Features

Property Owners Recalibrate Expectations Following Financing Challenge, Shifting Vacancy Rates

by Sarah Daniels January 30, 2024

High costs, modulating occupancies and a lack of financing options reshaped the industrial, office, retail and multifamily sectors in the fourth quarter of 2023, signaling the determining factors for 2024, according to Lee & Associates’ 2023 Q4 North America Market Report. The industrial sector saw stabilizing tenant demand — the number of new buildings delivered increased in the fourth quarter, while new construction starts slowed. Meanwhile, the office sector’s struggles deepened as more than half of the office leases signed pre-2020 approach their expiration by 2026. With low-rate loans maturing into a high-rate environment, the factors troubling the office sector seem insurmountable in this decade. In the retail market, low vacancies did not lead to booming construction in that sector in the last quarter of 2023 — financing costs plus land and labor costs have hampered new development in spite of high demand. Finally, the health of multifamily markets is tied closely to geography. Sun Belt multifamily properties and their Midwest and Northeastern market counterparts are seeing reversals from the multifamily trends of 2021: formerly fast-growing Sun Belt markets are experiencing slowed rent growth or rent decline, while rent growth for slower-growing, major North and Midwestern metros has grown steadily. Lee & Associates …

January 30, 2024

Development Features Multifamily Office

The Journey from Empty Urban Offices to Residential Solutions Is a Complex Path

by John Nelson January 26, 2024

By Charvi Gupta of Getzler Henrich & Associates LLC Vacancy rates in office buildings in major metropolitan areas like New York City have surged, driven by the widespread adoption of remote work policies as well as the relocation of major corporate headquarters. With housing shortages exacerbating the issue, there is a growing discourse surrounding the conversion of these vacant office spaces into residential units. According to The Wall Street Journal, 1 billion square feet of office space sits vacant across the United States. While the numbers cover only office mortgages packaged into commercial mortgage-backed securities (CMBS), they reflect a broader freeze in the lending market for office buildings. However, the journey from empty office buildings to habitable residences is far from a linear path and comes with considerable challenges. With numerous examples to examine, as well as insights from financial restructuring consultants to consider, it’s clear that office-to-residential conversions are complex to say the least. Conversion Challenges The conversion process is becoming increasingly difficult. Construction loans are far more expensive than they were 18 months ago, and banks continue to be cautious about development lending, with many conversion efforts on hold because of higher interest rates. Although more cities are …

January 26, 2024

Acquisitions Content Partner Features Loans Midwest Multifamily NAI Northeast Office Retail Southeast Texas Western

Previous Year’s Challenges Shape 2024 Outlook for Cap Rates, Investment Activity, Distressed Properties

by Sarah Daniels January 25, 2024

If NAI Global president and CEO Jay Olshonsky had to use one word to sum up the 2023 commercial real estate market, it would be “inactive.” The interest rate-fueled bid-ask spread stifled investment sales of all property types, and in the office sector especially, tenants avoided making any space decisions if they didn’t have to. One month into 2024, not much has changed. From an investment sales perspective, Olshonsky still sees properties offered at capitalization rates between 4 and 5 percent while interest rates are 6 percent or higher, which is prolonging the disconnect between buyers and sellers. Meanwhile, robust job creation well beyond today’s levels is needed to create the leasing demand that will reverse the office sector’s troubles in the new era of hybrid work. But that’s not likely to happen in 2024 as the tech sector, in particular, continues to lay off workers. “I’ve been in the real estate business a long time, and this is a cycle unlike most others,” says Olshonsky. “The biggest problem we have right now is mainly record-high office vacancy just about everywhere — certainly in the large cities — which we’ve never really seen before. On the investment side, lenders cannot …

January 25, 2024

Bohler Content Partner Features Midwest Northeast Restaurant Retail Southeast Texas Western

