Midwest Market Reports

Despite Costs, Developers Pursue Rehab Opportunities for Detroit’s Historic Buildings

by Kristin Harlow July 30, 2020

By Steven Phillip Siegel Mies van der Rohe. Yamasaki. Kamper. Kahn. Portman. Gyllis. Some of the biggest architects in the world have a presence in Detroit. Motown’s exceptional confluence of architects and designers earned the city a UNESCO City of Design designation, the only city in the United States to receive the UN’s award for design excellence. However, beginning in the early 1970s, many of the city’s finest architectural works slowly sank under a weakening market amid tenant (and residential) flight to the suburbs. In the aftermath of the Great Recession, developers, led by Dan Gilbert’s Bedrock, began slowly redeveloping Detroit’s architectural gems. Historic properties like downtown’s David Stott Building or New Center’s Fisher Building saw massive capital investments in recent years. Yet, many city residents and tenants find it hard to comprehend why rents on these new projects are so much higher than the rest of the market. The narrative of Detroit’s architectural gems — and the financial Jenga it takes to make them succeed — tells the story of the city’s modern-day renaissance. “To us, it’s a passion project,” says Brett Yuhsaz, Bedrock’s director of construction, who has worked on some of the city’s most notable historic rehabs, …

July 30, 2020

Healthcare Market Reports Midwest Midwest Market Reports

COVID-19 Interruptions Are Largely Short Term for Medical Office Sales

by Kristin Harlow July 9, 2020

By Mike Wilson, Principal, Avison Young As the commercial real estate industry shifts toward a new normal, there are several changes occurring in the medical office sector. This asset class has long been considered a safe haven, even in recessionary times, given its ties to the healthcare system and overall population growth. The onset of COVID-19 and the subsequent stay-at-home orders in many states have created challenges that also touch the medical office sector, although not nearly as deeply as other asset classes. One shift occurring is a varying level of activity among medical office tenants, depending upon whether their services are deemed essential or nonessential. Tenants in essential buildings, particularly those tied to large healthcare systems, are still seeing patient throughput activity as healthcare needs remain. Some elective surgery centers and outpatient testing facilities, however, have seen a temporary pause as medical professionals retrenched due to the state closures. Landlords in turn have had to manage rent relief requests from tenants. These changes are considered short-term and are not expected to have long-term effects on tenant activity or property investment levels. The medical office sector continues to draw the attention of a wide range of investors, due to its …

July 9, 2020

Market Reports Midwest Midwest Market Reports

Post-Pandemic Lease Provisions: They’re Changing, But Will They Work?

by Kristin Harlow July 2, 2020

By Tim McCaffrey, Counsel, Eversheds Sutherland (US) The coronavirus pandemic has impacted individual and corporate behavior on a global scale. Businesses across every sector are attempting to mitigate the economic impact of this crisis. Previously standard leasing terms are changing, both in light of the current environment and in anticipation of a second wave of infection. But even as parties negotiate carefully drafted provisions and carve-outs, it remains unclear when courts will be available to interpret these changes and how they will ultimately respond. The most commonly discussed change to standard contract terms is the force majeure provision, which typically allows one or both parties to delay or excuse performance of contractual obligations when prevented by unforeseeable circumstances. Where pandemic-specific language is not already part of a force majeure clause, many parties are seeking to add it to the contract. In typical leases, this defense to performance is only available to landlords for obligations such as the timely delivery of the property or completion of certain landlord work. And in those instances where it does apply to benefit tenants, it typically expressly excludes payment obligations. But in today’s climate, tenants have begun requesting the ability to invoke a force majeure …

