Archives for February 2019

The U.S. economy turned in a solid performance in 2018, boosted in part by tax cuts and higher government spending. But growth slowed by year’s end, and most economists envision a weaker outlook for the coming months and probably years.
The nation’s gross domestic product, the broadest gauge of economic health, expanded at a 2.6 percent annual rate in the October-December period, the government said Thursday. That was down from a 3.4 percent rate in the July-September period and a sizzling 4.2 percent pace from April through June. During those months, the economy benefited from tax cuts and from higher government spending, the gains from which are thought to be fading.
For 2018 as a whole, GDP growth amounted to 2.9 percent, the government said, the best showing since 2015. It was just below the 3 percent pace the administration has said it can maintain consistently. By contrast, most economists foresee slower growth ahead. For the current January-March quarter, many analysts say they think growth could slow to a 2 percent annual rate or less.
“I think the economy will be steadily throttling back over the next two years,” said Mark Zandi, chief economist at Moody’s Analytics.
The economy’s pace of expansion last quarter reflected a slowdown in consumer spending and the start of a 35-day partial shutdown of the government, which subtracted an estimated 0.1 percentage point from growth. That weakness was offset somewhat by a gain in business investment and less of a drag from trade.
The $1.5 trillion tax cut that President Donald Trump pushed through Congress in late 2017 and billions of extra dollars in government spending that Congress added for military and domestic programs helped accelerate the economy last year.
In the view of most economists, though, 2018 may turn out to have been the economy’s high point for some time. Many are forecasting that growth this year will slow to around 2.2 percent and to weaken further in 2020. Some analysts say they think the economy could even dip into recession next year as the support from the tax cuts fades and the global economy sputters.
Zandi has forecast growth of 2.5 percent this year and just above 1 percent in 2020 and estimates the chance of a recession starting in 2020 at about 50-50. The National Association for Business Economics said in a survey released this week that roughly half the economists who responded to its latest survey expect a recession to have begun by the end of 2020.
The forecasts from the Trump administration are far rosier. Its officials have projected that the administration’s policies will produce growth surpassing 3 percent in coming years.
Kevin Hassett, chairman of the White House Council of Economic Advisers, argued in an interview Thursday that private forecasters are relying on outdated models that don’t fully reflect the latest research. Hassett said he had forecast growth of 3.1 percent for 2018, when measured on a fourth-quarter-to-fourth-quarter basis and said that that pace was achieved.
“It worked exactly the way I said,” Hassett said.
For 2019 as a whole, Hassett said he foresees growth improving to 3.2 percent — well above the expectations of most economists.

The economic expansion, now in its 10th year, is the second-longest on record. If it lasts beyond June, it will surpass the decade-long recovery from March 1991 to March 2001. Despite its duration, the expansion has been marked by the weakest annual growth rates of any recovery in the post-World War II period — just above 2 percent.
In a separate report Thursday, the government said that applications for unemployment benefits, a reflection of layoffs, rose by 8,000 last week to a seasonally adjusted 225,000. That is still a low level by historical standards and suggests that businesses are mostly maintaining their workers in a tight job market. The unemployment rate is 4 percent, near a half-century low.
The economy’s 2.6 percent annual growth rate last quarter, though solid, was the slowest since a 2.2 percent pace in the first quarter of 2018. That was followed by two strong quarters last year. Trump has often cited those performances as evidence that his program of tax cuts, reductions in regulations and tougher enforcement of trade agreements was working.
Thursday’s GDP report from the Commerce Department had been delayed by a month because of the government shutdown. And there will be only two estimates for last quarter’s GDP, rather than the usual three.
The report showed that consumer spending slowed to a still solid growth rate of 2.8 percent in the fourth quarter, down from 3.5 percent growth in the third quarter. Business investment spending came in at a strong 6.2 percent annual rate, up from 2.5 percent in the previous quarter.
The trade deficit subtracted an estimated 0.2 percentage point from the annual growth rate, though that was much less of a drag than the 2 percentage point cut in the third quarter.
Government spending grew at a rate of 0.4 percent. But non-defense spending fell at a rate of 5.6 percent, a drop that partially reflected the government shutdown.
By: Martin Crutsinger (Globe St)
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Industry experts discuss the dwindling talent pool.

