Archives for April 2018

Voice for Real Estate 85: GDPR, AMCs, Midyear Mtgs, Infrastructure

April 30, 2018 by CARNM

Brokers and associations face changes to their websites and other data collection activities as a European Union rule to protect privacy takes effect. AMC-ordered appraisals don’t overvalue property at a higher rate than appraisals ordered by lenders. A two-year goal for federal environmental reviews for infrastructure projects are ambitious. Sales are up for the second month in a row. and REALTORS will be focusing on tax policy changes, Fair Housing, Net Neutrality, and flood insurance on their visits to members of Congress in mid-May for the REALTORS Legislative Meetings in Washington.

By: NAR
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Wireways: Wrangle Office Cables for Safety and Aesthetics

April 27, 2018 by CARNM

Each new piece of technology in your space adds at least one cable or cord. Even wireless options often need to plug in to recharge. Electrical cord organizers can help alleviate many issues associated with cables. Wireways result in a safer and more design-pleasing workspace.
Every building has issues with cable management, from conference rooms to auditoriums, classrooms and courtrooms, notes Steve Batchelder, Director of Sales at Connectrac. For older buildings built before the amount of technology used today was a factor, the need for wireways can be even greater.
Batchelder has seen temporary solutions to the problem ranging from carpet tiles laid on top of wires so people don’t trip or cables held in place with shredded tape. “The cables need to be fixed, replaced, managed and protected,” he says.

Electrical cord organizers have a number of benefits:

Safety. Cables are out of sight and covered. “Exposed wires are a liability,” Batchelder points out.
Cable durability. They’re protected, rather than exposed, which can save on expensive repair costs.
Aesthetic design of the space for clients and users. “People might be bringing in clients to a space where the building looks great, but the conference room has cables all over,” Batchelder says. “You want them to focus on your business, not that they see extension cords, tape or a rubber bump.”
Flexibility. Wireways can meet changing needs through expansion or reconfiguring the space.

Cable Management Ideas

People often don’t know what types of cable management options are available. Batchelder says that people often first notice a need during a remodel or some trigger when cables are being added to an area.
When assessing if a wireway solution would benefit the space, Batchelder suggests people ask themselves a few things before beginning:

Walk from room to room asking, “What do we see?” If there are cables on the floor, a cable management solution can fix the problem.
What updates or changes are you planning? Are you going to leave the carpet or are you remodeling?
What’s the traffic like in the area?
What’s the room used for, and will it continue to be used like that?

“The cost of cable management is inexpensive compared to figuring out where a damaged Cat cable is,” Batchelder explains.
By: Valerie Craven (Buildings)
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Lots of New Supply Is Leading to More Concessions in the Office Sector

April 27, 2018 by CARNM

Competition for tenants in markets with an oversupply problem is pushing concessions higher, according to real estate services firm JLL.
With new office construction currently topping 100 million sq. ft., the office market is beginning to turn in favor of tenants in some markets. “The pendulum is swinging toward tenants in cities with a supply-demand imbalance driven by new construction,” says Scott Homa, senior vice president and director of U.S. office research with real estate services firm JLL. Homa notes that high levels of new construction are creating weakness for lower quality buildings, as well as overhang in new deliveries.
“Deceleration in the broader U.S. office market has occurred over the past 36 months with reduced absorption, and expansion now more confined than in 2016,” Homa says. “If you strip away co-working market, the office market has actually contracted in first quarter 2018.”
Competition for tenants in markets with an oversupply problem is pushing concessions higher, according to a first quarter 2018 JLL office report, which noted that while office rents grew overall by 1.6 percent in the first quarter, rent gains were outstripped by tenant concession packages. Allowances for tenant improvements (TIs) rose 3.5 percent in the first quarter to an average of $75 per sq. ft. That figure was even higher in markets where there is a lot of competition for tenants—up to $150 per sq. ft. for trophy properties.
The exceptions include Seattle and Los Angeles, where net effective rents are outperforming markets like New York, Chicago and the District of Columbia. Net effective rents are flat or diminished by aggressive concessions in these three markets, which also account for more than one-third of all new construction underway, with 15.4 million sq. ft. rising in New York, 7.3 million sq. ft. in Chicago and 7.6 million sq. ft. under construction in Washington, D.C. The JLL report notes that any new office deliveries will exacerbate oversupply in these gateway markets, which are already being negatively impacted by rightsizing and consolidating firms.

