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Savannah Duncan Single-tenant drug stores are flying off the market. Investor demand for higher quality properties in this asset class, such as Walgreens, CVS/pharmacy and Rite Aid properties, outweigh demand for the entire net lease sector, according to The Boulder Group’s Net Lease Drug Store Report. “National drug stores are trading at a 50 basis point premium compared to the rest of the single tenant net lease market,” says Randy Blankstein, president of The Boulder Group. “This can be attributed to a limited supply of assets and quality tenants with lease terms more than 20 years. The aging demographics in the U.S. are increasing the use of pharmaceuticals and that has been very positive for the retail pharmacy sector.” In the second quarter of 2012, median asking cap rates for single-tenant drug stores compressed by 20 basis points on a year-over-year basis. In the second quarter of this year, the median asking cap rate for Walgreens was 6.45 percent, compared to 6.8 percent a year earlier. CVS/pharmacy had an asking cap rate of 6.7 percent in the second quarter, compared to 6.9 percent this time last year. Rite Aid had the highest asking cap rate at 9.2 percent, down from …

Darrell Smith When it's all said and done, the value of a building will be gauged by how well it achieved its design goals, especially in environmental and utilization terms. Developing a design that suits those goals is the time-honored profession of the architect. Constructing those plans falls to the builder. Ideally, there is a seamless interplay between plans and a finished building, whether new or a renovation. Once construction gets under way, what happens if there is a major disconnect between the design plans and the actual “constructability” of those plans in terms of budget, time or just feasibility? After all, construction usually occurs months or even years after the plans are drawn. Markets can evolve, material prices will always change and even project goals can require rethinking. If these disconnects emerge during construction, they can stall out a project, costing time, money and, ultimately, require compromise on design to accommodate shortfalls elsewhere. BRING IN THE HARD HATS FROM THE START The solution to divergence between original plans and actual construction is summed up in the strategy called “constructability counsel.” This form of counsel brings highly skilled, design-build expertise into the planning phase from the very start. This counsel …

Matt Valley WASHINGTON, D.C. — For sectors of the labor market most vital to commercial real estate, the nonfarm payroll jobs report for August proved to be a mixed bag. “The news was good for the office and hospitality markets, poor for the industrial market and neutral for retail,” says Bob Bach, national director of market analytics for Newmark Grubb Knight Frank. Employers added 96,000 net new payroll jobs in August, short of the 125,000 expected by analysts and shy of the 148,000 monthly average that has persisted since the beginning of 2011. The U.S. Bureau of Labor Statistics also revised the data for June and July lower by a combined 41,000 jobs. A closer look under the hood by Bach shows the following breakdown for commercial real estate on the jobs front: • The office-using sectors of professional and technical services, information, and finance together added 36,800 jobs in August, up from 26,000 in July. • The sectors of the economy most important for the industrial market — manufacturing, wholesale trade, plus transportation and warehousing — lost 1,400 jobs in August, down sharply from the 42,400 jobs gained in July. • Retailers added 6,100 positions last month compared with …

Ronald Fieldstone, Esq. The EB-5 program has generated a unique opportunity for real estate developers and operators to supplement traditional financing sources and provide debt funding to projects and businesses that otherwise qualify under United States Citizenship and Immigration Services (USCIS) guidelines. The program provides needed capital, job creation and the migration of wealthy foreigners to the U.S. To date more than $3 billion of capital has been funded under the program. The program involves the investment of $500,000 of capital (or $1 million if the reduced investment amount is not applicable) in a commercial enterprise whereby 10 direct and indirect jobs that last for a period of at least two years are created. The typical transaction involves the formation of a limited partnership or limited liability company where foreign investors pool their funds to make a loan to a real estate project that is typically secured either by a first or second mortgage or mezzanine-type financing on the project. Virtually every type of real estate product has been utilizing EB-5 capital throughout the U.S., with a concentration in the states of California, New York, Florida and Texas. A substantial majority of the investors come from Asia, with China leading …

Adam Darowski Imagine being heavily penalized for unwittingly going into business with a landlord or tenant with a sordid past. Sadly, this is a reality for businessmen and women who pay hefty fines for associating with undesirable individuals or businesses in lease transactions, even if he or she did so unknowingly. $622,985,023 million is a large amount of money by any standard. This is the dollar amount of fines and penalties levied by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury against companies for doing business with individuals or entities on OFAC’s “Specially Designated Nationals and Blocked Persons” list (i.e., the guys you are not allowed to do business with). And $622,985,023 million is not the all-time, cumulative total. It’s only the amount of fines and penalties levied by OFAC so far this year. The calendar year total for 2011 was $91.65 million. The calendar year total for 2010 was $200.73 million. The foregoing dollar amounts illustrate the economic impact to businesses for knowingly or unknowingly violating laws and regulations restricting commercial transactions with prohibited persons. How does OFAC compliance apply to commercial leasing transactions? What can landlords and tenants do to ensure they …

