Features

Gregg Gerken, Head of Commercial Real Estate for TD Bank

TD Bank: Why We Need to Address Affordable Housing Needs Now

by Sarah Daniels February 26, 2021

By Gregg Gerken, Head of Commercial Real Estate for TD Bank Even prior to the COVID-19 pandemic, it was a struggle to build or find affordable housing. But since the pandemic broke out, finding affordable housing may be even harder for those who now need it most. A Problem Made Worse by a Global Pandemic The lack of affordable housing was an urban, suburban and rural problem even before COVID-19. Rent-burdened families and seniors living on a budget reside in almost every small and large city in America. While the $600 per month unemployment payments, stimulus checks and extension of eviction moratoriums have helped, the bottom line is that those most affected by COVID-19 financially still have the longest road to recovery and need more assistance – especially affordable housing – to get back on their feet. The Tenant Versus Landlord Narrative Multifamily housing renters are trying hard to make rent, but some just can’t, and that hardship then tilts onto landlords who are trying to cover payroll, taxes, utilities, upkeep and mortgages. The looming crisis now is that millions of renters are behind on their rent with approximately $70 billion due in back payments that could create a wave …

February 26, 2021

Features Finance Insight Loans Midwest Net Lease Northeast Southeast Texas Western

Envoy Discusses Construction, Bridge Loan Lending, Future of Net Lease

by Sarah Daniels February 24, 2021

Ralph Cram, president and manager of Envoy Net Lease Partners LLC, is responsible for providing strategy, marketing and investment advice on all aspects of net lease property investments. He believes 2021 will be a banner year for net lease, and that Envoy is particularly well suited when it comes to providing “one-stop shopping” for developers. Finance Insight: How is Envoy is different from a “normal” commercial real estate finance provider? Cram: Envoy’s focus is construction and bridge loan lending on single-tenant, net-lease properties in most commercial real estate segments such as retail, restaurant, medical and industrial properties. What differentiates us from most lenders is that first and foremost, Envoy can lend up to 100 percent of the total project costs. A developer receives all the project’s capital from one source without having to take on outside investors and time-consuming joint-venture (JV) and related agreements. Envoy’s “one-stop shopping” allows developers to concentrate on what they do best and provides the entirety of financing and other capital considerations for a given project. Second, the only thing we do is lend on net-lease properties, so we are experts. We don’t do an apartment loan one day and a PPP loan the next. We don’t leave, enter and then re-exit the net-lease market and …

February 24, 2021

Content Partner Features Midwest Northeast Southeast Texas Western

Valbridge: Automation Can Assist Valuation Process, But Not Replace It

by Sarah Daniels February 23, 2021

The pandemic has forced the appraisal business into a surreal experience: many valuation professionals had their physical connections to the market severed or diminished. The question became: how best to assign value to the properties that appraisers are tasked with assessing especially while the demand for valuation has grown. Where does the rise of automatic valuation systems (AVSs) fit in with the valuation process? Karl Finkelstein, vice president of Business Development and senior managing director for Valbridge Property Advisors, spoke recently to REBusinessOnline. He explains, “The appraisal business is still all about reporting on what we see in the marketplace. That hasn’t changed. What has changed is our physical connection to the market — talking with market participants and attempting to read the tea leaves.” As for many companies, the past few months have been a time of reassessment and reengagement with the technology and tools at hand. “We’ve had to rethink how we do inspections; we’ve had to rethink how we physically interact. Technology has given us a big hand with that, and it has changed some of the some of the ways we do business and enhanced others,” says Finkelstein. A Hands-On Business, Socially Distanced Physical inspections remain …

