Archives for July 2022

During an industry deep dive session at GlobeSt.com’s national Women of Influence conference, panelists discussed the labor market, advice and how to push forward and find new opportunities during times of uncertainty.

Key industry influencers from every link in the value chain came together Tuesday morning at the GlobeSt. national Women of Influence conference. Their goal was to discuss the current state of the CRE market, examine transactional shifts, break down key trends from capital resources to adaptive reuse, and where to find opportunities during such uncertainty. And when asked what keeps them up at night, the answer really was connected to their job.

Kristen Croxton, SVP of loan originations at Capital One, for example, has the lender perspective and is kept up at night by uncertainty and inflation. Panelist Siobhan Harold Fink, VP of workspace consulting at PPM, says the worry comes from what to do about attracting employees back into the office along with new ways of working. “Trying to figure out how to reposition assets keeps me up.”

For panelist Julie Baird, president of First American Exchange Co., the worry is affordability, more specifically, housing affordability and how that plans into her teams.

The panel then switched gears and dove into labor markets, and Harold Fink said that when you look at the workforce from a generational perspective, there is a large gap and she said that people are no longer necessarily tied to just doing one job. “They are doing side jobs due to affordability. Millennials and Gen Zs are not necessarily going and working for a big corporation… They are more entrepreneurial in terms of spirit and are choosing to work how they want to do.”

She continued that many are also making things work by working at home and don’t want to come back to work. “It is about finding a happy medium,” she said. “The purpose of space is about promoting creativity… There are also employee concerns with having a work life balance. They have redeveloped the life balance part of it which is why you have the push and pull between the two sides.”

Panelist Meghan Czechowski, managing director of Apprise by Walker & Dunlop, agreed noting that Millenials and Gen Zs are “very interested in ‘funployment’ and digital innovation. They need to enjoy what they are doing.”

As for what companies are doing to retain talent and back to the office plan, Croxton said that Capital One’s policy is a three-day work week in the office, but she said it hasn’t started yet. “We spent a lot of time putting together policies to get everyone reengaged.”

For Baird, her firm hasn’t issued any mandates. “Training, hiring and getting people ingrained in the culture is difficult when away from the office, but we are getting better at understanding what people need,” she said. “I don’t want to create additional hurdles for someone to come work for us and force them to come into the office when the office might not be necessary.”

True, said Harold Fink, there is not one size fits all. But she says that it is important to “really customize your model to what works best for your business.”

The panel then turned their sites to trends in digital acceleration and implanting improvements in that area. For Baird, the first thing her company looked at was how to add technology to their team to push some things digitally instead of manually each day. “Some automation is client facing and some are enhancement platforms for our teams,” she said.

For Capital One, Croxton said that it is a constant process. “We are still in a digital revolution and a lot of that is getting all the platforms on a similar system, removing the redundancies, and improving the systems.”

Czechowski said that her company is looking at enhancing the appraisal process and making it all web based. “We have built our own application and translated that into data points and been able to offer that up to our clients.”

So, when asked where opportunities are, Baird said her company is very focused on growth. “With the market shift, we see transaction volume shift and can catch our breath a little. We are in a sweet spot now with interest rates going up too, which doesn’t affect us negatively,” she said.

She also explained that her firm is focused on looking for strategic hires and thinking about the company’s geographic footprint, and about where they can increase their market share. “We need to look to lead at a time of transition and change.”

As for Baird’s advice, she says to know your ideal outcome and how you want to show up. “Content is important but what people will remember is how you make them feel and how you showed up for them.”

Harold Fink’s firm is testing new ideas and pushing forward. “We are sort of looking at how we move the industry forward and make all of our lives easier and better. It is about pushing the envelope and testing everything and seeing where we end up.”

She noted that it is key to be adaptable and flexible. “You can chart a path, but there is no right way right now. You don’t always have to be 100% right. You can try something and see where it goes.”

Croxton’s company is also in growth mode on the commercial banking side. “We are opening in markets we have not been to before. We are always looking to compete and take care of our clients. Another big focus is being one team. Traditionally big banks are siloed, but we are focused on working together.”

Her advice is to not be stagnant. “Watch the trends and figure out how you can be an advisor for your clients and provide the best service to them.”

Source: “Finding New Opportunities in Times of Uncertainty“

The central bank raised rates by three-quarters of a point, its fourth increase this year, as it attempts to tame prices without causing a severe downturn.

The Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday, continuing its aggressive campaign to cool rapid inflation even as the economy begins to slow.

Central bankers voted unanimously to make the unusually large interest-rate move, and the policy-setting Federal Open Market Committee signaled in its post-meeting statement that more is coming, saying that it “anticipates that ongoing increases in the target range will be appropriate.”

As Rio Grande water dwindles to a mere trickle in the Albuquerque area for the first time since the early 1980s, irrigators are facing the possibility that only the Pueblos will be able to draw water from the river.