The talent pool for commercial real estate professionals is dwindling. How can the industry curb the tide and bring in more professionals, more diversity, and more young people?
During the CCIM Global Conference in October 2018, CCIM Institute gathered a panel representing the construction, development, and education sectors to discuss the shrinking workforce and how to combat it. The panel included Dionne Edwards, CCIM, (moderator), vice president of corporate real estate, SunTrust Bank; Collete English Dixon, executive director of the Marshall Bennett Institute of Real Estate, Roosevelt University; Jeff Lyon, CCIM, CCIM instructor and chairman & CEO of Kidder Mathews; and Brian Murray, CEO, Ryan Companies.

By: CCIM National
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Geotechnical and seismic assessments can help preserve structural integrity and avoid property damage.

Risks are abundant and varied in the world of commercial real estate. Some are apparent at the onset of the transaction and require an immediate tolerance check from the buyer or lender. Conducting a Phase I Environmental Site Assessment (ESA) at the onset of the process can account for your calculated risks but what about the things you may not see? One of these geological conditions is soil liquefaction. While it is only prevalent in certain areas globally, soil liquefaction is an event that can drastically affect your property. If you’ve never heard of soil liquefaction or what you can do to possibly reduce the risks associated with in on your property, let us give you a quick overview below.
What is soil liquefaction?
Soil liquefaction is a geological phenomenon that occurs when soil becomes either partially or completely saturated and is simultaneously disturbed, thereby losing strength and stability and taking on the properties of a liquid. Soil is composed of individual particles which, in normal circumstances, remain packed closely together. The soil below the ground surface is held in place by the weight of the soil above it, and it is heavy, on average about 100 pounds per cubic foot! When soil is in a saturated condition, the contact between particles can instantly disappear due to a sudden increase in water pressure that is greater than the overlying weight of the soil. This is most commonly caused by seismic activity. Once the soil becomes weightless, it softens and weakens so much that is actually loses its properties as a solid and takes on those of a liquid.
When does this happen?
There are actually three factors necessary for soil liquefaction. The first is a relatively loose and light weight soil deposit. This can be loosely compacted, relatively young soils (less than 11,000 years old) which is most commonly located in low lying areas near bodies of water such as rivers, bays, lakes, and oceans. The second is the saturation of the soil with groundwater or as the result of a ‘wet season’, over-irrigation, leaking pipes, swimming pools, etc.  The third is strong shaking or disturbance of the ground, which can happen naturally, as in the case of an earthquake, or by other means such as blasting, soil compaction, or similar tasks.  All of these factors are needed to cause the ground to lose its ability to support itself or any structures resting upon or adjacent to it.
What kind of problems can this cause
Since earthquakes are the most common instigator of soil liquefaction, the first thing that comes to mind is the loss of structural integrity of and/or collapse of buildings. Liquefaction causes a sudden shift that the building is not prepared for, such as the foundation being pulled down into the soil causing the structure to lean and/or collapse. Other structures that can be compromised include bridges, dams, and retaining walls. Loss of bearing strength is not the only effect of liquefaction.  Additional effects can include:

• Lateral Spreading: The ground can slide down gentle slopes or towards stream banks
• Sand Boils: Water, loaded with soil, can be ejected from a buried liquefied layer and erupt at the surface to form sand volcanoes
• Flow Failures: Earth moves down a steep slope with large areas of displacement and internal disruption of material (Landslides)
• Ground Oscillation: a surface layer of material, floating on a buried liquefied layer, is thrown back and forth, causing the surface to become deformed (Parking lots, sidewalks)
• Flotation: Lighter structures, like pipes, sewer lines, etc., can be moved to the surface when they are surrounded by liquefied soil

