Features

Strong Demographic Trends Drive Investment Activity in Medical Ofﬁce, Says Marcus & Millichap

by John Nelson March 2, 2017

As the 65-and-older age segment increases by 20 million individuals over the next 10 years, demand for healthcare services will rise, which attracts investors to the long-term growth potential of medical office real estate. Institutional funds and REITs are actively searching for larger healthcare deals and portfolios, and private capital is emerging as a major option in the $5 million to $20 million-price range and could begin to take a larger share of transactions this year, according to Marcus & Millichap’s National Medical Office Research report. A rise in crossover capital is also increasing competition for medical ofﬁce properties as single-tenant retail investors target similar investment opportunities in this segment for higher yields. For-sale inventory is limited as medical ofﬁce assets are in high demand with cap rates compressing over the past several years. On-campus medical ofﬁce buildings command top cap rates, trading at sub-6 percent initial yields for single-tenant properties, while multi-tenant buildings draw ﬁrst-year returns in the mid-6 to low-7 percent range, according to the report. Off-campus medical ofﬁce properties with strong tenancy, which often include a healthcare system and long remaining lease terms, are in high demand. These properties fetch initial returns in the mid-6 percent area. …

March 2, 2017

Features Mixed-Use Top Stories

AIA’s First Architecture Billings Index for 2017 Slips into Negative Territory

by John Nelson February 28, 2017

WASHINGTON, D.C. — The first Architecture Billings Index (ABI) of the year slipped below the positive mark, reflecting a decline in demand for design activity at architecture firms. The American Institute of Architects (AIA) reported the January ABI score was 49.5, down from a very strong 55.6 in December 2016. The score reflects a decrease in design activity, with any score above 50 indicating an increase in billings. The new projects inquiry index was 60.0, up from a reading of 57.6 the previous month, and the design contracts index, which is an early indicator of construction contract awards, was also positive with a mark of 52.1. Given the positive showing for the new projects inquiry and design contracts indices, Kermit Baker, AIA’s chief economist, isn’t too concerned about the ABI starting 2017 in the negative territory. “This small decrease in activity, taking into consideration strong readings in project inquiries and new design contracts, isn’t exactly a cause for concern,” says Baker. “The fundamentals of a sound nonresidential design and construction market persist.” Regionally, the West was the only geographic region with a negative showing (48.8). The South led the way with a 54.2 mark, followed by the Northeast (53.0) and …

February 28, 2017

Features Loans Top Stories

After Strong 2016, Commercial Lenders Prepare for a Slightly Better 2017

by Kristin Harlow February 23, 2017

SAN DIEGO — Commercial mortgage lenders, their correspondent lenders and brokers gathered this week in San Diego at the annual MBA CREF Conference held at the Manchester Grand Hyatt. The Mortgage Bankers Association (MBA) reports 3,200 attendees at this year’s conference, a 10 percent rise in attendance over 2015. Mortgage bankers are fresh from one of the strongest years in originations in an era that shows few signs of a slow down. While there are some possible speed bumps in 2017, many attendees were upbeat and positive about 2017 and beyond for the commercial real estate lending industry. MBA reported its results for the industry in a session with its chief economist and senior vice president of research and technology, Michael Fratantoni, and vice president, commercial real estate research, Jamie Woodwell. Volume was up in commercial mortgage lending in 2016, with a record $502 billion in originations. MBA has forecasted 2017 to have a slightly larger volume of $515 billion. MBA cites continuing strong commercial real estate fundamentals as the main reason for the predicted increase in 2017, with other factors including a strong job market and relatively low interest rates. MBA’s forecast does not include any possible economic stimulus — …