A 1928 agreement means that Pueblo water rights are considered “prior and paramount.” That means the six Middle Rio Grande Pueblos will be able to take water from the river when other users are cut off.

The Middle Rio Grande Conservancy District has now used all of the available San Juan-Chama water it had in storage. That means it is relying on the baseflow of the river and on water from monsoon events.

Because of the Rio Grande Compact, MRGCD is only able to store San Juan-Chama water, meaning water pumped from the San Juan River, which is part of the Colorado River Basin, to the Rio Chama, which flows into the Rio Grande.

A stream gauge that measures the Rio Grande’s flow near Alameda shows it flowing at 18 cubic feet per second as of Tuesday. A week ago, it was flowing at 138 cubic feet per second and, when the month began, the flows were more than 400 cubic feet per second, at times reaching up to more than 1,100 cubic feet per second amid monsoon storms.

Tuesday’s flows were slightly higher than Monday’s when the gauge read 6 cubic feet per second.

Anne Marken, the MRGCD water operations division manager, told NM Political Report that the inability to store water due to the rehabilitation of El Vado Reservoir and compliance with the Rio Grande Compact contributed to when the channel began to dry. Normally, she said, the MRGCD would release water from storage to prevent river channel drying.

In a press release, Jason Casuga, the MRGCD CEO, said the rehabilitation of the reservoir “is critical for the safety of the facility but unfortunately means the Dam is unavailable for storage until at least 2024.”

The drying of the Albuquerque stretch was not unanticipated. Marken said the conservancy district’s board was even preparing for it to occur earlier in the year—in June rather than July.

Board minutes from a May 31 special meeting show that Marken warned that the Albuquerque reach could experience drying this summer.

“We were anticipating these conditions, the monsoon kind of changed a little bit,” Marken said.

Monsoon storms helped delay the drying of the channel and, Marken said, even if El Vado was not undergoing rehabilitation, the river channel would likely have gone dry.

She said instead of the drying coming at the end of June, as previously predicted, the monsoon kept the channel wet through most of July. Now it looks like the river will go dry in late July or early August in the Albuquerque stretch.

Downstream, it is not uncommon for the San Acacia reach to dry up during the summer and Markin said the drying of the Albuquerque reach could become more frequent under climate change models.

The last time the reach went dry, in the 1980s, a period of wet years ended that trend, according to State Engineer Mike Hamman who spoke to the Legislative Water and Natural Resources Committee this week.

Since the 1980s, water management has changed in part because of the need to protect endangered species. This has contributed to the four decades when the river did not run dry in Albuquerque.

Water management practices need to change once again to deal with a future with less water, according to David Gutzler, a climatologist at the University of New Mexico who spoke to lawmakers during the committee hearing on Monday.

“History suggests that severe droughts have occurred naturally in this part of the world for many centuries,” Gutzler said. “And I anticipate that the current horrible drought will end one of these years and supplies will return at some level.”

However, with climate change, he said it may not return to what the state has previously recorded.

The flows into Elephant Butte under climate change models start to resemble what the state water managers currently view as drought-diminished, he said.

Current water management practices will not work in an era of diminished supplies, like the climate change models show will happen. Gutzler said state policy makers have a choice. They can rewrite management practices to take into account the lessened supplies or they can continue with the current water management practices. Should they choose to do the latter, Gutzler warned that the state will enter into an era of perennial crisis management.

Existing water rights, he said, represent an over allocation of available water.

Gutzler said to increase water the state would have to either import it—which could be hard because New Mexico would be competing with its neighbors for that water—or find new sources such as desalinization or produced water.

Meanwhile, the MRGCD is focused on delivering water to Elephant Butte when possible in hopes of reducing the water debt New Mexico owes Texas in hopes that someday the state will be able to store water from the Rio Grande once again, Marken said.

Source: “As Drought Continues, River Flows Dwindle In Albuquerque Area“

How one private equity real estate firm is trying to bring flexible industrial facilities to the market in U.S. cities with its Portal Warehousing offering.

The past few years have been a time of massive growth in the U.S. industrial sector. Industrial space has been at such a premium many tenants have been signing leases in anticipation of future growth, while more and more developers have invested in building multi-story warehouses in urban cores.

But not all industrial tenants can or want to invest in large-scale warehouse facilities right away and sign long-term leases. Some start-ups, for example, may want to start with a smaller unit that fits their current business volume and grow from there. Other companies looking at expansion might also want a testing ground to play with their logistics networks. To serve that segment of industrial end-users private equity real estate firm Capstone Equities launched its Portal Warehousing concept last year, a sort of flexible warehouse solution offering the smaller spaces and shared amenities that have become common in the office co-working sector on a membership basis.

