Archives for June 2018

Arguably, nowhere is the overworked phrase “retail experience” more evident than in malls and shopping centers. As Crystal Allen, Transwestern’s SVP of retail services, indicates, the old shopping magnets have switched.
“Over the past five to 10 years,” she tells GlobeSt.com, “the mix has changed dramatically.” As enticements to stay longer, landlords are starting to lead with the former minority players—the restaurants and entertainment. “Traditionally, 75% of the mix was soft goods,” says Allen. “Now restaurants and entertainment can take up as much as 50%.”
[Editor’s note: a video interview is also available at the end of this article.]
As often as not, where shoppers would once come first to shop and then maybe grab a bite, now, Allen says, they are as likely to come first for that bite or that movie, and then possibly pick up an item or two.
In addition to this reversal of purpose, she adds there is also a switch from national to local in terms of inventory. “We’re seeing more of a concentration on unique, handmade goods as opposed to national brands,” she notes. “As a result, there’s more of a customer-service feel to the shopping experience today.”
Driving it all, of course, is technology, and the growing ability to tap into the wants and needs of the local market. And, despite what often seems as too-narrow a focus on millennials, Allen is quick to point out that boomers aren’t left out in the cold.
“It’s not really all about millennials,” Allen suggests. “But it is about technology, and millennials have simply had it all their lives,” unlike the generation before them. So while millennials might be more naturally comfortable with shopping apps and promotional alerts on their phones, boomers too are getting the hang of new methods of shopping.
In fact, research indicates that many of the top 10 e-tailers are actually older, established brands—such as Nordstrom and Home Depot—that have been able to marry the in-store experience with online convenience. It’s a matter of adaptation, and customers adapt along with their favorite brands.
Then what of those traditional brands that fueled a lot of the doom-and-gloom headlines of the past 18 months? “They waited too long to change,” Allen says. “They couldn’t keep up or waited too long to develop omni-channel strategies.”
And that is key, says Allen, as a response to the way people shop today. “They check out stores online before they visit,” even though they still tend to make their final purchases in-store. “Online is still less than 10% of sales,” a dynamic that underscores the importance of a strong omni-channel approach.
Despite the above-mentioned headlines, retail today is strong, says Allen, different, but strong. “Everyone is changing,” she concludes, “But the sky isn’t falling.”
By: John Salustri (GlobeSt)
Click here to view source article.

A group of top business economists believes the major tax cuts President Donald Trump pushed through Congress will give a significant boost to economic growth this year and next year. But they worry that by 2020, the country could be entering a new recession.
The National Association for Business Economics says in its latest quarterly outlook that its panel of 45 economists expects the economy, as measured by the gross domestic product, to expand 2.8 percent this year. That is down slightly from the panel’s March forecast, which put GDP growth this year at 2.9 percent.
The NABE economists are “slightly less optimistic about the U.S. economy in 2018 than they were three months ago,” says NABE vice president Kevin Swift, chief economist at the American Chemistry Council.
Part of the drop-off in optimism reflects growing worries about what Trump’s get-tough approach on trade might do to U.S. growth prospects.
Three-fourths of the NABE panel believes that current trade policies will have a negative impact on the economy. Trump last week imposed penalty tariffs on steel and aluminum imports from major U.S. trading partners — the European Union, Canada and Mexico — and he has threatened tariffs on up to $200 billion in Chinese imports, moves that could trigger a global trade war as the targeted nations pledge to retaliate.
The NABE forecasting panel was upbeat on the near-term impacts of the $1.5 trillion tax cut that Congress passed in December. The median expectation is that the cuts in individual and corporate taxes will boost growth by 0.4 percentage points this year and 0.3 percentage points next year.
The forecasters said the economy should grow 2.7 percent in 2019 after their projected 2.8 percent GDP growth this year. Both projections would be up from 2.3 percent growth in 2017 and the 2.1 percent average annual gains the country has seen since the Great Recession ended in 2009.
However, the Trump administration is projecting a bigger boost, forecasting that the GDP will grow by 3 percent or better over the next decade as the economy gains momentum from the positive impacts of the president’s economic program of lower taxes, deregulation and tougher trade policies aimed at reducing U.S. trade deficits.
But many private analysts are more pessimistic, noting that underlying factors such as the retirement of the baby boomers and weak productivity gains will continue to depress long-term growth prospects. The private forecasters believe the positive effects from the Trump tax cuts will quickly fade after the first two years.
Asked when the next recession might begin, two-thirds of the NABE economists saw one starting by the end of 2020, with 18 percent even more pessimistic, expecting the next downturn to begin by the end of 2019.
The current recovery, which began in mid-2009, is currently the second longest expansion in U.S. history and will become the longest if it lasts past June 2019.
By: Martin Crutsinger (ABQ Journal)
Click here to view source article.

