Posted on July 28, 2017

The U.S. office sector bounced back in the second quarter of 2017, absorbing 12.8 million square feet of space, according to Cushman & Wakefield. That’s more than twice the 6.3 million square feet taken up in the first quarter and the highest level since the third quarter of 2016. Cushman & Wakefield expects solid absorption in the near future as well.

“Even eight years into the cycle, office-using job creation remains healthy and solid in most markets,” the company’s chief economist Kevin Thorpe says. “Moreover, the leading indicators, such as job openings, suggest that business expansion will remain healthy, and by extension, so will demand for office space.”

Cushman & Wakefield finds that rents jumped to a new high nationally, and that construction is ramping up to meet demand. The company says “16.1 msf of new office space was completed across the U.S., the largest amount of space completed since the second quarter of 2009.”

Posted on July 27, 2017

Written by Brielle Scott

Incubators, accelerators, start-up spaces – the lines are often blurred on what these buzzed-about terms mean. In a new report from the Brookings Institute, “Innovation Spaces: The New Design of Work,” authors Julie Wagner and Dan Watch shed some light on these spaces and the trends contributing to their proliferation.

The report outlines three key factors influencing the design of innovative workspaces:

Posted on July 26, 2017

A group of experts from CBRE, Costar and NAI discussed the potential upheavals that could result from changes to NAFTA and ways to implement strategic business plans to protect your investments at I.CON: Trends and Forecasts last month. Download their presentation and catch up on all conference sessions and recordings on the resources page.

Click here to read more.

Posted on July 25, 2017

Written by Kelvin Tetz and Greg Martin

Local and regional developers who want to build relationships with institutional investors will need to implement these reporting and operating guidelines.

MANY REAL ESTATE owners, operators and developers seeking long-term growth are interested in institutional relationships, but building such relationships can seem daunting. Investment partners with billions of dollars to invest rightly need proven and capable partners. How does a local or regional real estate firm get into the institutional-investment club? The key is to get one’s existing house in order, so that investors who court these local or regional partners can more easily understand and embrace the real estate firm’s strategy.

While every firm has its own development strategy, one key to leveraging that success to attract institutional attention is to implement the reporting methods that institutions need their partners to use. Examples of internal components for local and regional operators to consider include 1) building an institutional-quality reporting system; 2) having a proper understanding of key issues, such as U.S. generally accepted accounting practices (GAAP), fair-value reporting and international financial reporting standards; and 3) creating operating guidelines that articulate the operator’s practices.

Posted on July 24, 2017

Credit rating giant Morningstar reports the delinquency rate for commercial mortgage-backed securities dropped to 3.09 percent in May. That reverses a five-month-long trend. CMBS delinquencies were down five basis points from April, but remain 18 basis points higher than in May of 2016. 

“We believe the delinquency rate is close to peaking as there’s not much left that we expect to default at maturity, resolutions remain high, and issuance is starting to pick up,” Morningstar writes. “The delinquent unpaid balance of commercial mortgage-backed securities amounted to $23.84 billion, down a modest $38.4 million from the prior month and up $1.35 billion from the year-earlier period.”

Morningstar finds office and retail remain the weakest sectors.

Posted on July 21, 2017

Legal disputes over construction contracts slow down building projects, costing both sides time and money. The Arcadis Construction Disputes report for the year 2016 shared some positive and negative trends in legal disputes.

“For the third consecutive year the average value of construction disputes in North America have dropped slightly in 2016 to US$21 million,” the report finds. “It appears the U.S. construction industry has become more sophisticated in their approach to managing risk and early intervention appears to be an effective means to keep average dispute values in check.”

That’s the good news. “This average dispute value is lower than most parts of the world; however, the average time taken to resolve disputes increased by two months over the previous year,” Arcadis points out.

Posted on July 20, 2017

The U.S. Energy Information Administration reports more than 10 percent of the country’s electricity was generated by wind or solar in March, the most recent month for which information is available. It’s the first time these renewable energy sources have provided that much power.

The administration notes that wind and solar combined to provide 7 percent of the nation’s electricity in 2016. It predicts that, “based on seasonal patterns in recent years, electricity generation from wind and solar will probably exceed 10 percent of total U.S. generation again in April 2017, then fall to less than 10 percent in the summer months.” Wind and solar tend to produce more electricity in the spring and fall than in the summer or winter.

The organization adds that, “about half of all utility-scale solar power plants in the United States use some form of sun-tracking technology to improve their seasonal output.”

Posted on July 19, 2017

Written by Dan Diehl

The conversation about indoor environments is changing as tenants leverage new technologies to support employee productivity.

OVER THE LAST decade, a slow and steady evolution has been taking place in the commercial built environment. Building owners, architects, engineers and various service providers are moving to incorporate new technology that optimizes worker productivity, space utilization and the operational efficiency of a building over its useful life. They are also seeking to create workplaces that help companies recruit and retain talent.

