Archives for September 2022

In recent years, there have been notable increases in real estate transfer taxes, which are levied on the sale of property by local and/or state governments and are typically defined as a percentage of a property’s sales price. In California, for instance, there were 20 ballot initiatives to raise transfer taxes between 2010 and 2020, 13 of which were approved by voters. Sage Policy Group (Sage) was commissioned to examine their economic and fiscal effects in the context of a post-pandemic world.

This report makes no attempt to assail the validity of transfer taxes as instruments of public policy. It also does not seek to diminish the importance of public revenues to support the provision of key services ranging from education and public safety to park and road maintenance. Rather, this report is intended to supply insight for policymakers and other stakeholders regarding the myriad considerations that should enter assessments of appropriate transfer tax rates.

Transfer tax increases have negative economic consequences for both the residential and nonresidential segments. They are regressive and can lead to decreases in population, real incomes, real estate transactions, investment in structures, and quality of the built environment. They are also associated with higher rents, lower property valuations, reduced residential mobility, and diminished homeownership.

The negative impacts of elevated transfer tax rates stand to be exacerbated by the increased prevalence of remote work, lingering weakness in office space net absorption, elevated mall vacancy rates, and diminished hotel occupancy. Many properties will need to be upgraded and/or adaptively reused to remain viable. Excessive transfer tax rates can frustrate the exchange of property that is often required to return to commercial viability.

Communities that support significant adaptive reuse and investment will prosper, while those that do not will experience increasing vacancy and abandonment, declining property values and quality of life, and sagging commercial real estate assessments. This is the context in which transfer tax rate-setting should be considered.

View the full report here.

Source: “The Unintended Consequences of Excessive Transfer Taxes“

About 90% of space planning professionals are struggling with managing work and learning spaces in more fluid, hybrid-use environments coming out of the pandemic, according to a survey of 255 professionals by Armored Things, a provider of AI software for space planning.

Richard Scannell, CEO, Armored Things, said in a prepared statement that getting a handle on the best use of physical space is more difficult in the current hybrid environment because a lot of the spatial intelligence available is point-in-time data that doesn’t provide space planners with the analytics and insights they need to make the best decisions about facilities.

A large majority of space planners have had to help manage day-to-day seating challenges; resolve disputes over space issues; and find that people are asking for more space than they need as they are “scrambling” to address their constituents’ changing needs, the company said in a release.

The survey featured 175 respondents from companies with at least 500 employees and 80 were from higher education institutions with at least 500 students.

AI-based space planning has helped close the data gap by providing, capturing and analyzing the occupancy data, Scannell said.

Qualitative Info Should Complement Tech Data

Rick Ybarra, principal, Avison Young Consulting Services, tells GlobeSt.com that companies he has engaged or spoken with agree that collecting quantitative information through technology sources of information has been a challenge based on lack of information or technology tools.

“As a result, there has been a significant push to implement workplace technology systems and tools to begin to capture occupancy information to enable the planning around the new workplace environment,” Ybarra said.

“There is a critical need to capture qualitative information to compliment the technology data. This additional information has been centered on understanding the work styles of employees and what places, spaces and technology they need to perform their individual work and when working with others.

“This combination of quantitative and qualitative information helps to fill gaps that may be lacking in one area to enable Avison Young’s clients to provide or enhance the right places and spaces for their employees.”

Hybrid Schedules Complicate Matters

Chris Congdon, director of global research communications at Steelcase, tells GlobeSt.com that her firm uses research and data to inform workplace design strategies for clients.

In its most recent global report, findings reveal 87% of people will spend at least some of their time working from the office, but 45% prefer working from home. This indicates organizations must create spaces that work better and offer more than remote work set ups, Congdon said.

“There is no one-size-fits-all answer,” she said. “The first step to designing a workplace that optimizes hybrid collaboration is listening to employees’ new needs. Organizations that understand what factors add value to employees’ day will create an office that earns their commute.

“Our report showed a shift from assigned to unassigned desks — pre-COVID, 88% of workers had a desk assigned to them, compared to the current 40%. However, workers are more likely to work from the office if they have an assigned desk.”

Steelcase found that the percentage of floor space dedicated to collaboration has also increased by 7% – up from a pre-pandemic number of 46%.

Additionally, when asked what office features are more important to people now than before the pandemic, spaces for hybrid collaboration, single-person enclaves for hybrid meetings, general privacy and workspaces with full or partial enclosure were the top four results globally.

Study How Space is Used, Not Number of Occupants

Albert DePlazaola, Global Director, Strategy at Unispace, a global strategy, design and construction firm, tells GlobeSt.com that before COVID, utilization and occupancy metrics were extremely helpful for strategic planning and evaluating space requirements. However, in a post-pandemic environment, not so much.

