One-fifth of surveyed Realtors® practicing in commercial real estate closed a sale with an international client in 2016, and as foreign investors flock to smaller-sized commercial properties in secondary and tertiary markets, many Realtors® are confident that increased sales and leasing activity will occur in 2017.
This is according to the 2017 Commercial Real Estate International Business Trends survey released today by the National Association of Realtors®, which analyzed cross-border commercial real estate transactions made by Realtors® during 2016. Most Realtors® who specialize in commercial real estate reside in smaller commercial markets where the typical deal is less than $2.5 million.
Similar to NAR survey findings on foreign purchases of residential real estate in recent years, China was the top country of origin in both buying and selling commercial real estate in 2016, and Florida was the top destination of choice for international clients. NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate is scheduled for release this summer.
Lawrence Yun, NAR chief economist, says the appetite for U.S. commercial real estate property was strong from foreigners last year and shows little signs of slowing in 2017.
“Multiple years of steady job growth and the strengthening U.S. economy – albeit at a modest pace – makes commercial property a safe bet for global investors looking to diversify their portfolios and generate returns outside their country of origin,” he said. “While Class A asset prices in many large markets have surpassed pre-crisis levels, Realtors® in many middle-tier and smaller markets stand to benefit from the increased interest from foreign and domestic commercial property investors.”
Added Yun, “Forty percent of Realtors® expect an increase in foreign buying clients this year. The healthy labor markets and lower property prices in smaller markets are poised to make up a larger share of activity.”
Of the 69 percent of Realtors® who indicated they completed a commercial real estate transaction last year, 20 percent reported closing a deal for an international client. Realtors® completed a median of one buyer-side international deal and two seller-side international transactions. The typical buyer-side sales price was $1,000,000, and the median seller-side price was $550,000.
Additionally, 22 percent of Realtors® said they completed a lease agreement on behalf of a foreign client. The median gross lease value for international lease transactions was $105,000, with most space typically under 2,500-square-feet.
Nearly two-thirds of commercial foreign buyer and seller clients were non-resident foreigners. The top countries of origin for buyers were China (17 percent), Mexico (14 percent) and the United Kingdom and Venezuela (both at 7 percent), while sellers were typically from China (17 percent) or Brazil, Canada, France and Mexico (all at 10 percent).
Florida and Texas were the top two states where foreigners purchased and sold commercial property last year, with California being the third most popular buyer destination and Michigan ranking as the third top state where foreigners sold real estate.
The survey also found that foreign buyers of commercial property typically bring more cash to the table than those purchasing residential real estate. Sixty percent of international transactions were closed with cash, while NAR’s 2016 residential survey found that exactly half of buyers paid in cash. For those not using all cash, 34 percent of commercial deals involved debt financing from U.S. sources. An overwhelming majority of buyers either purchased commercial space for investment purposes or acquired it for business use.
“Nearly half of Realtors® reported that they experienced a greater number of international clients looking to buy commercial space over the past five years,” said Yun. “Economic expansion has slowly chugged along since the downturn, but in comparison to the rest of the world, the U.S. remains one of the most attractive and safest bets for investors. There’s little evidence this will change anytime soon.”
NAR’s second quarter Commercial Real Estate Outlook, released last month, offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets.
The NAR commercial community includes commercial members, real estate boards, committees, subcommittees and forums; and NAR commercial affiliate organizations – CCIM Institute, Institute of Real Estate Management, Realtors® Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.
Approximately 70,000 NAR members specialize in commercial real estate brokerage and related services including property management, counseling and appraisal. In addition, more than 200,000 members are involved in commercial transactions as a secondary business.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
By: Adam Desanctis (National Association of REALTORS®)
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Archives for June 2017
A Guide to Real Estate Mapping and Analysis Tools
Smart land agents will embrace technology advances and use them not just to survive but to thrive. Others may cling to their brochures and rolodexes, hoping that they can continue to be successful because things were better in the old days and that’s how things have always been done. Unfortunately, history and my experience have shown that nostalgia and longing are rarely good business strategies, especially when it comes to real estate mapping.
Real estate technology innovation is booming. The first wave focused on residential real estate with companies producing solutions like Realtor.com, Zillow, RedFin and StreetEasy. The residential market was ripe for disruption because the Internet was a natural place to expand listing services, engage people through interactive digital marketing and differentiate the realtor’s business with better information, not just lawn signs.
Innovation in residential real estate led industry leaders in other markets to more broadly adopt technology. However, the uptake has been slower despite promises to make their businesses and the lives of their customers better. For many decades, there’s been no reason to change workflows or processes because immense wealth has been created without disrupting the status quo. However, in the past three years we’ve seen a sea change in technology.
