Features

California’s Population Exodus Arrives in Idaho

by Sarah Daniels May 25, 2021

There has been much anecdotal discussion lately of Californians fleeing high-cost, high-density, high-traffic living for greener pastures, especially as COVID-19 made working from home a possibility for California’s high-tech workforce. This trend is not just a rumor for the residents of Idaho. Idaho is the second-fastest growing state in the nation[1], and Californians make up nearly 46 percent[2] of a new population influx that the state has experienced over the past five years. What is driving so many people from the Golden State to the Gem State, and what does this mean for commercial real estate prospects in Idaho? REBusiness sat down with Matt Mahoney, managing principal, Lee & Associates Idaho, to answer those questions. Remote Work and Booming Growth COVID-19-related remote work is driving people to areas where there is a high quality of life, natural beauty and an abundance of outdoor activities. Matt Mahoney notes that because Idaho’s population is lower to start with, the state can easily find itself at the top of lists of fast-growing states. Still, there is real growth in Idaho’s population (increasing 17.4 percent since the 2010 census[3]). However, Mahoney believes there is a lag between the exploding population and the commercial real estate …

May 25, 2021

Theory-Wellness-Bridgewater-Massachusetts

Features Industrial

Flower Power: Commercial Architecture & Cannabis Facilities

by Taylor Williams May 20, 2021

By Jennifer Luoni, director of operations and architecture, and Lauren Nowicki, chief communications officer, Dacon Corp. From cultivation to curing, manufacturing cannabis is an exacting art that requires a careful, calibrated approach from selection, atmospheric, extraction and curing perspectives. The rapid rise in proposed health benefits from cannabis products has sparked interest in both pharmacological properties and extraction of phytocannabinoids. Former, free-flowing growing methods of the 1960s have been replaced with an exacting discipline amalgamating scientific rigor with natural farming practices and technological innovation. While seemingly antithetical in principle, this shift can result in a profitable, high-growth business model. Science Mimicking Nature Cultivation rooms — whether for leaves or flowers — are designed to mimic seasons via extensive control systems. High-growth rooms, such as those for leaves, create temperature and hydration conditions that simulate the summer climate. This is designed for volume production with leaf propagation stimulated within one month. Set between 70 to 80 degrees Fahrenheit, plants are exposed up to 18 hours of light and watered by pressure compensated drippers so that irrigation systems deliver oxygen directly to roots. For labs dedicated to flower cultivation, environmental conditions mimic autumn, with growth cycles falling between 60 to 70 days …

May 20, 2021

Features Office

Getting Ready To Return To The Office Increasingly Means Getting Scientific

by Taylor Williams May 18, 2021

By Rich Gottlieb, president and COO, Keystone Property Group While executives have differing perspectives on the future of remote work in a post-COVID-19 environment, most (52 percent) are targeting a return to the office in the second half of 2021, according to a recent survey of Fortune 500 executives. Based on the responses of survey participants, vaccine availability (51 percent) and improved COVID-19 therapeutics and treatment (14 percent) are the clear determining factors in their decisions to bring employees back. But changes to office space (13 percent), like onsite testing or temperature checks, also weigh heavily on their direction. The return is already happening. Data from a separate survey published in late March found that nearly a quarter of office-using employees are working at their office in 10 major U.S. cities. In New York City, some 80,000 municipal workers began staggered returns to their buildings on May 3. Major corporations are planning “soft reopenings” or hybrid-style returns. Proactive building owners need to be ahead of tenants in terms of preparing for post-pandemic concerns, implementing the latest industry standards and technologies and addressing overall health and safety requirements. This is not always easy, especially because the science of the coronavirus continues …

