wins the Race: The Case for Multifamily in Cincinnati and Detroit

by Sarah Daniels November 12, 2020

Investors favor multifamily markets with brisk population growth and meaningful barriers to entry. But can a case be made in turbulent times for slow-growth Midwest cities characterized by weak entry barriers? View higher resolution version of chart above here. Midwest metro areas with relatively healthy demographic growth — Columbus, Indianapolis and Kansas City come to mind — have posted constructive performance trends during the pandemic recession so far, particularly with respect to rent. Among the 10 largest Midwest markets, Columbus recorded the fastest rent growth over the past three years (18.2 percent, according to Yardi Matrix) and nearly the fastest since the beginning of the pandemic (2.9 percent between February and October). Indeed, Columbus, Indianapolis (2.7 percent) and Kansas City (2.3 percent) respectively recorded the third, fourth and sixth fastest rent trends in the region since February, and each readily topped the -1.1 percent U.S. primary and secondary market average. The fastest rent growth in the region, however, was recorded by two metro areas not blessed with brisk population growth — Cincinnati and Detroit. Between February and October all property rents increased 3.0 percent in Cincinnati and 3.4 percent in Detroit, figures exceeded in only a handful of markets nationally. …

November 12, 2020

Content Partner Heartland Feature Archive Indiana Lument Midwest Missouri Multifamily Ohio RED Capital Group

Secondary Midwest Markets: Investor Refuge or Flavor of the Month?

by Sarah Daniels November 5, 2020

More than a few column inches in multifamily media this year were dedicated to the implications of coronavirus on the housing preferences of renter households. Many theorize that the pandemic is leading householders to reexamine their attachment to urban life and consider suburban alternatives that offer larger floor plans, better schools, free parking and unit access without an elevator ride. Available data suggest there is something to this notion. Occupancy and rent in core urban neighborhoods in the primary markets have declined, substantially in the highest-cost cities. Suburban performance, by contrast, is strengthening. What is less certain is whether the same phenomenon is working to the benefit of secondary markets as well as big city suburbs. The jury is still out but investors already have stepped up acquisitions in the Sunbelt growth markets to exploit the opportunity — Austin and Phoenix were among the nine most active property markets in the third quarter, and Raleigh and Charlotte were just a step behind – but what of the staid and stable Midwest? Columbus, Indianapolis and Kansas City (the “Midwest Three”) stand out among Midwest cities as the secondary markets most likely to attract gateway city refugees. Each offers renters most of …

November 5, 2020

Content Partner Heartland Feature Archive Lument Midwest Minnesota Multifamily RED Capital Group

The Twin Cities: An Unlikely Shelter in Turbulent Multifamily Markets

by Sarah Daniels October 27, 2020

The Minneapolis metropolitan area made plenty of headlines in 2020, and much of the news wasn’t good. The social fabric was frayed, and property damage estimated at between $250 million and $500 million ensued. On the surface, the Twin Cities appear unlikely sources of stability and relative safety for multifamily investors, and yet market performance and property value trends have so far proven resilient in the face of adversity. In comparison to many of the primary markets and its regional rival, Chicago, Minneapolis has navigated the effects of the pandemic recession remarkably well and may represent an attractive option for investors who remain committed to the urban mid-rise model, as well as those considering increased exposure to suburban situations. The Minneapolis economy was by no means immune to the effects of public health-related lockdowns. Payroll employment plunged by 270,000 jobs in March and April, representing about 13.3 percent of the February metro total. Although severe, pandemic losses fell below the national average (U.S. payrolls fell 14.6 percent) and were comparable to those recorded in Chicago and Milwaukee. Since April, the Minneapolis labor market has made considerable headway. The unemployment rate dropped to 7.9 percent in August, materially lower than the …

October 27, 2020

Content Partner Heartland Feature Archive Illinois Lument Midwest Multifamily RED Capital Group

Investors Seek Safe Harbor in Chicago’s Apartment Market

by Sarah Daniels October 14, 2020

Multifamily investors prefer to concentrate capital in the primary markets. Although prices are steep and cap rates low, the gateway cities offer private equity and institutional buyers the young, affluent tenants, economic diversification, deep trough of performance data and property market liquidity that can’t be found in smaller cities. Gateway cities offer these assets…until they don’t. The pandemic recession has turned the usual way of looking at things upside down. At least for the moment, tenants are fleeing the high costs and perceived dangers of dense urban living for the relative safety and larger floor plans found in suburbs and, in some cases, secondary and tertiary markets. The impact on property performance is significant. In the modern urban mid- and high-rise buildings favored by large portfolio investors, occupancy and rents are down materially, trimming forward-looking net operating income 15 percent or more in many Los Angeles, New York and San Francisco buildings. Determining fair asset value is nearly impossible under the circumstances. Buyers still may be willing to bid at prices generating deeply sub-4 percent initial yields but only against conservatively underwritten NOI levels that discount an extended period of performance weakness. Few owners are willing to realize the resulting …