“CRE leaders should be paying very careful attention to metrics that provide insight as to how space is being used, and not necessarily by how many,” DePlazaola said. “The frequency by which employees return to the office should be determined by a thoughtful RTO (return to work) strategy that is set by leadership and HR/People teams to best support the business and the employee experience.

“CRE leadership then needs to understand, and strategize, around how the work environment can support the RTO strategy, whether it’s a virtual-first strategy or a mix of hybrid.”

Data Must be Visualized

Kul Wadhwa, CEO and Founder of BeyondView, tells GlobeSt.com that data is top of mind, “however, when data is visualized it is easier to interpret and see its potential impact. In order to understand space and its potential uses, contextualizing data is essential.”

Lisa Stanley, CEO of OSCRE International, tells GlobeSt.com that corporate occupiers, as well as owners and investors in real estate, need reliable, timely and accessible data to guide decisions related to space in a hybrid work environment.

“While emerging technology platforms can collect large amounts of data, these platforms don’t often have the ability to communicate with each other,” Stanley said. “Standardizing data across platforms contributes to effective data governance and is key to fully utilizing the power of these new technologies.”

Source: “Space Planning Pros Lack Necessary Data to Configure Post-Pandemic“

It’s a dream of some, running warehouses without manual labor. Not surprising given that hiring for just about any job is tough.

“The key to those properties and operations are the robotics inside the facilities,” Peter Lewis, founder and chairman of Wharton Industrial, which develops and invests in industrial properties, including warehouses, tells GlobeSt.com.

He speaks of micro fulfillment centers that run 15,000 to 45,000 square feet, with a beta facility in Brooklyn. “The facility is probably 95 percent automated,” he says, with manual labor putting product in bags for delivery. “I think we’ll start seeing a shift over the next couple of years to more automation,” pushing out people other than some software engineers, “and there has to be a businessperson sitting on top of this, obviously.”

But while that would solve problems getting workers, many other people, including those at companies that develop robotics and consult on warehouse design, operation, and automation, say the goal is far trickier—and further off. Instead, there will be workers in ever more complex facilities, and they will need training to gain the necessary skills and understanding of logistics warehouse jobs will demand.

THE CURRENT STATE OF THE WAREHOUSE

Warehouses have been stuck in the past for too many years, mired in old workflows and methods, leaving it vulnerable without enough help.

“What has happened in the last 24 to 30 months is we were in a model in manufacturing and warehousing that was all about just-in-time, minimizing inventories, reducing cycle times, getting everything tight,” says Mark Stevens, a principal as well as the manufacturing and distribution lead at accounting firm Wipfli. “What we found was that it was a huge tragedy.”

Everything fell apart in one supply chain after another because there was no room for problems and, with low unemployment rates, getting enough help on short notice to manually work around hiccoughs wasn’t possible. And now? There were 0.6 jobs per unemployed person in February 2022, the lowest figure since at least 2007. Forget picking and choosing for the most qualified; employers must fight for workers.

Technology has promised greater efficiencies, reducing the need for manual help. But the view of the lights-out warehouse is still a long time off.

“Big companies, these deep-pocketed companies—Home Depot, Costco, Amazon—they’re building warehouses around new technology functionality,” says Aviva Sonenreich, managing broker at the Warehouse Hotline in Denver. “That is more efficient, to build a property from the ground up, by building the warehouse that suits their direct need rather than occupying a warehouse and adding it. I do have national tenants, but in my experience our tenants are on the smaller business side. They’re just happy to get a space with a garage door.”

Even the large ones may not be doing enough at a sufficiently fast pace because the capabilities are still not there.

“I think you could do corner cases probably now,” Mark Messina, CEO of robotics firm Addverb America, says. “But it certainly doesn’t move the needle at all. When we start to see something that is scalable or that other companies could adopt, personally, I would guess minimally eight years out. It’s not just the technology. There are regulations around packaging and safety concerns. It’s a complex problem to solve for an industry that’s slow to change because they don’t want to add costs and they’re worried about the moment.”

But change there will be because there won’t be a realistic choice. The future will need a specially-trained staff, which means much more than learning how to follow directions from a mobile device on what to pick.

WHAT THE WAREHOUSE WILL NEED TO BE

To understand what skills warehouse workers will need and how companies will have to attract and retain them, it’s necessary to start envisioning the likely and practical future of warehouse facilities.

