Features

How Property Managers Protect, Add Value to Commercial Assets

by Taylor Williams November 7, 2024

By Donna Long, managing director, property management, LanCarte Commercial The role of property managers is to safeguard and enhance the value of our clients’ assets. And in today’s evolving landscape, commercial property managers navigate challenges such as extreme weather events, rising insurance costs, regulatory changes and environmental sustainability. Addressing these challenges effectively requires a proactive, quality-focused approach to ensure smooth operations and long-term profitability. Extreme weather events — hurricanes, floods, tornadoes — are more frequent and severe than ever before. They pose increasingly significant risks to commercial properties, requiring greater expertise in risk management strategies. Weather-related or other destructive events can lead to significant business interruptions, so property managers play a vital role in developing and implementing effective emergency response plans that align with insurance requirements and expectations. These plans include: Having a network of trusted contractors, structural engineers and other service providers on standby is essential for rapid repair response and minimized operational interruptions. Strong relationships with local emergency services and disaster response teams allow for quicker deployment of resources and support during a crisis. Effective communication with all stakeholders — tenants, property owners, emergency responders — ensures that everyone is informed, expectations are managed and appropriate actions are being taken. After …

November 7, 2024

Features

Empowering Residents as Key Stakeholders: The Role of Community Engagement in Development

by Taylor Williams November 5, 2024

By Kori Zwaagstra, director of operations, TriCelta Development As the commercial real estate market continues to evolve in unexpected ways, the key to making a project truly impactful lies in strong community involvement from the beginning. With shifting trends and economic ups and downs, developers beneﬁt from listening to the people who will be most aﬀected. By working closely with residents, city oﬃcials and underrepresented groups, developers can create projects that feel more connected, sustainable and widely accepted. This approach not only streamlines the development process but also preserves projects’ relevance and adaptability to market changes — all while keeping the community’s needs front and center. Understanding Stakeholders’ Impacts Stakeholders are more than people with ﬁnancial interests in a project — they also include the end-users who will experience the space ﬁrsthand. These are the individuals who will live, work and interact with the development daily, and their perspectives impact the project’s success. Prioritizing community needs and incorporating feedback ensures that the project aligns with expectations. The goal is to create a development that beneﬁts both investors and the community, achieving a balance that enriches the lives of everyone involved. While immediate ﬁnancial gains and the needs of primary owners …

November 5, 2024

Dual Appraisal Methods Improve Opportunities to Get Fair Taxation for Seniors Housing Properties

by John Nelson October 31, 2024

By Phil Brusk and Caleb Vahcic of Siegel Jennings Co. L.P.A. The seniors housing sector can’t seem to catch a break. Owners grappling with staffing shortages and other operational hardships lingering from the pandemic are facing new challenges related to debt and spiraling costs. High interest rates and loan maturations loom over the industry, with $19 billion in loans coming due within the next 24 months, according to Cushman & Wakefield’s “H1 2024 Market Trends and Investor Survey” on senior living and care. Factors driving high costs include wage pressures, inflation and — incredibly — rising property taxes. Despite operational challenges and declining occupancy at many facilities during the COVID-19 pandemic, property tax relief for seniors housing was mixed. Many assessors resisted downward adjustments to taxable values, maintaining that recovery was around the corner. Now, seniors housing operators face property tax assessments that equal or exceed pre-pandemic levels. As in the hospitality sector, most seniors housing owners understand that their operating properties include more value components than real property alone. In evaluating whether a tax assessment is reasonable and fair, however, owners need to realize that how an assessor addresses their real estate, personal property and intangible assets can drastically …

