Features

Coworking Poised to Overtake Tech as Top Office Leasing Sector in 2019, Says JLL

by John Nelson July 26, 2019

CHICAGO — The U.S. office market registered 34.8 million square feet of leasing activity larger than 20,000 square feet during the second quarter, according to JLL’s latest Office Outlook report. This continues the established absorption trend of 30 to 35 million square feet per quarter. Among office-using sectors, tech and coworking remain dominant, having both exceeded the 10 million-square-foot mark halfway through the year and representing 31.1 percent of all activity year-to-date. The year-to-date gap between tech and coworking narrowed even further in the second quarter as WeWork, Spaces and other coworking operators continued to rapidly expand. At the current rate of growth, coworking is likely to be 2019’s largest driver of office leasing. Consolidation and mergers-and-acquisitions, combined with a severe lack of skilled employees, have tempered expansion potential for tech companies, according to JLL. About 58 percent of transaction volumes in the tech sector represented growth or expansion. In comparison, expansion as a share of tech leasing activity routinely reached 75 to 80 percent in 2016, 2017 and early 2018. Densification and office space efficiency are still weighing on legal, consulting and other professional services firms, although active preleasing and relocation is boosting total activity from these users. JLL’s …

July 26, 2019

Features North Carolina Office Southeast Southeast Feature Archive Uncategorized

LED Lighting: An Amenity With Immediate Payback for Office Owners

by John Nelson July 25, 2019

DURHAM, N.C — The term “environment” is typically thought of as being strictly outdoors, but for office owners, investors and tenants, the interior of office buildings is an environment unto itself. And like planet Earth, an office environment needs investment in order to protect its inhabitants. “We believe the workplace, where employees spend eight hours a day or longer, must provide a healthy and stimulating interior environment,” says Dan Goldstein, managing partner with Accesso Partners LLC of Hallandale Beach, Florida. Goldstein, whose 15-year-old company owns Class A office towers spanning 15 million square feet in major U.S. cities, contends “it makes good business sense to invest capital in an interior environment where employees are productive, efficient and above all, healthy, which cuts down on illnesses and absenteeism and contributes to job satisfaction.” Accesso Partners is doing more than just preaching. In Durham, the institutional commercial real estate fund recently installed a new lighting solution at its 10-building, 690,520-square-foot space within the Meridian Corporate Center, which is adjacent to the famed Research Triangle Park. The result has been brighter offices that are easier on the eyes and more conductive for close-up, meticulously detailed work. There is also a flipside to that …

July 25, 2019

Features Florida Net Lease Retail Southeast Southeast Feature Archive

Collaboration is Key for 1031 Buyers to Avoid Missteps, Tax Obligations for Single-Tenant Net-Leased Retail Assets

by John Nelson July 23, 2019

Single-tenant, net-leased properties (STNL) are among the most sought-after investments in the market, and over 40 percent of all STNL properties acquired are purchased by investors in a 1031 exchange. Finding the right properties can be challenging and competitive, and factoring in the time restrictions of a 1031 exchange further complicates the issue, particularly when deals can be derailed for a myriad of reasons. Many of these pitfalls can be avoided or limited by leveraging a team of well-versed experts, from property brokers to tax professionals, reducing the odds of an investor getting shouldered with a hefty tax obligation. An infrequent but potentially catastrophic event that can derail a 1031 exchange is a tenant exercising a right of first refusal (ROFR). Approximately one-in-five leases include such a provision, and most tenants infrequently take advantage of the opportunity. Experienced real estate professionals often know which occupants tend to favor acquiring their buildings when given the opportunity. Corporate-owned McDonald’s restaurants are among the most frequent tenants exercising a ROFR when presented with the chance. Although targeting these deals does not automatically derail a 1031 exchange, having a viable backup property is important in these situations. Other hurdles can derail a flawlessly executed …