It’s now far easier to use and delivers bigger benefits more quickly. Buyers expect an interactive, digital experience and marketing automation. How do you make sense of all the hype, especially if you are a small business owner who is not tech savvy? Above all, where do you start?
Drones: No Longer Just for Dramatic Video Shoots
The excitement around drones has increased immensely in the past year and with good reason. New Federal Aviation Administration rules have reduced uncertainty on who can fly and where and, more importantly, the technology is at a point where anyone can now use them for a small investment.
Drones used to be used exclusively in marketing real estate. A drone mounted camera can produce cost-effective shots of a property. For large, high-end homes or big expanses of land, dramatic videos let you immerse yourself and experience tree top flights. Today, that immersion comes in the form of virtual reality-like 3D interactive experiences that let you fly around and view the scene from any perspective. In the University of Oxford example, shown below, the drone flew multiple paths over the city. The raw video imagery is used to create a full 3D model of the buildings, including exquisite detail for the build frontages, rooflines, gargoyles and chimneypots. You can literally fly down the streets and lanes, and land in any courtyard to explore the buildings.
The same data feeds used to map Oxford can be used in land management to create terrain surfaces which show perspective and hillshading. This can be used to detect slopes, hollows, banks and hidden landscape features which are not obvious in aerial or satellite imagery. Low level drone flights also create very high resolution data which can show changes in vegetation and land development with high degrees of precision such as in this montage below where we not only can see where a new road has been laid but also changes to the height of vegetation and small hollows where water is ponding or eroding the land.
Immersive scenes are immensely valuable for supplementing existing online marketing. What’s more the video data can also provide new perspectives, often quite literally. I recently worked with a land broker who was selling a large tract of land along California’s Mendocino Coast. She had a drone fly over the pasture and old growth forest, up fern filled gullies and fishing ponds. Only after did she realize that the views of the homestead from the private vineyard were missing. They had flown the house and grounds but had not flown towards the house over the vineyard. The great thing was that even though the drones had flown different routes, we could still recreate a full 3D model of the house and grounds. Rather than have a static video, our client created a virtual fly through along the rows of grapes glistening in late summer evening sun, and then up and over the house to show the full grandeur of the setting. Better still, her clients can take the same virtual tour or browse a set of interactive snapshots she has created. She didn’t need to organize another drone flight. Everything she needed to properly promote her ranch was in the data files the drone had collected, we just needed to process it.
Data in the Cloud – Everywhere for Everyone
We’ve all experienced Google Maps and Google Earth. They have changed how we find and view maps and land data. The revolution Google drove is for online data. Today, there are millions of map layers from every corner of the globe forming a Living Atlas of the World. Local, regional and national Governments, private companies and even crowdsourcing volunteers are publishing authoritative and personally collected data into open libraries which anyone can use.
In the United States we have Federal Government data on everything from cropland to wilderness areas, maps of geology, soils, landscape, forest, flood zones, wetlands and hundreds more. Every one of these is freely available to use for analysis and overlay. In many rural areas, the data is better and more useful than cities.
One of the most valuable data sets is satellite imagery. Every frame of Landsat data, which has been imaging our planet since 1972, is available online. This is a valuable source of land surface change information and provides insights into seasonal changes in vegetation, soil moisture, crop growth and much more.
Many satellites have collected data which has been used to collect a high-resolution terrain model of the world. Since this data is also open to everyone, land owners and consultants can use it to understand more about the property throughout the buying process. One common use is gaining an understanding of soil drainage, as it has an important impact on crop production together with water and fertilizer use. Terrain profiling tools, like those shown above, can provide detailed analysis on changes in topography, drainage direction and soil moisture variations. In the example, we can see how the land slopes across the mile-long profile. Even small features of a few feet can be understood by tracking the profile against the aerial imagery. It is possible to identify old stream beds and even the site of a small quarry and ditch.
Sketching, Markup and Marketing
Many land specialists just want simple tools to access land parcels and property data. Open map and data standards mean that many communities are sharing their parcel data as online map services or files. Desktop and online software allow you to upload and fuse these files, trace parcels lines and find out ownership details like those shown in this suburban example below. Map services are simple, syndicated data feeds which create layers for each one you open in free real estate mapping applications like Google Earth or ArcGIS Earth. These “services” are more than pictures. You can query them, see attributes and, in many cases, use them to draw property boundaries by sketching straight onto the map.