May 18, 2021

Features Heartland Feature Archive

All Bets Are Off on Property Tax Assessments

by Kristin Harlow May 13, 2021

By Jerome Wallach, The Wallach Law Firm In the budgeting process each year, property owners ask tax attorneys to estimate their projected tax exposure for the coming year or, in the case of multi-year cycles, what their property’s assessed value will be. Customarily, attorneys experienced in real property tax appeals find answers to those questions by using traditional valuation methods: The cost approach is applicable to newer properties; the income analysis approach is tied to capitalization rates; and the comparable sales approach draws on recent, market-value transactions involving similar properties. In addition, the attorney will review the local assessor’s treatment of similar properties. Armed with such analogies, the advisor will predict the probable range of assessed values for the taxpayer and provide a computation of the tax rate against that value. These analyses are reliable within a reasonable range. At least until now. The nation may or may not be entering a post-pandemic economic recovery. What is certain is that the challenges created by COVID-19 have badly disturbed traditional methods of determining value. The concept of using a property’s recent historic performance as a predictor of future performance, used universally by market participants and assessors, has been gutted by a …

May 13, 2021

Content Partner Data Centers Features Industrial Midwest NAI Northeast Southeast Texas Western

NAI Global: Industrial Demand Rooted in Long-Term Changes to Distribution, Manufacturing

by Sarah Daniels May 12, 2021

Shifting behaviors and expectations for consumers, manufacturers and distributors have made industrial space central to the commercial real estate landscape. “This is an asset class that for 25 years of my 39 years in the commercial real estate business was a boring, middle-of-the-road class. But this steady investment has just exploded,” says Jay Olshonsky, president and CEO of NAI Global. Much of the most recent change has been driven by the particulars of the COVID-19 pandemic. Delivery became a way of life for those socially distancing, creating an instant need for more distribution and warehousing centers. Olshonsky explains that the behavioral changes starting in March of 2020 accelerated trends (online shopping, delivery/pickup services and working from home) that might otherwise have taken five or more years to come to fruition. Olshonsky explains that there are still hurdles for this ascendant product type to overcome, but the changes we’ve seen over the last year will remain. Industrial Not a Bubble “Industrial is here to stay,” says Olshonsky. “COVID accelerated trends that already existed, but those trends were already in motion. We’re seeing some changes that are fundamental.” The need for delivery and warehouses is fed by new expectations: “Ecommerce is the …

May 12, 2021

Features Loans

Lenders’ Willingness to Grant Loan Modifications Will Decline After Pandemic

by Taylor Williams May 11, 2021

By Kathleen Tarbox Munoz, partner, Hunton Andrews Kurth LP The outbreak of the coronavirus pandemic cultivated an economic downturn that differed significantly from financial crises like the Great Recession or even the Great Depression. Worldwide stay-at-home orders and mass business closures meant that industries across the board were hit simultaneously, as opposed to experiencing the domino effect reminiscent of past crises. At the onset of the pandemic, the lending industry ground to a halt; few lenders were advancing funds for several months as the world waited to see how long this period would last. The commercial real estate industry as a whole has suffered as much as any industry, with retail and hospitality being hit fast and hard at the beginning of the pandemic. A future second wave of commercial foreclosures and defaults within these asset classes looms as a near certainty. But the response to these defaults from lenders has followed a unique trajectory — one that is as much a response to the pandemic as a product of it. Increased Flexibility Perhaps the result of empathy born of a shared experience, or perhaps due to the introduction of highly effective vaccines that support the notion of a swift …

May 11, 2021

Features

How Real Estate Investors Can Benefit From Losses, Exclude Gains

by Taylor Williams May 6, 2021

By Jeffrey Dunn, principal, Fineman West Real estate investments often show taxable losses, even though they have positive cash flows. There are also many elections and actions that investors can take to drastically increase real estate losses and reduce taxes. By default, real estate losses are suspended and cannot be used until a property generates positive rental income or is sold. In addition, there is a 3.8 percent net investment income tax on real estate losses and gains if real estate is considered passive. For example, a taxpayer could have a rental property with a positive cash flow of $100,000 and a taxable loss of $1 million due to depreciation or other non-cash deductions. If nothing is done, the $1 million loss is suspended and there is no immediate tax benefit. If the rental is converted to non-passive income, then the taxpayer could use the $1 million loss immediately and possibly have $500,000 of tax savings, assuming the investor is subject to a 50 percent tax bracket. Also, if the building is converted to a non-passive rental and later sold at a $5 million profit, the investor will save the 3.8 percent net investment income tax, or $190,000. Passive Loss Hurdle …

