Features

Rising Deal Volume Favors Sellers in Net-Lease Investment Market, Says InterFace Panel

by Taylor Williams October 1, 2021

NEW YORK CITY — As more players enter the market, rising demand for net-leased commercial properties in the United States is leading to higher prices and lower capitalization rates, making it a good time to be a seller of such assets. According to a new report by national brokerage firm The Boulder Group, average cap rates for net-leased retail, office and industrial properties fell by 22, 15 and 19 basis points, respectively, between the second and third quarters of this year. The number of net-leased retail and office properties on the market both grew between the second and third quarters of this year, but the report noted that the sector is still defined by “significant investor demand combined with a limited supply of quality assets.” Like any other asset class, certain subcategories of net-leased product are performing better than others. Due to the compounding forces of e-commerce and a global pandemic, industrial remains a pack leader while office is shrouded with uncertainty. By the same logic, in the net-lease retail space, properties leased to essential service retailers and quick-service restaurants with outdoor seating are among the preferred investment vehicles. But on a broader level, institutional investors are growing their presence …

October 1, 2021

Walker Dunlop Williams Small Multifamily

Acquisitions Content Partner Features Leasing Activity Loans Midwest Multifamily Northeast Single-Family Rental Southeast Texas Walker & Dunlop Western

Small-Balance Multifamily: Sizable and Resilient

by Sarah Daniels September 30, 2021

While new-builds and top-of-the-line, large-scale developments typically attract the most buzz in the multifamily world, the vast majority of apartment properties in the United States have fewer than 100 units. These smaller properties play a vital role in delivering affordable and workforce rental housing inventory to the U.S. population. While the commercial real estate industry may refer to this sector of the multifamily market as “small,” make no mistake, “small” multifamily is not insignificant or inferior — it’s sizable and resilient. As other commercial real estate sectors paused during COVID-19, smaller multifamily properties and small-balance lending thrived. What does the future hold for this market? The Small Multifamily Market Defined The small multifamily market is highly fragmented with no clear definition of what constitutes “small” among capital sources. Generally, market statistics define the “small” multifamily sector by at least one of two measures: Unit count between five and 99 units; and/or Principal loan balance at origination between $1 million and $10 million[1] Strong Demand and Operating Fundamentals While the pandemic negatively impacted many areas of commercial real estate, with offices, retail shops and hotels largely shuttered across the U.S., the multifamily market remained resilient. Despite the past year’s challenges, multifamily …

September 30, 2021

Features Industrial

How Architects Can Integrate Modern Design into Traditional Industrial Building Types

by Taylor Williams September 28, 2021

By Jonathan Quinn, associate, RODE Architects The industrial typology is no longer reserved for business parks in remote locations. As economic issues, changes in technology and increased demand for skilled labor highlight the need for more localized production and distribution, industrial buildings are moving back to cities and residential areas. This presents a major opportunity for cities to reclaim and revitalize their aging industrial districts and increase employment opportunities within their markets. Proximity to population centers provides access to large customer bases, but it also requires that industrial architecture be approached in a different way. The scale reduction of the manufacturing systems and the movement to more clean and sustainable processes has solved part of this problem. As a profession, architects need to recognize that there are opportunities for good design to help integrate industrial projects as well. The program and needs of industrial projects are always unique, and in urban settings, it is critical that they respond well to the site and its adjacencies. One of RODE’s projects, 250 Marginal Street in Chelsea, Massachusetts, is a 146,000-square-foot freight forwarding facility that uses its materiality as one of its main design features. As the building is a large …

September 28, 2021

Affordable Housing Content Partner Features Lument Midwest Multifamily Northeast Single-Family Rental Southeast Texas Video Western