Many commercial buildings now include features such as operable windows, dynamic glass, smart metering, prefab construction and chilled beam HVAC systems, all of which aim to optimize the indoor working environment for productivity, health and overall well-being. While a number of these technologies and approaches have been available for quite a while, many are now moving from being the exception to the norm.

Posted on July 18, 2017

Written by Michael Suriano

As employees increasingly work from a variety of locations and companies lease co-working spaces – or even do away with offices altogether – real estate developers and owners seek the ever-elusive “edge” that will keep their companies and their buildings competitive. To do so, developers are expanding building amenities to entice top talent and facilitate staff engagement. According to Colliers International, traditionally only 3 percent of commercial real estate was devoted to amenity space; today, the recommendation has more than tripled to 10 percent, or up to 12 percent to attract high-value tenants. The value of increasing amenity spaces can be significant: CBRE has reported that in one instance, amenities like gyms, lounges, and restaurants boosted asking rates by 15 percent.

Amenities have typically ranged from providing daily conveniences (dry cleaning, food courts, etc.) to recreation or health (gyms, saunas, clinics, etc.). To appeal to a younger generation, building owners are in a race of amenity one-upmanship, with popular amenities like table tennis and complimentary food becoming less of a differentiator than health complexes, basketball courts and hair salons.

Click here to read more.

Posted on July 17, 2017

During the most recent Industry Trends Task Force meeting, held during the National Forums Symposium in April, NAIOP Foundation Governors and invited guests participated in a session focusing on technological innovations impacting the CRE industry.

Topics discussed include:

• Legal documents can be produced and executed more easily today than they could years ago – one simple example of how technology has facilitated leasing and sales transactions.
• There are a tremendous number of regulatory barriers that prevent zoning technology from advancing. Parking ratios required by zoning laws are too high in some instances and too low in others. Sensors enable the collection of reliable data about when and where cars are parked but correcting the imbalance will require a change in local zoning, a feat that historically has been difficult to achieve.
• Drones have become more sophisticated and can be used for surveying, inspection of roofs, and many other aspects of either pre- or post-construction. Drones could begin to replace people, including site crews and inspectors.
• With aerial photography and Google, it’s now possible to look at a site and conduct market analytics, enabling a retailer, for example, to select an optimal location.
• The brokerage industry may become like the travel industry; in the future, real estate brokers (both commercial and residential) may provide guidance rather than carry out transactions. Building management software now tracks work orders. A tenant can submit a problem and the building engineer can change a setting from an iPad without having to travel to the site.
• A key problem is the pace at which change is occurring today. There is an inherent disconnect between technology that changes rapidly and physical, fixed, tangible real estate products that take a long time to build and modify. To address this, the industry must begin to think about how to build flexibility into real estate assets.

The session was moderated by NAIOP Distinguished Fellows Mark Stapp, Executive Director, Master of Real Estate Development, W.P. Carey School of Business, Arizona State University; and Chris Redfearn, Director, Dollinger Masters of Real Estate Development program, Price School of Public Policy, University of Southern California.

Posted on July 13, 2017

Nearly three-quarters of employees say being happy at work is the key to a good work experience. But how can companies create a happier work environment?

JLL spent a year surveying workers at 40 companies in a dozen countries. More than 7,000 people responded. “Our research shows that a positive workplace experience leads to happiness and that, in turn, improves productivity and quality of life,” says John Forrest, JLL’s Global and Americas CEO, Corporate Solutions. “Companies should think about how their real estate offers the right locations, technology, and design in order to capture the best from their employees.”

The report zeros in on three major areas: engagement, empowerment, and fulfillment. It also makes specific recommendations, such as changing the layout of a workspace.

Posted on July 12, 2017

Written by Alvaro J. Ribeiro

Living wall systems can be simpler to install and maintain than one might expect — and can have meaningful impacts on building owners and occupants.

THE EMERGENCE of biophilic design and living green walls satisfies the human need to connect with nature, offers positive health benefits and provides welcome visual elements. (See “Plantscaping and the Value of Biophilic Design,” Development, Spring 2017.)

There’s no doubt that indoor plants can improve people’s health and mood. According to a 2015 study published in the Journal of Physiological Anthropology, “interaction with indoor plants can reduce physiological and psychological stress through suppression of autonomic nervous system activity and diastolic blood pressure and promotion of comfortable, soothed, and natural feelings.” Architects have devised various ways of incorporating indoor plants into the design of corporate, commercial, and even industrial work environments, including living green walls.

Posted on July 11, 2017

Design firm Gensler says now is a time of “profound change in how design supports work in all its varied forms,” as the industry sees demand for new real estate products that are “a reflection of new and more collaborative ways of working.”

A forthcoming study by the NAIOP Research Foundation, “Activating Office Building Common Areas,” will look deeper at this trend, specifically examining buildings’ common areas and how some owners are “activating” these common spaces to make their buildings more vibrant.

Through surveys and interviews, the study examines the activities, designs, costs and more associated with creating vibrant communities inside office buildings.