Retail Development Programs Favor Suburbs, Shifting Shopper Habits

by Sarah Daniels January 23, 2024

With high operating costs eroding profitability at many urban stores, major retailers are concentrating development and store renovations in suburban locations with layouts geared to the latest consumer preferences. As more retailers follow suit, early adopters provide object lessons in best practices to better serve an evolving customer base and reveal pitfalls to avoid along the way. “Retailers are more sensitive to the pressures of high costs and loss prevention in urban markets, and as a result, they are backing off in those areas,” says Cornelius Brown, a principal and regional manager in the Philadelphia office of Bohler. “Retailers looking to grow, in our experience, are shifting to the suburbs and using retail program methods to cut costs.” Bohler is a land development design and consulting firm that helps developers move their projects forward quickly. Recently, those clients have been keen to avoid risk in both site selection and design features, Brown says. Streamlining Retail Development Retail programs allow developers to use pre-existing retail layout prototypes to determine optimal site arrangements. This approach uses checklists to assign one of several pre-made layouts to a development based on factors such as road location, grading and elevation, parking needs, drive-through layout, loading …

January 23, 2024

Features

Majority of Lenders Expect to Grow Their Business in 2024, Exclusive Survey Shows

by Kristin Harlow January 18, 2024

As the commercial real estate industry turns the page from 2023 to 2024, direct lenders and financial intermediaries are much more confident about the growth prospects for annual loan production than they were a year ago. They are also keenly aware of the growing level of distress in the office sector. Fifty-eight percent of participants in France Media’s 13th annual lender forecast survey expect the total dollar amount of commercial and multifamily loans closed by their firms this year will be higher than in 2023. Another 24 percent anticipate annual business volume will decrease, and 18 percent indicate it will remain at the same level. By comparison, 35 percent of respondents in last year’s survey expected their firms to increase loan volume in 2023. The largest group of respondents, 44 percent, anticipated annual loan volume to decrease. In the latest survey, views on the annual percentage change in business activity vary greatly. Among respondents who expect their firms to boost deal volume in 2024, 41 percent predict an increase of over 20 percent. Another 27 percent expect a more moderate increase of 6 to 10 percent. Among those who foresee a decrease in the total dollar volume of loans closings …

January 18, 2024

Features Mixed-Use

How to Revitalize Urban Landscapes Through Mixed-Use Development

by Taylor Williams January 16, 2024

By Lamar Wakefield, senior vice president, national practice leader for mixed-use, NELSON Worldwide In recent years, urban landscapes across the globe have witnessed a transformation fueled by mixed-use development. Cities are using sports and entertainment venues in particular as anchors for sizable mixed-use projects, creating vibrant destinations that not only attract crowds but also breathe new life into previously neglected urban areas. These developments have the power to serve as economic catalysts, creating new jobs, increasing foot traffic and generating tax revenue — and it all begins with great urban design. Creating Fan & Cultural Hubs A key element of these mixed-use developments is their ability to serve as hubs for fan and cultural activity. Before and after the main events or games, these districts are central gathering places where people can live, work and play. The incorporation of multifamily, office, retail and recreational spaces fosters a sense of community, making the urban environment more dynamic and engaging. Likewise, these multifunctional spaces can be used year-round to host festivals, markets and social events. This infusion of cultural richness adds to the vibrancy of the urban environment, attracting a diverse range of residents and visitors. In metro Atlanta, The Gathering at South …

January 16, 2024

David Braun Managed IT Services Pavlov Media

Content Partner Features Leasing Activity Midwest Multifamily Northeast Pavlov Media Southeast Texas Western

Managed IT Services Simplify Multifamily Operations

by Sarah Daniels January 11, 2024

The multifamily industry has its hands full: finance in adverse economic conditions, rapidly rising operation costs, as well as the challenge of attracting and keeping quality tenants as the biggest jump in new inventory creates more competition than the industry has seen in decades. Technology is an enabling and defining tool in the midst of these challenges. Tenants often expect services like internet access, telephone, television and Wi-Fi hotspots throughout a complex. Multifamily property staff need data access, speciality software, as well as the ability to schedule prospective resident visits, remote viewing, maintenance and more. Relatively few multifamily operations have the scope, scale and economics for an IT staff that can handle the support and repair requirements necessary to install systems, keep them working, protect data and networks while assisting tenant and staff users, particulary 24 hours a day, 7 days a week. Managed IT services are third-party companies that remotely provide the IT expertise and the help a company requires. “If a resident can’t get on Wi-Fi, if a phone stops working, if there’s an issue with the network or if there’s a problem with the ability to share or store or retrieve data — that’s where we step …

