Originally published on April 20, 2023, by Gary Tasman for NAIOP.

If you’ve ever attended a ceremonial groundbreaking for a school, restaurant, corporate headquarters, or other new building, you understand the symbolism of that first turn of the dirt. The groundbreaking ceremony signifies the physical start of a construction project. In most cases, however, months or even years have already been spent preparing the land for future growth, as planners and developers work behind the scenes to make the property “shovel-ready.”

Attempting to market a property that is not shovel-ready can be a significant barrier to making a commercial property sale. In fact, it’s hindered some significant transactions where our company is based in Southwest Florida. But what does it mean to have a shovel-ready property, and why is it so important?

What Does Shovel Ready Mean?

The term “shovel ready” became popular during the Great Recession as part of the American Recovery and Reinvestment Act of 2009. The legislation placed funding priority on projects that could begin construction rapidly, in hopes of jumpstarting the economy by providing investment and employment opportunities quickly. The phrase became an important buzzword, and an even more important strategy, in commercial real estate.

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We definitely see growing momentum around the country related to adaptive reuse.  In some cases, this involves office-to-residential conversions and in others office to other institutional uses.  You may recall we started beating the drum on this back in November as one of our six strategies related to housing affordability (click here) with the mindset that increased production of housing units would be a positive outcome.

Since that time, we have had an opportunity to talk to a lot of folks who agree that we should see if we can make it work.

One architectural firm in particular, Gensler, has put much effort into the concept.  Click the links below to learn more about how these ideas could become a reality.

• Gensler Blog - What We Learned
• Gensler Blog - Converting Class C Office Space
• Gensler Webinar
• Calculator Presentation

During last night's meeting, the Charlotte City Council held a hearing on four text amendments related to the soon-to-be-implemented Unified Development Ordinance (UDO).  Since these were introduced several weeks ago, REBIC representatives met with Planning Staff and suggested revisions to the proposed amendments, some of which were accepted, and some were not.  This is the first round of changes that will likely be made over the course of the next couple of years.   Here are the details:

• Text Amendment to the Charlotte Tree Ordinance - (1) Adds new requirements for collected civil penalties to only be used to further the purpose, intent, enforcement, spirit, and requirements of the Charlotte Tree Ordinance with regard to the use of collected funds; (2) Corrects numerical and roman numeral sequencing in Articles; and (3) Deletes two unintentional words in one sentence.  
• Text Amendment 2023-056 - Amends the UDO for the use Landfill, Land Clearing, and Insert Debris (LCID) by (1) deleting it as a use permitted with prescribed conditions in all zoning districts except ML-2; (2) modifying the use in the ML-2 zoning district as a use requiring a conditional zoning that complies with the prescribed conditions; (3) increasing the distance between an operational portion of an LCID landfill to 50 feet from any property line; (4) adding a requirement that the actual fill area shall be located at least 300 feet from any Neighborhood 1 or Neighborhood 2 Place Type or an existing residential structure in any other place type; (5) deleting collector streets as a permitted primary vehicular access; (6) adding limited hours and days of operation for the use; (7) adding a requirement for a geomembrane liner and leachate collection system subject to state standards that is equal to or exceeds the state criteria for municipal solid waste landfill units; (8) adding a requirement that the use shall comply with the state groundwater well and surface water requirements for a municipal solid waste landfill; and (9) deleting the requirement for a zoning permit for the use. 
• Text Amendment 2023-057 - Amends the UDO to allow Multi-Family Attached and Multi-Family Stacked development in the CG and CR zoning districts under certain conditions and to modify the prescribed conditions for the principal use of Drive-Through Establishment and the accessory use of Accessory Drive-Through (formerly Drive-Through Facility) to limit their use in Centers Place Types.
• Text Amendment 2023-058 - This is a broad "clean up" amendment that corrects errors in the adopted ordinance and will improve functionality.  This is the first of many such amendments that will be proposed over time.  Click this link for a Summary Memo that describes the proposed language changes.  

A final vote on the amendments will likely be held prior to Memorial Day as the originally adopted ordinance becomes effective on June 1st.

Originally published on April 10, 2023 by Miles Haladay for NAIOP E-Newsletter.

America faces a multipronged real estate crisis. We have a stubborn residential housing shortage, high office vacancy rates, and flight from many downtown hubs that is killing off businesses servicing those areas. In West Coast cities like San Francisco, it’s been dubbed the “donut effect,” with workers moving farther away from the urban core.

