Archives for January 2020

Many key industry victories last year have set real estate professionals up for success in 2020.

REALTORS® had an action-packed year in 2019, with many key victories that have set the industry up for success in 2020. Although not an exhaustive list, here are 19 of the National Association of REALTORS®’ biggest wins last year that will help your business succeed going forward.
Condo rule. After nearly a decade of NAR advocacy efforts, the Department of Housing and Urban Development released new Federal Housing Administration condominium loan policies. NAR is hopeful the changes will yield thousands of new homeownership opportunities and help increase access to credit, as condominiums are often the most affordable option for first-time home buyers, small families, and those in urban areas. The rule extends certifications from two years to three and allows for single-unit mortgage approvals, among other reforms. Officially implemented on Oct. 15, the changes are already being felt in many parts of the country where affordability and inventory concerns are the most significant.
Flood insurance. NAR worked closely with congressional leaders to ensure reauthorization of the National Flood Insurance Program, which was extended through Sept. 30.  NAR also lobbied for H.R. 3167, known as the NFIP Reauthorization Act of 2019. This legislation includes a longer, five-year extension of the NFIP along with significant reforms to improve mapping, enhance mitigation, and remove obstacles to private flood insurance policy. NAR believes the legislation “strikes a delicate balance between NFIP sustainability and affordability.” The bill was unanimously approved by the House Financial Services Committee and is awaiting action in both chambers of Congress.
Veterans home loans. On the heels of the 75th anniversary of the GI Bill, the Blue Water Navy Vietnam Veterans Act was signed into law in late June 2019, increasing well-deserved resources for America’s veterans. This legislation eliminates the cap on home loans issued by the Department of Veterans Affairs and helps ensure our nation’s veterans have greater access to the American Dream of homeownership. NAR, along with other housing industry trade groups and veterans affairs associations, had been actively engaged in Capitol Hill negotiations to ensure veterans’ health benefits could be extended without increasing unrelated VA home loan guarantee fees.
GSE reform. NAR hosted its first-ever Policy Forum, which focused on Housing Finance Reform. The event, held in February 2019, brought together hundreds of academics, industry stakeholders, and policy leaders to discuss the future of the government-sponsored enterprises and the impact on consumers and the economy.  NAR unveiled its whitepaper on GSE reform, “A Vision for Enduring Housing Finance Reform,” developed in collaboration with Susan Wachter of the Wharton School and Richard Cooperstein of Andrew Davidson and Company. NAR’s policy recommendations ensure that responsible, creditworthy Americans can secure a mortgage in all types of markets. The utility model proposed in the whitepaper outlines the best possible path forward for the GSEs, and NAR’s 2020 advocacy efforts will be shaped by collaboration with policymakers to secure these positive, pragmatic system reforms.
Opportunity zones. NAR participated in a White House event on the Qualified Opportunity Zone program in April. The second round of proposed rules for the program, released in connection with the event, provide more specific details on how investors can participate in the program and receive the full tax benefits it offers. NAR also participated in a HUD Policy Development & Research Stakeholder “HUDdle” on QOZs. At the event in June, HUD Secretary Ben Carson gave the opening remarks, and he highlighted the goal of the program to draw long-term investment, jobs, and economic growth to the distressed communities designated as QOZs. In August, NAR released the QOZ Toolkit, which includes info on RPR’s QOZ tool and the Community Planning Grant for QOZ events.
Cannabis banking. The Secure and Fair Enforcement Banking Act passed the House in September by a vote of 321-103. The bipartisan legislation provides a clear framework for cannabis businesses to access financial services. NAR sent a letter to the full House supporting the bill, and in late July, NAR sent a letter to the Senate Banking Committee supporting the Senate version of the legislation.
Commercial real estate investment. NAR participated in the U.S. Department of Commerce SelectUSA Investment Summit in Washington, D.C., in June. NAR Chief Economist Lawrence Yun presented the “State of the Industry: Real Estate” segment.
Terrorism risk insurance. NAR scored a major victory, primarily for its commercial members, with the seven-year reauthorization of the Terrorism Risk Insurance Program. Terrorism risk insurance is often required to secure necessary financing for thousands of commercial practitioners nationwide. NAR repeatedly called on Congress to reauthorize TRIP before its scheduled expiration in 2020, publicly supporting Chairwoman Maxine Waters’ Terrorism Risk Insurance Program Reauthorization Act of 2019.
Tax changes. In December, Congress passed a spending package funding the federal government for fiscal year 2020. Included in the package are temporary extensions of three tax provisions directly impacting the real estate industry:

• The exclusion of forgiven mortgage debt from gross income, meaning that owners of primary residences who sold them short and had part of their mortgage debt written off will not have to pay tax on the amount forgiven.
• The deductibility of premiums for mortgage insurance.
• The deduction of the cost of improvements to commercial buildings that make them energy efficient.

These provisions had all expired at the end of 2017, but the bill extends them, retroactive to the beginning of 2018 and through the end of 2020. NAR also advocated strongly for H.R. 5377, the Restoring Tax Fairness for States and Localities Act, which would provide a temporary two-year repeal of the $10,000 cap imposed on state and local tax deductions. The bill passed the House at the end of December.
Fair Housing Act. NAR continues to promote the importance of the Fair Housing Act and encourage member compliance with the law. NAR’s fair housing toolkit offers resources to expand understanding of and compliance with fair housing responsibilities. NAR also supported HR 5, the Equality Act, a bill that would protect LGBTQ people from discrimination in housing and other settings. In May, HR 5 passed the House by a vote of 236 – 173. NAR also worked closely with HUD to develop policies that protect those who rely on the assistance of companion animals while preventing individuals from exploiting the system.
Association health plans. In June, NAR jointly filed an amicus brief with five local boards to defend the US Department of Labor’s rule enabling working owners (including NAR members) to participate in association health plans. Over 200 state and local REALTOR® associations signed in support of this effort. NAR and several state and local associations also met with Department of Labor and White House officials to discuss the industry’s strong support for AHPs in May. NAR built an AHP toolkit and resources for state associations to work with their state legislature and insurance commissioner to better understand and seek opportunity to adopt the department’s association health plan rule into state law and continues to meet with the Secretary of Labor to support these state efforts.
Access to credit. NAR is working to ensure the American Dream of homeownership is not out of reach due to an inaccurate determination on willingness and ability to repay a mortgage. NAR has supported several bills affecting federal credit policy and student loan debt, including H.R. 123, the FHA Additional Credit Pilot Program Reauthorization Act, which passed out of the House Financial Services Committee in September. The bill would allow HUD to create a pilot program to automate alternative credit.
CFPB. In December, NAR jointly filed a neutral amicus brief with the Mortgage Bankers Association and the National Association of Home Builders in the Supreme Court case examining the structure of the Consumer Financial Protection Bureau that requested the least disruptive remedy possible to ensure market stability and certainty. The brief argues that if the court finds the restrictions on the president’s ability to remove the director of the CFPB unconstitutional, it should sever the restrictions rather than strike down the entire Consumer Financial Protection Act. This would prevent significant disruption to the economy, including substantial uncertainty in housing markets.
U.S.-Mexico-Canada agreement. NAR supported the USMCA, the recent agreement with Mexico and Canada in the renegotiation of the North American Free Trade Agreement. The USMCA will bring North American trading activity into the 21st century through groundbreaking reforms on digital trade, agriculture, and the environment, among others. The agreement also preserves and strengthens the strong trade ties between Canada, Mexico, and the U.S.
Loan limits. The 2020 mortgage loan limits for the Federal Housing Administration, Freddie Mac, and Fannie Mae increased in high-cost areas. The baseline (national) limit increased to $510,400 from $484,350 in 2019. In high-cost areas, the limit will go up to $765,600 (from $726,525). The loan limits are based on the Federal Housing Finance Agency’s Housing Price Index, which increased by 5.38% since last year. NAR has strongly advocated that the FHFA allow the GSEs to meet their public mission of supporting liquidity and broad access to mortgage credit. This includes adjusting the loan limits each year for the GSEs to reflect the change in the average U.S. home price, required under the Housing and Economic Recovery Act.
WOTUS repeal and replace. Since 2015, NAR has supported efforts to repeal and replace the Waters of the U.S. regulation, which would have swept more water bodies under the control of the federal government and resulted in more burdensome and expensive regulation. These efforts came to fruition in 2019, when the Environmental Protection Agency finalized the repeal of the WOTUS regulation. NAR continues to support the second step of this process, which is to develop a common-sense WOTUS rule that provides consistency, predictability and a bright line on which waters are regulated by the federal government and which are regulated by state and local governments.
“The Group.” NAR has spent much of the past 12 months emphasizing and leveraging industry partnerships to strengthen its advocacy efforts. After a four-year gap, NAR hosted a reunion in March of “The Group,” the informal name given to the four key industry trade leaders— American Bankers Association, NAHB, MBA, and NAR. The Group met several times throughout the year and will meet throughout 2020 to continue building policy consensus and convey a united real estate industry.
By: NAR
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Click here to download the Winter 2019-2020 Edition of the NMREC Property Lines Newsletter.

