Archives for August 2018

Co-working space in retail properties will grow at a rate of 25% annually through 2023 reaching approximately 3.4 million square feet.

The retail and co-working industries may very well see more deals such as the one Macerich inked with Industrious to bring its co-working platform to select malls in Macerich’s portfolio. A new report by JLL finds that co-working space in retail properties will grow at a rate of 25% annually through 2023 reaching approximately 3.4 million square feet.
This stat JLL developed from what it says is the first ever survey of the inventory of existing and proposed co-working locations in retail properties across the US. The 75 locations it identified constituted over one million square feet of retail space.

The Synergies

Much of the study makes the case of why co-working is destined to meld with retail, or perhaps that is vice versa. Retail is still struggling to absorb empty space in power malls and neighborhood centers across the US. At the same time, they are maneuvering to change the mix of tenants to different use cases. Co-working providers, for their part, are increasingly integrating retail space as a perk for members, JLL noted, as it provides an additional revenue stream and elevates worker satisfaction. This relatively new model also works well in both urban and suburban areas — although the walkability of the co-working site is very important. But JLL found that slightly more than half, or 54.7% of co-working spaces in its research are in suburban locations.
Nor are these retail co-working sites uniform in their presentation or business cases. JLL identified four major categories into which this emerging use fall into. It writes:

This co-working and retail mix is a burgeoning trend of multifunctional mixed-use spaces. This opens up opportunities for local, niche or startup concepts that do not have capital for their own location to flourish as part of a shared retail space.

Four Types

JLL grouped the types of co-working spaces that will move into retail into four types: retail launchpads, telework hubs, business boosters and creative coalitions.

Launch pads specifically target retail startups, making them unique to this genre. They have retail incubation and demo space where new brands and innovative tech companies can gain access to target shoppers. One example is Cowork at the Mall at Chicago’s Water Tower Place, which is occupying 15,000 square feet and will open this Fall. The space will be a mashup of coworking space, event space and merchandising space for retail and tech brands, JLL says.
More common are the telework hubs, representing 78% of JLL’s case studies. They are telecommuting locations that are home to corporate office workers, entrepreneurs and creatives. An example of this is Union Cowork’s North Place location in San Diego, which ties a retail storefront with its coworking space.
Business boosters offer development tools including capital, consulting services, creative support, speciality equipment and classes. An example of this model is CTRL Collective in Pasadena, CA, which is situated in a 22,000-square foot building and which targets entrepreneurs and innovators at each stage of the business lifecycle.
Creative coalitions offer community and workspaces for artists, makers and creatives and often will supply specialty equipment like 3D printers, welders and dark rooms. Spaceus in Boston follows this model, providing local artists with workspace, business development events and classes. It ran a pop up in Boston’s Faneuil Hall Marketplace and will have another pop up at Roslindale Station through September.
By: Erika Morphy (GlobeSt)
Click here to view source article.

The United States will play an important role in the growth of crowdfunding, estimated to be approximately 30%, followed by Asia-Pacific, especially China, occupying more market share in the future.

fter the Securities & Exchange Commission passed final rules around the JOBS Act in 2016 allowing all investors to participate in equity crowdfunding, massive growth rates have been predicted for the next couple of years. Crowdfunding transaction value is expected to show an annual growth rate of 29% by 2022, according to Statista.
North America, especially the United States, will play an important role in that growth. However, any changes from United States might affect the development trend of crowdfunding.
The United States is followed by North America, Europe, Asia-Pacific, South America and Middle East/Africa in terms of activity level. Asia-Pacific will occupy more market share in coming years, especially China, along with fast-growing India and the Southeast Asia regions, according to Digital Journal.
On the basis of product, the crowdfunding market is primarily split into peer-to-peer lending, reward-based, equity investment, donation and others.
Most recently, CrowdStreet completed an $8 million Series B round of financing to fuel its next stage of growth. The financing was led by Grotech Ventures, with continued participation from existing investors including Rally Ventures, Seven Peaks Ventures and Green Visor Capital, and also includes financing from strategic investor Noam Bardin, CEO of Waze.
This round of capital allows the company to continue to build out its fundraising and investment management platform with institutional-quality investment opportunities for high-net-worth investors. Proceeds from the Series B financing will go towards developing new products and services to meet investor demand and to provide a broader array of high-quality alternative investment vehicles. The funding will also be used to grow marketing and sales to acquire new real estate project sponsors and high-net-worth investors.
“CrowdStreet is fundamentally changing the way people invest in commercial real estate,” said Tore Steen, CrowdStreet CEO. “Previously, investors and sponsors could not transact with each other, but CrowdStreet, with our software and marketplace, has changed that.”
Company metrics dated June 30, 2018 show that there was $320 million in capital raised on the marketplace through 220-plus offerings. Moreover, there is $8.5 billion in commercial property value on the CrowdStreet platform.
“The real estate crowdfunding universe is maturing, and CrowdStreet is pleased to be among the platforms that are not just thriving but leading the way, as evidenced by the 230 real estate sponsors and over 100,000 investors on our platform who are helping inform the continual evolution of our products and services,” Steen tells GlobeSt.com. “The financing round we just secured will fuel CrowdStreet’s next stage of growth to help real estate developers fund their projects and help individual investors build wealth through online real estate investing.”
Investors can directly access institutional-quality commercial real estate offerings with CrowdStreet’s online investing platform. For CRE developers and operators, CrowdStreet Connect provides a platform to manage investors and investments, and to raise capital to grow businesses. CrowdStreet maximizes opportunities for investors by diversifying outside of the traditional avenues of the stock market and better distributing risk through technology.
The CrowdStreet senior leadership team has experience in real estate, technology, online marketing and private equity. Lawson DeVries, general partner of Grotech Ventures, just joined CrowdStreet’s board of directors.
By: Lisa Brown (GlobeSt)
Click here to view source article.