Manufactured Housing Communities Garner Investor Interest

by Sarah Daniels September 22, 2021

Interest in affordable paths to homeownership and the growing popularity of lower density living are raising the profile of the manufactured housing option among American households and investors. At the same time, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac are making concerted efforts to better serve this historically underfinanced market at both the individual homeowner and community levels. The combination of robust cash flow growth (particularly in Sunbelt and Western markets), cap rate compression, and liquidity provided by the GSEs makes a compelling case for manufactured housing community (MHC) acquisitions and refinances. As increased competition has left market participants looking for an edge amidst compressing cap rates, the importance of working with an experienced MHC lender with access to short- and long-term loan programs has become more apparent. The following provides an in-depth analysis of the recent performance of rental MHCs, sales volume and pricing trends, and loan and underwriting trends in the MHC space. The Performance of the Site Rental Market The COVID-19 pandemic affected American housing preferences in profound ways. Increasingly, households are seeking lower density options with larger floor plans, home offices, and dedicated space for entertaining or distanced learning. This phenomenon …

September 22, 2021

Conference Coverage Features Multifamily Texas Texas & Oklahoma Feature Archive

InterFace Panel: Supply Chain Issues Continue to Challenge Multifamily Developers

by Taylor Williams September 20, 2021

By Taylor Williams Facing extended construction timelines and elevated costs of materials due to COVID-19’s disruption of global, national and local supply chains, multifamily developers are being forced to pivot, improvise and forge new relationships with suppliers in order to manage overall risk levels within their projects. Even before the pandemic, real estate developers and users across all asset classes understood how crucial competent supply chain management was to their budgets. But the global health crisis has reinforced that fact, especially for developers whose product type remains in high demand, such as housing providers in the rapidly growing state of Texas. In terms of basic economics, when COVID-19 hit and ground global commerce to a halt, suppliers across a range of industries decreased their inventories in response to sluggish demand for sundry goods and services. With vaccines now widely available, travel picking back up and businesses reopening at full capacity, pent-up demand is being unleashed on these industries, including real estate development, forcing suppliers to rebuild their inventories. Yet this process is not a simple matter of flipping a switch back on. Furthermore, being aware of a problem is very different from actually solving it. And a global pandemic that …

September 20, 2021

Features

Pandemic Drives Demand for More Business Automation in Real Estate

by Taylor Williams September 17, 2021

By Brian Thayer, vice president of real estate, AvidXchange Over the past 18 months, the real estate industry has encountered unprecedented challenges, radical demand fluctuations and workplace shifts in which employees conduct business virtually more than ever before. And now, because of all this, the industry has made necessary adaptations to maintain the status quo. Technology changes, particularly back-office automation, have been a big part of this newly coalescing industry. How might these changes affect the financial operations and management of commercial properties for real estate professionals? Decentralized Industry Structure According to the Association of Finance Professionals, paper checks still comprise 42 percent of all business-to-business (B2B) payments in the United States. This use of paper — still remarkably popular in 2018 — has become an even bigger pain point due to the demands of the real estate industry’s decentralized structure. Today, property managers employed by the same company are often dispersed and manage hundreds of units across multiple states, creating an increasing need for the use of automation technologies. And no matter the location or number of projects, paper invoices and payments still must be processed and paid on time to avoid late fees. During the pandemic, automation technology …

September 17, 2021

Features Hospitality Office Retail

Does Your Property Tax Assessment Reflect COVID-19’s Long-Term Challenges?

by John Nelson September 16, 2021

Countless companies have seen their top and bottom lines decimated by COVID-19-related shutdowns, travel restrictions and changing consumer preferences since the start of the pandemic. Yet for many taxpayers, property tax values have changed little or even increased. Many of these taxpayers have been surprised to receive property tax bills that do not reflect the real and lingering economic challenges that the retail, hospitality, office and other industries have, are and will continue to face. These taxpayers — and even those in industries better suited to weather the storm — should give special attention to ensuring they receive fair and reasonable assessments. Observe Valuation Dates, Notices and Appeal Deadlines With a large percentage of employees working remotely, together with an inconsistent postal service, it is more important than ever to have dedicated employees and knowledgeable property tax professionals reviewing property value assessments annually and filing timely protests when warranted. Failure to receive a tax valuation notice rarely excuses a missed protest deadline, so it is vital to know and comply with applicable deadlines. Many property tax bills issued in 2020 were based on statutory valuation dates that preceded the emergence of COVID-19. For instance, assessors working under a valuation date …