CRE will poised to receive a double-whammy from automation, with the technology reducing the need for space across several industries as well as remaking its own internal processes.

Much has been written about the impact automation will have on the global workforce, with manufacturing and related occupations expected to be heavily affected. More recent studies, such as one from Brookings Institution that came out last year, suggest that higher-wage occupations will feel the impact as well.
That includes commercial real estate.
Indeed, CRE will poised to receive a double-whammy from automation, with the technology reducing the need for space across several industries as well as remaking its own internal processes.
This is one of the findings from Avison Young’s newly-released global 2020 Forecast, which covers ten trends to know for 2020.

What Will It Look Like?

Not that our workspace will be re-imagined with robots sitting in the seat next to us. Like so many other industries, the greatest impact will be seen from robotics process automation, a type of software that automates workflows across multiple interfaces and that makes routine computer tasks much easier.
“RPA adoption is a fast-emerging trend that crosses all industries, with major real estate implications due to the cumulative effect on the type and number of jobs required across different businesses,” according to Avison Young, which points to a McKinsey Global Institute estimate that about 30% of the activities in 60% of all occupations could be automated.
Here is how automation could affect space needs, according to Avison Young: Back-office functions, which tend to be clustered in more cost-effective secondary and tertiary cities around the world, will be significantly affected. Hot-bed offshoring locations will also be substantially impacted. Less obvious is the impact on organizations, or individual jobs, where such processing is currently intertwined with more client-facing tasks.