May 6, 2021

Features

Show Obsolescence to Help Achieve Successful Property Tax Appeals

by Taylor Williams May 5, 2021

By Angela Adolph, partner, Kean Miller LLP Judith Viorst, author of the children’s book Alexander and the Terrible, Horrible, No Good, Very Bad Day, had nothing on 2020. By virtually every metric, 2020 was a terrible, horrible, no good, very bad year. Taxpayers quickly learned that while most states have some sort of catastrophe exemption for property tax tying an abatement or reduction to a defined disaster event occurring that year, the provisions and requirements in these statutes are state-specific. Few states had any authority to address whether physical damage to the property was required for the taxpayer to receive any relief. Most states eventually concluded that some form of physical damage was necessary for property values to be reduced following a disaster. Other states went the other direction, concluding that their disaster statutes did not require physical damage, only that the property be inoperable due to a declaration of emergency by the governor. Accordingly, property values for the 2020 tax year could be reduced in those states due to COVID-19-related economic losses. Fortunately, 2021 gives all taxpayers a fresh start. Most states use Jan. 1 as the “lien date” or valuation date for determining fair market value of property …

May 5, 2021

Bohler Due Diligence Development Redevelopment

Bohler Content Partner Development Features Midwest

Six Factors to Consider During Due Diligence for Land Development or Redevelopment

by Sarah Daniels May 4, 2021

Whether you are buying undeveloped land or assessing a property for potential redevelopment, thorough due diligence is critical to good decision-making. With the speed at which today’s commercial real estate market operates, you may face time constraints and you definitely want to limit expenditures related to due diligence — but you don’t want to cut corners. An incomplete understanding of the challenges at the site will limit your ability to scope out the project and could impact your ability to keep it on schedule and within budget. Even if you need to complete due diligence on an expedited timeline, make sure you check all the boxes. Here are six key items that should be on your checklist to ensure you limit unexpected costs and delays. 1. Geotechnical and Environmental Investigations Depending on your project scope, some form of a geotechnical investigation makes sense. Prior to design, it’s important to find out if soil constraints pose risks or design challenges. Geotechnical due diligence will disclose information about the physical properties of the underlying soil including rock, historic fill, unsuitable organic layers, seasonal groundwater and/or buried debris. Environmental due diligence will provide information about existing site challenges including wetlands, floodplains, brownfields, archeological factors …

May 4, 2021

Features Multifamily Student Housing

Rethinking Student Housing Design in Response to COVID-19

by Katie Sloan April 29, 2021

When the world shut down over a year ago, architects, designers and developers took a collective pause to assess what needed to change in the built environment. A particularly scrutinous eye was paid to off-campus student housing, a sector whose successful model was based on bringing students together, not keeping them a safe distance apart. Some sweeping changes were recommended at the onset — many operational in nature, based on the latest guidance from health officials. As courses moved online and on-campus residence halls closed, off-campus communities emerged as a safe haven for students who did not want to — or were unable to — return home. The resilience of the sector, as evidenced last fall by pre-leasing rates and rents that were only slightly below 2019 levels, suggested the temporary tweaks made out of necessity in 2020 worked. The real question was whether those modifications would carry through to newly developed and renovated communities post-pandemic, and if so, what form they might take. Our firm took the time to reflect on how design must evolve to meet the changing needs and expectations of students, parents, operators and developers — all of which have different priorities. At the top of …

April 29, 2021

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