Map services also now support social media and online storage sites like Facebook, Photobucket and Flickr. Photos which have been captured with your GPS on your smart phone or tablet contain location data that these sites use, so that these photos can automatically be positioned with your map. Tools to change the color, transparency, outline and shape of any symbols allow you to create high quality digital and print materials with no additional software, as shown below.
You can drag and drop spreadsheets with property addresses or GPS coordinates onto a web browser automatically turn them into online maps. A few clicks, and no coding later, the same spreadsheet can become an interactive property promotion or marketing resource. Rather than creating and mailing out paper books, land specialist can now email links to their properties, so clients and prospects can browse them at their leisure. Since the real estate mapping services which underlie these apps are dynamic, they automatically change when new entries are added to the spreadsheet. Better yet, web analytics tools embedded on your website can tell you how many people are browsing your properties and which ones are the most popular. Having real time listings, web analytics and links to your CRM means you can better market your properties and keep your clients coming back for more.
The Real Estate Digital Revolution
The full impact of the digital revolution in real estate is yet to be seen. The huge improvements in the simplicity of building web apps, promoting properties through interactive marketing tools and using different map layers, are producing a strong movement towards empowering the consumer and land specialist alike. Today, buyers expect to be able to access online information and experience the property without having to visit in person. They are more discerning buyers with many choices for who they do business with.
Real estate mapping, analytics and marketing in the real estate industry are moving on, and fast. Shouldn’t you be making the most of it?
By: Jessa Friedrich (REALTORS® Land Institute)
Click here to view source article.
Small Business and Economic Growth
On Thursday, Apr. 27, 2017 the House Small Business Subcommittee on Economic Growth, Tax and Capital Access held a hearing: “Small Business: The Key to Economic Growth.” During the hearing, members and the witness panel discussed the ways that small businesses contribute to the U.S. economy, through the creation of jobs and contributions to the GDP, as well as challenges small businesses face, including accessing capital and difficulty navigating the U.S. tax code.
NAR sent a letter to the Subcommittee for the hearing, thanking them for addressing this important topic and pointing out that NAR members are frequently both small businesses themselves and serve them as their clients. The letter supports regulatory reform while encouraging growth in the alternative lending market, and points out the important role that 1031s serve in helping small businesses grow and create jobs.
Link to Letter
Developing Parking Facilities in the Modern Day: Preparing for the Future
Take a moment to think about the world in 1987. Virtually every aspect of our daily life has changed in those three decades. At the time, mobile phones cost around $1,400 and were the size of a Dutch oven. The words “climate change” meant nothing. The average monthly rent was $395 and a dozen eggs could be yours for just $0.65. And then there’s this humbling fact: the World Wide Web would not be invented for another two years.
Yet, for many individuals and businesses making the final payment on a 30-year mortgage or bond this year, 1987 was likely the year in which such debt was first secured, likely against a physical property, be it a home, office building or other facility, showing its wrinkles as compared to more modern, technically-up-to-date facilities. Developers and governing bodies throughout the country seeking to construct and/or finance certain facilities are now being forced to consider the shelf-life of such properties like never before.
For certain types of facilities, such as structured parking garages, many experts are predicting a rapidly diminishing overall demand in the decades to come. Those looking to finance the construction of such facilities would thus be best counseled to account for what many of these experts believe will be a seismic shift in the way people get around. Whether it be through conservative planning, by designing such facilities in a manner which allows for adaptive reuse, or by utilizing shorter term financing options, developers of structured parking facilities should be careful not to find themselves in a position where they are still making debt service payments on an empty, unused and, ultimately, non-adaptable facility.
For generations, the need for more and more parking has seemingly grown unabated. According to The Economist, parking accounts for as much as 24 percent of the area of American cities, and some urban areas have as many as 3.5 parking spaces per car.[1] Still, those looking for parking spaces account for as much as 30 percent of miles driven in urban business districts.[2] Experts now believe, however, that we may be at the apex of that growth curve. Due to technological advances such as the proliferation of automated driverless vehicles, the growth of companies offering “shared” vehicle services such as Zipcar and Uber, and overall shifts in the value society places on owning cars and suburban living, parking demand is now beginning to decrease in many areas of the country.
