Archives for March 2020

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By: NAR
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The latest forecast from Christopher Thornberg of Beacon Economics predicts a bad quarter, but not necessarily a recession.

There have been a lot of predictions about the severity of economic disruption caused by the coronavirus pandemic, and most are pretty abysmal, from record GDP loss in the second quarter to predictions of double-digit unemployment. However, the latest forecast from Beacon Economics sheds a more positive light on the recent economic events, predicting a bad quarter but not necessarily a recession.
“We can quibble for hours over the definition of what a recession is,” Christopher Thornberg, founding partner of Beacon Economics, tells GlobeSt.com. “For me, a recession is a protracted period of weak economic growth. While I think this is going to be really jarring and the second quarter is going to be ugly, I think that it is reasonable to expect a bounce back in the third quarter. I think that is completely reasonable to assume.”
According to Thornberg, the current job losses are more akin to widespread furloughs than real job loss, in that the jobs will return once the pandemic subsides. “These are job furloughs, not job losses in any traditional sense,” he says. “When we get passed this virus, the economy is going to look like the same economy. Contrast that to what happened prior in the great recession when the subprime lending industry collapsed, residential real estate collapsed, some parts of commercial collapsed and the financial industry collapsed. You are talking about millions of jobs that weren’t on furlough for a month; these are jobs that were eliminated from the economy. How do you equate those two things?”
Of course, Thornberg thinks there should be a response; however, he thinks the current $1.6 trillion plan is outrageous. “The only thing that you have to do is make sure that furloughed workers are taken care of and that businesses can get short-term loans to get through a couple of months of hard time,” he says. “There isn’t a relevant business in the world that couldn’t take a two-month hit to get through a hard time.”
While Thornberg agrees that there is a significant economic impact, he also sees a swift recovery. “I am not trying to down play the severity of what is going on here. This is the single largest threat to the economy that we have seen in 10 years. This is real, and this is going to be a rough quarter,” he says. “You are going to see a lot of jarring numbers, but there is a difference between business delayed versus business canceled. I see a good bounce back, and obviously that is not the same opinion held by others in the market.”
As for the opposing opinions forecasting a severe recession, Thornberg is familiar with being contrarian. “This mentality is certainly nothing new,” he explains. “This kind of mentality is par for the course lately. I keep pointing out to people that a year ago the markets were down 20% because of an expectation that real estate would collapse over the higher interest rates and a Chinese trade war. That amounted to basically nothing. Here we go again; the same sort of phenomenal overreaction.”
Source: “Beacon Isn’t Forecasting a Recession Yet“

How spaces are built and used is changing rapidly in response to consumer demand, according to designers and developers of commercial and residential projects speaking at the 2020 ULI Arizona Trends Day panel titled “The New Market for the Built Environment.” Space is not enough, panelists agreed, adding that you need people to activate the design to create experiences and program for community, and also provide walkability, sustainability, and open space.
With cell phones now serving as our office and access to retail and food, “we don’t have to go to spaces anymore, we want to go to spaces,” said moderator Steve Lindley, executive director of capital markets for Cushman & Wakefield in Phoenix. “Years ago, we worked in Dilbert cubicles, but today, if we don’t get the work space right, we’ve lost an opportunity.” New space of all types, he said, needs to provide “experience” and workplaces need to foster collaboration and innovation and attract and retain talent. All spaces need attractive qualities such as being inspiring, authentic, and vibrant.
“Ten or 15 years ago, we sat in cubicles, and now there’s a fad of working in coffee shops,” said Curt Kremer, founder and managing partner for George Oliver, a Scottsdale, Arizona–based commercial real estate investment and operating company that has developed popular office projects for tech and creative industries. “We try to make multiple experiences so employees aren’t stuck in their offices, and we try to cultivate the experiences they’re looking for.” In 2019, the firm redeveloped a 1980s Spanish-style office building in Phoenix’s Uptown neighborhood as Casa, a class A office focused on health, wellness, and community with amenities such as a training center, coworking, a lounge, a library, a café, a food-truck cantina, an outdoor activity-game area, and a dog park. Some people work all day at Kaleidoscope juice and coffee bar or use the meditate room “to mentally check out and then be ready to work again,” he said.