We need to build 3.8 million more housing units in the United States to keep up with household formation rates – and we’re very behind. Construction rates need to double from now to 2030 to bring us up to speed. Climate change only raises the stakes: to stave off the worst-case climate scenario and double construction output in the next seven years, we need to slash per-project emissions by at least 70%.

Converting office towers into housing could solve multiple problems at once: increase available housing; revitalize downtowns and their property tax base; all while attracting populations to city centers where green living is easier.

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Erin Shaw is slated to become the newest member of the Charlotte Mecklenburg Planning Commission as she received seven recommendations during last night's Council meeting earning her an automatic appointment.  Erin is a Managing Director with Beacon Partners, a REBIC Member, serves on the Charlotte Region Commercial Board of REALTORS®, a participant in the Urban Land Institute National Development Council, and is a member of NAIOP.  She will add a wealth of experience to the commission.  

 

 

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In a move that is definitely backward motion, that will create uncertainty, and potentially threaten the economic vitality of an important part of our region, the Board of Commissioners of the Town of Mooresville adopted a resolution establishing a working group to study the legal requirements of imposing a growth moratorium. 

To view the meeting (total time under one hour) please use this link.  We will be following this development closely.  Click here to view the current Mooresville Comprehensive Plan.  As a reminder, municipal elections occur later this year with filing commencing on July 7th and ending on July 21st.  In closing, this kind of activity is the reason we ALL NEED to be educated and get involved. If you're reading this, your next move should be making sure your own cities and towns aren't moving in this direction.  Help them understand. Use your knowledge!  

Last Thursday the Charlotte City Council held a Budget Workshop as it works toward a May/June approval of the Fiscal Year 2024 Budget set to begin on July 1st.  To view the full meeting, click this link.  Additional inks to presentations provided can be found following here: 

• Revaluation Update Presentation 
• Revaluation Impacts
• CATS FY 2024 Budget Outlook
• CATS One-Pager
• Charlotte Water FY 2024 Budget Presentation
• Charlotte Water One-Pager
• March 9th Budget Workshop Follow Up

Originally published on April 3, 2023, by Kathryn Hamilton, CAE for NAIOP E-Newsletter.

“There’s a really exciting trend emerging in hiring and compensation that’s going to accelerate throughout 2023,” opened Chris Lee, CEO of CEL & Associates, during a recent NAIOP webinar. “It’s the blending together of the quantitative – the numbers, compensation and bonuses – and the qualitative – workplace environment and benefits.”

Lee detailed compensation and benefits trends identified in his firm’s annual Compensation and Benefits Report, jointly published in partnership with NAIOP and specializing in commercial real estate firms and positions. In 2022, bonus realization for performance was around 90% of target – quite high, but a key tactic for attracting and retaining talent. Base salary increases in 2023 range from 4-6% overall, and higher for mission-critical positions.

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Originally published on March 20, 2023, by Larry Lichtenauer for NAIOP E-Newsletter.

Impending recession expected to be grinding, enduring and especially difficult for Class B and C office space

With all signs pointing to an economic recession – presumably arriving midyear or Q3 – how can the commercial real estate community best plan for this event, what lessons can be learned from similar downturns, how long will this period last and which asset classes will be particularly hard hit? Recessions cause hardships and are never a good thing, but what silver linings and opportunities will be available to savvy investors and progressive companies? Offering their insights and perspectives on this topic are Anirban Basu, chairman and CEO of Sage Policy Group and Jennifer LeFurgy, Ph.D., vice president of knowledge and research for NAIOP.    

An already-challenging real estate environment is poised to get worse

Jennifer LeFurgy (JL): The NAIOP CRE Sentiment Index is predicting a gradual slowdown this year in new development, as well as sales and leasing activity across the board, but we do not foresee a catastrophic event. The commercial office sector will be particularly impacted with projects paused, foreclosures and slower dealmaking, which rising construction costs and labor issues will exacerbate. Guidance is calling for a difficult first quarter, followed by a slow, but gradual pickup in late Q2 or early Q3. Research indicates that Class B and Class C buildings, particularly those located in urban areas, will face considerable challenges due to the number of employees still working remotely and the flight-to-quality trend prevalent among many tenants. An additional complication is a slowdown in the development approval process and difficulty in obtaining entitlements. As interest rates continue to rise, the office sector becomes increasingly risky, and we can expect to see more adaptive reuse projects.

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Originally published on March 22, 2023, by Yonah Sturmwind and Kathy Kozak for NAIOP E-Newsletter.