Car-share companies such as Zipcar, car2go, Uber and Lyft, claim that for every shared vehicle on the road, 15 personally-owned vehicles are taken off of it.[3] A report prepared by the University of Berkeley’s Transportation Sustainability Research Center backs that claim up, finding that around 20 percent of corporate Zipcar members reported that they sold a personally-owned car after joining the program.[4] Additionally, another 20 percent claim they avoided buying a car as a result of joining the service.[5] Overall, the study concluded that cost-sharing is on the rise due to a younger generation less keen on vehicle ownership and a growth in the corporate sector looking to enjoy the cost savings over maintaining a fleet of vehicles.[6] In Paris alone, it has been estimated that more than 20,000 private cars have already been taken off the road.[7] When you consider that personally-owned cars are parked as much as 95 percent of the time,8 it only makes sense that such services will grow as more and more people look to shed unnecessary car payments, repair and upkeep costs and insurance premiums.
Another major factor to consider is the expected implementation and growth of driverless, autonomous vehicles. Companies such as Google, Apple, Ford, Volvo, General Motors and Tesla have all been working on self-driving technology for years and, by all accounts, we are closer to a driverless world than ever before. According to the Boston Consulting Group, fully automated cars could make up nearly 10 percent of global vehicle sales a year by 2035.
The Government thinks the time for self-driving vehicles is coming as well. In February 2016, the U.S. Department of Transportation included $4 billion in its proposed 2017 budget for the purpose of implementing driverless car pilot programs over the next decade.[9] Meanwhile, carmakers, technology companies and ride-sharing startups announced they were forming a coalition to lobby the federal government on the rules for self-driving cars.[10] The “Self-Driving Coalition for Safer Streets,” composed thus far of Ford, Google, Uber, Lyft and Volvo, aims to advocate for the quick implementation of rules governing autonomous vehicles as the technology gets closer to being market-ready.[11] Part of their push is an argument that the proliferation of driverless vehicles which practice conservative driving techniques and obey all speed and traffic laws would greatly reduce the rising number of casualties caused each year with more and more drivers distracted by texting, screaming kids in the backseat, applying makeup, etc. Driverless vehicles would also help reduce the number of intoxicated drivers on the road.
At first impression, it could appear that the advantage of such vehicles would be personal without an impact on overall vehicle ownership. But many experts believe such vehicles would cause a dramatic reduction in the number of cars needed in families. A driverless vehicle could drop Dad off at work in the morning, drive back to pick up Mom and drive her to work, pick up the kids after school and then pick both parents up at the end of the day. During its nonuse, the car could park further away without needing to use closer, for-fee, options. Finally, the driverless technology will make traffic flow more smoothly because of the elimination of erratic braking, the ability to re-route to avoid congestion, and the ability for vehicles to travel closer together to increase road capacity.[12] With cars in constant use, and the reduction of vehicles per family, much less parking space would be needed.
Aside from technology, society is slowly shifting its values away from vehicle ownership and suburban or rural lifestyles. In 1983, more than 91 percent of 20- to 24-year-olds held a driver’s license. By 2014, that number had dropped to approximately 77 percent and shows little sign of recovering.[13] At the same time, cities are growing faster than the country as a whole. The Pew Research Center found that 48 percent of Americans would choose walkable urban areas instead of suburbs.[14] Notably, more people used public transportation in 2014 than in any year in six decades.15 Still, some believe that the proliferation of driverless cars will mean many people moving further away from work since they are now able to be productive during their commute since they do not need to be behind the wheel.[16]
It is for these reasons that there have been calls on developers to strategically design new parking structures. Washington Post columnist Carlo Ratti believes that “designers, tasked with creating garages, should take as a challenge to introduce flexibility and acknowledge the full life cycle and potential transitions for these structures.”[17] Architects and designers are more frequently being asked to design urban parking garages with the ‘good bones’ necessary to allow them to be re-purposed in the future to other uses. “As the auto culture wanes we’re going to have a lot of demolition to do, which is unfortunate,” according to Tom Fisher, dean of the College of Design at the University of Minnesota. “If we’re going to build these [garages] let’s design them in a way that they can have alternative uses in the future. With just a few tweaks that’s really possible.” The biggest design change that will yield the greatest flexibility, yet be the most costly, would be a do-away with sloped garages. Exterior spiral ramps or elevator lifts, for example, would surely enable developers to re-purpose the facility with the greatest flexibility in the future, however the cost in doing away with the tried-and-true sloped ramps which serve both as the means of traversing the different parking levels but also as additional surface area for parking will surely prove uneconomical for many projects.
There is no question amongst experts that the demand on parking is going to decline. What cannot be predicted is how slowly or rapidly that decline occurs. It is impossible to determine the parking demands of a society thirty years out. With conservative planning and prudent engineering, however, parking facility developers can avoid making the last debt service payment in 2045 on an empty parking facility.
By: Robert S. Goldsmith, Esq., CRE & Steven G. Mlenak (The Counselors of Real Estate)
Click here to view source article.