“What the millennials expect in an office space is more than a fitness facility,” said Kremer. “We have yoga studios with free classes, or we cultivate a yoga class that employees can go to.” In planning for community, he said, “we try to be thoughtful about the end users and their needs for the space.” Casa has 28 tenants who are “all like different families,” he said. “A building concierge takes care of building needs, but also cultivates community and plans gatherings. But you can’t do it with just one tenant. It takes a team.” Kremer said that operating expenses for amenities like a concierge, a food truck, and yoga are higher, “but we think we’re getting 10 times the value on amenities, and ultimately we’re getting a better place to work.”
Kremer noted that millennials are moving to other parts of the metro region as they begin to start families. “All of the Phoenix area is suburban, and doesn’t have true urban infill densities,” he said, but 22 miles (35 km) southeast of Phoenix, downtown Chandler “has a ton of authenticity, walkability, and densities, with new residential, amazing retail, and new hospitality.” His firm is redeveloping two adjacent office buildings, now called the Alexander and the Johnathan, that will complement recent downtown development.
“We have to break apart assumptions about any one demographic, and we can’t build for just one type of people,” said Jason Schupbach, director of The Design School in the Herberger Institute for Design and the Arts at Arizona State University, pushing back on the notion that millennials or any group should drive development. “The key word is belonging. We spend so much time in our office with a family we didn’t choose, and we want to feel like we belong, we need to feel safe, and that’s why space is changing so much.” The key to belonging is what the space “signals,” he said. “Ask employees or people who might be renting a building or buying a house: What does the space signal, and is it a place where they want to be?
“Humans are naturally social creatures, and we want to see people and experience [amenities], usually while being around other people,” said Schupbach, who previously was director of design and creative placemaking programs for the National Endowment for the Arts. “It’s not just about that Instagram moment.” He observed that much of the Phoenix region’s urban form does not have outdoor space, which is “different from the way many people here want to socialize.” One attractive exception: Uptown Plaza, a redeveloped midcentury mall with outdoor spaces, experiential shops, and eateries.
Kristina Floor, an urban designer and landscape architect and president of Floor Associates in Phoenix, designed the courtyard and landscape for Uptown Plaza. The previous courtyard was inviting only when a restaurant activated the space, she said, and the development team considered: “Is it the right size? Does it encourage participation? What do you need to do to reduce the square footage or change the configuration?” She credited developer Vintage Partners for being willing to reduce the space. “We went through several iterations of how much and what parts of the building should come off to promote views and invite people into the courtyard.” The new design and circulation included another entrance to encourage neighbors to enter from the back. The type and mix of tenants were determined by what she called “setting the table”—“ice cream, coffee, and restaurants always attract people in a courtyard.” Design flexibility for “tenant expression” was also important, she said. “It’s a collaboration among designers, owners, tenants. Add a water feature for kids.”
Floor also described the design considerations for Culdesac Tempe, a $140 million car-free mixed-use neighborhood being developed by San Francisco–based Culdesac that will house up to 1,000 residents on 16 acres (6.5 ha) next to a light-rail station. The project has parking for commercial space, including a grocery store, a food hall, a coffee shop, and coworking, but none for residential. Residents will use mobility options including light rail, biking, walking, Uber/Lyft, and carshares. Parking typically requires a long, skinny rectangle of space, and without parking, there is far more landscaped space and flexibility in building angles and shapes, she said. This allowed for unique courtyards for each residential pod, with scaled spaces and different amenities. Eliminating parking also provided more public spaces, one facing a boulevard and the other more internally focused off a major pedestrian spine.
With all space and design trends, said Schupbach, “there’s a danger in taking them too seriously and [assuming] there’s only one solution. There’s no such thing as a silver bullet—you need silver buckshot.” Understanding the psychology of how humans use space is important, he said, as opposed to making assumptions about how a space will work. When the federal government tried “hoteling,” with employees sharing space without personal desks, he said, “that became Lord of the Flies really quickly. Hoteling had huge pushback, and people ended up with their own space again. We went backward, but maybe that was forward” to allow private as well as community space.