October 31, 2024

Emerging Trends Report Predicts Rebound in Transaction Volume in 2025 as Capital Markets Are ‘Poised for Recovery’

by John Nelson October 29, 2024

LAS VEGAS — At the September meeting of the Federal Open Market Committee (FOMC), the Federal Reserve lowered the federal funds rate by 50 basis points, which is the first easing of monetary policy in four years. This move lowered the short-term interest rate to a target range of 4.75 to 5 percent. Elevated borrowing costs have stifled commercial real estate transaction volumes the past couple years as buyers and sellers found that values were a moving target. Now with a reduction in interest rates, many real estate professionals expect transaction volume to rebound at least moderately. “In 2025, we expect lower interest rates will reduce borrowing costs, aid in price discovery and ultimately encourage an uptick in [commercial real estate] transactions,” said Angela Cain, global CEO of the Urban Land Institute (ULI). Cain’s comments came in a prepared statement to summarize the findings of Emerging Trends in Real Estate 2025, an annual report jointly produced by PwC US and ULI. The report was published in conjunction with ULI’s Fall Meeting, which is taking place this week at Resort World Las Vegas. Cain said that the real estate professionals surveyed for the report relayed that sentiment is improving, though many remain cautious. …

October 29, 2024

Features Multifamily

NMHC Survey: Apartment Deal Flow Increases for Third Consecutive Quarter Despite Loosening Market Conditions

by Kristin Harlow October 25, 2024

WASHINGTON, D.C. — All indices in the National Multifamily Housing Council’s (NMHC) October 2024 Quarterly Survey of Apartment Market Conditions showed more favorable conditions this quarter, except for the Market Tightness (37) index. The survey’s Sales Volume (67), Equity Financing (63) and Debt Financing (77) indices all came in above the breakeven level of 50. “The 10-year Treasury yield fell 28 basis points over the past three months as the Federal Reserve enacted its first 50-basis-point cut to short-term rates,” says Chris Bruen, NMHC economist and senior director of research. “Survey respondents, in turn, reported more favorable conditions for debt financing for the third straight quarter and more available equity financing for the first time in two-and-a-half years.” However, elevated levels of multifamily deliveries resulted in the ninth consecutive quarter of “looser” conditions, especially in the South and Sun Belt markets, says Bruen. “Still, strong demand for apartments has meant that much of this new supply is getting absorbed,” he states. While close to half of respondents (46 percent) thought market conditions were unchanged relative to three months ago, 40 percent indicated markets have become looser, up from 27 percent in July. Fifteen percent of respondents reported tighter markets than …

October 25, 2024

Pictured is an office interior in New York City.

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Lee & Associates: Absorption Is Positive Across All Property Types According to Third-Quarter Report

by Sarah Daniels October 24, 2024

Perhaps the most salient information within Lee & Associates’ 2024 Q3 North America Market Report pertains to the office market. The third quarter of 2024 ended nine continuous quarters of negative net absorption in the office sector. However, additional occupancy losses may be on the horizon for the office market, even as supply pressures ease for this property type. Positive retail news has led to positive industrial news, as rising demand for retail goods has bolstered tenant demand for industrial space just as additional industrial inventory is coming on line. Steady economic growth and continuing impediments to home ownership have created strong absorption in the multifamily sector. Rent growth and vacancy rates have largely plateaued. Lee & Associates has made their complete third-quarter report available here (with more detailed information broken down according to property type). Below is an overview of the strengths and challenges in the industrial, office, retail and multifamily sectors. Industrial Overview: U.S. Demand Spikes Industrial demand across the United States dramatically improved in the third quarter. There were 52.8 million square feet of positive net absorption in the country in the third quarter, a 76 percent jump from the same period a year ago and more than double the …

October 24, 2024

Features Heartland Feature Archive Retail

Brokers Await Uptick in Net Lease Retail Sales

by Kristin Harlow October 22, 2024

Amid a slump in investment sales volume, investors eagerly welcomed the Federal Reserve’s interest rate cut in September. The half-percentage point decrease was more than what many in the industry had anticipated, but Fed Chairman Jerome Powell recently indicated that additional rate cuts this year will likely not be as aggressive. The move by the Fed came after a spike in the federal funds rate from near zero in March 2022 to a range of 5.25 to 5.5 percent in July 2023 — a period during which the central bank raised the federal funds rate 11 times. Ultimately, the higher interest rate environment has led to a major slowdown in the sales volume of net lease properties this year, says Randy Blankstein, president of The Boulder Group based in Wilmette, Illinois. “Transaction volume is down approximately 60 percent from 2022 levels,” he says. In a net lease transaction, the tenant pays a portion or all of the taxes, insurance fees and maintenance costs for a property in addition to rent. For the 12-month period that ended in June, net lease investment volume across property types decreased by 34 percent from the same period a year ago to $35.4 billion, according …