January 11, 2024

Features Multifamily Office

Developers Meet Renter Demands with Office-to-Residential Conversions

by Taylor Williams January 10, 2024

By Michael Brookshier, vice president of development, Keystone The COVID-19 pandemic sent renters flocking to spacious apartments in the suburbs. Now, in this post-pandemic world, just as companies revert to in-office work and homeownership becomes increasingly unattainable, renters are moving back to cities and seeking an urban lifestyle. This re-acceleration to urban centers drives another trend in commercial real estate: converting outdated and vacant office buildings into stylish, amenity-filled residential buildings. To keep up, developers must strategically identify the right building, location and amenities in order to meet renters’ demands. Philadelphia is a perfect example of an 18- to 24-hour city in which a large residential population in the central business district drives foot traffic outside of regular office hours. The Center City area also boasts an attractive downtown landscape of diverse uses such as office, residential, retail, award-winning restaurants and nightlife. Find the Right Building The ideal candidate for a successful office-to-residential conversion in an urban setting is often an office building constructed before World War II. These types of properties feature intricate designs, high-level finishes, ample natural light, outstanding views and beautiful and inviting lobbies that lend historical architectural details that are conducive and appealing to residential living. …

January 10, 2024

Zachary Richards adaptive reuse quote Bohler

Bohler Content Partner Development Features Midwest Multifamily Northeast Office Retail Southeast Western

Adaptive Reuse Developers Repurpose Antiquated Real Estate to Benefit Contemporary Consumers

by Sarah Daniels January 9, 2024

Commercial property conversions can offer significant advantages over conventional ground-up real estate developments. Conversions can provide a head start on construction with established entitlements, existing structures, in-place utilities and entry to choice locations in otherwise built-out submarkets. Consider the Universal Buildings, Post Brothers’ conversion of two 1960s-era office buildings into more than 600 residential units and ground-floor retail just north of the District of Columbia’s Dupont Circle. The 15-story complex will feature a two-level, glass-walled fitness and recovery center with more than 10,000 square feet of training zones, equipment and classrooms. The developer is housing the fitness center and other amenities in a new atrium that replaces the upper levels of structured parking originally built within one of the former office buildings. “The location is incredible — there is probably no greater location in any major city in the country for conversion,” says Josh Guelbart, Post Brothers’ Co-Chief Operating Officer. “Having the entire block means we have light, air and hilltop views of Kalorama, Adams Morgan and Dupont Circle, three of the finest residential neighborhoods in the District. There isn’t room for new buildings of scale in those neighborhoods, and that really made this existing, large building attractive to us.” …

January 9, 2024

Development Features Western Feature Archive

Adaptive Reuse is an Urban Repair Strategy That’s Here to Stay

by Jeff Shaw January 5, 2024

— By Carina Mills and Maura Schafer — In 2017, partner design firms RDC and Studio One Eleven (RDC-S111) relocated from a high-rise office to a former 25,000-square-foot Nordstrom Rack at 245 E. Third Street in downtown Long Beach, Calif. The store was located in a 1980s-era shopping center that had fallen into serious decline. On the plus side, the location was consistent with Studio One Eleven’s mission of urban repair, allowing for a pedestrian-level interaction with the neighborhood, while strengthening the city fabric. Soon enough, the retail space was converted into a modern creative office that added 130 design professionals to the neighborhood’s daytime population. This higher-use conversion occurred alongside other public and private investments that brought restaurants into the area. These included Ammatoli (a Los Angeles Times Top 100 restaurant), Beachwood Brewery, Rainbow Juices and Michael’s Pizzeria, among others. The adjacent Harvey Milk Park garnered grants for a reinvigoration by Studio One Eleven, and developers started working on housing development around the immediate neighborhood. This move and project was not only a chance for RDC and Studio One Eleven to create urban impact, but to design an environment for staff that instills creativity, collaboration and wellness. The office achieved …

January 5, 2024

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