July 23, 2019

Features

Research Study Finds Flood of Middle-Income Seniors Provide Major Housing Challenge, Opportunity

by Alex Tostado July 18, 2019

ANNAPOLIS, MD. — Middle-income seniors — those with too much money for government assistance, but not enough to afford luxury rents — may be the single biggest growth opportunity for the seniors housing industry over the coming years, according to research by the National Investment Center for Seniors Housing & Care (NIC). The Annapolis-based nonprofit organization is a data and analytics firm serving the seniors housing industry. The research project was conducted in partnership with NORC at the University of Chicago, a non-partisan research institution that seeks to guide programmatic, business and policy decisions with data. The findings were presented on a webinar hosted by Seniors Housing Business on Tuesday, July 16. Approximately 1,200 industry professionals attended the webinar. “Part of our purpose for doing this study was to shine a light, to call attention to this huge societal need and challenge that also provides a tremendous market opportunity,” said Bob Kramer, NIC’s founder and now a strategic advisor to the organization. “Middle-income seniors are the forgotten group because they don’t have advocacy behind them, but are not wealthy enough to attract the interest of developers and investors.” These types of seniors include retired teachers, firefighters, government workers and nurses, noted Beth Mace, …

July 18, 2019

Features Loans

Discipline Tempers Debt Market Flush With Capital

by Taylor Williams July 16, 2019

When the current economic expansion passed the 10-year mark on July 1, it became the longest growth cycle in U.S. history. Still, mixed messages continue to plague the economic outlook. Arguments for optimism include the rising trajectory of GDP growth, which hit a three-year high of 2.9 percent for all of 2018 and was followed by a 3.1 percent reading in the first quarter of 2019. Unemployment is at a 50-year low, and interest rates remain near historical lows. On June 19, the 10-year Treasury yield briefly fell below 2 percent for the first time since 2016 before closing that same day at 2.03 percent. That figure was down about 85 basis points on a year-over-year basis. Such inexpensive capital tends to fuel investment in residential and commercial real estate, driving up property values. Meanwhile, the Federal Reserve has indicated that it wants to maintain low rates due to mixed signals in the global economy. Bearish signals include the possibility of an extended tariff war with China that could lead to a hike in consumer prices, disappointing job growth of 75,000 in May, stock market volatility and a flat yield curve creeping toward inversion. The two-year Treasury yield stood at …

July 16, 2019

Features Office

Coworking is Snatching Up Office Space, But Is More Disruption on the Horizon?

by Kristin Harlow July 11, 2019

CARLSBAD, CALIF. — The office investment market is back on track and buoyed by significant sources of capital for deal making, following some political and economic uncertainty over the past year, according to the June 2019 Office Investor Sentiment Report by Real Capital Markets (RCM). Among the key takeaways is that a majority of investors (87 percent) who participated in the survey view coworking as a moderate to high risk to investment values, with 37 percent of that group noting that the market could already be saturated. Overall, investors are looking more closely at the investment value of coworking space, given its rapid expansion and potential exposure to any market downturn. The report also notes that investors remain confident in the office market in general, especially given economic conditions and population growth. “Conventional wisdom and years of experience tell us that we may be long in the [economic] cycle,” says Tina Lichens, COO of Carlsbad, Calif.-based RCM. “At the same time, there is a broad sense of optimism, albeit somewhat cautious, that with the level of capital poised for investment, there are still allocations to be met and transactions to be completed.” Coworking risks, opportunities Coworking space has led all …

July 11, 2019

Features Retail

Reis: National Retail Vacancy Experiences First Drop Since 2016 Among Neighborhood Shopping Centers

by Kristin Harlow July 9, 2019

NEW YORK CITY — The neighborhood and community shopping center retail vacancy rate fell 10 basis points to 10.1 percent in the second quarter, according to New York-based commercial real estate data firm Reis. This is the first time in which vacancy has declined since the first quarter of 2016. For context, in the second quarter of 2018, the rate had risen 20 basis points to 10.2 percent and remained flat at that rate through the first quarter of this year. The tightening of available space is in contrast to the larger talking points about U.S. retail, which often claim a “retail apocalypse” is upon us as e-commerce continues to cause a sea change in how Americans shop. Reis information comes from its database of commercial real estate property information, spanning 77 primary metro areas. Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.4 percent in the second quarter. At $21.39 per square foot (asking) and $18.73 per square foot (effective), the average rents have both increased 1.7 percent since the second quarter of 2018. Mall outlook The regional mall vacancy rate rose 30 basis points in the first quarter to 9.3 percent, …