September 16, 2021

Features Student Housing

Contractors Face Uncertain Materials Costs, Lull in Student Housing Activity Due to COVID-19

by Katie Sloan September 14, 2021

Rising construction materials costs have been one of the biggest stories of the pandemic era. When COVID hit, many factories ramped down production. In addition, some raw materials industries had challenges like tariffs, natural disasters and COVID-related slowdowns. When construction continued during the pandemic, supply suffered and pricing rose dramatically. This has been especially true for lumber and steel, but natural disasters in areas like Texas have even hampered the manufacturing of other goods, like appliances. Student Housing Business, sister publication to REBusinessOnline, spoke to six general contractors to get their take on the student housing sector at present, and to get their advice on what they are telling clients who are pricing projects for 2022 groundbreakings and beyond. SHB spoke with Arne Goldman, director of business development at Marous Brothers Construction; Marty Hoffey, business development manager at MW Builders; Emily Kessinger, business development manager, and Chris Harrison, executive vice president at The Weitz Company; Sean Studzinski, president of strategic initiatives at Modular Design+; and Sky Sanborn, executive vice president and chief operating officer of Broeren Russo Builders. SHB: How busy is your student housing pipeline? What projects have you recently built/completed? Goldman: We have some projects that are lined …

September 14, 2021

Features Retail

Now is the Time for Regional Mall Redevelopments

by Taylor Williams September 10, 2021

By Glenn Brill, managing director, FTI Consulting Inc. Despite the growth of e-commerce as consumer expenditures and retailers adapt to omni-channel sales, digital marketing strategies and shifts in consumer behaviors resulting from COVID-19, most shoppers still go to stores. Eighty-six percent of consumer sales take place in a brick-and-mortar store environment, according to the U.S. Department of Commerce’s second-quarter e-commerce retail sales report. Still, upscale retailers are increasingly consolidating local market share into exclusively Class A retail properties. The death of the shopping mall is widely discussed and perhaps greatly exaggerated; high-end malls continue to find success as upscale consumers unleash pent-up demand and savings accumulated during the pandemic. However, due in large part to stagnant middle-class incomes and the struggles of stalwart anchors of middle-class consumption like J.C. Penney and Sears — as well as the general decline of department stores — many Class B and C malls have been left to compete with each other for declining shares of middle-market tenants in oversaturated markets. According to CoStar Group, U.S. mall properties had a vacancy rate of approximately 7.3 percent as of August 2021, representing the fourth consecutive annual increase. In an August report, Coresight Research estimated that 25 …

September 10, 2021

Features Hospitality

Select Assets Can Present Strong Opportunities for Hotel Investors

by Taylor Williams September 8, 2021

By David Vincent, investment products specialist, Cadre Asset selection in the hospitality investment market will be critical through the remainder of 2021, as particular hotels in select locations could thrive from new sources of growth and revenue, while others may sit on the wrong side of shifting demand. But investors shouldn’t completely write off the sector. Instead, they should keep their eyes wide open about specific opportunities with solid information that could support a potential increase in valuation. Travel on the Rise Stretching their wings after extended COVID-19-related isolation, Americans are now taking to the skies and highways in large numbers. A need to return to normalcy is driving increased demand for travel, boosted by the promise — and delivery — of vaccinations and then-falling infection rates. Confidence appeared to peak in the early summer, as major airlines announced profitable quarters and plans to hire and purchase planes more aggressively, according to reports by The New York Times. In July, the uptick in travel and lodging brought the national hotel occupancy rate to 71.4 percent — the highest level since summer 2019, according to data from CoStar Group. Now, amid the uncertainty of the Delta variant, the future of hospitality …

September 8, 2021

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