July 2, 2020

Market Reports Midwest Midwest Market Reports Office

Office Best Practices: How to Prepare for a Post-COVID-19 Reality

by Kristin Harlow June 25, 2020

By Andy Gutman, President, Farbman Group It’s no hyperbole to acknowledge that we are living in unprecedented times and facing unique and historic challenges. The novel coronavirus pandemic has had a profound impact on the lives and livelihoods of Americans across a wide range of industries, and commercial real estate is no exception. As brands and businesses struggle to adjust to the slowdown, with many shutting their doors and others making significant operational adjustments, owners and operators face their own dilemmas. How can real estate professionals help their tenants while protecting their own interests? What can they do differently today to start preparing for a post-shutdown new normal once the nation and the economy begin reopening in the months ahead? What follows is a review of practical tips and best practices that real estate professionals should be deploying to ensure they are doing everything they can to help themselves and their tenants navigate the unfamiliar terrain of a pandemic-altered landscape. Talk the talk Communication with tenants is always important. In the current circumstances, however, clear and consistent communication is not just a priority, but an urgent necessity. Make sure your team is connecting on COVID-related changes to tenants, sharing updates …

June 25, 2020

Market Reports Midwest Midwest Market Reports Ohio Restaurant Retail

Ohio Delivers High Property Tax Values

by Kristin Harlow June 18, 2020

By Steve Nowak, Siegel Jennings Co. A recent decision from an Ohio appeals court highlights a developing and troubling pattern in the state’s property tax valuation appeals. In a number of cases, an appraiser’s misuse of the highest and best use concept has led to extreme overvaluations. Given its potential to grossly inflate tax liabilities, property owners and well-known tenants need to be aware of this alarming trend and how to best respond. In the recently decided case, a property used as a McDonald’s restaurant in Northeast Ohio received widely varied appraisals. The county assessor, in the ordinary course of setting values, assessed the value at $1.3 million. Then a Member of the Appraisal Institute (MAI) appraiser hired by the property owner calculated a value of $715,000. Another MAI appraiser, this one hired by the county assessor, set the value at $1.9 million. The average of the two MAI appraisals equals $1.3 million, closely mirroring the county’s initial value. Despite the property owner having met its burden of proof at the first hearing level, the county board of revision rejected the property owner’s evidence without analysis or explanation. The owner then appealed to the Ohio Board of Tax Appeals (BTA). …

June 18, 2020

Market Reports Midwest Midwest Market Reports Retail Wisconsin

Reimagined Milwaukee Retail Scene Meets Consumer Lifestyle Needs

by Kristin Harlow June 11, 2020

By Ray Balfanz, Outlook Management Group What does Milwaukee bring to mind? Beer? Cheese? TV’s “Happy Days?” Perhaps the city chosen as the site for the 2020 Democratic National Convention? Yes, that’s us — being recognized and happy about it. But since I began penning this piece in March, we’ve experienced a world of change in the realities of group gatherings: we can hardly have 10 people in a group now, let alone thousands of delegates filling our new Fiserv Forum. It’s anybody’s guess how long the multi-trillion-dollar brick-and-mortar retail industry will be effectively shuttered and how the industry will have changed when it’s over. So without a crystal ball, I’m sharing Milwaukee’s story of how our retail developments have kept relevant for our consumers, while hoping for the best possible outcome once we’re on the other side of this coronavirus pandemic. “A great place on a great lake” our tourism slogan once proclaimed — and indeed it is. Milwaukee is a largely undiscovered gem with excellent quality of life and endless spots at which to spend your hard-earned cash: a prolific culinary scene, first-rate arts offerings and vibrant retail. From the reimagined Drexel Town Square, to redeveloped Bayshore, to …

June 11, 2020

Industrial Market Reports Midwest Midwest Market Reports Ohio

Low Vacancy Rate in Toledo Industrial Market Prompts Call for More Spec Space

by Kristin Harlow May 28, 2020

By Lynette Reichle, Reichle Klein Group On March 12, Ohio’s governor declared a state-wide order closing schools and gatherings of over 100 people. On March 15, he ordered all bars and restaurants to close dining rooms (but could maintain carryout and delivery) with further closings on almost a daily basis. Finally, the stay-at-home order came on the 22nd. As of the writing of this article, it is difficult to estimate the full effects of the COVID-19 pandemic and what the moves our government has taken to protect us will have on our real estate markets. Prior to the spread of the coronavirus, Toledo’s industrial real estate market had been running at unprecedented high levels in both leasing activity and new development for the past several years. While the beginning of this year was decidedly quiet compared with the fourth quarter of 2019, we had every reason to expect strong demand for industrial properties through the remainder of 2020. In fact, the Toledo market still suffers from an inventory problem; virtually every project that was built last year was a build-to-suit. Local and regional developers have yet to develop enough of an appetite to build speculatively. Further, no one in the …