February 23, 2017

Features Top Stories

Rising Interest Rates Top Concern for Real Estate Executives, According to Seyfarth Market Sentiment Survey

by Kristin Harlow February 21, 2017

CHICAGO — Rising interest rates continue to dominate concerns for U.S. commercial real estate executives in 2017, according to Seyfarth Shaw’s second annual survey of the commercial real estate market. Seyfarth’s 2017 Real Estate Market Sentiment Survey found that respondents are even more hawkish about interest rate increases this year (98 percent concerned) compared to last year (90 percent concerned). Of these “hawks,” 77 percent expect multiple rate increases in 2017. Other topics rounding out the top three concerns include supply/demand issues and banking regulations. Notably, political change-over and tax policy rank fourth and fifth this year, overtaking maturing CMBS loans from the previous year. Concern regarding the industry’s ability to refinance record levels of maturing CMBS loans remains strong with 86 percent of respondents expressing concern, nearly matching the 87 percent in 2016. Participants were also asked their primary source of equity for 2017, to which 36 percent of respondents indicate that institutional investors would be their primary source of equity. Comparatively, 21 percent report no engagement of third-party equity. Over two-thirds of respondents believe that the Trump presidential administration will have a positive impact on the 2017 commercial real estate market. Of those respondents, deregulation was top of …

February 21, 2017

Conference Coverage Features Retail Top Stories

Building Emotional Connection to Visitors Paramount to Retail Success, Say EEE Panelists

by Katie Sloan February 16, 2017

SANTA MONICA, CALIF. — The retail landscape is changing, and the tried and true formulas for retail centers and malls are no longer cutting it. The convenience of e-commerce is cutting into purchases once almost exclusively entrusted to the local mall, and consumer tastes are evolving to demand better experiences from the centers they choose to shop at with their discretionary dollars. Those were the conclusions suggested by panelists at the third annual Entertainment Experience Evolution (EEE) conference, where over 550 retail experts and top industry players joined Shopping Center Business at the Fairmont Miramar Hotel & Bungalows in Santa Monica Feb. 7-8. Panelists and attendees were there to discuss the future of retail and the brightest and best upcoming trends for success in today’s changing landscape. Overwhelmingly, the conversation focused on creating an emotional connection with visitors. When it comes to discretionary purchases, shoppers seek a space where they can create memories, not just pick up merchandise and leave. This connection is attained through thoughtful placemaking, a carefully chosen mix of unique shopping and dining, the hosting of community events and the creation of an environment through lighting, music and landscaping. Creating Memory-Making Destinations After opening remarks by Jerry …

February 16, 2017

Features Healthcare Top Stories

Looming Repeal of Affordable Care Act Shakes Up Otherwise Healthy Forecast for Healthcare Real Estate

by Katie Sloan February 14, 2017

In 2016, the national vacancy rate for medical office buildings hit an all-time low, net absorption rose to its highest mark since 2008, rents grew and investment activity remained strong. But despite last year’s strong performance, Colliers International’s 2017 Health Care Marketplace Report shows that questions loom for the year ahead in the medical office space. While every administration change causes some degree of uncertainty, this year’s shift is markedly different as healthcare providers and system owners face the possible repeal of the Affordable Care Act and the details of the coverage set to replace it. Healthcare providers are also grappling with the implementation of the final terms for the site-neutral payment rule — which limits the way off-campus facilities are reimbursed by Medicare — and a continued rise in costs, from services provided to construction materials and labor. The report predicts that decision-making in the sector is likely to be delayed for a time, especially if policy changes surrounding the Affordable Care Act evolve over a protracted process. An additional burden to the healthcare industry is the continued aging of a large segment of the U.S. population. Healthcare expenditures per capita surpassed $10,000 in 2016, and are forecast to …

February 14, 2017

Features Office Top Stories

U.S. Office Sector’s Fundamentals Stall Despite Growing Economy, Says Ten-X Research

by John Nelson February 9, 2017

IRVINE AND SILICON VALLEY, CALIF. — The U.S. office real estate sector’s fundamentals appear to be stalling after years of slow recovery, as vacancy rates remain stubbornly high despite a healthy labor market and growing national economy, according to Ten-X’s latest U.S. Office Market Outlook. Ten-X cited Reis data that shows the national vacancy rate for office space has held steady at 16 percent for three consecutive quarters. Vacancies are now 40 basis points lower than a year ago and 160 basis points below their cyclical peak, but they remain well above levels seen during the last economic cycle. Only 70 million square feet of new supply has been occupied during each of the last two quarters. Rent growth has hit a similar slump, with effective rents edging up just 0.4 percent in the third quarter of 2016 and 2.8 percent over the past year — the slowest annual growth since mid-2014. The downturn in office fundamentals comes despite a strong labor market that continues to add jobs and a steadily expanding economy. Low unemployment, consistent payroll gains and rising wages should offer a boost to overall demand for office space, though the national economic picture is marked by stark differences among markets …