February 23, 2021

Features Office

Cushman & Wakefield: U.S. Office Market Outlook Begins to Show Reasons for Optimism

by Kristin Harlow February 18, 2021

CHICAGO — The road ahead will be bumpy for the U.S. office sector, but there is light at the end of the tunnel, says Cushman & Wakefield. The Chicago-based commercial real estate brokerage recently published Part III of a series of snapshots entitled “U.S. Office Sector: the Road Ahead in 2021,” which are focused on the economy and office trends. What follows is a synopsis of those predictions in the third segment. The path of the virus is central to the office sector recovery, asserts Cushman & Wakefield. As of early February, roughly 11 percent of the U.S. adult population has received at least one dose of the vaccine. Additionally, the seven-day moving average of vaccines being administered was trending up and the number of vaccinations was outpacing the number of new confirmed daily infections. Most baseline forecasts assume the vaccines will be widely distributed by mid-2021 in most advanced countries and in some emerging markets. In the U.S., it is currently assumed that full herd immunity will be reached by September or October of this year. Undoubtedly, the pandemic directly impacted office leasing fundamentals in 2020. In the U.S., there was 104 million square feet of negative absorption last …

February 18, 2021

Features Heartland Feature Archive

General Contractors Look Forward to Possible ‘Tsunami of Projects’ as Backlog Dissipates

by Kristin Harlow February 16, 2021

With light emerging at the end of the COVID-19 tunnel thanks to the rollout of a vaccine, general contractors are confident of an uptick in business activity in 2021 following a year in which many projects were put on hold. But that optimism is clouded slightly by the high cost of materials, particularly lumber. Michael Sullivan Jr., CEO and founder of Des Plaines, Illinois-based Peak Construction Corp., says his company is prepared to absorb more of the rising costs this year than it did in 2020. Last year, many developers that Peak worked with were willing to take on the increased costs simply because they wanted to continue operating during the pandemic. “It appears that 2021 will change from that pattern, and we expect to see significant increased costs for many materials, subcontractors, insurance premiums and costs attributable to modified operating practices in the field,” says Sullivan. These cost escalations will erode profit margins despite increased revenues, he predicts. Adam Miller, president of Summit Design + Build LLC in Chicago, says lumber prices are nearly double what they were in September 2019. The reason is threefold: fires in the lumber source forests of the Northwest U.S.; disruptions and delays at …

February 16, 2021

Features Retail

By Reducing Occupancy Costs, Brick-and-Mortar Retailers Can Save on Property Taxes

by Taylor Williams February 12, 2021

By Morris Ellison Esq., partner, Womble Bond Dickinson LLP E-commerce was here to stay even before the pandemic devastated small businesses and placed an even greater premium on technology. In the changed landscape, lowering occupancy costs by reducing property taxes is one of the most important steps businesses can take to remain competitive. Stay-at-home orders still prevent many shoppers from visiting their favorite brick-and-mortar stores, while fear of contagion exacerbates consumers’ reluctance to shop in person. Regardless of customer traffic, however, retailers still incur fixed costs including insurance, enterprise software, property taxes and, arguably, rent. The occupancy costs of online-only retailers are much lower, making it difficult for small brick-and-mortar businesses to compete. Put differently, sales taxes decline with reduced sales but property taxes do not. Landlords and tenants in triple-net leases often fail to examine property taxes, but the survival of both may depend on reducing this expenditure. Other costs such as insurance and the enterprise software needed to run the business generally lie beyond a small business’ control and do not diminish with reduced business volume. The active 2020 hurricane season certainly has not reduced insurance costs. During the pandemic, some landlords have deferred or forgiven rent, but …

February 12, 2021

Features Office

U.S. Office Rents Won’t Return to Pre-Pandemic Levels Until 2026, Says Moody’s Analytics

by Jeff Shaw February 11, 2021

NEW YORK CITY — It will take at least five years for office-using companies in the United States to demand enough office space to push rents to pre-pandemic levels, with more short-term pain for office owners on the horizon, according to projections by Moody’s Analytics. The New York City-based research firm, which is a subsidiary of ratings agency Moody’s Corp. (NYSE: MCO), issued the forecast last week, punctuating its findings with an assertion that U.S. office vacancy would rise to 19.4 percent in 2021. That figure would represent a 30-year high, surpassing the national vacancy rate of 17.6 percent that occurred in 2010 toward the end of the Great Recession. It would also be the highest national vacancy rate recorded since the 19.7 percent posted during the Savings & Loan Crisis of the early 1990s. In addition, the report from Moody’s Analytics predicted that the national office vacancy rate of nearly 20 percent would hold equally steady in 2022, while rents would fall much more sharply in 2021 than the 0.7 percent decline they posted in 2020. Effective office rents are projected to decrease by 7.5 percent in 2021 before recovering in 2022 as companies continue to implement entire or …