Savannah Duncan After hitting peak effective rent growth of 5.32 percent in July 2011, the apartment market has started to stabilize. Year-to-date effective rent growth in July was 4.42 percent, up .54 percent from June, according to Axiometrics. “Since the tear the apartment market was on in July of 2011, there has been a gradual moderation in both effective rent and occupancy growth, though we are still near historical highs for both,” says Ron Johnsey, president of Dallas-based Axiometrics. Corpus Christi, Texas, posted the most improved market, with annual rent growth from 3.22 percent in July 2011 to 7.74 percent in July 2012. On the other hand, several of the bottom markets, such as San Jose, continue to post overall positive annual growth but were unable to maintain strong year-over-year gains. San Jose’s rate fell from 15.17 percent last year, to 9.17 percent this July. Axiometrics says that REIT properties, which account for 12 percent of the company’s database, continue to outperform the broader national market. REIT properties posted 6.46 percent effective rent growth in July 2012, compared to 6.35 percent this time last year. However, the report states that in 2011, REIT properties lowered rents each month from August …

Emil Gullia As the economy continues to stabilize, new trends have unfolded regarding consumer health habits. The perfect storm is brewing for niche sporting goods retailers as consumers are becoming more mindful about health and reconnecting with the outdoors. Small industry sporting goods and outdoor companies are taking advantage of the climate and growing their concepts into national chains. This trend has made it possible for these retailers to grow their footprint and boost sales by being able to offer specialty brands and services to consumers fueling a healthy competitive market. Evidence of this expanding market trend is found within the growth plans of smaller regional chains such as Olympia Sports, Dunham Sports and Sport Chalet. National brands such as Gander Mountain, Academy Sports + Outdoors, Dick’s Sporting Goods and Cabela’s also are reacting to the changing consumer trends and seeing an increase in their growth metrics. Examples include: · Academy Sports + Outdoors has been aggressively expanding in the Southeast with new store announcements and has plans to expand its distribution center in North Georgia, adding more than 250 jobs. · Olympia Sports announced plans to open 25 more stores in 2013. · Sport Chalet, a chain which has …

Eileen Mitchell Research some rent and sales data on the high streets and class “A” or “A+” regional malls around the country, and you might conclude a robust recovery is in full swing. Manhattan storefronts in and around Times Square are asking for rents of $2,000 per square foot. SoHo and Union Square in New York, and Michigan Avenue in Chicago, are commanding rents of more than $500 per square foot. Eye-popping rates are once again the norm in many of the biggest MSAs across the country. Meanwhile, with demand in these markets at a high, many top-tier malls are commanding sky-high base rents and CAM charges, making it tough for chains to afford any space. Drive out of the city to tertiary markets like Altoona, Penn., however, and the economic picture looks very different. As of June, Altoona's unemployment rate stood at 7.5 percent, up from a low of 3.7 percent in Sept. 2007. The city's population of about 46,000 people has been on the decline for some time now, and vacancies are more common at malls and other retail properties around town. This “tale of two markets” highlights the unmistakable divide running through today's retail markets: Even as …

Savannah Duncan With an increase in jobs and exports, as well as a decrease in vacancy rates, the United States manufacturing market continues to display signs of recovery. A new white paper by Carolyn Bagnall, director of research based in Cassidy Turley’s Kansas City, Missouri, office, explores the manufacturing market and the outlook for the remainder of the year. “With both domestic and global consumption rebounding — albeit at a choppy rate — America has steadily increased production of vehicles and parts, semiconductors, civilian aircrafts, clothing, fuel oil and commodity-based food items, to name a few,” Bagnall says. As a result, the U.S. manufacturing sector added 335,000 jobs between January 2011 and June 2012. According to Bagnall, this is the strongest stretch of job creation in manufacturing since the 1990s. Falling Vacancy Rates Another sign of resurgence is that vacancy rates for manufacturing facilities continue to fall. More than 116 million square feet of warehouse space has been leased during the last 15 months. In the first quarter of 2012, the vacancy rate for manufacturing facilities was 7.8 percent, down half a point from the end of 2011. “The markets that showed the greatest improvement were primarily on the West …

Savannah Duncan According to the U.S. Green Building Council (USGBC), the total footprint of commercial projects that have achieved LEED certification has reached more than 2 billion square feet worldwide. Additionally, 7 billion square feet is currently in the pipeline as registered projects. “In communities around the globe, leaders from every sector of the building industry are reinventing their local landscapes with buildings that enliven and bolster the health of our environment, communities and local economies,” says Rick Fedrizzi, president, CEO and founding chair of USGBC. Each day LEED is certifying approximately 2 million square feet of commercial building space in more than 130 countries. Nearly 50,000 commercial projects comprising 9 billion square feet of construction space, are participating in the LEED program. 2500 Windy Ridge, an office building in Atlanta, achieved LEED EBOM Platinum certification in August. “The journey to this milestone has energized our economy, funneling $554 billion annually into the U.S. economy alone, and has helped support 7.9 million jobs across the U.S.,” Fedrizzi says. LEED takes several factors into account when awarding certification, including sustainable sites, water efficiency, energy and atmosphere, materials and resources, indoor environmental quality, locations and linkages, awareness and education, innovation in design …