February 9, 2017

Features Top Stories

Property Insurance Forecast for 2017: Reinsurance Industry Keeps Clouds Away

by John Nelson February 7, 2017

As commercial property owners renew their insurance programs in 2017, they’ll be pleasantly surprised to see their property premiums continue to decrease. Those owners can thank favorable meteorological and financial conditions for their good fortune. Florida hasn’t been hit by a major hurricane in more than a decade. Hurricane Matthew skirted much of Florida’s coast, ultimately wreaking damage and disruption in Jacksonville, but overall, had a relatively small impact on the state and the insurance industry as a whole. Insurers have enjoyed the good weather, which has attracted more competitors to the state at the primary and reinsurance levels, while better technology and predictive modeling have driven property catastrophe (CAT) coverage closer to a commodity, making it difficult for existing carriers to firm up rates, let alone drive increases. Weathering the Storm Even if we were to experience major storms in 2017, the effects of any jolt would be contained. As carriers begin the new year with significant surplus in their coffers and the January treaty renewals wrapping up, initial reports point to another year of declining reinsurance costs. For carriers, the cost of capital has declined materially for years and their ability to strike a better deal has cascaded down …

February 7, 2017

Features Industrial Southeast Feature Archive Top Stories

Southeastern Ports Adjust to Expanded Panama Canal

by Jeff Shaw February 2, 2017

The Southeast’s top seaports and their surrounding industrial real estate markets have braced themselves for years for the larger post-Panamax vessels that can now pass through the newly expanded Panama Canal. The 102-year-old canal opened in late June 2016 following its $5.4 billion expansion, creating a shortcut for the larger ocean carriers coming from Asia. The opening of Panama Canal’s expansion was delayed by two years, missing the 100-year anniversary of its 1914 debut. Shipping companies had their larger vessels in place, though, and decided to ship those vessels to the East Coast via the Suez Canal, according to Walter Kemmsies, managing director, economist and chief strategist of JLL’s U.S. Ports, Airports and Global Infrastructure Group. “As the Panama Canal gets through the learning curve, we’re seeing the number of weekly transits increase, and we’re still in that phase and perhaps will be for the next six months,” says Kemmsies, who is currently engaged with three of the top five seaports in the United States on their master plans. “The ocean carriers are starting to scrap their smaller vessels and moving their services back from the Suez Canal to go through the Panama Canal. Right now the East Coast has …

February 2, 2017

Features Mixed-Use Texas & Oklahoma Feature Archive Top Stories

Texas Developers Bet on Entertainment

by Jeff Shaw January 31, 2017

Recognizing that today’s retail environment stresses experience over shopping, developers of mixed-use communities in Texas are more frequently signing entertainment-oriented tenants to spaces that traditionally would have been reserved for department stores and inline soft goods retailers. Developers pursue different types of entertainment tenants, depending on the projects, their locations and their audience. All of the projects leverage a growing number of new options in the food and beverage category, including food halls, artisan markets and re-imagined restaurants and bars. Boutique movie theaters and bowling lounges — concepts that also strive to give patrons a unique food-and-beverage experience — are in demand, and are in expansion mode. Many landlords are adding specialty gyms or health-oriented services like yoga venues. And when it comes to pure retail, developers are enlisting operators that provide a differentiated customer experience across all categories, from beauty supply to sporting goods. For example, in 2015 beauty goods retailer Sephora launched in-store technology and education initiatives to enhance the customer experience, while newer Scheels sporting goods locations typically feature an indoor Ferris wheel, aquarium and other interactive attractions. Mixed-use developers are also creating Wi-Fi accessible public spaces with artistic and landscaping elements where customers, residents or workers …

January 31, 2017

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