Meanwhile, the Seattle and Los Angeles office sectors remain tight, with 4.8 million and 2.2 million sq. ft. under construction, respectively. Expansion of tech companies is driving the office demand in Seattle, while companies representing the intersection of entertainment and technology—Netflix, Amazon, Hulu—are largely responsible for strong office performance in Los Angeles.
While extraordinary concessions are offered in markets with an oversupply of new office product, Homa says, “We’re not seeing a reset in base rents—in most cases landlords are preserving or even raising face asking rents.” He notes that new product generally commands a 25 to 50 percent rent premium over second-generation office space, but concessions help to make the price tag more palatable to tenants, thereby reducing sticker shock.
John Galaxidas, president/CEO of San Diego-based Synergy Real Estate Group, Corporate Advisory, Inc., a national brokerage firm that specializes in tenant representation, says, “Landlords in California markets don’t offer many concessions unless you push for them.”
This is because demand is not keeping up with supply, he adds, pointing out that there is little new construction in major California cities, as there is not enough entitled land available for development in large CBDs. In addition, the entitlement process is a long, arduous and extremely expensive one compared to markets like Houston and Dallas, which are development friendly with less regulations, fewer planning/zoning restrictions and lots of land available for expansion.
The greatest concessions in large California cities for space in new buildings according to Galaxidas, include several months of free rent on a five- to 10-year lease, if rental rates are high enough to justify it, and a hefty TI allowance, as extensive tenant improvements are required for interiors that are in shell condition.
“The difference when a tenant goes into second-generation space is a landlord isn’t going to pay for much in the way of improvements, because the space has previously been built out and, due to high demand and short supply of space, [the landlord] is less willing to do improvements,” he adds. For new product a tenant may get up to $60 per sq. ft. in TI allowance, but the figure goes down to $10 to $15 per sq. ft. for second-generation space.
Other concessions landlords may be willing to provide include: early occupancy equating to one to two months of additional free rent; the option to renew at a fixed incremental rate, rather than market; and “first right of refusal or relocation,” a provision in the lease agreement that allows the tenant to expand or move to a larger space when the company outgrows the original space.
Houston-based Stuart Showers, director of research services at real estate services firm Transwestern, notes that companies are becoming more thoughtful about the impacts of their real estate decisions on employees. “As such, there is a big appetite for new office space, as the latest wave of office construction is more efficient and offers the type of amenities occupants need to attract and retain talent,” he adds, noting that all types of firms, from tech and creative firms to legal, financial and professional services companies, desire state-of-the-art office space in quality locations.
But the most attractive office space by far, according to Showers, is in mixed-use projects, which command up to a 30 percent rent premium over stand-alone, competing projects. “The retail mix in these projects is more thoughtfully planned than in the past,” Showers adds, noting that projects generally include a fitness facility and an attractive variety of food, bank and other services that offer occupants convenience and choice and help tenants attract and retain talent.
Showers points out that while this type of project has been around for a long time in high-density markets like Boston, New York and Los Angeles, it is a more recent addition to the Houston marketplace.
While Houston continues to see demand for both new and second-generation office space retrofitted with amenities, Showers says one-fourth of office inventory is listed as available for lease due to both overbuilding and an abundance of space exited by energy companies. New construction, therefore, presents a challenge, with competition for tenants heated and concessions generous, with landlords routinely offering a year of free rent on a 10-year lease and exceptional TI packages.
“Interestingly, owners are better funded than in the past, giving them the wherewithal to do ‘financial engineering’—increase TIs and free rent—to preserve base asking rent and get the bumps they want,” he adds, noting that once the free rent period ends, the rents justify the losses.
By: Patricia Kirk (National RE Investor)
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How Property Managers Drive Real Value

April 26, 2018 by CARNM

With the increase in supply for multifamily product, property managers are finding unique ways to curb competition at the property level to drive value for owners.