What can I do to reduce my risk or plan for the possibility of this geological condition?
While the prospect of soil liquefaction occurring on one of your properties may be ‘unsettling’, there are some things that you can do to reduce your risk if your property is located in an area prone to seismic activity. During the design of new construction, geotechnical engineers can conduct a geologic report and geologic hazard analysis, which should include soil mapping and geotechnical borings, to determine the amount of liquefaction induced settlement that could occur during an earthquake. There are design solutions to any case, though they will vary in cost.
Some these options may include:

• Soil Excavation and/or compaction;
• In-situ ground densification;
• Edge containment structures;
• Deep foundations and/or
• Reinforcement of shallow foundations.

If a hazard has been identified on a site with existing construction, you have a few options to protect yourself including:

• Avoiding any of the areas on the property identified as high risk;
• Purchasing insurance to cover any possible losses as a result of the findings;
• Improving the ground to be less susceptible to liquefaction; and/or
• Fortifying existing structures to withstand liquefaction of underlying soil.

An experienced geotechnical consultant can help to suggest measures to prevent serious damage to your property as well as creating solutions if you have already experienced a geological issue at your site.
By: Matthew Marcus, PE, RG (Globe St)
Click here to view source article.

Beyond rent considerations, companies often overlook the fact that they can realize even more significant savings—sometimes more than $1 million—if they think strategically and adopt a “project-centric” rather than a “transaction-centric” approach.

As corporate America deals with changing dynamics in the economy and at the workplace, many challenges exist, including site selection, lease negotiation, space planning, and construction. But today’s greatest underlying challenge may be the need for the workplace to promote the recruitment of top talent in an increasingly competitive market.
The financial implications of the above are clear, and an age-old truism still applies:  Following human resources, real estate represents a company’s largest investment.  Looking at ways to cut costs, companies often turn to real estate service providers to help them negotiate favorable lease terms.  But beyond rent considerations, companies often overlook the fact that they can realize even more significant savings—sometimes more than $1 million—if they think strategically and adopt a “project-centric” rather than a “transaction-centric” approach.
If you’re a corporate executive in charge of facility management, chances are you’re looking to maximize the use of your office, warehouse, or R&D space.  Perhaps you want to reduce your footprint, anticipating more virtual workers and more desk-sharing, which will significantly lower your occupancy costs.  Perhaps you want to relocate to more creative space that promotes your brand and provides highly sought-after amenities such as a café, a variety of work setting within the office, an executive briefing center, and even a fitness center.  Perhaps you want to reconfigure your existing space to include more open areas that promote collaboration and may improve morale and production.
Tied to the above considerations, you will likely want to address how best to accommodate the rising number of Gen Z and Millennial employees while being sensitive to Baby Boomers.  And you will certainly want to identify customized, cost-effective solutions, recognizing that one size doesn’t fit all.
In planning a move or a design/build project, a typical question is:  Should I hire a project manager (PM)?  Often the initial response is, “Not sure I need to spend the money.” But with so much at stake—including opportunities to save considerably—this is worth another look.  In fact, if you want the project to be delivered efficiently, on time, on budget, with minimal risk and maximum value, your final decision will likely be “yes.”
Charting Your Direction
Let’s assume that your company needs help with one or more of the following:  strategic planning, budget/schedule development, building evaluation, benchmarking studies, programming/growth forecasts, space planning, construction implementation, move-in coordination, overall project supervision, and quality control.  How can you ensure that you select the right project manager?
First, consider your broad options.  Should you keep the task in-house or outsource?  If choosing the latter route, should you go with an architectural or construction firm, a full-service real estate firm, or an independent project management firm?
Here are some thoughts to guide you:  
In-house project management.  This scenario may be worth exploring if you have a professional on staff who has the requisite expertise as well as the time to dedicate to this huge undertaking.  Unless the scope of your project is small, this most likely isn’t the case.  Typically, for more substantial projects, it is more efficient to outsource the work to a more experienced specialist, allowing in-house managers to focus on their core competencies and work with their advisors.
Architects and construction managers.  Architects and construction managers are vital to workplace solutions; however, even the most successful firms of this kind generally don’t possess the business acumen, strategic know-how, and experience to manage the entire project.  For this reason, to ensure the proper expertise and financial oversight, they often partner with PM firms, some of whom have their own architects and construction managers. In this model, they are subsets of the PM firm and can still work their magic under the direction of the principal project manager, who is best suited to avoid conflicts and cost overruns.
Commercial real estate firms.  Some of the larger commercial real estate firms have a project management arm, but PM is likely not their primary focus.  Further, since these PM’s are first accountable to the brokers, they may lack a third-party perspective, and their objectivity may be compromised.  Still, an integrated approach like this might make sense if the real estate firm partners with an independent PM firm that has the required experience and depth.
Independent project management firms.  As workplace solutions become more demanding and complicated, more companies are adopting this approach as the most efficient and cost-effective way to go.  Many PM firms may specialize in this discipline, but make sure they have the expertise and experience required for the job.  Overall, a good project manager will set the tone from the onset.  This includes mapping out the project’s objectives and the expectations of all players involved.  A good project manager will inspire confidence and make everyone’s job a little easier, while giving team members the space to excel in their roles.
In selecting a PM who promises to be the right fit, be sure to check with references and determine if the firm’s bandwidth includes a far-reaching network that allows them to assist with projects beyond the local area.
A New Breed—the Contemporary Project Manager
Over the last 10 years, we have witnessed a dramatic transformation in work and the workplace.  As this transformation continues, cubes with high walls and private offices with minimal glass are often being replaced with an open environment and a variety of work settings that support collaboration. Thanks to the untethering of the desktop, workers can more easily move around the office and effectively do their jobs.
This shift has caused project managers, facility managers, brokers, and architects to think differently about their roles.
For many years, project managers have directed vendors and integrated services with commercial real estate brokers.  They have served as mechanics, responsible for staffing, budgeting, scheduling, and implementation, including IT, AV, security, furniture, and relocation management. While these are mission-critical activities, PMs seldom were involved in big picture thinking. Today, the PM needs to think like a CFO, brand/marketing manager, workplace strategist, architect, facilities manager, risk manager, HR recruiter,   operations manager, and workplace visionary. In this context, alignment of the workplace with the corporate vision and strategic goals, while meeting the task needs of each department, become more important than ever!
Accordingly, we need to view the role of the PM through a wider lens.  Enter the Contemporary Project Manager (CPM), who ideally has the following attributes:

• The expertise of a mechanic but also the broader skills of a strategic thinker.
• A client partner and advocate, providing non-biased counsel from start to finish.
• An experienced professional who brings business acumen and understands lessons of sociology and psychology and is sensitive to employee demographics.
• A good listener and communicator.
• One who combines strategic planning and tactical know-how.
• One who understands the design and construction process, infrastructure systems, operational programs and jurisdictional requirements.
• One who can align real estate plans with corporate objectives.
• One who is part architect, part space planner, part interior designer, furniture dealer and part visionary.
• One who understands the businesses that comprise a project team and has the background and experience to negotiate the best deal for the client.
• A coach/facilitator who collaborates with staff and vendors but is also nimble enough to overcome barriers and strong enough to push for solutions that meet the client’s best interests.

As part of today’s holistic approach to project management, CPMs should be involved from the start in tenant improvement discussions, lease negotiations, and work letters, through occupancy.
In the final analysis, the right project manager can mitigate risks, reduce your time involvement, and improve your ROI.
So consider a start-to-finish approach to your real estate needs, beginning with site selection and continuing with lease negotiation (including an appropriate tenant improvement allowance), and project/process management that will optimize recruitment and retention.  The right project managers will navigate around the thousands of potential pitfalls, deliver an appropriate/effective workplace, and squeeze savings every step of the way.  Today, getting the workplace right isn’t just a priority; it is a necessity.
By: Robin Weckesser (Globe St)
Click here to view source article.