“Where there’s a will, there’s a way.” This adage has never been more relevant for developers looking to finance new building projects. With Federal Reserve Chair Jerome Powell indicating that the Fed will continue to raise interest rates, traditional capital providers with strained balance sheets are pulling back on lending. And given the current economic outlook, many senior warehouse line lenders may also look to pull back on financing, opening the door for a more direct asset-by-asset approach. As a result, borrowers need to seek out alternative lenders that creatively finance their projects – enter nontraditional lenders and loan-on-loan financing partners.

How loan-on-loan financing works

Loan-on-loan (also known as “note-on-note”) financing is a common form of capital stack formation for bridge and construction lenders and offers a perfect example of a nontraditional lending approach that can provide financing for borrowers in a challenging environment. In a loan-on-loan arrangement, a senior lender (such as a bank, life insurance company or specialty lender) makes a loan to a building developer. That lender then secures senior financing for that loan from another capital provider at a lower rate, thereby increasing their margin and allowing them to offer more competitive terms to the developer. The loan-on-loan is collateralized by the loan to the developer and occupies the last loss position in the capital stack.

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Community Area Planning will build upon the engagement efforts from both the Charlotte Future 2040 Comprehensive Plan & Policy Map. Attend a Workshop to learn about the process and to share your input regarding future development and growth in your area. 

Meetings will be held beginning next week (March 28th) on Tuesdays at 11:00 am, Thursdays at 4:00 pm, and Saturdays at 9:00 am.

Click here to see the full list and sign
up for one or more workshop events! 

Originally published on March 14, 2023, by Marie Ruff for NAIOP.

Experts dug into the data behind labor and workforce trends in California’s Inland Empire and the surrounding regions, one of the most competitive labor markets for distribution and manufacturing workers in the western U.S., during a session at NAIOP’s I.CON West in Long Beach, California. Speakers noted that alternative markets like Phoenix and Las Vegas/Reno could provide valuable options outside of the Inland Empire, especially when considering total cost modeling.

The Inland Empire comes out on top according to many metrics in Hickey & Associates’ 2023 analysis, from its labor supply to location. “But if you look at the labor cost, the real estate costs, and the transportation costs, things start to change,” said session moderator Kevin Dollhopf, MBA, MA, MCR, IAMC Fellow, principal, Hickey & Associates. While the Inland Empire is great from a real estate market and returns perspective, occupiers are having heartburn from what’s going on, he added. 

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Originally published on March 10, 2023 by Marie Ruff for NAIOP.

The industrial real estate market has been on fire, but this still-hot sector is expected to cool, according to the latest Industrial Space Demand Forecast from the NAIOP Research Foundation. A powerhouse panel of financial experts addressed the capital markets outlook for industrial real estate in a session at NAIOP’s I.CON West in Long Beach, California. 

Session moderator Jim Linn, executive managing director, Newmark, led the discussion. The panel included Valerie Achtemeier, vice chairman of capital markets, CBRE; Gregg Boehm, managing director, market officer, industrial, Ares Real Estate Group; and Max Gagliardi, CFA, senior managing director, capital markets, Dalfen Industrial. 

Where are you seeing opportunities? 

Originally published on March 10, 2023, by Kathryn Hamilton, CAE for NAIOP.

As industrial spaces move deeper into urban areas, the need to build up instead of out will increase. Vertical industrial – whether used for fulfillment, maker spaces, labs or light manufacturing – requires a new approach, different requirements and a whole lot of explaining.  

Russell Hazzard, AIA, president of MG2, led a panel of experienced vertical industrial developers and architects at this week’s I.CON West in Long Beach, California, that explored the advantages and challenges that accompany these types of projects.  

It’s important to consider three main elements of multistory industrial that differ from traditional single-story industrial before getting started, said Ken Sun, senior vice president, regional head of development – West region, Prologis. First is the target customer and their use, whether traditional warehouse, third-party logistics company, fleet management or another purpose. 

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Originally published by Marie Ruff for NAIOP E-Newsletter.

The next phase of advanced manufacturing innovation is ready for launch in the Long Beach region of California. Attendees of NAIOP’s I.CON West were able to go behind the scenes on a project tour of cutting-edge advanced manufacturing facilities in Douglas Park, an industrial, retail and hotel center that spans more than 260 acres adjacent to the Long Beach Airport.