RPA Comes for CRE

These changes will also have an internal impact on CRE. Avison Young writes that the “scope and pace of these advances should cause us to focus on the processes embedded in our industry. From research and investment decision-making to project management and building engineering, our use of technology and automation to process and manage information is in its infancy.” That’s in addition to such areas where RPA is already becoming mainstream, such as financial management, invoicing, recruitment and HR. For instance, Avison Young notes that one of the big four management consultancies already uses RPA in the onboarding of thousands of new employees each year.
Real estate, though, is still in its infancy in the use of RPA and, as Avison Young put it, there is some less glamorous blocking and tackling required first. “As an industry we need to be much better at collecting and taking back control of the data we have access to, and combining it with third party sources in order to unite the currently fragmented real estate data landscape,” it says.
Technology will help, but the first step is a change in mindset, it continued, as transparency of data about our urban environment has a long way to go. “As an industry, we don’t yet have clarity over what meaningful information we have and what other data potential strategic partners within real estate might own.”
By: Erika Morphy (GlobeSt)
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As an industrial real estate broker in one of the country’s hottest submarkets, Patrick Turner sensed opportunity when he heard a news report announcing the closure of a national-brand bakery complex near Chicago’s O’Hare International Airport.
“A light went off in my head,” says Turner, a vice president in the Rosemont, Illinois, office of Colliers International. “When you’re talking about urban infill, you can’t just go out and find 10 acres [4 hectares] anywhere around the airport. It just doesn’t happen.”
Divided by a street, the former bakery property now is home to two light industrial warehouses developed by Colliers with Chicago’s Bridge Development Partners. The facilities total a modest 64,000 sq. ft. (6,000 sq. m.), which, combined with the choice location, fits the profile of some of the most coveted properties in today’s industrial real estate market.
“We have both buildings fully leased at some of the highest watermark rates in the market,” says Turner. “The real gap in the market today is the ability to deliver those smaller units.”
That demand is being driven by the accelerating expansion of e-commerce and the ever-shrinking delivery times promised by Amazon, whose competitors are scrambling to keep up.
“You need to have inventory in more places and closer to the customer,” says Benjamin Conwell, who leads a special e-commerce advisory group for Cushman & Wakefield.
“It wasn’t too many years ago,” Conwell says, “that in the e-commerce space, everybody was all about great big buildings. But light industrial has gone from being an ugly stepchild to the belle of the ball. In just the last few years, both occupiers and investor capital both have developed a super strong appetite for that kind of product.”
A new study bolsters Conwell’s analysis. In October, CBRE reported that light industrial properties outperformed other-sized industrial buildings over the past five years. CBRE found that light industrial warehouses measuring 70,000 to 120,000 sq. ft. (6,500 to 11,150 sq. m.) registered the biggest decline in availability, down 3.9 percentage points, and the largest gain in average rents, at 33.7%.
‘Hottest Coal in the Campfire’
CBRE’s five-year study period roughly parallels the rise of e-commerce. Online sales now account for about 11% of retail purchases and are projected to rise to 17% in 2022, according to CBRE.
“Light industrial is the hottest coal in the campfire,” says Chris Zubel, a senior managing director who leads CBRE’s representation of industrial and logistics investors. “We’ll continue to see strong demand for light industrial facilities as e-commerce grows, which in turn means we can expect to see additional strong rent growth for these warehouses.”
The expense and scarcity of urban infill properties, plus the specific demands of e-commerce, make standing up a “last touch” warehouse tricky. Location is paramount. The analysts we spoke with also agree that abundant space for employee parking and truck turnaround eclipses the need for interior storage capacity, especially when goods are moving in and out quickly.
“We like a higher parking ratio with less coverage on the site. Less building on a bigger lot gives people more flexibility in where they can store last mile trucks,” says Brian McKiernan,” senior vice president of Chicago-based CenterPoint properties, who is active in the light industrial space.
Unlike Colliers, which bulldozed the former Chicago bakery and built from ground up, many developers elect for adaptive re-use of existing infill buildings. That’s a margin call, though, generally made on a case-by-case basis.

“There are no absolutes one way or the other,” says Cushman & Wakefield’s Conwell. “Can I adapt my operation to what’s there already? Can I do some limited amount of remodel and have it up and running within six to nine months? There’s operational risk in going with an older building, but there’s capital and speed-to-market risk by going with an all new development.
“Five years ago,” Conwell adds, “there was virtually no new state-of-the-art urban infill product. Now, as demand has matured a bit and capital sources and developers have gotten more confidence in being able to permit and design these buildings, we’re actually seeing more of a mix.”
Anthony Pricco, Bridge Development’s president, says the decision of whether to adapt or build from scratch can vary by market.
“In a tighter market like New Jersey or the boroughs in New York or the South Bay or Los Angeles, people are going to live with some inefficiencies to get a prime location,” he says. “As developers, we see an old building and wonder how we can take it down and build something new and modern. But for a lot of users, if it’s a well-located asset, they can make do with some things we might view as obsolete.”
Change is the only true constant. Drone delivery, long promised, is getting closer. Less hyped, but perhaps more significant, is the near-term prospect of teams of delivery bots dispatched en masse from autonomous motherships.
“Retailers,” says McKiernan, “still don’t have the perfect profile of how their e-commerce distribution works. There’s no set profile for the perfect building to just go buy or develop. That’s what’s unique about this whole segment, that it’s still to be defined. That’s where it gets pretty interesting.”
By: Gary Daughters (Site Selection Magazine)
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