Shifting demographics, an aging population and an increasing need for medical services are driving significant activity in the Albuquerque health care office sector.
Some current and future projects include a large hospital system investing in outpatient clinics to reduce the patient crunch in emergency rooms; a dental practice expanding its fast-growing pediatric business; an out-of-state investor opening a skilled-nursing facility; a health care support company taking a large footprint in a Downtown office building; and a new-to-New Mexico Medicaid provider backfilling an empty Northeast Heights office building.

Developers like Scott Throckmorton are well aware of how strong demand has been for health care space. His firm, Argus Investment Realty, has been an active player in medical real estate leasing, sales and construction for more than a decade, bringing health care-oriented companies and properties together.
Health care-related tenants’ appetites for properties in the area are not abating, Throckmorton said. He estimated the value of the new construction and remodels in recent years in “the tens of millions of dollars.”
There are particular advantages to specializing in health care real estate, Throckmorton said, not the least of which is capitalizing on the continuing demand. Those needs are skyrocketing due to demographic trends and legislation that has brought many more New Mexicans into the insurance fold.
“It’s been a pretty resilient market,” Throckmorton said.

The development sector in general is profiting from the demand. That includes businesses like Throckmorton’s – matchmaking tenants to new buildings like the Lovelace Clinic in Independence Square or helping them find office space to support expansions – along with architectural and design firms and builders.
Filling up spaces
The latest addition to one of Argus’ Downtown properties – the Bank of the West Center – is Carenet Healthcare Services, a Texas-based health care support company, which is expanding to Albuquerque with plans for 244 jobs over the next five years.

The San Antonio-based firm will invest $3 million in the property at 303 Roma NW and an adjoining building, where Carenet employees will occupy nearly 24,000 square feet of space. The sum includes a 10-year lease, tenant improvements, furniture, fixtures and equipment, according to information provided by Albuquerque Economic Development Inc.
“Carenet has a particular challenge: They want all their employees on the same floor,” Throckmorton said. The design and construction team had to get creative, figuring out a solution that involved connecting to the third floor of an adjacent building at 500 4th NW.

Already in the 230,000-square-foot Roma building is DaVita Medical Group, which located its New Mexico corporate headquarters in the building after extensive tenant improvements. With Carenet leasing up, Throckmorton said 35 to 40 percent of the building’s tenants are medical/office focused, and the 10-story structure is now 93 percent leased.
Throckmorton recently brokered another deal across town for Western Sky Community Care – the New Mexico entity of Centene Corp., which will help manage the state’s Medicaid program, along with Blue Cross Blue Shield of New Mexico and Presbyterian Health Plan, beginning in January. Western Sky is taking over a vacant, 60,000-square-foot office building at 5300 Homestead NE, with Klinger Constructors handling extensive tenant improvements at the site.

According to the Kaiser Family Foundation, New Mexico now has the second-highest percentage of residents served by Medicaid, and it’s estimated that in the near future that one in two New Mexicans will be served by Medicaid.
Throckmorton said Western Sky is projecting 350 employees at the Albuquerque site once the insurer is fully ramped up.
Not far from that project, Presbyterian has wrapped up a $20 million addition to its corporate headquarters in North Albuquerque to accommodate several hundred new employees expected to handle Medicaid management services for a future North Carolina venture.
“Back office medical (as a category) has really been strong, what with the Presbyterian project” and others coming on line, said Dan Newman of CBRE in New Mexico, whose crew represented the landlord on the Centene deal.
“A lot of staffing goes along with that,” he said of the insurer’s arrival in New Mexico.
Also benefitting from their entry in the market: construction services providers, IT vendors, and sellers of office furniture.
Crunching the numbers
How much space is devoted entirely to medical-related uses in Albuquerque is a hard number to crunch. When CBRE New Mexico compiles its quarterly research reports, its statistics do not include medical office buildings owned and occupied by entities like Presbyterian and UNMH or buildings 100 percent leased to medical users.
However, the numbers do include medical users leasing general office buildings.
For example, Lovelace leases a sizable space in Altura Building at 4101 Indian School NE, which is included in CBRE’s office statistics. Smaller medical users, such as dermatologists, dentists, and eye doctors, are also included in the numbers if they lease general office buildings.