July 9, 2019

Features

U.S. Economy Adds 224,000 Jobs in June, Unemployment Ticks Up to 3.7 Percent

by Taylor Williams July 5, 2019

WASHINGTON, D.C. — The U.S. economy added 224,000 new jobs to nonfarm payrolls in June, exceeding economists’ expectations and building on last month’s total of 72,000, according to the monthly report from the Bureau of Labor Statistics (BLS). The job growth figure for May was revised down by 3,000 positions from 75,000 jobs. The unemployment rate ticked up 10 basis points to 3.7 percent, but the overall rate of job growth suggests the economy still has some gas in the tank as the expansion approaches the 10-year mark. In addition, the economy has now experienced 121 consecutive months of positive job growth and is averaging about 172,000 jobs per year in 2019, compared with 47,000 per month in 2018. Growth was balanced between industries, with strong gains in key sectors. Professional and technical services (51,000), transportation and warehousing (24,000), healthcare (35,000) and manufacturing (17,000) were among the industries that saw positive growth from the previous month. Average earnings across nonfarm payrolls rose by 6 cents during June after increasing by 9 cents in May. The labor force participation rate was unchanged for the month and year at 62.9 percent. — Taylor Williams

July 5, 2019

Features Industrial Texas

Cold Storage Yet to Tap Full Potential

by Taylor Williams July 2, 2019

Across the country, natural population growth is triggering demand for more space for the manufacturing, processing, storing and distributing of food. Cold storage facilities cater to this demand by offering numerous types of warehousing solutions, from chilled spaces for dairy products and dry fruits and vegetables to freezer facilities for meat and seafood. Most major grocers are slowing their paces of new store openings while also developing their online delivery platforms, the latter of which is a key demand generator for cold storage facilities. A 2018 study by Food Marketing Institute and global market research firm Nielsen found that the online grocery shopping market will ensnare 70 percent of consumers to some degree by 2024. The report also projected that the percentage of online grocery shopping relative to total grocery sales would grow significantly in the coming years from its mark of 3 percent in 2017. Total online grocery sales are eventually expected to exceed $100 billion. According to some industry experts, that growth translates to a need for an additional 40-some million square feet of cold storage product — just to meet demand for online groceries. The advent of meal kits — online platforms that provide ingredients and recipes …

July 2, 2019

Conference Coverage Features Multifamily Seniors Housing

Executive Directors Take on Heightened Importance in Evolving Seniors Housing Industry, Says InterFace Power Panel

by Jeff Shaw June 28, 2019

CHICAGO — Operators in the senior living space universally agree that the executive director holds the single most important position at their communities and that the job is a daily grind. These frontline administrators are not only tasked with providing the best care possible for residents, but they must also demonstrate strong financial acumen. They are frequently thrust into the role of crisis manager, all the while they are expected to be strategic thinkers. Rather than simply give lip service to the idea that the executive director is an invaluable part of the overall operation, Charter Senior Living is putting its money where its mouth is. The operator of 14 senior living communities in nine states is exploring the possibility of giving executive directors an ownership stake in its communities. “I know that’s been talked about for years, but we are actually in a position [to provide that incentive] on top of a very competitive financial package,” said Keven Bennema, president and CEO of Charter Senior Living, which offers independent living, assisted living and memory care across its properties concentrated in the Midwest and Southeast. It’s important for department heads to feel a sense of ownership as well, added Bennema, …

June 28, 2019

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