Why not automate everything? Because it’s not feasible yet. “We’ve managed the low-hanging fruit,” Messina says. “Even stacking boxes in a truck is low-hanging fruit. But the harder stuff that requires more tact is not yet solved. How do you decant those boxes that come in to get singular items? If you’ve got a box of 12 candles, [automation of] shipping one isn’t solved yet. Opening a box, that’s not easy to do. If you think about the returns process, reverse logistics, that’s a whole other ball of wax.”

Automation is often a second level of problem solving that needs other groundwork done first.

“As a consultant, we get asked a lot to come in and do the analysis of putting automation in the facilities,” Kirk Waldrop, managing director for the operational transformation and sourcing and supply chain practice at Grant Thornton, says. “We find nine times out of 10 it’s going to be solved with improving processes, better processes, improving process discipline. At a minimum they need a good warehousing system.”

In addition, it’s easy to let assumptions run away. More complex robotic materials handling is possible, but they aren’t by themselves solutions. “If you don’t take people, process, and technology and put them together, it may not be cost effective,” Waldrop says. “I’ve had customers over-automate their facilities to the extent they didn’t have flexibility. If something went wrong, they were stuck and couldn’t get product out the door.”

The opposite mistake is also possible. Smaller companies might think that automation and robotics are only for large companies.

“The smaller companies, it depends on their business model and where they see themselves amongst their peers,” says Messina. “If they’re looking for a competitive edge, generally things that are small and diverse, of a particular geometric size and high diversity, are really good at automation. If you need to maximize your space, automation is great.” A warehouse can more easily change its pick rate or scale up and down during the year. “I’ve had discussions with players out there who took a look at automation. Even though the ROI is only 18 months and can give them a big improvement on their bottom line, they don’t have a lot of competition and are fat, dumb, and happy. Sure, I could make more money, but that means I have to do this and what if it doesn’t work?”

The need for people who can work in more highly automated warehouses will only grow because even smaller companies will increasingly find already automated warehouses they can rent. Lewis recently invested in a 1.5 million-square-foot industrial park in Mesa, Arizona. “They’re latching on to new age companies and these warehouses with offices as well are being created to serve them,” he says.

Increasingly, serving smaller companies will mean providing capabilities they need to remain competitive. “There is a trend towards, and I’ve seen it lately, some real estate firms that are partnering with technology companies, automation technology as well as equipment and software providers, to build spec warehouses that are largely if not fully automated,” Waldrop says. Bespoke for each company? It needn’t be when many companies have similar materials handling needs—things on shelves that must be placed, picked, gathered for orders, and sent out.

THE WORKERS NEW WAREHOUSES NEED

That raises the question of how to get the employees with the skills warehouses need. According to experts, there needs to be a fundamental shift from thinking that people in warehouses are only meant to follow orders flashing on a screen and that they have no technical sophistication.

“The idea that we don’t have tech savvy people is crazy,” Stevens says, pointing to how most will be comfortable using a smartphone, which is a powerful mobile computer. “The technical side of this is the easy part. Companies recognize they can train anyone on technology. You need to find the people with the right competencies.” That is integrity and self-initiative; communications and active listening; the conceptual competency of someone solving their own problems; customer orientation; and the ability to work with others.

“One of the things the industry has not done so well is that the entry-level jobs are positioned as jobs, not a career path,” Douglas Kent, executive vice president of strategy and alliances at the Association for Supply Chain Management, says. What companies need people to do in warehouses is far more complex than just following orders. “Somebody’s got to be figuring out at the shift level what are the outgoing requirements, how I get the constrained resources of materials, labor, equipment to line up with the expected demand. These are learned skills. Somebody’s got to be able to understand how incoming demand is represented, the volatility and predictability of the demand, and how to plan to meet customer expectations.”

That also touches on keeping employees. “If I’m not making people feel like they’re getting an education that’s important to them and providing usable skill sets, it’s going to be job in, job out,” Kent says.

In other words, let people see the important context of what they do. “They have a higher cause,” says Stevens. “You’re picking medical devices to save lives. There’s a higher cause and higher purpose.”

And make the positions palatable beyond a given wage rate. “There is more of a push even at the hourly wage level for more work-life balance,” says Waldrop, who recalls a manufacturer that had a “huge” absentee rate in the warehouse, until management asked employees what they wanted. “They wanted to move to a four-day workweek or even some shifts on the weekends.” The result, “the absentee rate just tanked, and productivity went up. Companies need to get creative and not be afraid to talk to people and see what they want.”

Help people get the specific skills, treat them with respect, and you may solve your labor and warehouse issues at the same time.

Source: “Smart Warehouses And The Laborers That Can Run Them“