Morf3D: Advancing Aerospace with Additive Manufacturing

The first stop on the tour: Morf3D, a company that primarily serves clients in the aerospace, space and defense industries. These industries require highly specialized equipment that meets stringent specifications including being durable, lightweight and thermal-resistant, which Morf3D achieves using metal additive engineering and manufacturing.

The 90,000-square-foot Douglas Park building was a spec building that Morf3D has been adapting to suit the varying needs of their clients, from security clearance requirements to power needs. Some tenants require temperature control within four degrees to keep the equipment running smoothly and prevent any quality concerns with the products; others require the temperature to not vary more than two degrees.

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Originally published on March 9, 2023, by NAIOP.

NAIOP is again partnering with CEL & Associates, Inc. to compile the 2023 NAIOP/CEL Commercial Real Estate Compensation and Benefits Survey. A nationally known real estate advisor, CEL has conducted this survey – the largest in the industry – for 34 consecutive years.

Complete the survey by May 9. 

Go to the survey

This valuable survey is the national standard allowing commercial real estate businesses to stay current on salaries, bonuses and benefits for CRE professionals from executives to entry-level positions. Each company that participates in the survey will receive a complimentary electronic copy of the full comprehensive survey report – a $3,000 value!

Originally published on March 6, 2023, by Eliza Theiss for NAIOP E-Newsletter.

Three years after the COVID-19 pandemic upended the office sector, it remains in flux. While many businesses have fully committed to hybrid and remote work arrangements, others are becoming more adamant about getting employees back into the office. And, according to the CommercialEdge U.S. office market analysis, there will be even greater uncertainty and upheaval as the industry transitions to a new status quo.

In 2023, higher interest rates are anticipated to negatively affect both the new supply pipeline and transactional activity; while some buildings will be constructed in desirable sites, many other projects will be postponed or abandoned entirely. Moreover, in addition to fewer office transactions, higher rates will also result in reduced property prices for those that do trade.

At the same time, tenants’ flight to quality is also expected to continue in 2023. Businesses that want workers in the office more frequently are looking for high-quality amenitized space to tempt workers to come in, which can mean embracing smaller footprints in prime locations.

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Originally published on February 27, 2023, by Janet Pogue McLaurin AIA, FIIDA, NCIDQ , LEED AP for NAIOP E-Newsletter.

Office workers around the globe scrambled to suddenly work from home in March 2020 at the beginning of the COVID-19 pandemic. As the global pandemic raged from weeks to months to years, we adapted to virtual meetings and new ways of working. It fundamentally changed how we work and our expectations of the office. Over a period of time, Gensler surveyed 2,000 U.S. workers as they were returning to the office to understand the new role of the office, what’s working and not, and what’s missing in the work experience.

The Role of the Office has Shifted

Throughout the pandemic, we conducted 11 workplace research surveys — six alone in the U.S. — to capture how the pandemic has shaped the workplace experience. During this time, the top-ranked reason cited by employees to return to the office was “working in-person with my team/colleagues” — consistent across countries, generations, and industries. In our latest research, “to focus on my work” emerged as the top-ranked reason workers say they are coming into the office. Work activities based in the physical space, such as access to technology, scheduled meetings, and access to specific spaces, materials, and resources, also rise to the top.

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Originally published on February 16, 2023, by NAIOP.

From pricing to building codes to zoning and beyond, developers embarking on an adaptive reuse project must consider key factors that can make or break its success.

Steve Smith, principal with Cooper Carry, explores the importance of location, authenticity of a building, and the important return on investment that make adaptive reuse projects successful.

This NAIOP Insight was filmed at CRE.Converge 2022.

Watch Video

Originally published on February 15, 2023, by Toby Burke for NAIOP E-Newsletter.

Cities and counties are increasingly adopting local ordinances that are intended to spur the electrification of our transportation system in order to reduce greenhouse gas (GHG) emissions from fossil fuels. A survey by The U.S. Conference of Mayors identified electric vehicles (EVs) “as the most promising technology for reducing energy use and carbon emissions in their cities.” Local efforts to support the use of EVs by both the public and private sectors will require the development and expansion of a reliable and sustainable EV charging system.

Efforts by mayors and local governments to transform the nation’s transportation system from fossil-fueled vehicles to electric ones has been boosted by the federal government and the private automobile industry. Both the Biden Administration and major U.S. carmakers – Ford, General Motors and Stellantis (Chrysler) – have set aspirational goals for EVs to account for 50% of all vehicle sales by 2030. These aspirational goals reflect growing consumer interest for electric vehicles that will further accelerate the demand for a sustainable EV charging network across the United States.

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