By: Kathleen McCormick (Urban Land)
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Retailing in the digital age transformed itself to compete with the likes of Amazon, but as a result, this industry is better prepared to perform during the current health crisis without even realizing it.

Retailing in the digital age transformed itself to compete with the likes of Amazon, but as a result, this industry is better prepared to perform during the current health crisis. Although no one could have imagined the way the current health crisis would have such a profound impact, retail was preparing for the current social distancing environment without realizing it, says Marshall Mills, Weitzman president and CEO.
Weitzman launched a proprietary digital platform several years ago, seeing it as a way to allow tenants, particularly smaller tenants and mom-and-pop concepts, to compete by reaching customers where they shop: online and on mobile devices. As a part of that platform, the firm made a huge investment in a full-suite digital infrastructure that includes shopping center search engine optimization websites, digital marketing, social media outreach, Google adwords and other avenues.
“Over the next week or so, we’ve got a large number of social media ads, largely via Facebook, set to go to targeted audiences in specific communities in Texas where our tenants operate. This number changes from hour to hour based on tenant needs,” Mills tells GlobeSt.com. “We’re also promoting retail centers and how they are operating in terms of hours, curbside pickup, etc. These ads for individual tenants are designed to promote dining options such as what delivery, pickup and to-go options each restaurant offers. For services ads, such as for fitness, they are highlighting what online options are available, i.e. online workout classes for a gym that is closed or renting workout furniture for fitness equipment stores. This way, we can promote the offerings and services from our tenants that allows them to meet customer needs while maintaining safety and social distancing. We also offer one-on-one consulting with tenants on how they can operate and meet customer needs safely and effectively in an environment that has changed so rapidly due to the health crisis.”
On the brick-and-mortar side, Weitzman worked with its grocery stores and other retailers on upgrades for amenities such as drive-thru and curbside pickup areas, which meant redeveloping parking lots and even existing retail space to make these amenities possible.
At the same time, an entire industry of delivery services such as Favor, DoorDash, Uber Eats and the like grew out of customers’ desire to get what they wanted, when they wanted it and where they wanted it. “We worked to promote all of our tenants offering such services because we wanted to satisfy customers’ need for convenience,” Mills says. “The fortunate result of this huge investment finds our company and our industry with the digital infrastructure in place to achieve the need for safety and social distancing. At the same time, the digital platform gives us as a landlord a dynamic way to instantaneously communicate our tenants’ ever-changing circumstances to their targeted audiences.
This ability to immediately communicate as a landlord on behalf of our tenants in real time will prove to be a critical tool to let the community as a whole know that their favorite stores and restaurants are still hard at work to service their needs.”
Currently, Weitzman shopping center digital marketing and tenant relations team members are reaching out to its statewide base of more than 3,000 tenants to work with them on initiatives that will help them service customers and keep businesses viable.
“We’re working with concepts from small mom-and-pops to regional and national brands and franchisees to promote their take-out and delivery services as well as their adjusted hours and special offers,” Mills says. “For those who have not previously operated such services, we’re putting them in touch with delivery platforms, many of which are currently offering free or reduced-fee services for the near term for small- to mid-size businesses. This is a huge benefit that many of these smaller concepts previously could not afford. We even instruct tenants one-on-one about staffing for phone orders to be filled for lunch and dinner, and advise retailers and services on possible promotions in the current reality.
We then promote these retailers and services on the shopping centers’ websites, on their social and digital platforms and via any other distribution channels they have to reach their customers. We then make sure the tenants have current notices posted at their places of business pertaining to current operating hours and services such as take-out and/or delivery.”
Retailers all throughout Texas are utilizing these approaches to stay connected to loyal and potential customers during the next critical weeks of social distancing, he says.
“Fortunately, we are already seeing results of this consistent communication and consultation with our tenants,” Mills says. “They are reporting that their patrons love having ways to support their local businesses while fulfilling basic needs during this time of social distancing. We were preparing for e-commerce competition, and in the process created a proprietary digital and physical infrastructure that has become one of the most dynamic, most critical tools in our arsenal to keep our tenants as strong as possible during these unprecedented times.”
By: Lisa Brown (Globe St)
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