The IRS on Wednesday published proposed rules on the 20 percent business income deduction that was created as part of last year’s tax reform law. The rules are a win for real estate because they make clear that broad limitations included in the law will not apply to real estate professionals.
Under the new law, individual owners of sole proprietorships, including independent contractors and owners of S corporations, LLCs, or partnerships, can take the 20 percent deduction on their net qualified (non-investment) business income. The calculation will depend on income thresholds, what type of business you own, and how you meet certain wage and qualified property tests. But the basic structure is very favorable to you as a small business or independent contractor.
REALTORS® were integral to the favorable interpretation in the proposed rules. The National Association of REALTORS® made a forceful case—both in a detailed letter sent on June 19 and in a face-to-face meeting with IRS officials in early August—that certain limitations on specified service businesses were not intended by Congress to apply to real estate professionals. And that’s the interpretation the IRS has ended up taking. NAR “met with [the Office of Management and Budget] and Treasury Department officials to discuss proposed rules outlining computation of the new write-off for pass-throughs,” Bloomberg News reported Tuesday.
The new deduction is available for tax years beginning after Dec. 31, 2017. You’ll be able to claim it for the first time on the 2018 federal income tax return you file next year.
Look for detailed NAR guidance by mid-September. It’s a complicated provision, and how it works for you will depend on many factors unique to your business structure and your income. Consult with your accountant or tax attorney on how this deduction should be applied in your situation.
By: NAR (NAR Magazine)
Click here to view source article.

In this EXCLUSIVE, CCIM’s Conway discusses assessing communities’ needs for reuse especially in areas with land scarcity in conjunction with his report, “Adaptive Reuse: Turning Blight into Bright”.

As the industry remains uncertain about how an extended trade war could affect the price of new construction, adaptive reuse may be a viable alternative for many developers and investors. In this exclusive, KC Conway, CCIM Institute chief economist/director of research and corporate engagement at the University of Alabama’s Center for Real Estate, examines the new era of adaptive reuse. In a report Conway authored in partnership with the Alabama Center for Real Estate, he says reuse represents the first step to redefine and quantify the adaptation of obsolete commercial properties for new uses as an institutional-grade product category.
GlobeSt.com: Adaptive reuse has been part of the industry conversation for at least the past 10 years. Why have you decided to examine this topic now?
Conway: Several factors are driving interest in adaptive reuse now more than ever before. First, there is a population migration back to the city—not just by Millennials, but Baby Boomers as well. That migration back to the city translates into demand for everything from housing to services. Second, there is a scarcity of developable land in most urban areas; therefore, developers are forced to re-examine empty or under-utilized buildings. Third, ground-up new construction costs are rising to levels that make adaptive reuse an economically attractive option. Our research found that adaptive reuse projects cost as much as 15% to 20% less than a new construction alternative. The one caveat here is environmental. If a site or building has a material environmental issue, that economic advantage can quickly dissipate. And finally, the growth of e-commerce and demise of traditional retailing is creating a supply of assets that need to be repurposed. Whether it is a defunct mall converted to a warehouse like one in Mesquite, TX or a closed branch bank in a small town, cities are increasingly having to figure out how to make these assets productive again. The loss of property tax and sales tax revenue is a material concern to cities. And that in turn is causing cities to rethink zoning and approval processes to facilitate more adaptive reuse that can turn blight back to economically bright.
GlobeSt.com: What factors have been preventing adaptive reuse from reaching its true potential as a product category?
Conway: The primary factors inhibiting adaptive reuse activity until late have been cost and the approval and permitting process. That is changing as demand for urban locations and rents have risen in the wake of the financial crisis. Projects that were once passed over are now economically viable. Another key factor has been zoning and approval process inflexibility. Cities are realizing that flexibility is required in the zoning and approval process to bring vacant or functionally obsolete assets back to life. To date, these items revolve around things like parking and density. Cities have figured this out and they’re a blueprint for other communities to study.
The other key impediments are the lack of an industry-recognized definition and the data to underwrite adaptive reuse projects to attract debt and equity capital. ACRE and CCIM Institute have proposed a definition in the report and begun the quantification process, but addressing the lack of underwriting data is a longer-term project. The team at ACRE has started to build the nation’s first adaptive reuse database to demystify development and investment in this increasingly relevant product category.
GlobeSt.com: How can commercial real estate professionals prepare to capitalize on the new era of adaptive reuse?
Conway: The first thing they can do is become familiar with the fundamental demand drivers: Millennials entering the workforce, scarcity of developable land in urban areas, rising costs for new construction and alternative solutions for needs like affordable housing. Then they can begin to inventory the assets that are candidates for adaptive reuse in their own community. Those professionals who can match the demand to a supply alternative, like a closed big-box retail store or a functionally obsolete warehouse to a need for affordable housing or a new experiential retail concept like a Top Golf, will be the ones that advance adaptive reuse.
The second thing is to engage with city and community leaders to assess their awareness of adaptive reuse and local government’s receptiveness to evolving their ordinances and approval processes to make repurposing vacant or under-utilized real estate feasible.
Finally, interact with some of the design and engineering companies that have successfully repurposed properties to understand the challenges and lessons. Our discussions with the developers for all the projects profiled in the report revealed a lot of lessons learned.
GlobeSt.com: What would be your takeaway or call to action for city leaders and communities?
Conway: Start to inventory the potential adaptive reuse assets/empty buildings in your community and begin to assess your community’s needs: More affordable housing? More hotel rooms? More experiential retail? Think about how you can align that inventory with assets that could be used to address the community’s needs.
By: Lisa Brown (GlobeSt)
Click here to view source article.