October 14, 2020

Features Heartland Feature Archive Kansas Midwest Missouri Retail

COVID-19 Continues to Put Tenant-Landlord Relationships Under Microscope, Say Kansas City Retail Webinar Panelists

by Kristin Harlow September 22, 2020

KANSAS CITY, MO. — The COVID-19 pandemic has continued to highlight the importance of strong tenant-landlord relationships, particularly in the retail sector. Tyler Enders, co-owner of local Kansas City shop Made in KC, works with roughly 10 different landlords and has experienced a variety of different approaches to the COVID-19 conversation. “Some local landlords have been very communicative and have come to us with a creative solution. Others have been responding late and are bogged down,” said Enders. “Ultimately, we’ll continue to look at vibrant centers, but we’re going to care way more about who owns it than we have in the past.” Enders’ comments are indicative of the importance of relationships in today’s marketplace. Enders joined a panel of retail experts Wednesday, Sept. 16 for a webinar entitled “Greater Kansas City Retail Outlook” hosted by Heartland Real Estate Business and Shopping Center Business. Fellow panelists included David Block, principal and president of Block & Co.; Erin Johnston, vice president of retail brokerage for Copaken Brooks Commercial Real Estate; Dan Lowe, managing partner for Legacy Development; and Andy Crimmins, founding partner of Crossroads Retail Group. David Waters, partner with Lathrop GPM, moderated the discussion. Block said that his firm has …

September 22, 2020

Features Heartland Feature Archive Michigan Midwest Retail

Pandemic Accelerates Need for Omnichannel Presence, Say Retail Webinar Panelists

by Kristin Harlow August 28, 2020

As the nation’s retailers adapt to more curbside pickup and outdoor offerings as a result of COVID-19, what will happen in cold-weather states like Michigan once winter hits? Panelists pondered this question during “Michigan Retail Outlook,” a webinar hosted by Shopping Center Business and Heartland Real Estate Business that took place Tuesday, Aug. 25. “We have tenants that are expanding their outdoor seating and planning ahead for winter by adding covers, plastic vinyl or outdoor heaters,” said Mike McBride, senior vice president of asset management for RPT Realty, which has an office in Southfield, Mich. “We’re seeing them expand for the long term with outdoor equipment.” Joining McBride on the panel were Deno Bistolarides of Encore Real Estate Investment Services, Thomas Litzler of Schostak Brothers & Co., Cynthia Kratchman of Mid-America Real Estate — Michigan, Nathan Forbes of The Forbes Co. and Eric Larson of Downtown Detroit Partnership. Todd Sachse of Sachse Construction moderated the discussion. “Europe has lived with outdoor seating 12 months per year forever,” noted Forbes, who is managing partner in Southfield, Mich. “There have to be ways to keep that outdoor space open during the winter months through temporary heating or other measures. We have to …

August 28, 2020

Content Partner Features Heartland Feature Archive Lee & Associates Office Restaurant Retail

Facility Management Will Require Changes Under New COVID-19 Regulations

by Sarah Daniels July 1, 2020

Facility managers across the nation are sorting through information about the coronavirus and looking at building modifications that can prevent the spread. Owners and tenants alike in the office and retail sectors have turned to facility management professionals to help their businesses thrive under rapidly evolving circumstances. REBusinessOnline recently spoke with three facility management professionals from Lee & Associates via video conference about their company’s approach to facility management during the coronavirus pandemic. Teresa Gascho, Director of Management Services, Indianapolis; Frances Smith, Senior Vice President, Property Manager, Cincinnati; and John Rickert, President-Executive Managing Director, Cincinnati, spoke about how facility managers communicate with tenants, encourage healthy behaviors and support businesses in compassionate and creative ways. Communicating with Tenants About COVID-19 Regulations Early in the pandemic, facility managers were charged with limiting access to properties as buildings shut down. Now that occupants are returning to retail and office buildings, the team at Lee & Associates sees themselves as “facilitators and accommodators” for their tenants. Working to reopen buildings under the guidance and recommendations from state health departments and the Centers for Disease Control & Prevention (CDC) is a lot more involved than closing buildings — and it can be frustrating for all involved. However, Rickert notes, “We’re …

July 1, 2020

Features Heartland Feature Archive Northeast Feature Archive Restaurant Retail Southeast Feature Archive Texas & Oklahoma Feature Archive Western Feature Archive

JLL: Coronavirus Is Impacting Retail Supply Chains

by Sarah Daniels March 12, 2020

With the stock market dropping to lows unprecedented since the Great Recession on Monday and the World Health Organization (WHO) declaring the outbreak of COVID-19 a pandemic, concerns are now rising regarding coronavirus’ long-term impact on domestic investments. But will the disease have any impact on brick-and-mortar retail? According to a research report from JLL, while retail supply chains have already been affected, the health of retail as whole depends heavily on how long the pandemic lasts. Certain sectors have already been impacted, and those in the industry can model their current economic outlook on the course SARS (severe acute respiratory syndrome) took in 2003. However, whether that model will hold as the pandemic evolves remains to be seen. The JLL report explains that the type of short-lived and limited outbreak created by SARS mainly affects the “first and second quarters with many retailers feeling impacts of a disrupted supply chain, but with a subsequent rebound in the following quarters.” Sectors already affected include inventory and complex supply lines. Chinese-manufactured goods may not be able to reach retailers in the coming weeks to months, as the retailers’ existing supply diminishes. Fashion stocks, especially for luxury retailers dependent on Chinese consumers …

March 12, 2020

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