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 …
By Kurt Strasmann, Executive Managing Director, CBRE Industrial properties have been in high demand in recent years both nationally and, particularly, in Southern California and the Greater Los Angeles area. Our region is a strategic hub for goods coming from all over the world, especially Asia, and boasts the necessary infrastructure to store and deliver product regionally and throughout the nation. Greater LA is also a major consumer hub. About 50 percent of product coming through the LA and Long Beach ports remains in the region. Our first-quarter numbers emphasize LA’s strong industrial fundamentals prior to COVID-19 taking effect. These numbers have put the market in a strong position to weather the recession, which we expect to be short. The 1.7 percent overall vacancy rate in the first quarter represented the limited supply and high demand for industrial space within the region. The diverse tenant base has created further market resiliency with occupiers in logistics, food and beverage, entertainment, manufacturing and a broad array of other industries. Going forward during these extraordinary times, we do anticipate an increase in vacancies and decreasing tenant leasing activity through at least the fourth quarter. Until we return to a more normalized state, we need …
By Edward Henigin, Chief Technical Officer, Data Foundry The COVID-19 pandemic has been a highly disruptive force in the global market, changing the way businesses, communities and economies operate today — and perhaps into the future. While uncertainty has defined this challenging time, trends have been developing in the wake of the virus’ worldwide impact. One of the most prominent trends has been the shift to remote and digital means of working, communicating and learning. Across nearly every device category, in-home data usage has seen an increase in the first three months of 2020 compared to the same period in 2019. This year, the two-week period between March 1 and March 17 alone exhibited a 34 percent increase in smartphone data usage compared to the previous year’s usage during the same period. As a result of social distancing and quarantine protocols, many businesses have reduced onsite work or even shut down their locations in favor of work-from-home options that incorporate video conferencing platforms or other virtual applications. Today’s increased online dependence creates a focus on digital infrastructure, and data centers are only growing in importance (and in demand) as they become more widely recognized as crucial components of a resilient …
Like many Southeastern markets, the Charlotte industrial market largely hit the pause button from mid-March until June due to COVID-19. While the impacts of the health crisis remain fluid, the market is showing some signs of life, and trends that have long been at play are not likely to be reversed. For the past 90 days, the market has seen a significant drop in leasing and sales activity. The market was a bit sluggish in 2019, but experienced good activity in the first quarter prior to area shutdowns. Asking rents rose 5 percent year-over-year to $4.81 per square foot as new space is being added to the market at a higher price point. That rental rate is a record high for the Charlotte warehouse and distribution market. Most of the recent growth has occurred in the Cabarrus County, Stateline and Airport/West submarkets. Developers continue to fill demand for modern e-commerce, third-party logistics and general distribution space. Additional deliveries will keep upward pressure on vacancy in the near-term, but overall conditions should remain healthy thanks to strong economic tailwinds and Charlotte’s proximity to key East Coast transportation corridors and population centers. Absorption declined significantly over the past 12 months, from 5.3 …
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 …
By Riley McKee, Advisor, NAI Maestas & Ward If summarized in one word, New Mexico’s industrial real estate market can best be described as undersupplied. Steady increases in demand, combined with a dearth of new construction, have resulted in record-low vacancy rates in Albuquerque, Las Cruces and Santa Fe – the state’s primary metropolitan areas. A string of noteworthy projects are underway in Albuquerque. Food products supplier Ben E. Keith Foods is building a 260,000-square-foot regional headquarters and distribution center to service markets throughout the region. FedEx Freight recently opened a 95,000-square-foot distribution center strategically positioned on a 50-acre site to expedite planned expansions. Brunacini Development, the city’s largest industrial landlord, just completed a 140,000-square-foot multi-tenant distribution center anchored by Bunzl, a London-based food packaging distributor. Finally, and perhaps most notably, nuclear energy firm Kairos Power acquired an 110,000-square-foot research and development facility after a nationwide site selection process. It plans to expand the facility, which sits on 35 acres, as part of an incentive package with the state. Las Cruces is seeing strong development activity as well, specifically in Santa Teresa, an international Port of Entry that sits 21 miles south of the city. W. Silver Recycling, which processes …
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). …
By Sydney Bardouil, Esq. If you own or manage real property in the District of Columbia and are wondering why your real estate tax bill has gone up in recent years, you are not alone. One common culprit is rising assessed value, but that may not be the main or only source of an increase. A less obvious contributor may be a new, different, or incorrect tax rate. Since tax rates vary greatly depending on a property’s use, staying diligent when it comes to your real estate’s tax class and billed rate is critical. The District of Columbia applies differing tax rates to residential, commercial, mixed-use, vacant and blighted properties. Why is this important? Because the classification can make a considerable difference in annual tax liability – even for two properties with identical assessment values. For example, a multifamily complex assessed at $20 million incurs a tax liability of $170,000 per year while the same property, if designated as blighted, incurs an annual tax liability almost twelve times greater at $2 million. Therefore, the assessed value is just one piece of the puzzle. Keeping a sharp eye on a property’s tax bill for the accuracy of any tax rate changes …
By Rachel Duck, director and senior property tax consultant at Popp Hutcheson LLP, the Texas member of the American Property Tax Counsel Property taxes are big news in Texas. Last year, property taxes were a primary focus of the 86th Legislature, and Texas Gov. Greg Abbott deemed property tax relief so important that he declared it an emergency item. The 2019 legislative session produced significant modifications to tax law. Here’s a rundown of the most noteworthy changes affecting taxpayers in 2020, along with a look at how fallout from the COVID-19 pandemic may complicate the taxpayer’s position. Removing The Veil Property taxes are not only big news, but they are also confusing, particularly given the “Texas two-step” appraisal and assessment process. After an appraisal district values a property, taxing entities separately tax that property based upon the final determined value. For a single property, a taxpayer may owe five or more taxing entities spread among three assessors’ offices. Understanding the ultimate tax liability for such a property can be a monumental task for taxpayers. Senate Bill 2 addressed the confusion and promoted transparency and truth in taxation, earning it the title of “The Texas Property Tax Reform and Transparency Act …
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 …