Click here to read more.

Posted July 7, 2017

Written by Marie Ruff

Since its founding as an online bookstore in 1994, Amazon.com Inc. has increasingly expanded its reach in a quest to sell the full spectrum of goods from A to Z. Now, as a $136-billion-a-year company, Amazon offers everything from wristwatches to tires to blenders to fresh produce, and, of course, books. The announcement last Friday that Amazon would buy upscale grocery chain Whole Foods Markets, Inc., for $13.7 billion cash set off waves of speculation about what this acquisition means for the two retail giants – and what it portends more broadly for e-commerce and grocery retail. In 2016, Whole Foods reported sales of $16 billion and a retail footprint of 460 stores in the United States, Canada and the United Kingdom, so the merger would establish Amazon’s strong presence in physical stores in dramatic and immediate fashion.

We asked some of NAIOP’s Distinguished Fellows – an elite group of academic thought leaders from real estate programs at top universities – for their perspectives on Amazon’s purchase of Whole Foods, the advantages and challenges of Amazon’s expansion into brick-and-mortar grocery space, and what the future holds for commercial real estate retail.

Posted on June 27, 2017

Commercial real estate is at the crossroads of major global changes. A variety of factors are impacting the industry, from moderate macroeconomic growth and space utilization shifts to changing interest rates and record pricing. Global economies have experienced noticeable slowdowns over the past couple of years, leading many central banks to resort to easing monetary policies, which put interest rates at or near zero. The United States economy, while also moderate, has maintained an upwards growth trajectory, which has cast it as a comparative bright spot in the gloomy global economic landscape.

Commercial real estate investment trends mirrored the global economic slowdown and broader uncertainty over the past year and a half.  Investors took a pause from the strong pace of investments recorded in 2015 as they weighed the impact of economic and geopolitical changes upon markets. Commercial investments in the U.S. echoed the global trends, with sales volume in large cap[i] markets closing the year at $488.6 billion, an 11 percent decline on a yearly basis, according to Real Capital Analytics. The first quarter 2017 sales volume came in at $94.8 billion, an 18 percent drop year-over-year.

Click here to read the full article written by George Ratiu.

Posted on June 26, 2017

During Tuesday's meeting of the Building Development Commission (BDC), Ed Gagnon, a consultant with Customer Service Solutions, Inc. provided a presentation detailing the results of a recently conducted customer satisfaction survey.  Responses indicated those surveyed were generally more pleased than they had been during a similar survey conducted in 2014.  However, the top areas of concern (ability to reach the right person, timeliness of permit request process, and timeliness of inspections) are the same as they were three years ago and appear to be more significant concerns.  For a summary of the results, please click the following link:

LUESA Customer Service Survey 2017

Posted on June 22, 2017

NAIOP celebrates 50 years of advocacy, education and professional excellence.

NAIOP, the Commercial Real Estate Development Association, began in 1967, when nine owners and developers of industrial parks in the eastern U.S. first met on September 12, 1967, near Philadelphia. Their goal was to support the emerging niche of industrial parks by addressing the need for standardized covenants and restrictions, building requirements and beneficial legislation and taxation.

Posted June 15, 2017

The NAIOP Research Foundation has released a new glossary titled "Commercial Real Estate Terms and Definitions." It contains more than 220 terms relating to development, investment, leasing, office, industrial, retail and more.

New terms added this year include:

• 1031 Exchange, or Like-kind Exchange
• Commercial Mortgage-backed Securities (CMBS)
• Fulfillment Center
• Omnichannel (also called "Multichannel") Retail
• Pop-up Retail

Bookmark this resource for future use and utilize other reports published by the Foundation. For the latest news about the Foundation, read the current newsletter or visit naiop.org/foundation.

View the Glossary

Posted June 9, 2017

The Federal Reserve Board is indicating that it intends to increase interest rates twice more this year. But a new report from Real Capital Markets indicates that the expected rate hikes are not causing potential investors to move their purchases up.

“[I]n spite of rate increases dating back to last Fall and the prognosis for even further hikes, investors aren’t motivated to accelerate their acquisition plans in order to lock in rates at what continue to be extremely low rates. According to the survey, almost 63 percent of respondents said interest rate activities will not be the motivating factor,” the report states.

Instead, investors tell Real Capital Markets they are motivated by value.

Posted June 8, 2017

First Uber changed the taxicab industry – now it wants to enter the trucking business. The company is launching a new app that is supposed to make it easier for truckers to find cargo.

“Uber Freight is an app that matches trucking companies with loads to haul. We take the guesswork out of finding and booking freight, which is often the most stressful part of a driver’s day. What used to take several hours and multiple phone calls can now be achieved with the touch of a button,” writes Uber’s Eric Berdinis in a blog post.

The company promises it will pay for every load quickly, “within a few days, fee-free.” If drivers have to wait too long to for a load, Uber promises to compensate them for their time.