October 22, 2024

Features Office

Why Are Office Conversion Projects So Tough To Pull Off?

by Taylor Williams October 17, 2024

By Taylor Williams Successfully executing a commercial conversion project is like hitting a six-leg parlay in sports betting: A lot of dominoes have to fall the right way, and without a little luck and outside help, it’s probably not happening. Take the embattled office sector. Even working professionals from outside the office real estate market who read the plethora of mainstream news articles recognize that it’s no small feat to turn those buildings into apartments. After all, when you’re dealing with thousands of tons of steel, glass and concrete in any capacity, things are bound to get messy. But theoretically, if the demand for more housing is there — and there can be little arguing that it is — and cities recognize that office usage has forever changed, then why aren’t we seeing more of these projects come to fruition in our cities? Setting aside the fact that office-to-residential conversions are incredibly expensive and fraught with risk even in the absence of a tight and constrained lending market like we currently have, there are still numerous reasons as to why these deals don’t proliferate. Does the city in question have flexible zoning? Does the community have a reputation for NIMBYism? …

October 17, 2024

Features Multifamily Seniors Housing

When It Comes to Seniors Housing, GSEs Are Down, But Not Out

by Taylor Williams October 15, 2024

By Jeff Shaw Freddie Mac and Fannie Mae — collectively known as the government-sponsored enterprises (GSEs) — have been on divergent paths in recent years when it comes to lending in the seniors housing sector. As specifically regards current activity, Freddie Mac is in the midst of a transaction rally, while Fannie Mae is enduring a wave of delinquencies fueled by seniors housing loans. The two lenders posted similar deal volumes in 2019 before the onset of the COVID-19 pandemic, with both closing over $3 billion in loans that year. While loan closings fell during and after that pandemic, the difference in scale of that drop is significant. While Freddie’s annual volume has not fallen below $2 billion, Fannie’s has stayed at or below $1 billion for four years running, and volume fell 50 percent from $1 billion in 2022 to $500 million in 2023. It’s not hard to see why Fannie Mae is doing less seniors housing business. The organization has a delinquency problem in the sector. Chryssa Halley, Fannie Mae’s CFO, called out the problem on the full-year 2023 financial results conference call. “Our multifamily serious delinquency rate increased to 46 basis points as of Dec. 31, 2023, …

October 15, 2024

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C-PACE Maintains Appeal in Lower Interest Rate Environment

by Sarah Daniels October 10, 2024

The Federal Reserve’s decision to begin aggressively hiking the federal funds rate in 2022 threw the commercial real estate market into turmoil. Property investors found it difficult to refinance much cheaper short-term loans that were often used to renovate or develop properties. However, the interest rate spike greatly enhanced the viability of commercial property assessed clean energy (C-PACE) financing, a type of loan that becomes an assessment that borrowers pay along with their tax bill. The program emerged more than a decade ago and generally pays for energy, water and seismic resiliency upgrades in new construction and rehabs, including retroactively. As a result, developers embraced C-PACE as they sought ways to pay down debt to secure new financing or loan extensions and modifications. Now that the Federal Reserve has reversed course with its 50-basis-point federal funds rate reduction in September — and with Wall Street anticipating additional rate cuts before the end of the year — will C-PACE demand start to cool? Don’t count on it, says Rafi Golberstein, founder and CEO of PACE Loan Group, a direct lender of C-PACE financing based in Minneapolis, Minn. From the competitive cost of capital to the continued restraints on bank lending, C-PACE …

October 10, 2024

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