CBRE said it doesn’t have the exact square footage occupied by medical users but hazards a rough estimate: approximately 3 percent of the 13 million square feet of office space the firm tracks in the metro area.
In its first-ever report on U.S. medical office buildings, national CBRE research notes that the vacancy rate for MOBs has tightened steadily since 2010, to its current level of 8 percent, a record low for the sector and well below the 13 percent average vacancy rate for the U.S. office market.
Cushman & Wakefield in a recent report said 11 million square feet of projects affiliated with health systems were under construction in 2017, along with another 13 million square feet of standalone health care projects not affiliated with any health system.
In Albuquerque, that would include the recently completed Smiles for Kids orthodontics building at Eagle Ranch Road and Paseo del Norte NW, which is right next door to an existing Smiles for Kids pediatric dental practice.

Helming both projects was Insight Construction. Damian Chimenti, the company’s CEO, said remodels of medical spaces as well as new construction in some years accounts for “easily half our business” in terms of annual revenue.
“It’s a niche that helped build Insight,” said Chimenti, whose company was born in the recession of 2008.
He said the business has benefited from renovations and expansions for clients like Lovelace and Presbyterian. Some of Insight’s other clients are Eye Associates in Los Lunas and HME Specialists in the Journal Center, and the firm also recently transformed a former office building in Uptown into an outpatient physical therapy clinic for New Mexico Orthopaedics.
“The work has been steady,” Chimenti said. “We’re pleased that there’s a perception in the marketplace that we have this level of expertise,” he said. “It’s a little more stressful than working at a strip mall,” he said of the remodels for medical clients. For example, “If we’re working in a hospital (during business hours), we have to be very careful not to kill the power or hit the wrong pipe,” he said.
Outpatient facilities
CBRE researchers note that providers are attempting to stem perennially increasing health care expenditures by moving more patient volume away from hospitals and toward more cost-effective outpatient facilities, such as medical office buildings and urgent-care centers – a trend that is catching on in Albuquerque.
For example, three freestanding medical clinics are being planned by Presbyterian Healthcare Services, each of which will offer urgent and emergency care under one roof: one at San Pedro and Paseo NE; another on the West Side at Coors and Learning NW in the first half of 2019; and an Uptown location that has not yet been chosen. Construction costs for the 12,500-square-foot clinics will be between $3.5 million and $4 million each, according to a Presbyterian spokeswoman.
While it’s a hybrid model that’s caught on in other U.S. markets, combining urgent care and emergency medical services in the same building is a concept that’s new to Albuquerque, said Dr. Darren Shafer, Presbyterian’s medical director of emergency medicine. The emergency clinics will be open 24/7, and the urgent care side will be open into the late evening hours.
Also looking to expand services soon will be a 1,665-square-foot outpatient rehabilitation clinic operated by Lovelace UNM Rehabilitation Hospital at 4250 Coors SW. The clinic will begin seeing patients on June 11. Lovelace/UNM invested $250,000 in tenant improvements.
By: Steve Sinovic (ABQ Journal)
Click here to view source article.

Fewer immigrants disproportionately affect commercial real estate and related industries.

Several economists specializing in the commercial real estate industry worry that if proposals to limit immigrants to the U.S. are enacted, they will affect economic growth. Typically, the cycle of the commercial real estate industry closely aligns with U.S. economic trends.
However, immigrants may have an even stronger impact on the U.S. commercial real estate industry than the overall U.S. economy. Foreign-born workers comprise about 17 percent of the U.S. labor force, but they fill 31 percent of buildings and grounds cleaning jobs and 25 percent of construction positions, according to Cushman & Wakefield.
“We have a shortage of talent, and immigration fills up the gap,” says Revathi Greenwood, head of research, Americas, at Cushman & Wakefield.