May 28, 2020

Kansas Market Reports Midwest Midwest Market Reports Mixed-Use

Building Momentum: How Public-Private Partnership Revitalized Downtown Topeka, Kansas

by Kristin Harlow May 21, 2020

The city of Topeka has built significant momentum in the five years since its downtown revitalization. Capital investment and strategic planning at the city’s center had a reverberating effect across town, from the expansion of vocational-technical training to the growth of Kanza Fire Commerce Park. Public-private partnership The year 2015 was pivotal with a $9.4 million public-private investment in infrastructure and amenities along Kansas Avenue, the main downtown thoroughfare. The city invested $5.8 million in roadway, sewer and streetscape infrastructure. Meanwhile, private businesses sponsored pocket parks with statues, benches and fountains. The Downtown Topeka Foundation brought another $4 million in private funding to the effort through its “Imagine Downtown” capital campaign. Since that day, local investors like AIM Strategies LLC have purchased more than 25 buildings on the avenue for gradual restoration into thriving businesses like Iron Rail Brewing, Cyrus Hotel and The Pennant restaurant, bowling alley and vintage arcade. Popular annual festivals and parades expect to see even more traffic after the unveiling of the next phase of major downtown investment. Evergy Plaza With 30-foot digital screens and the 50-foot CapFed On 7th Stage, Evergy Plaza was developed as a hub for community and a catalyst for business. The …

May 21, 2020

Industrial Market Reports Midwest Midwest Market Reports Wisconsin

Metro Milwaukee Industrial Market Poised to Remain Strong

by Kristin Harlow May 14, 2020

The southeastern Wisconsin industrial real estate market had a banner year in 2019 and remains strong. According to Catalyst, the industrial market in southeastern Wisconsin had a vacancy rate of approximately 4 percent at the end of 2019 and that rate has moved down slightly to 3.9 percent during the first quarter of 2020. This rate is well below the historical vacancy rate in southeastern Wisconsin, which averages between 7 and 9 percent. Several submarkets are significantly lower than the southeastern Wisconsin average: Racine, where the massive Foxconn project is underway, has a 3.8 percent vacancy rate; the large Waukesha submarket, which has nearly 83 million square feet of inventory, has a vacancy rate of 1.9 percent; and the Sheboygan submarket, which has about 27 million square feet of industrial space, has an astonishing 0.1 percent vacancy rate. These extraordinarily low vacancy rates suggest that demand for industrial space in southeastern Wisconsin remains very robust and that, particularly in certain submarkets, supply has not been able to keep up with demand. While lease rates have remained fairly steady throughout the last year, upward pressure on such rates continues to build. Nevertheless, there are some signs of the market taking a …

May 14, 2020

Kansas Market Reports Midwest Midwest Market Reports Mixed-Use

Wichita’s Downtown Revitalization Serves as Catalyst for New Projects

by Kristin Harlow May 7, 2020

Wichita has been experiencing a strong downtown revitalization that has brought construction of new and redeveloped office, retail and mixed-use projects throughout its urban core over the past few years. Two years ago, companies began relocating downtown as shifting workplace demographics incorporated close proximity, “live, work, play” amenities in order to grow their businesses as well as attract and retain talent. Today’s businesses are seeking modern Class A finishes within Wichita’s center where these types of environments exist or will be available in the near future as developments continue. Downtown revitalization In the early 2000s, downtown Wichita lost many of its office users to more suburban office developments on the east and west edges of the city, leaving high vacancy rates and rendering many downtown office buildings functionally obsolete. Now this trend has reversed after the Wichita Downtown Development Corp. put together a comprehensive master plan to revitalize the urban core. Developers purchased key catalytic sites and repurposed them into economic drivers for downtown as shifting demographics brought about the need for businesses to attract and retain top talent with both onsite and walkable amenities. As new office projects downtown are beginning construction and being completed, the idea of relocating …

May 7, 2020

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