The company’s first Portal location opened this month in Salt Lake City, with a 30,000-sq.-ft. incubator that offers spaces ranging in size from 250 sq. ft. to 2,500 sq. ft. on a short-term basis. Amenities at the property include high-speed Internet connection, reception services, business growth support and community events, among other offerings. Capstone Equities executives say that out of the 22 suites available at the property, 14 already have tenant commitments.

Going forward, Capstone plans to expand this offering to several other cities, including Brooklyn, N.Y., Las Vegas, Los Angeles and Phoenix.

WMRE recently spoke with Alex Morrison, Portal Warehousing CEO at Capstone, about what types of tenants the company hopes to attract, what kinds of spaces it’s looking for and how its views the future of the concept.

This Q&A has been edited for length, style and clarity.

WMRE: What types of spaces are offered to tenants in through Portal Warehousing and how do they differ from traditional warehouses?

Alex Morrison: Traditionally, industrial space is only available in large sizes (minimum 5,000 sq. ft.) and [through] long-term leases (five years). Small spaces with flexible terms generally do not exist, relegating growing businesses to working out of garages, self-storage facilities or corners of other people’s warehouses.

Portal is institutionalizing the co-warehousing space. We give access to high-quality space with critical logistics infrastructure to a company of any size. Spaces range in size from as small as 50 sq. ft. up to 2,500 sq. ft., and everywhere in between. We allow companies to take on just the right amount of space they need today, with the flexibility to grow into more space as their business grows.

We’re reimagining what a warehouse is, bringing in amenities that people have become used to in co-working spaces, but do not exist in industrial, such as art, networking and collaboration space, coffee bars and photo booths. Portal turns warehouses into space for people too, not just product.

WMRE: What types of companies does this best serve?

Alex Morrison: Portal is a fit for companies with space needs for both physical products and people. We’re a great fit for e-commerce merchants of any size, logistics companies and growing businesses. Portal’s current customers include e-commerce merchants that are just growing out of their garages; established brands using the space to run their D2C operation or prototyping new products; and national companies generating [more than] $1 billion year in revenue that need overflow storage space.

WMRE: How does Capstone Equities source new properties for Portal Warehousing? 

Alex Morrison: Capstone Equities has been investing in real estate and real estate operating businesses for the past 15 years, with a track record of over $2.5 billion of invested capital. Capstone has extensive relationships within the brokerage community, private-equity ownership groups and high-net-worth individuals with private portfolios that it uses to source new space.

Capstone also has its own balance sheet, which it will use to opportunistically to acquire properties for Portal to operate. As Portal’s first locations have opened to strong tenant interest, we’re seeing more opportunities from landlords who are interested in partnering with Portal to amenitize their industrial portfolios.

WMRE: How many portal warehouses does your company plan to open and in which markets? Why did you choose these markets? What is your schedule for opening new Portal facilities?

Alex Morrison: Today, Portal has two facilities. Its Salt Lake City facility opened in July 2022, and it’s Phoenix facility is opening in August 2022. Portal has partnered with major institutional landlords for the first two properties.

Salt Lake City and Phoenix were chosen for a variety of reasons, including population growth, e-commerce activity, economics and favorable business climates. Looking forward, Portal plans to select several new markets by the end of 2022. It’s planning to open 10 locations in 2023, targeting infill, last-mile locations in primary and secondary markets.

WMRE: How do rates per square foot at Portal properties compare to traditional warehouses? What kind of lease terms does Portal offer tenants? 

Alex Morrison: Portal offers flexible terms that range from three months to one year. Comparing rates per square foot at Portal to traditional warehousing is an apples-to-oranges comparison. Portal’s suites range in size from 100 to 2,500 sq. ft., which is generally non-existent for industrial space. Portal memberships include access to private space and shared access to dock and grade doors, logistics equipment, an office area and other amenities.

WMRE: Your company also offers to help retail startups set up fulfillment operations, to access the best shipping rates through its aggregated volume rates, to secure new capital and provide mentorship. What is the additional charge for these services or are your rates all-inclusive?

Alex Morrison: By bringing merchants under one roof, we can provide benefits to all of the members in our facilities that are difficult to replicate on their own. Right now, our services are all-inclusive and include items like shipping/receiving assistance, a network of local mentors and consultants to help with starting and growing a business and access to information on best practices.

The current world of e-commerce is fragmented, and so is the information on common pitfalls and best practices. We’re creating a network where tenants can learn from each other and grow together.

WMRE: How are you marketing Portal Warehousing?

Alex Morrison: Co-warehousing is a completely new industry. Because of this we work hard to create brand awareness in each market. We do this by creating strong ties with entrepreneurial clusters, local brokers and e-commerce communities. We want Portal to become a gathering place for companies and brands with physical products, so we hold events, invite speakers and offer our space as a venue to community members.

Source: “Co-Warehousing Comes to the Industrial Sector“