Multifamily product is in high demand, but with ample new construction, owners are looking at what can be done at the property level to curb competition and create value. To find out what property managers are doing at the property level, we sat down with Scott Wickman, regional VP at Western National Property Management, a firm with 160 properties under management, how property managers are creating real value. Here, he talks to us everything from the growing supply to new technologies and onsite amenities.

GlobeSt.com: With an influx of multifamily product nationwide, how can property owners and managers stay ahead of the competition?
Scott Wickman: Maintaining a quality multifamily community that stands out above the rest comes down to a combination of factors. With so much supply entering multifamily markets nationwide, it is more important than ever for property owners and managers to establish a strong online presence. Technology has changed the way renters make their decisions. Many tend to perceive the quality of a community based on online reviews and photos. While owners can’t necessarily ensure all reviews are positive, they can remain proactive by responding to anything negative that may come about, and by ensuring that property photos are high quality.
Curb appeal can also drastically impact a potential renter’s first impression of a property. By investing in minor exterior upgrades such as a fresh coat of paint, landscaping improvements or fresh asphalt, owners can improve their chances of attracting new residents. In addition, taking a macro-level approach and noticing which amenities nearby apartment complexes may be lacking can greatly benefit property managers. Offering amenities that are in demand, but not widely offered, can instantly get a community noticed by renters.
GlobeSt.com: What major trends are you observing in amenities throughout your multifamily properties?
Wickman: Current amenity trends have a common theme: they are convenience-focused. Whether it’s automated storage areas or lockers for packages, trash valet services, or community dog parks, renters continue to demand amenities that bring ease to their lives. Many properties have added secure package delivery systems to their lobbies, which include either automated lockers or a concierge on duty to accept packages when residents may be out. In addition, many property management teams have begun implementing grocery delivery services as well as dry cleaning and trash valet in order to improve the lives of their renters. Further, communities are increasingly catering to pet owners by offering on-site dog parks and pet washing stations. Providing amenities that simplify the lives of residents can give property owners an edge, especially among new market competition
GlobeSt.com: How is technology driving these trends?
Wickman: Technology has changed the way multifamily properties operate. Everything from rent payments to resident screening and maintenance requests can be streamlined by websites and apps. Technology has also become the driving force behind renters demanding amenities that offer additional convenience to their everyday lives. With e-commerce thriving, the aforementioned package delivery system amenity at apartment communities is increasingly becoming essential not only as an amenity, but as an operational strategy.
Additionally, apps such as Uber, Lyft and DoorDash have become an integral part of life for many people. This is driving the demand for apartments to provide additional app-related services such as dry-cleaning requests and online grocery delivery via app. Owners and managers need to embrace these changes in order to adapt to modern-day resident expectations.
GlobeSt.com: What are some of the biggest challenges that you are seeing at the property level today?
Wickman: Property owners and managers need to be prepared to cater to the various needs of their residents. Renters are becoming increasingly diverse.
While millennial renters may be seeking electronic options for rental payments and dog-washing areas, baby boomer renters might want community activities and more trash receptacles dispersed throughout the property for ease of their lives.
Owners and managers must take geographic location and demographic factors into consideration in order to best assess which amenities will be most valuable in which location.
GlobeSt.com: When you take on a new property, what are your most common recommendations to property owners?
Wickman: There is no “one size fits all” remedy to operating a successful multifamily property, so it is crucial for owners to take a look at the demographics they are targeting and aim to best accommodate them. It becomes very easy to get caught up in the latest, high-tech amenities. If property owners were to constantly aim to have latest technology on the market, they may find that they are losing money. Instead, owners need to focus on the amenities that matter most to their specific renters. By doing this, owners and managers can increase resident satisfaction, NOI and retention rates. Further, we always advise going the extra mile when it comes to training on-site staff. It is important for staff to establish meaningful relationships with residents in order to increase retention rates. This also helps to garner a better sense of community throughout the property, therefore improving the overall experience for renters.
By: Kelsi Maree Borland (GlobeSt)
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