February 11, 2021

Single family rental SFR build for rent BFR space Walker Dunlop

Build-to-Rent Content Partner Features Multifamily Single-Family Rental Walker & Dunlop

Walker & Dunlop Predicts Growth for Single-Family Rental, Build-for-Rent Asset Class

by Sarah Daniels February 9, 2021

The single-family rental (SFR) and build-for-rent (BFR) space is emerging as one of the strongest growth sectors in commercial real estate. While the SFR market has made up a portion of the rental market for many years, historically individual and small-scale investors have dominated the market. Institutional investors have only invested in the space for the last 10 to 12 years since the end of the Great Recession. Demand for SFR has been steadily increasing due to current demographic trends related to Gen Y and baby boomers; however, migration patterns related to COVID-19 have accelerated that demand. SFR growth is expected to outpace multifamily, office, retail, storage and hospitality growth by 2022. As the demand for more SFR properties grows, an increasing number of larger investors are expanding their investment strategy to include the product. With the SFR asset class gaining more attention, the BFR sub-segment is playing an emerging role in large-scale investors’ portfolios. The SFR market is estimated at $3.4 trillion, compared to $3.5 trillion for the multifamily market.1 Institutional investors make up less than 2 percent of the SFR market compared to 55 percent for the multifamily market. As more young families, families with children and retirees …

February 9, 2021

Features Retail

Coresight Research: Apparel Represents Bulk of Retail Closures During Pandemic

by Jeff Shaw February 4, 2021

NEW YORK CITY — More than 8,741 major retail locations closed their doors in the United States during 2020 totaling over 139 million square feet, largely as a result of lockdowns and restrictions related to the COVID-19 pandemic. That’s according to the “US and UK Store Closures Review 2020 and US Outlook 2021” report from Coresight Research, a commercial real estate data firm based in New York City. Apparel stores, including clothing, footwear and accessories, took the brunt of the fallout, accounting for 3,151 of the store closures. Home and office retailers came in a distant second with 1,428 store closures. The apparel store closings were driven by a few high-profile bankruptcies. Ascena Retail Group — which includes Ann Taylor, Catherines, Justice, Lane Bryant, LOFT and Lou & Grey brands — closed 1,156 stores; Foot Locker closed 125 stores; Gap closed 119 stores; and Victoria’s Secret closed 231 stores. Eight retailers accounted for 75 percent of the total apparel store closures. The outlook for 2021 doesn’t look much brighter. Coresight predicts total U.S. retail store closures will hit approximately 10,000 locations, a 14 percent increase over 2020. On the other side, Coresight tracked 3,304 new store openings in 2020, and …

February 4, 2021

Acquisitions Features Multifamily Seniors Housing

Seniors Housing Sellers Are Highly Motivated Coming Out of COVID-19, Webinar Panel Concludes

by Jeff Shaw February 1, 2021

Seniors housing investors may be switching from development to acquisitions in the near term, as highly motivated sellers seek to unload existing properties at a lower price than the cost of building a new community. The prospect of highly motivated sellers has largely come as a result of the stresses of operating seniors housing during a global pandemic. “We’re starting to see valuations that are well below what we can develop for,” said Bill Pettit of R.D. Merrill Co. “If it’s the right business model and the right locations, we’ll be much more active on the acquisitions side moving forward.” Pettit’s comments came during a webinar entitled “Seniors Housing Valuation Outlook: What’s Ahead for 2021?” The event, held Thursday, Jan. 28, also included Rich Lerner of Housing & Healthcare Finance, Adam Heavenrich of Heavenrich & Co., Michelle Kelly of National Health Investors (NHI), Chris Kronenberger of Blue Moon Capital Partners and moderator JP LoMonaco of Valuation & Information Group. “Value by nature is a long-term concept,” said LoMonaco. “Value is created by the anticipated benefits of ownership over the long term. But short-term issues can cause short-term impacts on value.” LoMonaco noted that the acquisitions market for seniors housing was …

February 1, 2021

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